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image A WOMAN IN FRONT OF HER FLOODED HOUSE IN
SATJELLIA ISLAND. DUE TO THE REMOTENESS OF THE
SUNDARBANS ISLANDS, SOLAR PANELS ARE USED BY
MANY VILLAGERS. AS A HIGH TIDE INVADES THE ISLAND,
PEOPLE REMAIN ISOLATED SURROUNDED BY THE FLOODS.
© GP/PETER CATON
The real cost of conventional energy production includes expenses
absorbed by society, such as health impacts and local and regional
environmental degradation - from mercury pollution to acid rain –
as well as the global negative impacts of climate change. Hidden
costs include the waiving of nuclear accident insurance that is too
expensive to be covered by the nuclear power plant operators. The
Price Anderson Act, for instance, limits the liability of US nuclear
power plants in the case of an accident to an amount of up to $98
million per plant, and only $15 million per year per plant, with the
rest being drawn from an industry fund of up to $10 billion. After
that the taxpayer becomes responsible. 71
Although environmental damage should, in theory, be rectified by
forcing polluters to pay, the environmental impacts of electricity
generation can be difficult to quantify. How do you put a price on
lost homes on Pacific Islands as a result of melting icecaps or on
deteriorating health and human lives?
An ambitious project, funded by the European Commission -
ExternE – has tried to quantify the full environmental costs of
electricity generation. It estimates that the cost of producing
electricity from coal or oil would double and that from gas would
increase by 30% if external costs, in the form of damage to the
environment and health, were taken into account. If those
environmental costs were levied on electricity generation according
to its impact, many renewable energy sources would not need any
support. If, at the same time, direct and indirect subsidies to fossil
fuels and nuclear power were removed, the need to support
renewable electricity generation would seriously diminish or
cease to exist.
One way to achieve this is by a carbon tax that ensures a fixed price
is paid for each unit of carbon that is released into the atmosphere.
Such taxes have, or are being, implemented in countries such as
Sweden and the state of British Columbia. Another approach is
through cap and trade, as operating in the European Union and
planned in New Zealand and several US states. This concept gives
pollution reduction a value in the marketplace.
In theory, cap and trade prompts technological and process
innovations that reduce pollution down to the required levels. A
stringent cap and trade can harness market forces to achieve costeffective
greenhouse gas emission reductions. But this will only
happen if governments implement true ‘polluter pays’ cap and trade
schemes that charge emitters accordingly.
Government programmes that allocate a maximum amount of
emissions to industrial plants have proved to be effective in
promoting energy efficiency in certain industrial sectors. To be
successful, however, these allowances need to be strictly limited and
their allocation auctioned.
2. energy policy and market regulation
Essential reforms are necessary in the electricity sector if new
renewable energy technologies are to be implemented more widely.
Action: Reform the electricity market to allow better
integration of renewable energy technologies
Complex licensing procedures and bureaucratic hurdles constitute
one of the most difficult obstacles faced by renewable energy in many
countries. A clear timetable for approving renewable energy projects
should be set for all administrations at all levels, and they should
receive priority treatment. Governments should propose more detailed
procedural guidelines to strengthen the existing legislation and at the
same time streamline the licensing procedures.
Other barriers include the lack of long term and integrated resource
planning at national, regional and local level; the lack of
predictability and stability in the markets; the grid ownership by
vertically integrated companies and the absence of (access to) grids
for large scale renewable energy sources, such as offshore wind
power or concentrating solar power plants. The International
Energy Agency has identified Denmark, Spain and Germany as
example of best practice in a reformed electricity market that
supports the integration of renewable energy.
In order to remove these market barriers, governments should:
• streamline planning procedures and permit systems and integrate
least cost network planning;
• ensure access to the grid at fair and transparent prices;
• ensure priority access and transmission security for electricity
generated from renewable energy resources, including fina;
• unbundle all utilities into separate generation, distribution and
selling companies;
• ensure that the costs of grid infrastructure development and
reinforcement are borne by the grid management authority rather
than individual renewable energy projects;
• ensure the disclosure of fuel mix and environmental impact to
end users;
• establish progressive electricity and final energy tariffs so that
the price of a kWh costs more for those who consume more;
• set up demand-side management programmes designed to limit
energy demand, reduce peak loads and maximise the capacity
factor of the generation system. Demand-side management should
also be adapted to facilitate the maximum possible share of
renewable energies in the power mix;
• introduce pricing structures in the energy markets to reflect the
full costs to society of producing energy.
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climate & energy policy | TARGETS AND ACTION
references
71 HTTP://EN.WIKIPEDIA.ORG/WIKI/PRICE-
ANDERSON_NUCLEAR_INDUSTRIES_INDEMNITY_ACT
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