Wednesday, November 08, 2006

IEA wants more nuclear, renewable energy

From the

The world is facing an energy future that's “dirty, insecure and expensive” unless governments take steps to promote alternatives such as nuclear and renewable energies, the International Energy Agency said Tuesday.

“The energy future we are facing today, based on projections of current trends, is dirty, insecure and expensive,” the global energy watchdog said in its 600-page outlook. However, “new government policies can create an alternative energy future which is clean, clever and competitive.”

I'm all for it, but just out of curiousity, why do these type of reports always have to be 600 or 1000 pages long? Is it to ensure that noone will read them?

Also, if you read the article you'll see that the emphasis is placed on government; government policies need to be created, government action needs to be taken, etc. I see this kind of language in every kind of news report, regardless of the topic. If there is a problem, government will, or should, solve it. I'm afraid people have become totally powerless and look to government to do everything.

Will government make alternative energies or nuclear power truly cost efficient? They can create subsidies to speed their adoption, which many will argue is a good thing. But over time, these artificial boosts can interfere with the natural role of the marketplace, leading participants to embrace products and solutions that are merely efficient enough to meet minimal standards.

As an example, some people could be moved to install a not-so-cutting edge solar panel on their roof simply because a state tax incentive makes it seem like an attractive option. Let's say you have the following options: you can wait for a more efficient, next-generation solar panel system to come on the market or you can choose in favor of the currently available product and grab that fat tax incentive while it's still on the table. What do you do?

For someone who wants to "go green" and nab the benefit of a tax subsidy, it seems the motivation is there to buy now rather than later. What's so wrong about that? The danger is that a reliance on incentives will create an artificially large market for a so-so product, one whose technological progress has been slowed by a dulling of market forces.

Instead of spurring the market to create a better solar product that creates electricity at say, 10 cents a kilowatt hour, it creates a more complacent marketplace that embraces the current generation 30 cents/kWh product.

The same principle can hold true for the construction of power plants. Some observers have pointed out that nuclear power has been unable to prove itself a cost-efficient energy source in the absence of government subsidies. As the Financial Times noted in their editorial comment on the IEA report:

Even though nuclear power is an issue that still divides its member governments, the agency makes its biggest pitch ever for the building of more reactors. Its argument for low-carbon and relatively indigenous and reliable nuclear power should carry political weight in a week that has seen a widespread black-out in Europe and resumed negotiations to extend the Kyoto protocol on climate change.

Less convincing is its claim that the economics has moved in favour of nuclear power, particularly given the agency also calls on governments to help nuclear power overcome its inherent handicap in liberalised electricity markets.

For more info and opinions, please see the following on solar subsidies and energy subsidies.