Blowing away money

It gets worse. Further into the report, the institute estimates the cost of carbon abated through this process simply by assuming the wind energy displaces an equivalent amount of gas and coal generation. No allowance is made for reserve requirements, or of the loss of efficiency from retailoring the network to accommodate wind. On those favourable assumptions the report calculates the cost of saving each tonne of carbon at 54 Euros or several times the price of carbon on the European ETS at the time of the report. The cost of using PVs to reduce carbon comes to a staggering 716 Euros a tonne.

Another piece of real world evidence is Wind Energy The case of Denmark produced by a prominent conservative think tank, the Center for Politiske Studier (Centre for Political Studies or CEPOS) in September 2009. This report estimates that Denmark produces the equivalent of about 19 per cent of its electricity demand with wind turbines, but only about half of that is used locally. The rest is exported to Sweden, Norway and Germany through connections to the national grids, and those countries use the energy to pump water uphill into their major hydroelectric dams. This is the only way to store electricity on a power station scale. As well as having lots of dams, those national grids are much larger than the Danish network and so can absorb the additional power easily.

Although wind power indirectly saves some emissions in Denmark because it can be used to store up excess wind energy in dams in another country (reserve requirements, or losses through retailoring the network are not discussed), the report estimates that the cost per tonne of CO2 is 87 Euros or $US124. That was more than six times the price of carbon on the ETS at the time of the report. Danish domestic electricity prices are among the highest in the European Union, although this is not strictly the result of wind power. Commercial and industrial prices are deliberately kept down to make industry competitive with the rest of Europe.

Green activists bitterly disagree with most of this, particularly the part about reserve requirements, saying that if the wind farms are spread over a large enough area then the risk of changes in the wind is greatly reduced. The trouble is that if the wind towers are spread over too large an area then transmission distance comes into play. Electricity from wind farms can only be transmitted so far. So what is the trade off? How far can a grid manager spread wind farms, and how much does wind vary over those areas? Although there is some evidence on this point for Europe, which wind activists do not like, the issue is almost entirely unstudied in Australia.

As well as rushing into wind, despite massive gaps in our knowledge of just how effective this technology may be, the Rudd Government has added its own peculiar frills such as allowing the likes of solar hot water services to count towards the renewables target. This has led to other problems and the recent splitting of the scheme into a Small-scale Renewable Energy Scheme (SRES) and the Large-scale Renewable Energy Target (LRET) which we will not discuss here.

Although the use of hot water services seems laudable, especially considering that a well sited and maintained system might actually save carbon (the energy is stored in the hot water service), this is an extremely expensive way to do it. Large scale renewable projects have the advantage of economies of scale and still the electricity they generate costs several times that of conventional power. Further, solar hot water panels have to be properly sited and maintained to make any real difference, and with the solar industry undergoing a massive expansion many of the installers will not be adequately trained.

The Australian government has dived head-first into renewables with both eyes shut, and with the general approval of the voters, who mostly have no idea of what they have approved or how much it will cost. The government should drop the whole renewable energy scheme as too complicated and expensive and unlikely to save much carbon.

Another justification sometimes used for these alternative energy follies is that they will “generate jobs”. Adding a whole new system generating very expensive electricity to the existing power network will destroy jobs. Consumers and businesses have to pay the additional expense, and that means less money for other matters. As for exporting, forget it. Every other country is talking about exporting equipment for the green revolution. Solar energy is an additional cost to the economy, with no direct economic benefit.