Friday, September 27, 2013

Pain Everywhere!

On Monday ("Pain at the Plug?") I explained that regardless of the good intentions, the EPA’s proposed cap on new power-plant emissions would likely translate into increased electric bills for everyone.  Coal is a dirty source of power, but economic understanding leads to the inevitable conclusion that any future costs related to cleaner emissions will be borne by the electric consumer.

Of course, this might not be the case, the electric industry may choose to build no new coal-fired plants, favoring the cleaner natural gas with a mix of solar and wind power.  These other sources however are not without their own problems and controversies.  Solar energy is not available on cloudy days or at night and, like wind, has a much bigger environmental footprint than traditional power plants.  Wind power also faces mounting bad press in that “almost 600,000 birds are killed by wind farms in America each year, including over 80,000 raptors such as hawks and falcons and eagles” (not to mention hundreds of thousands of bats).  The practice of fracking, used to increase the recovery of natural gas is bringing citizens out in opposition, signing petitions, and just this week, demonstrating in Washington to "demand that the government reopen investigations into fracking-related drinking water pollution in Pennsylvania, Texas and Wyoming.”  It seems good options are hard to find.

Diversification, the investment principle of spreading out money over a number of different instruments so that one bad stock or one bad sector (e.g., bonds) does not ruin future prospects, applies here as well.  Diversification of energy sources protects against unforeseen shortages or disruptions.  If the above three energy types have problems, one of the few remaining alternatives is nuclear, which has zero emissions, but scares people enough to make opposition an easy sell.  Taking all this into consideration, it is quite likely that more of those cleaner, but more expensive coal-powered plants will be built in the future.

Individuals and families are not the only ones who use electricity.  Stores, manufacturers and governments do too.  GM uses it to power their robots.  Wal-Mart uses electricity to light the parking lots and keep the ice cream frozen.  The town uses electricity to heat and cool public buildings and to light the streets at night.  How would airports, restaurants, and printers, even Internet companies, run without electricity?  If the price of electricity goes up, the cost will not be restricted to uses at home.  Everything we buy will be more expensive.

When the time comes to pay for cleaner air, eventually the bill comes to us.

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