An Ill Wind
This post was written by Colm McCarthy
We do microeconomics too! From the current Farmers Journal, and apologies for the length:
Small countries can do little unilaterally to combat climate change. The planet has just one atmosphere, and every tonne of carbon dioxide, or of the other greenhouse gases, released into the atmosphere has an identical impact. It does not matter where in the world each tonne is emitted. For every tonne emitted in Ireland, about 500 tonnes are emitted somewhere else. If Ireland somehow managed to cut emissions to zero, the fate of the earth’s climate would barely be affected. The problem is global of its very nature and requires global solutions. Every country needs to accept its international obligations and indeed to encourage international agreement on faster action. But solo-runs by individual small countries aiming for very rapid emission reductions make no sense, achieve nothing environmentally but could impose serious economic costs.
Ireland has been pursuing very ambitious targets for emission reduction going beyond our international obligations, despite a sharp reduction in the measured output of greenhouse gases in 2009 consequent on the economic downturn. The 2010 figures are not yet available but chances are that emissions fell again and could remain flat until the economy begins to recover. Under current policy Ireland has been aiming for a major switch to wind-powered electricity, more bio-fuel in transport, electric cars and a long list of other emission-reducing initiatives. All of them will cost money and the overall policy pre-dates the onset of the Irish economic collapse. It is not surprising that the new government is being advised from several quarters to re-visit our emission-reduction targets, specifically to take the downturn into account and to see if excessive costs can be avoided.
A report earlier this year from the Irish Academy of Engineering argued that electricity generating capacity is no longer under pressure: reduced demand is being met comfortably given the availability of several new gas-fired plants and there is less urgency about building extra generation, at least for the next five or ten years. The report also questioned the haste in expanding the transmission system. More recently, the Economic and Social Research Institute has argued against subsidies for offshore wind projects and for reduced wind subsidies onshore. Finally the review group on State assets, as well as proposing structural changes to the electricity industry and partial privatisation, also warned against too rapid a rush into wind generation.
Wind power offers the advantages of zero carbon emissions and low operating costs. But these must be set against some significant drawbacks. Wind generators can be relied on to produce power only about one hour in three over a year, and those productive hours are unpredictable. So conventional capacity has to be kept in reserve for the periods when the wind does not blow. These stations will be utilised less than optimally and this is a hidden cost of wind generation. The dispersed wind units also need extensive investments in grid connections and a strengthened transmission system, so wind is by no means free at the system level. Any country which over-builds wind generators runs the risk of ending up with expensive electricity. It is a tribute to the lobbying efforts of the wind industry over the years that these limits to the attractions of wind-power are only now receiving attention. The challenge to policy is to incentivise wind only up to the point where it makes economic sense, having made due allowance for wind’s contribution to the reduction of carbon and other greenhouse gas emissions.
The likely cost of natural gas is also a key factor. Carbon emissions from oil, peat and coal stations are much higher than emissions from gas, and it is unlikely that power stations using high-emission fuels will be constructed on any large scale in Europe.
Coal is a major fuel for power stations around the world and seems to be in plentiful supply. But emissions per unit of electricity can be almost double the emissions from gas, so gas is attractive provided its cost proves to be containable. Prospects for gas availability have improved in recent years with the exploitation of shale-gas reserves in North America, which has released Arabian Gulf supplies to the European market and has given rise to expectations that gas prices into the medium-term will not rise as rapidly as oil.
It is remarkable that the production of gas from the Corrib field off Mayo is now ten years behind the original schedule. Corrib is only the second worthwhile oil or gas discovery in Ireland’s disappointing exploration history. The first was the Kinsale Head field off Cork, which went into production over thirty years ago and is now depleted. There are legitimate grounds for optimism that further gas discoveries are possible offshore Ireland but the carry-on in Mayo hardly provides an incentive for the exploration companies.