COMMENT: The costs Greenpeace didn’t bother to calculate

David Farrar

I blogged yesterday about the Greenpeace report that claimed all these economic benefits of New Zealand becoming 100% renewable and carbon free energy, and somehow was taken seriously despite not even calculating the costs of what they propose.

Someone said that there is no need for them to calculate the costs as they are environmental organisation, not an economic organisation. Now that would be true if their report was solely about the environmental benefits of implementing their policies. But this report is all about the economic benefits of their proposed policies. And to ignore costs when talking economic policies is just nuts. It’s like doing a report on the health system and ignoring the mortality rate.

Peter McCaffrey Facebooked a good analogy:

In other news, my highly technical report which I’ve commissioned tells me that if the government provided every single New Zealander with their own personal satellite we could have the best Internet access in the world.

I have made a deliberate choice not to research the costs of such a program because the aim of the report is to spark a discussion rather than getting too bogged down in the numbers.

I’d like my own satellite and using Greenpeace logic it would be great for the economy if we all had own own satellites. Think of all the jobs it would create.

Now personally I am a fan of renewable energy and think it is a major part of our future. In fact it is a major part of our present also. But there is a difference between direction and absolutism. Now we do have some ideas of what the costs of the policies proposed might be, from the Greens’ own website:

NIKKI KAYE: What advice has the Minister received on the statement by those who are promoting a 40 percent reduction in emissions by 2020 that a 100 percent renewable electricity supply is easily achievable by 2020?

Hon Dr NICK SMITH: I am advised that that would require, first, the writing-off of $4.5 billion of thermal generation assets. It would also require $11 billion for the replacement capacity of 2,500 megawatts, and $2 billion for additional renewable peaking stations needed to ensure security of supply in a dry year. This amounts to a total capital cost of $17.5 billion, excluding the additional transmission investment that would be required, and this would amount to a 30 percent increase in the power price for all consumers. Going 100 percent renewable would also require the equivalent of another seven Clyde Dams to be built by 2020. I do not describe $17.5 billion, a 30 percent power price increase, and seven Clyde Dams as being easy.

So just this aspect would cost $17.5 billion, increase power prices by 30% and require seven new Clyde Dams in the next seven years!

That will require those printing presses to really be working overtime.

Political commentator David Farrar posts at Kiwiblog.

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5 Comments & Questions

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How does a PhD in political studies, studying the failed Alliance Party, give credence to a tilt at being in Parliament, let alone at being Finance Minister?

Interesting bed fellows Labour will need trying to cobble together a coalition of the willing. Mind you, Labour are no strangers to having weird bed fellows and "unusual" sleeping partner arrangements.

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I am left wondering about the timing of the delivery of benefits and the incurring of costs respectively, the sensitivity of costs and benefits to risk/technology/political commitment or other change, the time scale under consderation, the discount rate used, and the net benefit or cost delivered ...

... or is that too much like a real cost benefit analysis. I'm neither for or against the outcome, just like decisions based on an appropriate mix of empirical data, reason, and principle. Ah .....politics .....

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Norman's comments..."These inconvenient details such as cost, how, who pays?, when, where, are minor details not needing further explanation... But let me explain how we're helping Labour build 10,000 homes a year...

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Umm probably a dumb question but what about incentives for sôlar water heating panels on every residence. That could reduce demand by 30% or so in domestic consumption?

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Costs are outlined in the report on pages 10-12 www.greenpeace.org.nz/energyrevolution

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