April, 2014 – Last month we introduced the U.S. Energy Information Administration’s (EIA)average cost estimates for various options for generating electricity. These estimates include construction, operation and fuel costs but do not include any anticipated “social” costs.
An example of “social” costs is the estimated cost of health problems related to traditional air pollution from older coal-fired power plants. These “social” costs were one of the primary reasons North Carolina adopted the Clean Smokestacks Act of 2002 that required those plants to be replaced at a cost of over $5 billion.
Unfortunately, future “social” costs are much harder to anticipate in terms of cents per kWh. Some groups that advocate one approach over another use seemingly speculative “social” cost claims as a way to emphasize the negatives of other energy choices. For Wake Electric, trying to anticipate a future regulatory requirement or even a consensus opinion based on reported “social” costs can be difficult.
An example of that difficulty is the U.S. Environmental Protection Agency’s (EPA) efforts to estimate a “social” cost of carbon dioxide emissions from burning fossil fuels. Preliminary numbers appear to indicate that the EPA anticipates a social cost of nearly 5 cents per kWh for electricity generated from coal. That would add 50 percent to the effective cost. For electricity generated from natural gas, it might be as much as 2.5 cents per kWh.
As a matter of common sense, we know that all energy choices, coal, natural gas, nuclear and even wind and solar, have positives and negatives. Trying to weigh all those factors, as well as construction, operation and fuel costs and calculating our best estimates of the regulatory requirements of future social costs, is part of our responsibility to develop a diversified portfolio of power supply resources.
Do you have a question or comment about “social” costs? Suggestions for future topics? Please submit them to MAC@wemc.com.
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