External costs of power generation

By PJ Lloyd, Energy Institute, Cape Peninsula University of Technology

 

Published in:

Electricity+Control, December 2013 (pages 40 - 43)

Enquiries: LloydP@cput.ac.za

 

Download the full article on External costs of power generation in PDF format.

 

In economics, an external cost (or benefit) arises from an activity that has some impact upon someone who had not chosen to incur the cost (or receive the benefit). So, for example, diesel fumes may settle on buildings, which therefore require more frequent cleaning. The extra cost of cleaning falls on the owners of the buildings, not on the owners of the diesel vehicles. That extra cost is therefore an external cost. In the same vein, the city may decide to provide lights in your street, and you would benefit from improved security at night even though your contribution to the cost of the lighting installation was minimal.

There has been growing concern about the external costs of power generation, particularly the generation of power from coal and in 1991, the European Union set up a programme, ExternE, to estimate the external costs of energy generation. It took more than 50 teams from 20 countries to develop these estimates. As the final report in 2006 notes: ‘The effects of energy conversion are physically, environmentally, and socially complex and difficult to estimate, and involve very large, sometimes ultimately unresolvable, uncertainties, unpredictabilities, and differences of opinion.’

Despite these difficulties, ExternE has become a well-recognised source for method and results of externalities estimation.

 

Take note:

  • There is growing concern about the external costs of power generation.
  • In economics, an external cost arises from an activity that has some impact upon someone who had not chosen to incur the cost.
  • The European Union’s study, ExternE, identifies external costs of power generation as a function of variables such as population density around the power station, local climatology and level of pollution costs.