I had James Delingpole, the right-wing journalist and blogger in one of my classes today. He described himself as an Austrian School, free market libertarian and soon lived up to his billing. Debate ranged from HS2 and NHS, to cutting the deficit and quantitative easing but we settled for a fair while on the energy industry and what he considers to be the worst 2 words in the English language - Renewable Energy.

According to James, wind farms are an example of unproductive enterprise - he compared them to the digging holes and paying someone to fill them in, as in the great depression. In fact, he claims, that on-shore wind farms have a 100% subsidy and off-shore a 200% subsidy. All we are doing is paying over the odds for our energy. I'm not sure where those figures are from but it is certainly true that the subsidies paid are very high but I can't agree that this is simply pouring money down the drain, or giving them an unfair advantage.

It is true that there are problems with wind power - they only operate on average about 75-80% of the time but changing wind speed means that they only produce about 30% of their theoretical capacity. This sounds poor but is is better than many other forms of renewable energy and even conventional power stations only average about 50% of their capacity. Then there are all the problems of transporting energy from remote wind farms to where it is needed. Much of the power is generated at times of low usage, such as at night, and it cannot really be stored, etc. etc. The costs and difficulties associated with wind power are clear but that doesn't mean that subsidies are unfair or wasted.

The costs of wind power may be clear, but the costs of fossil fuel generation are not. Some, the private costs of the fuel and labour for example are obvious but many of the external costs that the power generator does not have to pay for are not. We miss the cost of the acid rain, the visual pollution, the congestion created on road, rail or waterway by transporting the coal, the damage caused by huge gas pipelines. We ignore the risk of generating 60% of our energy through natural gas, much of which comes to us through a narrow sea lane between Iran and the UAE. All of these costs fall on people living near the power station but not on the company them selves. In Economics we call this an externality. A situation where some of the costs of production/consumption fall on people other than the producer/consumer.

Taxing more polluting methods of electricity production in order to subsidise greener methods, which is in effect what we are doing, simply levels the playing field, making up for all those hidden costs which we don't see. We refer to it as internalising the externality as now consumers make a choice based on the full costs of their actions. There it is, a justification for renewable energy and I haven't even mentioned the effects of CO2 emissions and the effect off man made global warming, which James denies... Oops.

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