Sunday, April 01, 2012

First, Let's Get the Prices Right

The Boston Globe ran a story on Friday about NStar's decision to "pay double the cost of conventional energy for Cape Wind power."  The quote is the headline, and the "cost" self-evidently does not include all of the externalities associated with burning fossil fuels.  I don't know if those external costs of transporting and burning natural gas would double the price, but that's the key piece of information required to make sense of the information presented. 

If you read the article, you will see that much of the public disagreement is about whether paying the extra amount for the cleaner energy is worth the environmental benefits.  If you want to make better policy, a wiser course of action would be to resolve what those benefits are and put a price on them.  With that price established, the decisions about whether a given project is worth the cost don't have to play out in public -- private companies can make those decisions and then come to market or not with power to sell.

The article also notes that this source of power would "add about $1 to customers' monthly bills in the first year" (presumably because this is only 2 percent of the load).  It seems like a sensible way to start off with renewable energy in the Northeast.

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