27 January 2011
The Social Cost Of Electricity
": Scenarios and Policy Implications (The Fondazione Eni Enrico Mattei Series on Economics, the Environment and
A book review by Nicholas Newman
Anil Markandya (Editor), Andrea Bigano (Editor), Roberto Porchia (Editor)
For both energy policy makers and energy companies involved in the decisions concerned with investing in
electricity generation technologies, determining what are the various social costs of diverse technologies is often
open to subjective individual evaluations.
What is this book about?
This book is a modern version of traditional cost benefit analysis as it is specifically applied to power
generation and its application to such externalities as climate change, human health and the environment. Though
the authors do admit, they do ignore the benefits that are derived from different power generation solutions, have
had on individual well-being, prosperity and human advancement.
The authors report's on the combined research effort of researchers involved in the design of power systems from a
social view point, who participated in the European Commission’s research project known as CASES (Cost Assessment
of Sustainable Energy Systems). The principal task of this research effort was to assess the policy options for
improving the efficiency of energy usage, underpinning this evaluation with a consistent and comprehensive picture
of the social costs of energy.
The writers investigated how the internalisation of social costs up to the year 2030 for generating technologies,
and using these estimates, evaluate policy options for external cost internalization, providing quantitative
scenarios by country and primary fuel for the years 2010, 2020 and 2030.
In addition to examining conditions in EU states, the research team examined the implications for developing
economies such as India and Brazil.
What were some of the problems identified?
Amongst the issues raised by the team was the problem of energy security. It examined how energy security issues
have evolved. Energy security is no longer concerned with just oil supply, today countries are focusing their
attention on the energy security issues as they apply to deliveries of natural gas, coal and electricity. However,
its observations about the European gas market now appear somewhat dated given the impact that LNG imports have had
on the EU gas markets, which has resulted in Europe being less dependent on Russian pipeline gas. In addition,
there is the welcome news of new potential domestic shale gas supplies being developed by the end of the decade,
which will further strengthen Europe’s gas supply security.
However, the authors make some valid points about the issue of uncertainty, including the problem of cost penalties
that society has to bear if the policy decision taken is based on subjective estimates. A case in point is the
impact that the encouragement of bio-fuel crops has said to have on food crops.
It is interesting to read how the authors have investigated the different approaches implemented by governments to
promote renewable energy policies and the effect powerful entrenched interests have influenced the policy decisions
of government in promoting specific solutions.
In the scenarios' section, the book reveals how policy can influence investment decisions by power generator
operators. In Europe, due to the full internalisation of social costs we have seen much elderly coal and oil power
plants retired early. However, in my role as an international energy journalist, I have observed, for example, in
the case of Italy, such policies have not discouraged energy companies investing in new more efficient clean coal
powered generating plant.
In conclusion, the authors have made some valiant attempts to describe the current state of social costs as it
applies to various electricity generation technologies. This work should provide a basis for further research of
this very complex subject.
Perhaps the next research project this expert group could attempt is a country such as Indonesia, which would
provide a fertile field for such an approach.
Hardcover: 328 pages
Publisher: Edward Elgar Publishing Ltd (1 Dec 2010)