Course:ECON371/UBCO2009WT1/GROUP5/Article1
Group 5 Article #1
U.S. Wind Power Industry
Source: http://www.greenbiz.com/news/2009/04/29/us-wind-power-industry-installs-more-2800-mw-q1-2009
Summary
The article states that during first quarter of this year, a large number of wind powered turbines were installed throughout the United States. The wind energy industry is getting a large boost in demand as President Obama came out with his energy and environment agenda. Among other things this agenda includes increasing the production of renewable energy. The goal is to double the output of renewable energy by 2012 to 10% of American consumption. Then by 2025 Obama expects renewable energy production to more than double again to 25% of consumption. The addition of these wind power farms in 15 different states has added enough electricity to power 816 000 homes raising total renewable generating capacity to more than 8 million homes. The American Wind Energy Association is proud of their accomplishments so far this year but their CEO believes that “The nation still lacks the long-term signal that is needed to build up renewable energy on large scale." This may not be a full scale switch to renewable energy but it is a good start for The United States. And it is a way to do so without creating too much of a financial burden for the country.
Analysis
This is an economically efficient way to move United States towards renewable energy. The start-up costs of the wind power farms are higher than that of non-renewable producers. The non-renewable producers also use more productive techniques and have higher outputs over time but do more environmental damage. This is why a gradual shift to renewable resources is important. Spreading the start up costs of renewable producers out over time and minimizing the damage done to existing conventional power producers. Following are some other economic principles that the article touches on.
As President Obama’s agenda encourages the move towards renewable energy the demand for non-renewable energy will move from position D1 to D2. This will move equilibrium from the blue point to the red point. This move lowers both price and output of the non-renewable power producers.
As President Obama’s agenda encourages the move towards renewable energy the demand for renewable energy will double by 2012 and move from position D1 to D2. This will move equilibrium from the blue point to the green point. This move raises both price and output of the renewable power producers.
MD1 and MAC1 represent the damage and abatement cost of non-renewable power producers. These curves are steep because both the environmental damage and cost to abate are high. The blue dot shows the socially efficient level of emissions for these producers. MD2 and MAC2 represent the damage and abatement cost of renewable power producers. These curves are much less steep because the damage and abatements costs are lower for these producers. The green dot shows the socially efficient level of emissions. The black arrow represents the 52 million tons of carbon dioxide that wind power helps to avoid from being emitted.
Prof's Comments
The article does expressly talk about increasing the demand for wind power. However, you have to be careful to think about what that means. To the consumer of electricity, does the source really matter, or is it about the lights being on and the toaster toasting? If green power is simply a substitute for conventional power, then the term 'demand' may be a bit misleading. Also, with the location of the MAC curve, I think that the horizontal intercept is much closer to the origin. This follows from the fact that the emissions from wind power are a lot lower, so even absent any regulations on emission, the chosen emission level will be a lot lower. Where the marginal damage function is for wind power is an interesting question.