Report tallies hidden energy costs

The average retail cost of U.S. coal-fired electricity was 9 cents per kilowatt-hour in 2007 (the most recent year for which data are available). But there are health and environmental costs of that power that consumers don’t pay, at least as part of their electric bill. According to a new report, accounting for those costs would double the true cost of shooting some electrons through the nation’s power grid.

As long as such costs remain hidden, they risk skewing policy and purchasing decisions. A new report released today by the National Research Council now attempts to compute and tally those hidden health and environmental costs associated with energy. And although the sums it offers up are huge, the report acknowledges that society may decide they’re well worth accepting in light of the benefits provided by that energy.

At least as long as those costs are recognized.

For instance, siting a coal plant in a region that exaggerates the environmental impact of that fuel might be avoided if the costs associated with particular siting options were identified. Similarly, motorists may lose part of any incentive to conserve when the true costs of gasoline are not reflected in prices paid at the pump.

Now about that coal, which supplies nearly half of U.S. electricity: The NRC report finds that the hidden per-kWh health and environmental costs average a little more than 3 cents, but can be as high as 12 cents. The big differential largely reflects the age of plants — newer ones must employ better stack-gas cleaning technologies — and how much sulfur the coal contains.

These extras also don’t account for any pricey environmental havoc associated with global change wrought by coal’s emissions of greenhouse gases, principally carbon dioxide. NRC’s rough gauge of such costs, based on reviewing analyses by others, suggests that these might amount to another 3 cents/kWh.

The report also tackles natural gas use, transportation fuels, nuclear power and renewable energy sources. Together, it computes their fairly easy-to-identify hidden health and environmental costs as at least $120 billion per year. However, NRC’s new analysis adds, because “large uncertainties are associated with the [report’s] estimates, there is little doubt that this aggregate total substantially underestimates the damages.” And that’s because this aggregate total doesn’t account for climate impacts, many ecosystem impacts, damage to infrastructure and potential national-security and environmental risks that could be associated with the cradle-to-grave nuclear-fuel cycle.

When energy decision makers and consumers lack access to such “external” costs of power production, the NRC report says, “there is a case for government intervention in the form of regulation, taxes, fees, tradable permits or other instruments” — things that effectively serve to unveil those formerly hidden costs. And it was to gauge the magnitude of these — and, therefore, the potential need for new regs or taxes — that Congress commissioned this new analysis.

There is another source of hidden costs that this report doesn’t seem to have addressed: subsidies. They also distort the apparent price of a fuel. I’m not arguing that subsidies aren’t often useful, for instance in getting new technologies into the marketplace. They just shouldn’t be hidden — at least not on timescales of years.