Understanding the costs and benefits of the energy transition
Understanding the less obvious costs of benefits
Most people like Spotify. It offers a more extensive music catalogue than most people to ever hope to access, is easy to use, and is cheap. Some musicians might have a slightly different take based on the royalties they receive.
Those same people are not likely to be fans of higher concert ticket prices, but this can be seen as a second order effect of the rise of convenient and low-cost streaming options.
Similar considerations apply to extended trading hours. They offer convenience, but that convenience has a cost which is ultimately met by consumers.
The energy transition
I typically think of the energy transition as encompasses at least three key shifts:
The decisions we make around these shifts - for example, how and where we build new infrastructure and our consumption patterns - impact the overall cost of the transition. As previously discussed here, this cost is ultimately met from one two sources: taxes or user charges.
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Cost and benefit trade-offs in the energy transition
Like the Spotify example above, it is possible to track through our collective decision-making and the resultant costs. By way of example:
Again, similar considerations apply to other energy intensive but convenient solutions.
The transition mindset
Any transition is not without costs. The challenge is getting people to accept that cost. The current system has generated reliable and cheap energy (but the externalities have never been priced in). Avoiding the externalities will add cost. At its simplest:
It is difficult in light of the current 'cost of living' challenges to build acceptance for additional costs that don't appear to improve living standards. Currently, the consensus is that the 'green premium' is higher than the value consumers are placing on the benefits.
In the absence a better 'sell' on the benefits (or more accurately in addition to it), we need to make smarter decisions around how the transition is delivered in order to bring costs down to level increases support and drives a broader acceleration of the transitions (further driving down the cost curve).
Director at Traffix Group
7 个月David, thanks for sharing with you rnetwork
Head of Commercial Management at Allens Linklaters
10 个月I would argue that Australians need to be convinced that the benefits to the planet significantly outweigh the costs. Australia contributes just over 1% of global emissions. The future of the climate is going to be decided by poor people in Asia and Latin America, who don't care about saving the planet. Sure, most countries there have their own net zero targets, but their governments also have the larger incentive to bring people out of poverty. We did that with cheap fossil fuels over the last century. Telling these countries they can't follow the same path can come across as colonial and wrong. We can certainly lead by example, but this may not be persuasive enough for someone struggling to make ends meet and seeing China open new coal plants every week – is the sacrifice worth it when any good work done here may be undone abroad? Of course, there are rebuttals to all these points but technological advances reducing transition costs will play a crucial role both in Australia and particularly for those low- and middle-income countries.
Director - Energy, Utilities & Infrastructure
10 个月Like the fast/cheaper/quality trilemma, I’d pose that your three options are the same - you can only choose two.
Author of The Climate Misinformation Crisis (2024); Climate & Energy Decoded (2022); Critical Comparison of Low Carbon Technologies (2020)
10 个月This video maybe of interest. It focuses on basic science to discuss the cost of electricity at high global shares of solar and wind power. https://youtu.be/1fcnS6Li_qw