By Institute for Energy Research ——Bio and Archives--September 10, 2015
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Simply examining forward-looking estimates like those of the EIA does not provide the full picture. If one merely looks at the benefits of new power plants and doesn’t assess the costs of destroying existing things of value, the analysis will be skewed and incomplete for policymaking purposes. The late French economist Frederic Bastiat examined the concept of unintended consequences in his essay, What Is Seen and What Is Not Seen, where he discussed the less apparent ramifications of destroying things of value in order to spur economic activity in another area. His best-known example is that of a child breaking a shop window, causing the people of the town to take comfort in the increased business for the glazier to repair the window. Ultimately, Bastiat disagrees with that common sentiment and argues that breaking windows to encourage industry in another sector is harmful, since “society loses the value of things which are uselessly destroyed.”[14] Similarly, policymakers must understand the full context of electricity generation and analyze the cost of breaking windows in the electricity generation sector—i.e. retiring existing generation resources before the end of their economic lives. In order to perform that analysis, policymakers need an apples-to-apples metric—the LCOE for existing sources. The IER study provides this much-needed cost information and illustrates the competitiveness of current resources with the politically favored, emerging ones.[15]Click here to read the entire article. Click here to view IER’s “True Cost of Electricity” study.
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The Institute for Energy Research (IER) is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society.