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ECONOMIC THEORY
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Article Analysis: Air Pollution
In their article, the Wind Power Working Group at the Appalachian State University
makes a case for the usage of wind energy in the state of North Carolina. The group stress that
wind energy is cheap and affordable over the long term, it is clean and that it is sustainable.
Among secondary benefits are the opportunity for creation of jobs and generation of additional
sources of income. Wind energy is noted as the fastest growing sector with a growth rate of over
30 percent just in the past 5 years. This has allowed for the technologies associated with the
energy to rapidly improve (“Why Wind Power for North Carolina?”, 2013).
Such benefits, the authors claim merit the introduction and immediate investment in wind
energy in the state so it becomes a part of that state’s energy portfolio. The authors also bring to
focus regressive legislation passed by special interest groups, for example the The North
Carolina Ridge Law that disfavors “unsightly development” because of which wind farms are
unable to be installed specially in the mountainous areas. Public attitudes are heavily in favor of
wind energy. Wind energy also makes for good economic sense.
The authors have shown that economically, wind energy is more attractive than the non-
renewable sources like coal, oil and natural gas. There are no hidden costs that are associated
with wind energy, which almost always are subdued when discussing the non-renewable modes
of power. Newer technological developments are causing this price to fall additionally. This is
reflected in the per unit price of 3 to 10 cents, compared with the over 40 cent in the early 80s.
This price also remains stable as opposed to the prices of fossil fuel, that fluctuate.
Model or Economic Theory
ECONOMIC THEORY
The theory most closely related here is the economic theory of Comparative Advantage
(deriving from an entity’s unique characteristics or circumstances). This theory is focussed on the
capacity of an entity to generate more quantities of a good or service at a lower marginal or
opportunity cost. This way, the entity gains a competitive advantage over the others and becomes
unavoidable.
The entire financial analysis in the article refers to the comparative advantage that wind
energy has over other forms of energy. While installation of wind energy is a one time expense,
subsequent maintenance is extremely manageable. There are no raw materials needed and the
energy comes with lower transmission losses due to the crowd sourcing aspect. These unique
characteristics give wind energy a unique comparative advantage because the marginal costs
associated with another unit production (dependent over another gust of wind) are negligible.
This is specially true when speaking in terms of conventional energy sources, which have
a gram yield. That is, a certain amount of fuel is requisitioned for a unit of energy production.
Advantages for wind energy also come from the fact that the initial expenditure in the
installation part is scales smaller than establishing a thermal energy plant. Opportunity cost is
also lower when compared to other energy sources. Additionally, the authors make a point that
as time passes and we witness improvements in technology, the marginal cost continues to go
down further.
Prediction
The prediction is that the costs will fall further for wind energy – as per the economic
theory of comparative advantage. The article falls short of identifying by how much are the costs
likely to fall in the future. However, the authors relate how the unit price for wind power in early
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ECONOMIC THEORY
80s was about 40 cents, which reduced to 15 cents just 4 years later.
The costs would continue to fall given the greater emphasis that wind energy received as
a sector. Since 1986, the costs have taken a straight line reduction up until 2005, when the costs
show to be as low as 2.5 to 3.5 cents per unit. This price will continue to reduce in the future as
per the graph, and the graph appears to be following an inverse curve. Therefore, the theory and
the article have agreement in that future bodes well for consumers as far as the cost of wind
power is concerned.
It is also immediately clear that the larger the size of the farm installment, the lower the
costs per unit as well as the marginal costs associated. There are little uncertainties involved in
this case because wind power is not dependent on any raw materials. Therefore the energy and
the predictions of the theory are free from market pressures (Manwell, McGowan & Rogers,
2010).
North Carolinian Situation
For North Carolina there is not only the dependence on this pressure, but it is also reliant
on neighboring states for all of the fossil fuel needs. There are no native reserves, even in the
western parts of the states. Therefore in precarious times as these, precious economy dollars run
longer in the local economy. There is always the points related with no pollution, hazardous
wastes or depletion of resources. The argument for native laws that prevent unsightly
developments on the Appalachians falls flat in the face of severe coal mining which is leaving a
ruin of ecosystem devastation in the Appalachians.
Thus far, with the technology at hand, the state is rated to be able to produce about 8
million Mwh of wind-generated energy. While this is only about 8 percent of North Carolina’s
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ECONOMIC THEORY
electricity needs, there are additional options that the state can resort to, to boost these numbers.
Some of these are crowd sourcing and offshore wind farms. The article only touches these
aspects cursorily.
Offshore Wind farms
Offshore wind farms add to the land potency for generation of wind power. Out at sea,
larger installations are of greater interest, because wind gets to pick speeds. The specially helpful
aspect is that due to these velocities, a wind farm need not be spaced out and pose a navigational
hazard. Sea wind farms are no longer than a few miles in length and breadth and no depreciation
in yield has been shown.
Crowd Sourcing
Crowd sourcing has been a rewarding strategy for some time now. Private land owners or
investors, that are willing to spare minimalist foot prints of their land for installation of a wind
mill are able to meet energy needs in their secluded or far flung areas while also selling extra
energy to the grid. This has minimized transmission losses and reduced energy reliance on the
grid, while developing local economies.
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Alignment between the Theory and the Article
New sources of property values have developed from these revenue sources, where
otherwise new industry is loath to come by. Jobs too have grown in these areas. The authors
have additionally presented in their analysis that for every 100MW of wind energy deployment
in the state of Minnesota, about $1 million in property tax revenue has come by. Direct lease
payments to the tune of $250000 per year has come to landowners as well. Infrastructure related
projects are liable to boom.
ECONOMIC THEORY
Comparative advantage is gaining in favor of wind energy for reasons not related to
technology as well. For example, conventional energy sources like wells in Texas are drying up.
As lesser production occurs, marginal costs are increasing. Deteriorating political scenario in the
middle east has also led to an increase in marginal costs. Comparatively, the wind energy
scenario is not affected by, lets say, climate change as much thus far. Additionally, waste
management, the authors say, with time is going to increase its marginal costs because of the
increase in the amount of this waste.
Environmental Issue Tackled
The environmental issue tackled here of course is that of pollution. Conventional energy
sources cause a variety of waste types to form. Disposal of waste has traditionally been an issue
with such energy sources. However, a matter of greater concern is the release of greenhouse
gases that have adversely impacted our climate systems and whose impact has only recently been
understood. Gradual adaptation of renewable energy sources will reduce our reliance on fossil
fuels and safeguard our environment (Nelson, 2009).
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It will also assist in slowing down global warming as fewer carbon emissions will occur.
Conclusion
The energy problem of today is related not with the magnitude of energy required or
meeting needs. It is instead focussed on ways of provisioning it with the renewable sources of
energy to minimize our carbon footprint. It is also concerned with reducing or entirely
eliminating pollution associated with energy production.
ECONOMIC THEORY
The authors in the concerned article have presented the merits of wind power and why it
fits the profile that North Carolina is looking for. The economic theory of comparative advantage
ensures that wind energy benefits from lower and lower marginal rates of production of wind
energy as technologic improvements come by.
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