[Terrapreta] Net Present Value vs. Net Future Value of Terra

[MMBTUPR at aol.com]

          from          Lewis L Smith

When we talk about "subsidies" for renewable energy, terra preta et cetera, 
we must remember that the market prices of fossil fuels do not reflect the full 
cost of their combustion to Country X taken as a whole, that is "Country X, 
Inc.". So it well may be that the recipients of "subsidies" are actually being 
compensated for the "hidden costs" of fossil fuels which they eliminate, and 
maybe not to the full degree that they should be.

In Puerto Rico, for example, I have identified five hidden costs of petroleum 
fuels   >>>

At any time   >>>

[1]     The damage to the health of human beings and the increase in the 
maintenance cost of buildings, equipment and machinery due to environmental damage 
which these fuels cause, EVEN WHEN all environmental regulations are complied 
with. I estimate that this hidden cost is at least $12 a barrel or at least 
two cents per kWh on the bus bar, assuming 600 kWh per barrel.

[2]     The cost of managing a budget and cash flows when the operations of 
an organization are subject to unexpected price spikes and supply delays or 
interruptions. For example, the unexpected appearance of a succession of very 
large energy bills may   at some point force an organization to borrow 
temporarily from a bank.

[3]     The cost of lost sales from the "motor" sectors of ones economy to 
outsiders or sales which would otherwise have substituted for imports into that 
same economy, because of the high cost of energy faced by local producers of 
goods and services.

[4]     The cost to ones economy of businesses which do not establish 
themselves in ones country, because of the high costs of energy.

In "normal times"   >>>

[5]     An imputed premium on a virtual insurance policy against oil-price 
spikes. I estimate this to be at least 29% of the "normal" price of crude, for 
countries without own oil production. For example, if that price is taken to be 
$60 per barrel, then the premium is $17.40 or 2.9 cents per kWh.

I have no way at present of estimating items [2] through [4] for any economy, 
including ours.   However, my gut feeling is that in Puerto Rico the sum of 
these three items is at least 30% of the sum of [1] and [5].   This would give 
us a total of hidden costs of at least $38.22 per barrel in normal times, or 
6.4 cents per kWh.   

This latter figure is 70% of the highest "avoided cost" recognized for any 
renewable-energy source by our PR Electric Power Authority.

So you see, it doesn't really matter what the true figures for hidden costs 
are. The minimum estimates are high enough to change a lot of decisions about 
the "feasibility" of renewable energy project and to change many alleged 
"subsidies" into "incomplete compensation" for services rendered to the local 
economy.

Cordially.   ###


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