Full-cost analysis (FCA) examines both complete direct i.e. capital and operating costs and indirect i.e. environmental, health and social costs of private and public investments.
FCA, many of whose methodologies are still being refined, is a much needed tool to enable companies and policymakers to accurately determine the true ROI of projects. It will hopefully end the free ride 'enjoyed' especially by highways, airports and sprawl. And it should be used to carefully evaluate the power generation choices available.
It would be instructive to see the pricing at the end of the day between coal and where and how the coal is produced, tar sands and natural gas for electrical power. The environmental costs of blowing up mountains, creating huge tailing ponds and extraction and refining costs, and transportation and distribution expenses and their impacts i.e. trains, trucks, pipelines need to be put into the equations.
The same goes between fossil fuels, hydroelectricity and nuclear, all of which have their tradeoffs. For example, what are the true disposal costs of fly ash versus that of nuclear waste, per unit generated? FCA would allow power buyers to make effective decisions on where they get the bulk of their electricity.
There are also many nagging questions over green power especially as to whether it is truly environmentally sound. For example, small scale hydroelectric projects have been touted as alternatives to large ones.
Yet is this actually the case when FCA methodologies are applied, such as on construction of the dams and building new transmission lines? It is one thing to reuse an existing dam or dammed river near in-place distribution systems, such as on the Moira River in Belleville, Ontario; it is another to 'greenfield' a run-of-river plant in coastal British Columbia.
The same goes for wind and solar power. Do they cost-effectively produce the power for the investment and operating i.e. maintenance expenses required, for the land consumed?
Questions have been raised about ethanol thanks to FCA, and it is falling out of fashion as a result what with the trucks and trains to haul and the plants to process the material. It follows wood fuel that was also touted as an alternative energy source.
I got a perspective of wood fuel some 20 years ago when I worked as a reporter in a small British Columbia town. A power plant at the local sawmill that burned waste fuel often belched out soot. The particulate matter and other emissions from wood stoves and furnaces created harmful smog in local valleys in winter.
FCA also needs to be applied to smart grid strategies. I've heard the argument that smart grid investments makes sense where electricity costs are high i.e. Ontario and grid partners i.e. in Ohio are unstable as witnessed by the 2003 blackout, but the ROI may not be there in British Columbia or Manitoba where the rates are low and the infrastructure is stable.
FCA should also be applied when comparing how that energy is used i.e. power plants to create electricity for use in rail and urban transit or in internal combustion engines. That will help policymaker decide more accurately whether to go with clean diesel, CNG/LNG, hybrid, hydrogen and electrification.
Finally FCA should be applied to conservation versus added building or buying additional generation capacity. If conservation via changes in methods and processes, or investments in more efficient technologies proves to be comparatively cheaper then more people, and commercial and institutions will conserve. And that's win-win all around.