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Transcript of Wind Farms
Windmills are used to convert wind energy to a useful form of energy such as mechanical power and form an alternative fossil fuel. The produced energy is renewable, widely distributed, clean and produces no greenhouse gas emissions.
The wind turbines are built closely together in order to produce more electricity. The larger the towers, the more electricity that can be made. It is important that the wind farms are located in areas with strong and steady winds which are usually tops of rounded hills, coastal areas and gaps around mountains.
Merit goods are goods that are underprovided by the market and therefore, under-consumed by consumers. The cost of production of wind turbines is high which means that not all countries will invest in the production of renewable energy. Therefore the wind turbines are under- produced; since the wind farms will be beneficial for the society as a whole, we can call them merit goods. Externalities What is a Wind Farm? Externalities:An externality occurs when the production or consumption of a good or service has an effect upon a third party. If the effect is harmful, the externality is negative. If the effect is beneficial, it is a positive externality. Each externality is split into two groups; consumption and production.
Negative externalities of production occurs when the production of a good or service creates external costs that are damaging to third parties. The marginal social cost of production is greater than the marginal private cost.
Positive externalities of production occur when the production of a good or service creates external benefits that are beneficial for the third parties. In this case, the marginal social benefit is greater than the marginal social cost. • Wind turbines create no greenhouse gasses, therefore create no pollution. Aside from creating a clean enviroment to consumers and producers, the non-polluted enviroment is also beneficial to the people who don’t consume the renewable energy created by windmills and other living creatures (in this case, the third party.)
• Even though wind farms require a spacious area, the windmill itself covers a small proportion of the land individually, meaning the rest of the land could be used for agricultural reasons by farmers who make up the third party.
• Regions that are not connected to the electricity power grid can use wind turbines to produce their own supply instead of getting their power shipped. The government no longer has to spend their money for shipment or purchase of energy and can use the money instead to build more wind turbines or other merit goods.
• The suppliers of wind turbines gain high profits becuase in order to produce the significant amount of energy, the quantity and size of windfarms need to be immense.
As the use of wind farms is widely spread, more electrical energy will be produced, which means that the electricity industry will have the chance to become productively efficient. In this case, the third party is the other industries that produce complementary goods to electricity such as electrical car producers. If the production of electricity increases by the increased use of windmills, the price of electricity could fall, which results in an increase in demand for any product that is complementary to electricity. Positive externalities of production in Wind Farms • The effectivity of wind farms can be reached by building a great quantity of wind turbines. A few wind turbines wouldn’t be sufficient in order to reach the necessary amount of electricity. However, this means that a great deal of land will be covered, destroying the habitats of various species including onshore and offshore. This also restricts the possible areas for agricultural activities, lessening the possibilities for farmers.
• The manufacturing of wind turbines can create pollution, also causing the destruction of nature which affects the health of the people who don’t consume the products as well as consumers and producers.
• While the wind turbines function converting energy, they generate sound at a low frequency because of the aerodynamic swoosh of blades. The numerous quantity of the turbines result in a high impact of noise, contributing in the formation of sound pollution. This results as a disadvantage for everyone.
• Since the wind turbines need to be capacious, the impact of the negative externalities become greater.
• The wind turbines are considered an ugly sight that disturbes the nature; the people that don’t consume the electrical energy from the turbines are forced to see the wind turbine (tourists,locals...) Negative Externalities of Production in Wind Farms • Various diseases that generate from pollution will be less occurring because of the decrease in the use of pollution emitting sources.
• As more wind energy gets used, the demand for coal decreases which will cause a decrease in the price of coal. Therefore, poorer people are now able to buy coal.
• As the consumption of wind energy increases, less polluting resources will be used, therefore decreasing the pollution made, resulting in a benefit for social welfare. Positive Externalities of Consumption in Wind Farms Negative Externalities of Consumption • Vehicles or machines that work with pollutive sources (such as petroleum) willhave a decrease in demand. This is a disadvantage for the producers in this industry who is the third party in this case. The Government Role - Solutions Subsidizing: The production of wind turbines is more expensive than the production of non-renewable energies because of the costs of production. This means that firms can be in need of assistance by the government to stay in business. When the government subsidizes the firms with money or by supplying parts of wind turbines for the manufacturing process, the supply can be increased. Hence, the price of the converted energy from the wind farms will fall and more people will be able to afford this energy. However, it could be hard for the government to predict how much subsidizing is necessary for individual firms and the money spent by the government to subsidize these firms will prevent the government from spending in other areas.
Setting up Training Centers: It is most likely that some people are not aware of the importance of using renewable energy. If the government informs the citizens about the pollution and the consequences of the pollutions of the fossil fuels, they might understand the importance of clean energy and start using wind energy. The problem about this service that the government could provide will be that trainers could lack the expertise or the cost of this process will be high which can dissuade the firms from investing in the education process. Evaluation The global enviromental concerns have risen the use of renewable energy sources such as wind energy. Wind farms are crucially important because of the contribution they make to the prevention of the mass destruction in the world. Even though the negative externalities of production are quantitatively higher than the positive externalities of production in this case, enforcing the use of wind farms must be prioritised because of the social welfare gained by the decrease in pollution, green house emmiting gasses and global warming with the use of wind energy. The positive externalities of production are qualitatively more important globally than the negative externalities of production; even though continuing to produce means that the producers of wind energy will have a decrease in their revenues, it is critical that pollution must be prevented. Currently there is enough supply of petroleum to reach the demand of the consumers. However, petroleum is a non-renewable source of fuel, meaning an alternative energy has to be discovered. Wind energy produced by wind farms is a good alternative. It is renewable and does not pollute the environment. The problem we face at the moment is the fact that the production of this source is expensive. Therefore many countries choose not to use wind farms. However, if the countries would invest money in the short-run, they would benefit from this investment in the long-run. This is because petroleum is a non-renewable source, meaning the supply will decrease in time and the prices will therefore increase. As this source becomes rarer and more expensive, people will choose to buy a cheaper alternative energy; wind energy. The production of wind energy is relatively cheap compared to the production of energy from fossil fuels and the manufacturing of the wind farms. Hereby in the long-run the demand for wind energy will increase and therefore the revenue of the producer of the alternative energy will also increase. At the same time in the long-run less greenhouse gases will be emitted, because the demand for wind energy will increase. As the demand increases more wind farms will b built. As this has been done the supply will increase, the prices will fall and more people will be able to afford this environmental friendly energy.
Also, if each country can afford their own wind farms, they will be able to produce their own energy. This means that the government won’t have to pay for the import of energy, so the money being saved can be used for other merit and public goods. In the long-run this investment will be worth it and all expenses made to build the wind farms will be covered. Positive Externality of Production Negative Externality of Production Positive Externality of Consumption Negative Externality of Consumption Pareto Optimality When a market is in equilibrium, with no external influences and with no external effects, it is said to be in a state of Pareto Optimality. In this case: it is impossible to make someone better off without making someone else worse off.
In the beginning the market produces at the point where MSC is equal to MSB.At this point it is said to be socially efficient.