A public scolding about opportunity cost

The Environmental Valuation and Cost Benefit News reprints, I think, a press release from the Long Island Power Authority:

The Long Island Power Authority (LIPA) released a study prepared by Pace Global Energy Services evaluating the economics of its proposed 140 megawatt (MW) Offshore Wind Park.

Pace estimates that the project’s cost could reach $811 million, which includes the construction and financing costs, and the cost for the transmission cable needed to bring the power produced by the wind turbines to a land-based LIPA substation.

When compared with the cost of Long Island-based combined cycle natural gas-fired generating plant, the Pace study concludes that the “levelized green premium” for wind-generated power, when spread out over a 20-year period, would come to about $66 million per year or about $2.50 per month for the typical residential consumer who uses 775 kilowatt hours per month.

It contains this horrible, terrible analysis:

The Pace study, found that the costs for the proposed offshore wind project are in line with market expectations for North American offshore projects given the early stage development of such a market and the overall lack of a well-defined national energy policy to support these kinds of projects. Costs for developing offshore wind projects in Europe are considerably lower due to the experience in building such projects there and the government incentives offered for such alternative energy resources.

Please note that "government incentives" are also costs. The opportunity costs in Europe are not lower than in the U.S. due to these subsidies. The costs are simply shifted from the electric power industry and consumers to the general public. 

Comments

[joshua corning]

The opportunity costs

I think I use a different definition of "opportunity costs" then you do.

In real estate development opportunity costs are the loss profits you might have made if you invested your time and money in something other then what you are currently doing.

I could have done project B which would have made me X instead I am doing project A which will make me profit Y.

X is your opportunity cost.

[John Whitehead]

Joshua,

Same thing. Opportunity costs reflect lost alternatives. You can measure these as the value of the next best alternative, as you do, or as the value of all of the resources devoted to that activity. The measurement approach used is most times the most convenient.

[joshua corning]

Please note that "government incentives" are also costs. The opportunity costs in Europe are not lower than in the U.S. due to these subsidies. The costs are simply shifted from the electric power industry and consumers to the general public.

Oh ok...

So it is one of perspective.
In Europe, in the eyes of the power plant developer, the opportunity costs are lower because of the subsidies.
In the eyes of the taxed general public they are higher because they could have spent that money on health care or roads or never been taxed in the first place.