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Energy Scarcity Economics Worksheet

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Energy Scarcity Economics Worksheet

Aotearoa New Zealand has limited resources and changing energy needs. Use the information and data below to investigate scarcity, choices, incentives and trade-offs. Show your reasoning; more than one solution may be defensible.

Scarcity and choices

A small coastal community is planning how to meet its energy needs. Use the scenario and data in each question.

1.The community has a limited budget, while residents want reliable electricity, affordable bills and lower emissions. Which statement best describes the economic problem?

There are limited resources to satisfy competing wants.
Energy has no cost if it is renewable.
Every resident can have everything they want.
Scarcity only affects people who use fossil fuels.

2.The community can spend its remaining $2 million on insulation for homes or a battery for storing electricity. If it chooses the battery, what is the opportunity cost? Explain what the term means in this example.

Energy choices in the community

The council compares two proposals. Treat the figures as estimates for this scenario, not national statistics.

Proposal

Upfront cost

Estimated annual output

Wind farm

$18 million

40 GWh

Gas-fired plant

$12 million

40 GWh

3.Which proposal has the lower upfront cost, and by how much?

4.A resident says, “The gas plant must be the better choice because it costs less to build.” Give one reason this conclusion may be incomplete, using an economic or environmental consideration.

5.The wind farm’s estimated annual output is 40 GWh. If poor wind conditions reduce output by 25% in one year, how much electricity would it produce that year? Show your working.

Prices, incentives and resilience

Energy markets respond to changing supplies and choices. Use the situations to explain likely effects, not to guess an exact price.

6.A dry summer reduces water stored in hydroelectric dams, while demand for electricity stays high. What is a likely short-term effect on electricity prices, and why?

7.The government offers a rebate to households that install efficient heat pumps. Which economic incentive does the rebate create?

It lowers the cost of choosing an efficient option.
It guarantees that electricity will never be scarce.
It makes household energy use impossible to measure.
It raises the upfront cost of every heating choice.

8.Match each energy source to the description that best fits it.

Hydroelectricity
Geothermal energy
Wind energy

Uses heat from beneath Earth’s surface
Uses moving air to turn turbines
Uses flowing or falling water to generate electricity

9.A town wants dependable electricity during dry periods and lower emissions over time. Recommend a mix of two actions or energy sources. Explain one benefit and one trade-off of your plan.