energystretching-blog

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"Sign of times: Pilgrim Nuke Power Plant has reduced output & may have to shut down cuz water in Cape Cod Bay is too warm to serve as coolant" - @strobetalbott

https://twitter.com/strobetalbott/status/358271719137492992

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This is a blog about energy, not climate change. Still, it is important to take a look at the effects of increased energy use (meaning fossil fuel combustion almost universally) on our climate. Instead of looking a year at a time, which can be unreliable, the World Meteorological Organization put out a paper (found here) detailing the status of the climate.

Temperatures are increasing. Who would have guessed?

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From a climate change perspective, this is a little terrifying.

From a coal producer perspective in America, I want to start exporting coal.

From an economic perspective of a Non-OECD country, this is thrilling and cough inducing.

As a reference, in 2011, the United States used 3856 TWh of electricity. (EIA.gov)

Also, holy hydro power, Batman! Granted, this graph ends at the start of the Shale boom and that boom hasn't really hit overseas yet but it's still very incredible just how small the use of natural gas is compared to coal or hydroelectric electricity.

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The United Kingdom's London Array was brought online on Thursday, July 4th, the largest offshore wind farm in the world with 650 MW of capacity thanks to 175 Siemens 3.6 MW wind turbines.

Offshore wind could be great for small island countries like the UK and Japan or even emerging economies without a great deal of land. Unfortunately, offshore wind is still quite costly compared to other technologies, often proving more expensive than its onshore brethren.

But Prime Minister David Cameron does a good job of showing the importance of certainty in this kind of marketplace and how cultivating an environment for investment is the most important factor in terms of renewable energy production.

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Manufacturing is using energy more efficiently almost universally. Most likely this isn't merely from the recession, mind you, as the second year sampled is from before the recession.

Efficiency is the easiest and most effective way to save money and reduce carbon emissions. Wind turbines and solar panels may be sexy but efficiency is going to do the most to slow climate change in the slow term.

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Whenever I hear about the future of renewable energy, a part of me gets really excited and another erupts with frustration.

Replacing our legacy fossil fuel society with a renewable energy society will take time. Lots of time. It probably won't happen in my life. People may start to drive electric cars on a mass scale in the next 20 years but fossil fuels are going to have a dominant position for the foreseeable future.

Then I look at things like the MTREMR report, just released by the IEA. I read things like this:

"Many renewables no longer require high economic incentives. But they do still need long-term policies that provide a predictable and reliable market and regulatory framework compatible with societal goals" - Maria Van der Hoeven, IEA Executive Director

Renewables are getting there. We are on our way. The biggest problem at this point is intelligent, long-term policy considerations.

Get it together legislators.

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"We have only two modes - complacency and panic."

James Schlesinger, first Energy Secretary of the United States, on American oil supply problems.

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The EIA released this really awesome graphic showing the use of different energy sources over the history of the US. This is similar to another photo I posted but this is really useful for acknowledging how much the number one energy source has changed. Natural Gas overtook Coal in 50s while petroleum wasn't very big until the 40s. It's kind of nice to see renewables at the end starting to get up there but they have a long way to go compared to petroleum.

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Payment Design of Feed-in Tariff Energy Policies

In my last post I gave a brief introduction of the energy policy known as a Feed-in Tariff. This is the policy that most of the world uses to increase its renewable energy portfolio. Some states in the US have had success with RPS (like California) and more than half of all states currently have an RPS of some type in place. Feed-in tariffs can work in conjunction with RPS policies or on their own.

In this post I’ll be discussing payment design options for FIT policies. How to pay for the large investment required for society’s power needs has been a concern since the first energy utilities and Samuel Insull’s consolidation of them early in the 20th century. Insull’s strategy was to lower prices by spreading the cost across more people and using the economy of scale to reduce electricity prices. This approach led to the democratization of electricity throughout the world. Countries that consolidated their electricity companies saw electricity use skyrocket. It worked for more than a century and still works incredibly well today, helping create economies of scale and reduce transmission infrastructure costs.

Feed-in Tariffs are more distributed by nature. Large projects will continue to save money. However, a well-crafted FIT policy will allow for smaller projects. Given the inherent distribution of many renewable energy projects, FITs have inherent synergy with this type of energy distribution. You can install a few solar panels or a couple of wind turbines as opposed to a 500 MW wind turbine farm.

But let’s return to payment design. The National Renewable Energy Laboratory (NREL) proposes three different funding strategies:

1.     Ratepayer Funding

2.     Taxpayer Funding

3.     Supplementary Funding

Within these strategies exist more specific policies. 

In America, the idea of a taxpayer-funded approach creates another hurdle to implementation. Anything with the word “tax” is tantamount to treason. We are allergic to the very notion of increased taxes. Since there is no major gain to taxpayer funding through a segregated tax, I’m going to ignore this funding policy entirely. Why put implementation of the whole program in jeopardy for the funding policy?

Supplementary funding is just that: supplementary. That means we’re looking at ratepayer funding for American Feed-in Tariff policies.

Within this funding approach there are three strategies that have worked elsewhere:

1. Equivalent Distribution

2.Customer Differentiation

3.System Benefit Charge (SBC) Fund

The flowchart below shows the options a little better. This is one of the advantages to this type of policy. The authority charged with creating and operating this program has plenty of options to fit different political realities and established policy frameworks. 

Equivalent Distribution:

All ratepayers pay an additional percentage on their utility bill to pay for the entire State’s program. This eliminates the problem of free ridership.

Customer Differentiation:

This policy is more malleable than the equivalent distribution policy. Different categories would pay different additional percentages on their utility bills. Often there will be an exemption for low-income residents or high-energy industry that would be unfairly economically impacted by any FIT costs. Germany, for instance, exempts many of its industries from the additional costs of its Feed-in Tariff policies. The number of businesses that fall under this exemption has grown so large that the EU is looking into this exemption as being anti-competitive.

System Benefit Charge (SBC) Fund:

Under this payment scheme, energy users pay an additional rate on their energy per kilowatt-hour (ex. $0.006/kWh). This rate can be differentiated depending on the customer. For example, Boulder, CO offers a different rate for residential customers, industrial customers and commercial customers.

Equivalent distribution is the simplest of the three payment options as it is a flat percentage that would be applied based on the adoption of the FIT policy and the variable costs from different energy sources, sizes, etc. However, in any State that has a large manufacturing or energy-intensive industry base, this additional cost could have a large impact on competitiveness.

SBC Funds are inherently smaller in scale so this would be more appropriate for a State that wants to slowly implement a FIT policy. Equivalent Distribution payment policies can have unfair tendency (despite the flat level of cost). Personally, I’m a big fan of the Customer Differentiation model given a smaller country or state. This probably wouldn’t be as effective for a your China or Japan but maybe Pennsylvania, Utah or Korea.

Supplemental Funding:

Greenhouse Gas Auction Revenue – Think cap and trade. Others have written more complete descriptions of this than I can and such a policy is beyond the scope of this article.

Utility Tax Credit – Any utility that develops a renewable energy project will receive an exemption of a certain amount on its tax bill. Basic enough. This isn’t meant to fund the whole program but can offer an incentive.

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On Feed-in Tariffs

The Renewable Standard Portfolio is one of the most well known policy initiatives at the state level to improve renewable energy production. Yet RSPs are not what has lead Spain and Germany to become the solar capitals that they are. In Germany, 3% of electricity comes from solar (it constitutes 0.11% in the US) and 2.7% of electricity in Spain (as of 2010).

 What has been behind the incredible ramp-up in renewable electricity generation throughout Europe? Feed-in tariffs (FiT’s).

Feed-in tariffs are a little more complicated than RSPs and have quite a bit of variation amongst themselves but here’s the gist. The government sets a price for producing electricity from different sources, say $0.20/kWh for wind and $0.30/kWh for solar. Price can also differ based on project size and other factors. Private companies then build renewable power plants. This electricity is then sold to the utilities, which promise connection to the grid as well as a 10-20 year guarantee on the price. Sometimes this price is a flat number throughout the life of the power plant. Other times it is a premium over other electricity generation sources.

I’m going to go through FiT policy over the course of several posts in the next few weeks. There are a lot of options to consider and ways to implement this policy. Different policies will be better suited to certain places.

On the broad scale, feed-in tariffs have quite a few advantages over RSPs, especially in the current political climate of the US.

The largest opponents of renewable electricity in the United States tend to be conservative Republicans who see this as a pointlessly expensive luxury. Many of these same people are not convinced of the effects of greenhouse gas emissions on the climate.

In order to gain the favor of those on the political right of center, other arguments must be made. Renewable standard portfolios are top down government policy that creates mandates but offers little actual incentive. Messaging for FiT’s can be quite different. These policies are more business oriented, disrupting the monopolies of the large utilities and creating a more competitive market economy for electricity. There is definitely a share of government subsidy involved (or increased cost to utility customers depending on how the policy is implemented) but this can also reduce costs thanks to market forces and competing firms. These are arguments that typical enemies of renewable electricity can support somewhat more than RSPs and big government.

Furthermore, FiT’s are more distributed and make for excellent policy in states with more rural populations. Due to this distributed model, communities with little chance of receiving large investments of electricity generation may see smaller investments, helping create more defenders in a state legislature concerned with jobs more than climate change and environmental impact. 

RSP’s are a partisan issue. Essentially, unless there is a state like California where one side of the aisle has a great deal of control or environmental issues are important to both sides of the aisle, a new RSP is dead in the water, especially as many states are only starting to feel more secure financially after the great recession. FiT’s are not yet on the public mind. Rush Limbaugh has not mentioned them. President Obama hasn’t taken a stand. Mitt Romney probably doesn’t have a clue what they are. When an issue isn’t already partisan, much more work can be done.

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Gross World Product Growth and Atmospheric Carbon Dioxide Growth

Sometimes it's easy to get down about the carbon dioxide emissions. Hell, I'm driving in an SUV as I type this so I'm certainly part of the problem.

I think this graph makes me a little happier about our outlook, though. There's not a ton of data here, partially because certain data (Growth World Product, the sum of all GDPs in the world) only really go back this far. But it makes things seem a little less dire, nonetheless.

The blue line is growth in Growth World Product. The red line is growth in atmospheric carbon dioxide levels. Yes, growth in carbon dioxide levels is at a record high, having just reached 400 parts per million in the past month. And it compounds greatly. But it seems that, during years of increased global economic growth, there is not a direct correlative growth in carbon dioxide emissions.

Before I looked into the data, I thought I would find increased growth in carbon dioxide levels in years of extreme economic growth. I also thought I would find smaller carbon dioxide increases in years of slower growth. It seems that this just isn't the case. Maybe this means that the economy of the world can continue to increase without necessitating increased rates of greenhouse gas levels. A little bit of hope can go a long way.

This actually isn't too surprising. There are many ways to grow an economy and not all of them are predicated on simply making more stuff. Let's take the example of Google.

Google is worth $289 billion as of my writing this. Sure, Google makes a few smartphones and a few tablets and even a few laptops here and there. But Google's real value is in search and advertising. And while these do require massive loads of servers located all over the world, the value is in the software and the information, not in the materials. More and more, America (and other first world nations) are growing their economies through ideas and improved efficiency. These modes of growth are decoupled from necessarily emitting more carbon.

Granted, this  decoupling between economic growth and atmospheric carbon levels could also be due to other, more natural conditions. There's not an excess of data here. Let me hope, just for a little bit, that our renewable industries can reach price parity sooner rather than later, especially for economies that are growing rapidly right now, like Southeast Asia (China, India, Vietnam [Myanmar?]).

Sources: 

Carbon Dioxide Level Data - Dr. Pieter Tans, NOAA/ESRL

(www.esrl.noaa.gov/gmd/ccgg/trends/) and Dr. Ralph Keeling, Scripps Institution of OCeanography (scrippsco2.ucsd.edu/).

GWP Figures - International Monetary Fund

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If you're not reading Brad Plumer or following him on Twitter, I'm going to ask you to do something that someone in the media business would never, ever do. Stop reading this post right now and look him up. That said, Brad's post today about the battle for supremacy between coal and natural gas is excellent. Basically, because of higher than normal natural gas demanded this past winter, prices have risen. This has caused coal to regain some ground on the suddenly incredibly cheap gas. As such, coal generation has increased.

That said, the U.S. is still terribly short of meeting its Copenhagen Accord target in 2020. And it appears that any sort of carbon tax or cap and trade, at least at the national level, is completely out of the question.

But if President Obama wants to tackle climate change, he might just have all the power he already needs in the EPA. If they can label carbon dioxide as a pollutant, they can regulate its emissions. This could have huge ramifications for America's greenhouse gas emissions. Why can't he do it right now? Partly it would really hurt the spirit of bipartisanship that is making Washington such a wonderful place to work.

Also, the courts. But that could change.

Jonathan Chait of New York Magazine discussed the impediments of the carbon pollutant label and what President Obama is doing to change the courts. Essentially, the case would be heard by the Washington, D.C. court of appeals. Right now the court leans conservative but there are also three vacancies on the court.

Three. Of eleven.

Read Chait's article. If President Obama gets his way, and it certainly seems like he could if Harry Reid doesn't back out again we could actually see some movement on U.S. greenhouse gas emissions.

References:

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/05/28/coal-is-making-a-comeback-in-2013/

http://nymag.com/daily/intelligencer/2013/05/obama-to-senate-obstruct-this.html

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Let's cut the crap for a moment.

When people talk about "energy" they're really talking about fossil fuels. Competitive costs for renewables just aren't coming fast enough.

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"A range of studies finds that a barrel of oil sands adds about 5 to 15 percent more carbon dioxide to the atmosphere than an average barrel of oil used in the United States. The reason the difference is so small is that, by far, most of the carbon dioxide id produced by the combustion in an auto engine and comes out of the tailpipe." - Daniel Yergin

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The cost of developing Brazil's Santos Basin for drilling could cost half a trillion dollars or more. That's on par with the entire U.S. Interstate Highway system. But this would also allow Brazil to produce twice as much oil as Venezuela.

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No Bullshit: Reasonable expectations for energy costs in 2018.

Among those who push for renewable energy we hear about cost. Much of the time there is lots of talk about prices plummeting. Moore’s law is often cited in reference to the cost of solar panels. http://blogs.scientificamerican.com/guest-blog/2011/03/16/smaller-cheaper-faster-does-moores-law-apply-to-solar-cells/

But the U.S. Energy Information Administration released a report showing the total system levelized cost (based on 2011 $/MWh) of the various types of energy production in America in the year 2018. Yes, the fortuneteller was put to work on energy numbers. Thanks Obama.

The EIA makes some important assumptions, such as what amounts to basically a $15/metric ton of carbon dioxide tax. While such a tax as such is highly unlikely, we’re already seeing the costs seep into the coal industry in the form of tighter emissions regulations by the EPA so maybe they aren’t that far off. Anyway, here’s the chart.

  It looks like wind isn’t so bad, actually. Wind comes in third place behind Advanced Combined Cycle Natural Gas and Conventional Combined Cycle Natural Gas. Wind clocks in at $86.6/MWh. Solar is still struggling, despite the so-called Moore’s law reduction in costs. But Gas. That’s one cheap source of energy. $65.6/MHw. And if a majority of our emissions are going to come from emerging markets in the near future, China, India, Brazil, etc., then getting the cost of a renewable down to the absolute lowest number is going to be important in any fight against climate change. Remember, these assume conditions in America, not overseas where environmental regulations are much less stringent. Just look what a sunny day in Beijing is like.

So will we in trouble? We already are in trouble. The Earth is still going to fry. I'll probably be dead, though. At least wind power will be cheaper than coal.