renewables, micropower, and the transforming electricity ...€¦ · power system—and what...

Renewables, Micropower, and the Transforming Electricity LandscapeByBennettCohenandAmoryLovins

OriginallypublishedinSolutions Journal,Spring2010http://www.rmi.org/rmi/RenewablesMicropowerTransformingElectricityLandscape

AtRMI,we’vebeenaskingour-selveshowtheworldwillgetitselec-tricity—nowthesourceofovertwo-fifthsoffossilcarbonemissionsandtherecipientofmostoftheworld’sinvestmentsinenergysystems.Overthenext50years,nearlyallcurrentlyoperatingpowerplantswillretire,sothefuturemaybeutterlydifferentthanthepastorpresent—andourlat-estdatastronglysuggestitwill. Everyday,utilitiesandemergingcompetitorsareplanningandbuild-ingtheassetsthey’llbeusingin2050.Trackingthosechoicesrevealstherapidlyshiftingcontoursofthefuturepowersystem—andwhatinvestorsthinkitmakeseconomicsensetobuildnow. Sincethe1970s,we’vetakenaspecialinterestinthesmaller,cheaper,faster,cleaner,andmoresecureelectricgeneratorsthattheEconomistcalls“micropower”:allrenewablesourcesexceptbighydrodams,pluscogeneratingelectricitytogetherwithusefulheatinfactoriesorbuildings. Cogeneration,alsocalled“com-binedheatandpower,”(see“Fossil-FueledCogeneration”sidebar)typi-callysavesupwardsofhalfthecost,fuel,andemissionsofmakingthemseparately. In2002,wepublished“SmallisProfitable,”anEconomistbookoftheyearthatremainsthedefinitiveworkonmicropower’shiddeneconomicbenefits.In2005,webeganpostingandupdatingtheonlydetailedpublicdatabaseofglobalprogressindeploy-ingmicropower. Nowourlatestupdateconfirmsmicropower’sremarkableaccelerationintakingovertheglobalmarketlongdominatedbycentralthermalsta-tions—coal-orgas-fired,nuclear,andbighydro.Thisdramaticshiftaugurswellfortheworld’scleanandsecureelectricityfuture.OurMay2010updateincludes

datathrough2008or2009(depend-ingonavailability),andtransparentlyrecalculatescogenerationcapacityand

outputfromtheprimarydatasources.(Seetheverylatestmicropowerdata,updatedinSeptember2010.) Alldatasources(see“MicropowerData”sidebar)andassumptionsaredocumented.Thedataaresubjecttoinevitableuncertainties,butarebasedingeneralonbottom-upequipmentcountsprovidedbyindustry,andcross-checkedwherepossibleagainstgovernmentoutputmetrics.Thetotalsareprobablyconservative,becausethecogenerationcapacityandoutputshownareknowntobesignificantlyundercounted.Wewillcontinuetoupdatethedatabaseasnewinformationarrives. Theemergingmicropowerrevolu-tionismakingnewelectricitylesscarbon-intensive,fastertodeploy,oftencheaper.Newpowerplantsareincreasinglybeingchosenbyentre-preneursandinvestorsratherthanbycentralplanners,drivingashiftto-wardsmallerandcleanerplantswithbettereconomics.Fasterconstruc-tionreducesfinancialrisks.Shorterdecisioncyclesbettercapturerapidtechnologicalevolutionandfallingcosts.Allthesetrendsheightencom-petitivepressureonbig,slow,lumpyprojectswhosegreaterfinancialrisksareclearlydeterringinvestors. Thechangingelectricitylandscapedependsonplantconstruction,retire-ment,andoperations.Thelatterisimportantfornuclearpower,whichduring1990–2006increaseditsglobalcapacityby44GW(13.5percent)butitsoutputby757TWh/y(40percent),duetothecombinedeffectsofnewconstruction(36percent),uprating(7percent),andimprovedcapac-ityfactorsthroughbetteroperation(57percent).Meanwhile,though,micropowerpulledaheadofnuclearpower,outproducingitin2008by25.8percentandin2009by34.1percent.

The Rise of Renewables Acommonargumentagainstre-newablepoweristhatitcan’tpossibly

Fossil-Fueled Cogeneration Combined heat and power (CHP) is sometimes fueled by biomass, like black liquor and hog fuel in pulp-and-paper plants or sawdust and scraps in furniture factories, but it’s primarily fossil-fueled. So why would RMI, whose focus is to speed the U.S. transition away from fossil fuels to effi ciency and renewables, be excited about the market adoption of smaller fossil-fuel-fi red generators? The answer is cogeneration’s radical effi ciency. Traditional power plants convert one-third of their fuel into electricity and two-thirds into waste heat. Cogeneration uses both. Often industrial heat made to run a manufacturing process can also make electricity, even from leftover high-temperature heat that is being expensively disposed of, but without using any more fossil fuel. Or small generators in buildings can heat or cool them with heat left over from making electricity. Such methods typically save at least half—often two-thirds or more—of the fuel, emissions, and cost of making electricity and heat separately, Moreover, most cogeneration is gas-fueled; gas is often more effi ciently burnable than coal and emits only half of coal’s carbon per unit of contained energy. Thus the International Energy Agency reckons that accelerating CHP could save 10 percent of global CO2 by 2030. The most effi cient CHP systems can exceed 90 percent effi ciency from fuel to useful work. Replacing, say, America’s 920 oldest coal plants with modern combined-cycle gas plants, then using most of the other 40 percent for district heating, would cut their CO2 emissions by more than three-fourths, save money, and help nearby city-dwellers’ pollution-assaulted lungs. The gas-fi red cogen system would still be fossil-fueled, but a great improvement, surpassed only by—and competing with—superinsulated, supereffi cient buildings and renewable electricity.

beeconomicallycompetitivewithlargecentralthermalpowerplants,because,afterall,renewables(exceptbighydrodams)provideonly2percentofworldelectricity,versuscoal’s41percentandnuclearpower’s13percent.Ifrenewableswerecom-petitive,we’retold,they’dproduceagreatershareofworldelectricity.Butthesesharesreflectthetechnologies,costs,costdistortions(chieflylargesubsidiestofossilandnuclearplants),andinstitutionalpreferencesandbar-riersofdecadesago.

Toseethegreatwaveofchangestart-ingtosweeptheglobalelectricitymarket,weneedtolookatdifferenttechnologies’marketshareofnewelectricitygeneration,reflectinginvestors’andbuyers’choicesundertoday’sverydifferentconditions. CoalmakesnearlyhalfofU.S.electricity(45percentin2009whennatural-gaspriceswerelow),butthemedianU.S.coal-firedpowerplantis41yearsoldwhenweightedbyunit,or30whenweightedbycapacity. Sowhat’sbeingboughttoday,notdecadesago?Notcoal. In2009,windandotherrenewablesaccountedfor42.2percentofallnewU.S.generatingcapacity,whilegasaccountedfor43.3percentandcoalforonly12.6percent.TheU.S.installed10GWofwindpowerin2009alone—nearlytwicethe6GWofcoaladdedduringtheentiredecadeof2000–2009.

Coalstilldominatesinstalledcapacityduetodecades-olddecisions(becauseoflongleadtimes,eventhecoalplantsnowenteringservicereflectdecade-olddecisions),butcoal’sU.S.andE.U.marketshareisnowdwin-dlingbecauseinvestorsareinsteadchoosingtobuildrenewablesandnaturalgaspower.Europein2009closedmorenuclearandcoalcapacitythanitadded.EvenChinahalveditsnetadditionsofcoalcapacitydur-ing2006–2009,reducedthecoal-firedshareofitstotalelectricityproductionbyoneandahalfpercentagepointsin2009,andisplanningonlyaboutfive-eighthsofits2010netadditionsofelectricalcapacitytocomefromcoal(nearlyalltherestisrenewable). Early2010datasuggestthistrendwillaccelerate.AccordingtoNewEn-ergyFinance,aleadingenergyindus-tryinformationproviderthattrackstheworld’sindividualclean-energytransactions,theworldinvested$27.3billioninrenewableenergyduringthefirstquarterof2010,up31percentfromthesameperiodin2009.

Smaller Is Better Partofthereasoninvestorsarefavoringrenewablesoverbigcentralthermalpowerplantsisthatrenew-ablesentailmuchlessfinancialriskandarequicklybuiltandstartedup.Mostcoalplantsarebeingcancelledorpostponed,whilerenewablecapacityisburgeoning—andmuchofthe2013renewablecapacityadditionsaresoquicktobuildthattheywon’tevenbeannounceduntil2011–2012. Attheendof2009,270GWofproposedU.S.windcapacity(notallfirmlyplanned)wasstuckinthequeueawaitinginterconnectiontothegrid,oftenresistedbyrecalcitrantcoal-firedutilitiesthatdislikecompetition.That’senoughwindpowertodisplacenearlyhalfofU.S.coal-firedelectric-ity,athalfthecostofpowergeneratedbyanewcoalplant.AndinTexas,thetopwindpowerstate,17percentofpotential2009windgenerationfromalready-installedturbineswascurtailed,oftenbylackofavailabletransmissioncapacity. RenewablesaregainingmarketshareevenfasterinEurope(seebe-low),accountingfor71percentofnewelectriccapacityaddedin2009.Ofthe31percentfromnaturalgas,too,asignificantfractionwasdecentralizedcogeneration.

Micropower = Renewables + Cogeneration (Except Big Hydro) Butthe“fuelstory”—thetransitionfromfossilfuelstorenewables—isonlyoneoftheshiftstransformingtheelectricitylandscape.Equallyimpor-tantisthe“scalestory”—thetransitionfromlargetosmallscale,andawayfromgiantcentralthermalplantstomicropower. Micropoweristypicallymodular,quicklydeployable,andfinanciallylower-riskthanlargecentralthermalplants.Itmayhavealotofcapacityclusteredtogether,likeawindfarmwith100-plusturbinestotalinghun-dredsofmegawatts,butitseconomiescomechieflyfrommassproductionofmodularunits(suchasindividualwindturbinesorsolarpanels)ratherthanfromthegargantuansizeofsingleunits.

Micropower Data Tracking micropower’s progress requires a considerable effort to combine many disparate data sources. One other independent organization—an important global network of renewable energy experts—annually updates its database on renewables. Until 2006, the World Alliance for Distributed Energy published an annual assessment of cogeneration plus small-scale wind and solar generation. We are unaware of another organization that compiles and publishes both cogeneration and renewables as RMI does. We suspect that, following a 2008 G8 communiqué directing countries to “...adopt instruments and measures to signifi cantly increase the share of combined heat and power in the generation of electricity” and the establishment of a special CHP working group at the International Energy Agency (IEA), better international cogeneration data will become available. In the U.S., the Energy Information Administration already began tracking industrial and commercial cogeneration in 2008, although an IEA report shows nearly twice as much installed capacity. Some central-station-oriented organizations, chiefl y in the nuclear industry, reject our data out of hand because their databases don’t show much if any micropower. That’s because they’re consulting databases confi ned to utility-owned or large units or both, and often excluding the newer kinds of renewables. Looking at the wrong database can be a bet-your-company mistake.

In2008,micropowerproducedabout17percentoftheworld’stotalelectricity,3percentagepointsmorethanitssharein2002.Nuclearpower’ssharemeanwhilefellbyslightlymore,andaccordingtoInternationalAtomicEnergyAgencydata,probablyfelltoaround13percentin2008andevenlowerin2009(Fig.1).Wedonotyetknowexactlyhowmuchelectricitytheworldgeneratedin2009,sowecan’tyetconfirmmicropower’s2009shareofthattotal,butitprobablyexceeded2008’sshare. Evenmoreimpressively,micro-power’sshareoftheworld’snewelectricity,hoveringaroundone-fourthormoresince2002,appearstohavesoaredto91percentfrom2007to2008asadditionalgenerationfellby63percentintheglobalrecession(Fig.2).Thisfigureisfuzzybecausethedenominatoristhedifferencebetweentwobignumbers,anddifferentsourc-es’statisticalseriesdiffer.IfweusedtheIAEA’sinsteadofBritishPetro-leum’sdenominatorfor2007and2008,micropower’sshareofnewgenerationwouldbeonly64percent,butitsshareoftotalgenerationwouldn’tchange.(Thetwoorganizations’generationtotalsmatchexactlyfor2008butnotfor2007.)

The2009data,whichRMIwillpostwhenavailable,mayalsoshowahighmicropowershareofnewgenerationbecausemostrenewablesresistedtherecessionbetterthancentralplantsdid.However,resumptionofreces-sion-suppressedgrowthinelectric-itydemandcouldsomewhatreducemicropower’sshareofnewgenera-tionaddedinthenextfewyears.Forexample,its2008addedgenerationwas36.5percentofthetotalaverageannualincreasesduring2005–2007.Butthat’sstillimpressive,andcom-pareswithnuclearpower’sshareoflessthan1percent.

Micropower’s Recent Impressive Achievements• In2006,micropowerproduced

16percentto52percentofallelectricityinadozenindustrialcountries—notincludingtheU.S.(~9percent),whoserulesfavorincumbentsandtheirgiantplants.Nuclearpowerworldwideadded1.44GW(onebigreactor’sworth)ofnetcapacity—morethanallofitfromupratingoldunits,sincere-tirementsexceededadditions.Butphotovoltaicsaddedevenmorecapacity;windpower,tentimes

more;micropower,30to41timesmore.Micropowerplusefficiencyprobablyprovidedoverhalftheworld’snewelectricalservices.InChina,theworld’smostambitiousnuclearprogramachievedone-sevenththeinstalledcapacity(7GW)andone-sevenththegrowthrateofChina’sdistributedrenew-ables(49GW).

• In2007,theU.S.,Spain,andChinaeachaddedmorewindcapacitythantheworldaddednuclearcapacity,andtheU.S.addedmorewindcapacitythanitaddedcoal-firedcapacityduring2003–2007,inclusive.Chinabeatits2010windpowertarget.

• In2008,Chinadoubleditswind-powerforthethirdyearinarow.Windpowerpulledaheadofgas-firedcapacityadditionsforthefirstyearintheU.S.andthesecondyearintheEU;inboth,renewablesaddedmorecapacitythannonrenewables.Thatplus~$40billionforbighydrodamsbroughtrenewablepowerproduc-tion,forthefirsttimeinaboutacentury,moreinvestmentthanthe~$110billioninvestedinallfossil-fueledpowerstations.

• In2009,theU.S.addedanother10andChinaanother13GWofwindpower.

• Inspring2010,Chinashouldbeatits2020windpowertarget,andaroundtheendof2010,renew-ables(excludingbighydro)shouldsurpassnuclearpowerintotalcapacity,overtakingitinoutputsome4–5yearslater.

• Developingcountriesin2008had43percentofrenewables’globalcapacity(excludingbighydro),headingforthemajority.AmajorAsianshifttorenewablescouldshrinkglobalcoaluse,because97percentofincrementalcoalde-mandisinAsia:ChinaandIndiausenearlyhalfofworldcoalandhad75percentofworldcoal-firedcapacityunder2008construction.Thisshiftisstartingtoemerge:China’snetrateofaddingcoalplantsfellbyhalfduring2006-2009Chinaalsoshutdown62GWofinefficientoldcoalplantsduring2005–2009,planstoclose31GWmoreby2011,andap-

pearstobecoolingitsoverheatednuclearambitionswhileaccelerat-ingefficiencyandrenewables.Thenew2020wind-and-PVtargetisreportedly~120GW,andaTsing-hua/Harvardteamfoundin2009thatChinacancost-effectivelyandpracticallyprovidetwiceasmuchwindpowerasitstotalcurrentelectricityuse.

The Bottom Line Centralthermalpowerplants—nuclearorfossil-fueled—arerapidlylosingshareintheglobalmarketplace,andfiercecompetitionisincreasingtheiralreadydauntingfinancialrisks. Newpowergenerationismov-ingphysicallyclosertocustomers,avoidingnewtransmissionlinesandpotentiallymakingpowersupplymorereliable.IntheU.S.,forexample,approximately98to99percentof

powerfailuresoriginateinthegrid,andonsitegenerationbypassesthiscauseofoutages. Newwaystodiversify,forecastandintegratevariablerenewables(wind-powerandphotovoltaics)intothegridcanletthemachieveveryhighsupplyfractionswithoutneedingbulkelectricitystorage. Inall,theshiftofbothsourceandscaleisrevolutionizingtheelectricitybusiness—theworld’smostcapital-intensiveandcriticalinfrastructuresector—beforeoureyes.