Can Renewable Energy Solve the Climate Problem?

Geoffrey HealColumbia Business School

October 2010

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Two steps to stabilizing climate

• End deforestation• Decarbonize world’s electric power supplies– Deforestation causes 15-20% of GHG emissions

and can be stopped tomorrow with no new technologies, no massive investments

– Really is the low-hanging fruit

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Two steps to a stable climate

• 56% of CO2 comes from fossil fuel use of which electricity generation produces about 38% in total

• But with clean electricity we can replace most other fossil fuels – e.g. electric cars, heating, cooling, process heat

• So: if we can fix forests and electricity we can fix the problem

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Carbon-free power• Technologies available – – Wind– Solar

• PV • Thermal

– Nuclear– Geothermal– Wave– Fuel cells– CCS– Biofuels

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Levelized Cost of Electricity lcoe

• Constant price p per kWh at which the operation would just break even over its lifetime (assumed 40 years) where r is discount rate

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(Capx Opex)t1 r t

p *KWH t

1 r t1

40

1

40

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Levelized Cost of Electricity

• Want the p at which PV of revenues = PV of costs: so lcoe is

• Sensitive to discount rate and to assumed life• A long-run marginal cost

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p

(Capx Opex)t1 r t

KWH t

1 r t

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Base Load vs Load-Following

• Base load is the level below which demand never falls – level at night in the season (usually winter) when demand is lowest

• Load-following energy (dispatchable energy) is provided to follow the demand up and down during the day– Base load typically coal or nuclear – big plants

never turned off– Load-following is gas or diesel or renewable

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Figures from NREL. Much capacity is only used in summer.Some of that is only used for a few hours each day.Plants only used for a few hours daily in summer have highLCOE. NYC summer peak power may cost $2kWh

Texas load curves summer and winter

Base load

Cost Structures

• Fossil fuels (ff) have capital costs and fuel and operating costs – Coal – capital $1750/kW and then $40-$60/ton

coal– 2000 MW coal plant might cost $3.5b capital costs

and 10,000 tons coal daily – 25,000 tons CO2 daily - $0.5m coal daily = $182.5m annually or $7.3b over the life of the plant

– CO2 costs > = coal costs

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Cost Structures

• For electricity generation main fossil fuels are coal and gas.

• Prices fluctuate – – Driven by business cycle– Gas prices driven down by new discoveries of tight

gas– Some scope for green paradox here – but effect

reduced by renewable mandates such as US RPS

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Cost Structures

• Wind - $2,000kW and no operating or fuel costs

• 1gW wind farm costs $2b– Why is wind not cheaper than coal?

• Capacity factor – a 3MW turbine only produces 3MW when the wind blows > 20kph

• Generally turbines produce 0.3-0.4 of their max rated power – the capacity factor

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Cost Structures

• Capacity factor is critical as it determines how many units of output we can spread the fixed costs over – and operating life too

• Economics of solar PV is similar but more expensive – higher capital costs and lower capacity factor

• Solar thermal is different – heats fluid to make steam and drive a turbine– Can store heat & operate at night by storing hot fluid

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Cost Structures - Nuclear

• Currently unclear what is cost of new nuke• Capital cost estimates range from $2,500kW

to $10,500kW – Fuel costs are low

• At low end this is competitive but not at the top end

• Nuclear has social costs (melt down risk, proliferation, waste) > renewables

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ENERGY LCOEsTECHNOLOGY ASSUMPTIONS

FEDERALINCENTIVES

STATE INCENTIVES

+ CO2 Tax

>8.4¢/kWhVarious Reactors(MIT 2003,CEEPR

2009)

Loan Guarantees,

Price Anderson, Prod. Tax Credits

Some Tax Incentives, Some Plant constr. cost recovery.

6.2¢/kWhAir-blown PC Gener.

Tech (MIT 2007, 2009)

Incentives Only For Clean Coal

Tech.None

$25/tCO2: 8.3¢kWh

Plus 3-4¢/kWh To Coal

Cost

Coal Plant With CCS Tech

(McKinsey & Co. 2008/Heal)

Government Funds Future-Gen Project

RPS/RECs, Prod., Invest. Tax Incentives

3.6¢/kWh-8.3¢/kWh

CommerciallyMature (MIT 2006)

Electricity Prod., invest. Tax

Credits, Loan Guarantees, etc.

RPS/RECs, Prod. Invest., &

Sales Tax Incentives,

Others

4¢/kWh-7¢/kWh

Utility Scale Turbines (California Energy

Comm. ‘05)

Wind energy tax credit (Federal)

RPS/RECs, Prod., Invest. &

Sales Tax Incentives,

Others

7¢/kWh-15¢/kWh

Utility-Scale Silicon PV

(Solar Advisor Model NREL)

Loan Guarantees,

Energy Grants, Invest. Tax

Credits.

RPS/SRECs, Prod., Invest. &

Sales Tax Incentives,

Others

12¢/kWh-14¢/kWh

CSP W/out Storage (DOE 2007)

Loan Guarantees,

Energy Grants, Invest. Tax

Credits.

RPS/SRECs, Invest., Prod. &

Sales Tax Incentives,

Others

15¢/kWh- 19¢/kWh

Utility-Scale Parabolic-Trough

(Solar Advisor Model NREL)

Loan Guarantees,

Energy Grants, Invest. Tax

Credits.

RPS/SRECs, Invest., Prod. &

Sales Tax Incentives,

Others

6.5¢/kWhGas Powered Plant

(MIT CEEPR May 2009)

None None $25/tCO2: 7.4¢kWh

Nuclear

Coal

CCS

Geo -Thermal

Wind

Solar PV

Solar Thermal

Natural Gas

Solar Thermal W/STRG

Bottom Line

• Wind, geothermal are cost competitive – indeed their social costs are lower than FF

• Solar PV is close to competitive and solar thermal is expected to be < $0.10 shortly– Both types of solar have lower social costs than FF

• So can we expect the replacement of FF by wind, solar?

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Are Renewables Competitive?

• Incremental capacity in US is now almost all wind or gas (gas has 50% of GHGs of coal)

• Some existing power plants will be refired by gas

• And some gas used as baseload• But large-scale implementation of wind, solar

faces problem of intermittency

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Wind power fluctuates widely ….

From D Mackay, Sustainable Energy – without the hot airwww.withouthotair.com

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Figures from NREL for Texas. In Spring solar will cut in tobaseload, which is much less expensive and alsocostly to turn up an down. So some solar will bewasted leading to a lower capacity factor. Even whenthe sun shines it may not be possible to sell solar power

Solar output fluctuates too

National Renewable Energy Lab

Intermittency

• Need backup or storage– Currently gas used as backup in US, hydro in EU– Storage from pumped hydro, compressed air

energy storage, both geology-specific– Some grid-scale batteries – 32MWh in S Cal –

emerging technology

• Storage, backup adds to cost – about $0.01kWh

• Can’t provide baseload supply – except solar thermal, geothermal 21

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Pumped water storage

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Compressed air energy storage (CAES)

Availability

• Note that wind, solar require large land areas – EU could not meet its electric power needs in its own territory, though US can– Area size of California can generate enough from

solar PV to power entire US

• EU could import from N Africa – DesertEc project – or use nuclear

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Conclusions

• Electricity could be generated from renewables & gas, greatly reducing CO2, at no extra cost

• Within a decade it may be possible to deploy storage units, reducing use of gas as backup

• Nuclear is CO2-free – but expensive and cannot follow fluctuations in wind output

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Conclusions

• Decarbonizing will require vast investments – – US electric capacity is 1 Terrawatt– = 1,000,000,000kW @ $2000/kW@40% cap factor– = $5T for generation capacity, plus storage and grid

improvements @ $3m/mile

• About 40% of US GDP – over 2-3 decades• US could go fully renewable (assuming storage)

but EU could not – but could decarbonize with nuclear or renewable imports

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