Where will the clean energy come from?

Last week, the president proposed a new push to reduce GHG. It’s not clear how (or if) the Congress will go along, or how much can be legally accomplished without legislative support.

One of the major targets is, as expected, coal generating electricity plants. Obviously the coal miners and the coal-intensive electric companies would try to push back, but again, it’s unknown how successful they will be. It’s also not entirely clear what the point of reducing US coal consumption is, if the entire US consumption is about a billion tons while Chinese demand has risen from 3 to 4 billion tons in only 5 years and India is also increasing coal generation.

That said, if the plan (or some other approach) succeeds in getting rid of US coal plants, where will the replacement electric generating capacity come from?

Hydro is maxed out, and wind and solar can only ramp so quickly. The remaining no-CO2 option is nuclear, but it’s becoming increasingly uneconomic. As the WSJ reported last week:

Nuclear power produces two-thirds of the nation's emission-free electricity, but that industry is in the doldrums now because of slack power prices in deregulated markets and generally low demand for power. The plants also suffer from high fixed costs.
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Dominion Resources Inc., D +0.60% a big owner of nuclear plants and utilities, shut down its Kewaunee nuclear plant in Wisconsin last month because it can't operate it profitably in the current energy environment. "Longer term, nuclear has to be a major part of the solution," said Tom Farrell, chief executive of Dominion, which is based in Richmond, Va.

Nuclear is plagued by high capital and other fixed costs, despite low variable costs. With natural gas prices plummeting, it’s hard to see how it will ever be cost-competitive again.

Natural gas generates half the carbon emissions of coal plants, but that’s still more than zero. Fixed costs (and nuclear waste) aside, nuclear would be a better GHG solution but one that seems increasingly out of reach.

Natural gas: the cleanest practical alternative

The bad news for adoption of renewable energy generation is that natural gas is increasingly cheap and requires relatively small capital investments.

The good news is that natural gas is increasingly cheap and requires relatively small capital investments.

A great discussion of the latter perspective can be found in the fall newsletter of the MIT Energy Institute. In summarizes “The Future of Natural Gas,” a report summarizing a two-year MITEI study.

Some excerpts of the newsletter article:

“Much has been said about natural gas as a bridge to a low-carbon future, with little underlying analysis to back up this contention. The analysis in this study provides the confirmation—natural gas truly is a bridge to a low-carbon future,” said MITEI Director Ernest J. Moniz in introducing the report.

Moniz further noted, “In the very long run, very tight carbon constraints will likely phase out natural gas power generation in favor of zero-carbon or extremely low-carbon energy sources such as renewables, nuclear power, or natural gas and coal with carbon capture and storage. For the next several decades, however, natural gas will play a crucial role in enabling very substantial reductions in carbon emissions.”

To cut to the quick, the best way to reduce carbon emissions is to find a way to retire the dirtiest coal-powered electric plants, and the only way to do that in the near term is to replace them with natural gas. The MIT researchers assume the switch will be complete by 2050.

The price of natural gas has been quite volatile over the past 40 years, so let’s hope for the sake of the economy — and the environment — that it remains cheap enough to enable such widespread adoption.

California has already gone down this path, with (according to 2008 EIA statistics) natural gas accounting for a majority (57.7%) of the state’s electricity generation. For the rest of the country, coal accounts for the plurality (48.2%). Unlike our current fiscal fiasco, this is one case where California remains a model for the rest of the country.

EVs' dirty clothes

The assumption of those buying, selling and seeking subsidies for EVs is that they are somehow cleaner than existing internal consumption engine cars.

The premise has numerous largely unexamined assumptions. One is that the alternatives are a stationery target — that there’s no progress on competing technologies (e.g. hybrids, diesels, fuel cells, etc.). Another is accounting for the energy cost of creating the batteries and the pollution cost of disposing of them.

And — as with any environmental investment — there is the question of whether this is the most efficient way to spend billions or trillions to save the planet. If (hypothetically) it takes $5 trillion to replace the global transportation infrastructure to not emit carbon but only $1 trillion to sequester carbon, couldn’t that extra $4 trillion be used to cure malaria, provide safe drinking water, or other alternatives that improve the health of the planet and its residents?

However, these are second-order arguments that don’t seem to be getting traction.

A much simpler argument is: is generating (and distributing) the electricity to the new generation of EVs cleaner than currently available gasoline-powered cars?

Increasingly, evidence suggests that the answer is “no”. As I noted last May, outside of New Zealand, few countries have green enough aggregate energy generation to reduce CO2 emissions if you shift from gasoline to grid power.

If you look a little deeper, the US picture is even worse. There are two types of electricity — cheap baseload and expensive (or more variable) peak load, used when lights are on and air conditioners are running. Solar obviously is a daytime peak load source, natural gas (the cleanest fossil fuel) is expensive and used only at peak load, and who knows when wind will be available.

However, smug homeowners with their non-polluting EVs are plugging into the grid at night, when there’s no solar. According to John Petersen (writing at Renewable Energy World) those kilowatt-hours will come from baseload power — which in the US means either coal or nuclear power. His article draws on a 2008 Rand study of the lifecycle comparison of HEVs vs. PHEVs.

The Rand study says that if you use natural gas to generate electricity, a PHEV is cleaner than a HEV but if you use coal it’s dirtier. (What about CNG cars? Petersen doesn’t say). Running coal plants to charge “clean” EVs is obviously somewhat of a contradiction in strategies.
From my analysis of 2008 EIA data, coal accounted for 48.2% of US electricity consumption and nuclear 19.6%. (In California, it’s 57.7% natural gas, 15.6% nuclear but only 1.1% coal.) Of course, shifting transportation from liquid fuels to the grid would require incremental increases in electricity generation — retiring fewer coal plants or even building more of them.

The one gap in Petersen’s analysis is that hydro can be shifted to be used whenever power is needed, so that increased electricity consumption at night could be fed by hydro. Of course, that takes away from its availability at (the more valuable) daytime peak load. More seriously, US hydro is only 6.2% of consumption and pretty much capped in absolute terms.

So this comes back to the fundamental systemic innovation problem: changing our century-old transportation system to be more green is complex and expensive. If we don’t use market forces — or distort the market by favoring one approach over another — there are likely to be suboptimal choices made.

In this case, it appears that it would be better to shift the grid to renewable energy first, and then put cars on the grid, than to add EVs to the grid at a time when renewable energy is a relatively small part (<10%) of our electricity supply. The only encouraging news is that when they spend their own money, consumers are thus far resisting the EV hype machine and going with more economically efficient alternatives.

Profiting from environmental catastrophe

The Chicago Climate Exchange has collapsed and is going out of business. It originally announced last month that it was scaling back, but now the plans are apparently to close up shop in December.

The exchange was created to trade carbon emission credits, in anticipate of a US cap-and-trade bill, but the bill died in the 111th Congress and its prospects are non-existent in the 112th.

Popular Science sees this as a bad thing: if the US won’t trade carbon credits, other countries will. Investor's Business Daily sees it as a good thing, further evidence that “job-killing” environmental regulation is temporarily on the back burner.

Like anything profiting from a government-created market, the major investors were among the most politically well-connected. According to IBD, the financial losers in the death of the CCX are its two main investors,Al Gore's Generation Investment Management and Goldman Sachs. Also losing out is Franklin Raines, Fannie Mae CEO during the subprime fiasco, who owned a patent on trading related to trading carbon emissions of residences.

Perhaps with the retrenchment of the CCX, the investors and regulators can solve the inherent problems of the carbon-trading schemes, including their potential for money laundering and the risk of fraud in countries with low transparency and/or weak legal enforcement.

To nuke, or not to nuke?

Nuclear power’s disadvantages — technical, economic, social acceptability — will probably prevent it from making much difference in solving climate change problems. Energy, both literal and metaphorical, spent on nuclear power is energy not spent working on other parts of the menu of choices for addressing climate change issues.”
— Lee Clarke, “The Nuclear Option,” in Routledge Handbook of Climate Change and Society

In a countries like France and Japan, the lynchpin of efforts to reduce carbon emissions (and imports of fossil fuels) is electricity generated from nuclear power. Overall, Clarke says that fission reactors generate 14% of the world’s electricity, and 20% of that in the US.

In the US, proponents of nuclear power argue that it’s a proven technology, it substitutes directly for the dirtiest of electric sources (coal), and the greenhouse gas emissions are zero. This option is particularly salient for moderate environmentalists (or at least liberal Republicans) who worry about GHGs but consider the nuclear question long since settled.

Of course, opposition to nuclear power in the US dates back more than three decades. I recall rock concerts and traffic jams in a futile effort to block PG&E from building the 2.2 gigawatt plant in the isolated Diablo Canyon — opening in 1985 as one of the last new nuke plants in the US.

Some of the environmental opposition is dispassionate and logical, focusing on the lack of political will (and technical uncertainties) regarding storage of spent nuclear fuel. Other opposition is hysterical, right up there with the anti-vacinnation campaigners who worry about imagined mercury risks (from vaccines that no longer use mercury as an antibacterial).

Similarly, some of the economic arguments are more sound than others. Nuke plants have huge capital budgets, long approval processes, and require complex and expensive technical and security training to operate safely. As with all economic policy arguments, the arguments against (or for) plants are subject to the usual lies and distortions because no one checks who was right 30 years later.

Some try to combine the approaches. Just as death penalty opponents claim (rightly or wrongly) that death penalty litigation is more expensive than 40 years of room and board, some environmentalists say that whether or not the plants are safe, they put too much of a rate burden on ratepayers.

In his chapter from the Routledge Handbook of Climate Change and Society, sociologist Lee Clarke is openly skeptical of environmentalists (such as Stewart Brand) who believe the threat of global warming is greater than the threat of nuclear power. While not anti-corporate like some authors in this edited volume, he clearly has the same objections to nuclear power today as did leading environmental groups 20 years ago long before IPCC, Kyoto and “An Inconvenient Truth.”

Still, one doesn’t have to agree with the motivations of people like Prof. Clarke to agree with his conclusions. Even if nuclear power is the right solution, is it a feasible one? Even with a major push, given the restrictions on where plants can be placed American voters and regulators are unlikely to approve more than a modest increase in the number of reactors. Another complication is the need to replace 40+ year old reactors as they come up for decommissioning, perhaps (as in Southern California) building them alongside the old ones.

Meanwhile, US (and IAEA) policy is not going to promote putting up fission reactors across South America, Africa, Asia and the Middle East.

If politics is the art of the possible, then the reality is that nuclear power (at best) will make a small difference. While those who want to reduce manmade global warming might want to support any proposed nuclear projects, they can’t be counted on to solve the entire problem.

Meanwhile, from a business standpoint, the stagnant industry already concentrated with four manufacturers consolidated to three: GE Hitachi, Westinghouse and Areva NP of France. What business there is will go to incumbents, not new entrants.

And even these companies recognize the long odds: none are placing all their eggs in a nuclear basket. GE has leveraged its turbine skills to remain (for now) the dominant seller of wind turbines in the US market, one of five major players overall, while Hitachi is concentrating on turbines for the Japanese niche market. It also has a solar business, as does Westinghouse (through its partnership with the company formerly known as Akeena) and Areva (which bought the SV firm Ausra in 2009).

EVs: An expensive way to pollute the planet

I've always wondered about the green bonafides of electric vehicles: not because of the batteries, but because of the greenness of the electricity that it pulls off the grid to charge those batteries.

Sure, some people make themselves feel better by buying electricity from green sources — but then that reduces the supply of renewable energy available for others to buy. Meanwhile, if California (and other regions) is straining to achieve even 20% RE share, the marginal effect of increasing electricity demand will be to increase fossil fuel consumption from peak sources. It’s easy to ramp up electricity generation from peak natural gas (or coal) plants, but nearly impossible to quickly increase baseline generation of carbon-free sources like RE or nuclear power.

Even if you go for average — rather than marginal — CO2 emissions from grid power, the federal Energy Information Administration predicts that fossil fuels will account for 65%of electric power generation in the US even in 2035.

Now, a veteran British auto journalist has attempted to calculate the lifecycle CO2 cost of electric vehicles. Building on a team of consultants working over a three year period, the report, “The Emperor’s New Car,”was authored by Clive Matthew-Wilson of the auto review site Dog & Lemon Guide.

As Matthew-Wilson writes:

Claims that electric cars are ‘emissions-free’ are simply a lie; they merely transfer the pollution from the road to the power station. Not only will electric cars not reduce emissions, they may actually increase emissions, because burning coal to make electricity to power an electric car creates more pollution than if you simply powered the same vehicle using petrol.

Renewable energy sources may be growing fast, but they’re still a tiny percentage of the world’s electricity supply and they’ll stay that way for the foreseeable future, because renewable energy sources tend to be far more expensive than fossil fuels.

The study contrasted the Tesla Roadster with the Lotus Elise (petrol-fueled) car that it’s built from. It concluded that the Tesla produced less CO2 emissions if used in New Zealand (where grid power is primarily hydro) but more emissions in the US, UK, China and Australia.

The report also concludes that the EVs are likely to be produced mainly at Chinese factories with far less environmentally friendly production and energy generation than those of the developed world.

Such errors are hardly accidental. As the Toronto Globe & Mail summarized the report:

The report says car makers, not environmentalists, are prematurely pushing electric cars. Car makers want electric cars because of the enormous subsidies they will generate.

This is hardly the final word on the subject, and it would be naïve to think this will end the hype and exaggeration. However, one can hope it will engender more accurate estimates among environmentalists and policymakers as to actual ways of reducing CO2 emissions.

Instead of cutting edge, technologically risky and expensive EVs, the report concludes that the best way to reduce CO2 emissions in populated areas is by using a proven (100-year-old) technology: mass transit.

Here in Silicon Valley, we’re heading in the other direction. In Santa Clara County, we have a mediocre bus network and a limited light rail system. Meanwhile, the three-county commuter rail (Caltrain) is about to disappear as cash-strapped local governments end their subsidies. Meanwhile, Googlers and other members of the Silicon Valley elite buy Teslas rather than depend on mass transit.

To me, it seems like stimulating EV usage before we have a large supply of RE is putting the cart before the horse. In 2009, both RE and EV manufacturers won generous Federal subsidies, but if the government some day decided to adhere to a budget, the data suggests subsidizing RE now and EVs later.

The bottom line for Captain Trade

The economic commentator with the biggest soapbox, Nobel prize winner Paul Krugman, devoted his NY Times column Thursday to the economics of cap-and-trade as a way of reducing CO2 emissions.

Krugman is a firm believer of aggressive government intervention to reverse global warming. At the same time, he writes

Yes, limiting emissions would have its costs. As a card-carrying economist, I cringe when “green economy” enthusiasts insist that protecting the environment would be all gain, no pain.

The Krugman column is a Rorschach test — people read into it what they want into it. On the left, political bloggers like Daily Kos praise Krugman for supporting cap-and-trade. (A few on the left, like the commenters at Washington Monthly, think that Krugman is a free market kook).

On the right, EconLog (by an economist and part-time Krugman fan) praises Krugman for his admission of the costs, but not for his vilification of cap-and-trade opponents. (More critical is Roger Pielke of the U. Colorado).

It is hard to make policy without considering both the pros and cons of a given policy proposal. Right now, we don’t know what the actual costs and benefits of cap-and-trade will be, and there’s really no way of knowing until we try it.

So it’s great that Krugman has given both sides, even if the partisans are only selectively quoting what they want to hear.