The President of the United States has chosen to make the goal of 80% clean electricity generation by 2035 the first priority in his move to make America more competitive. In his recent State of the Union Address, Barack Obama compared this project to the 1960’s moon shot program, noting we are at another “Sputnik moment” where we must innovate or be left behind.
(Unexpected editorial note: In the midst of the current events surrounding the Japanese nuclear reactors, it will be helpful to know how we can devise a practical and affordable clean energy plan without new nuclear power. This article presents just such a plan — not because of safety concerns, but because new nuclear power fails the “practical and affordable” test. — CS)
Investment, or Runaway Spending? While many applauded the President’s call for innovation and investment, “eyes were rolling” among many fiscal conservatives. The President’s call for investment in the future was immediately labeled as simply a call for increased government spending. This is a critical concern when we are already running a $1.6 Trillion U.S. budget deficit.
In my article from one year ago I noted the problems of both deficit spending and high unemployment were “paralyzing the nation’s political life, as Americans are worried about both high unemployment and record deficits.” I wrote the solution to this conundrum is investment — “to invest money now, into projects that when completed will help us individually and as a nation to save more“.
The difference between investment and runaway spending is that investment pays for itself. One way it can pay for itself is to help us spend less. Another way it can pay for itself is to bring in more revenues — more sales to other countries, and more job creation.
The Way to a Fail. A profligate “Clean Energy Plan” that invests in very expensive technologies will fail. Americans won’t save — we will be forced to pay more. Also, other countries won’t be attracted to buy costly boondoggles — we must have something to sell that makes sense.
Past forays of the government into supporting specific energy technologies — such as corn ethanol — give pause that government can prop up exactly the wrong “solutions”. Those with the best lobbyists and the most campaign contributions get the government gravy.
A Clean Energy Plan for the electric power industry is an even bigger prize and will have lobbyists all over it. If Democrats are not to be seen supporting high rollers, and Republicans are not to be RINO’s (Republicans In Name Only) wasting taxpayer dollars, then a practical and affordable Clean Energy Plan must be devised.
Public opinion also opposes utility subsidies. The most popular item suggested for elimination in a recent WSJ poll was the Federal program that pays the loan payments for utilities who default on new nuclear power plants.
Rather than a subsidy program, the “80% Clean Energy” goal is in the mode of the Renewable Portfolio Standards that have already been adopted by 24 states. These are simply regulatory standards that must be followed for the privilege of operating as utilities. When utilities select prudent projects, the costs can then be recovered through electricity rates.
If a Clean Energy Standard establishes a guaranteed new market for clean energy, why would any taxpayer subsidy be required? The government should continue to promote basic research for innovation, but little else is needed from taxpayers.
What Electric Customers Need. If electricity is to continue to serve us well as a foundation of modern life, it must meet three basic needs:
Need #1: Affordable. If electricity becomes too expensive it will place a significant burden on family budgets. Home electric bills already average over $100/month, as electric rates increased 29% from 2004 to 2009 — over twice the 14% increase in CPI. If these increases continue, over the next ten years average home electric bills will rise to about $180 per month.
Image: NY Consumer Protection Board
It’s not like consumers have more money. With the ongoing destruction of the middle class, American workers are experiencing declining real wages. Retiring Baby Boomers will be living on fixed incomes Will households be able to pay skyrocketing electric bills, and still buy prescriptions and groceries?
Consumers have supported clean energy standards that have price controls, such as Colorado’s 2%/year limit for renewable power rate increases above the comparable cost of fossil fuel power. (See “Colorado Shows How It’s Done“.)
If utilities ignore affordability, however, build-out plans can come to an inglorious end. Utilities can learn a lesson from the Florida ratepayer revolt that effectively halted Florida P&L’s nuclear plans after it proposed drastic rate increases to fund the new nukes.
Need #2: Always Available. Americans expect their electric utility will always “keep the lights on”. This will be increasingly important as our other energy sources such as oil begin to decline. Our entire economy and indeed way of life is threatened by Peak Oil Coming Much Sooner Than Expected.
The economic disruptions from high priced oil will destroy millions of jobs if we have not prepared alternative ways to fuel our society. An increased use of electricity for transportation — with electric cars, electrified freight and passenger trains, and increased use of electric transit — is a core solution to ending our addiction to oil. Our electric grid must prepare to meet this national security challenge.
Need #3: Clean Power. Protecting our jobs and homes from severe droughts, floods, sea level rise and other impacts of climate change can prevent literally trillions of dollars of economic losses.
Americans support the prevention of activities that harm innocent victims as a legitimate role of government. Polls thus show overwhelming support for EPA efforts to cut harmful utility pollutants. According to a recently released report from the American Lung Association, coal-fired power plants produce more hazardous air pollutants (including mercury, arsenic, lead, acidic gases, and dioxins) than any other industrial polluters in the U.S.
Photo: Wikimedia Commons
Electric utilities also currently emit 39% of total U.S. carbon dioxide emissions. Because electricity can be generated from a myriad of clean sources, utilities have been asked to lead the way to achieve 80% of total projected carbon dioxide emission reductions by 2030.
Reducing Unemployment. While most consumers and businesses have maxed-out debt and cannot help the economy grow, utilities can still borrow money and invest in new job-creating projects.
Utility spending can thus help counter the current deflationary pressure from the collapse of the Consumer Credit Bubble. Spending on U.S. productive capacity is also far better than cranking up money printing presses.
If American industries develop innovative solutions, we can also export technologies to other nations to help them clean up their power grids.
Just How Big a Challenge is this Clean Energy Moonshot? The graph below presents the most recent data from the Energy Information Administration (EIA), on the sources of electricity generation in the U.S., in 2010:
If one accepts the President’s definition of “Clean Energy” (though many do not especially in the wake of the Japanese nuclear accidents), the nation is already generating almost 54% of its electricity from qualifying sources — renewable energy, natural gas, and nuclear.
To meet an “80% by 2035” standard, therefore, would require a conversion of another 26% of the generation mix over the next 24 years — an average shift of 1.1%/year of total kWh’s generated.
If U.S. kWh demand did not grow at all, this would require the equivalent generation of installing about 13,500 Megawatts (MW) of new wind farms each year in the U.S (after accounting for wind’s kWh output per MW, and transmission losses). This is achievable — in 2009, the U.S installed 10,010 MW of new wind capacity, and “Clean Energy” will include more than wind.
Of course, if demand for electricity grows, even more new generation will be needed. If kWh use grows by 1% per year, by 2035 we will need about 30% more electricity.
Challenges Facing Electric Utilities. While consumers and politicians want utilities to supply affordable and clean power that is always available, there are major challenges facing electric utilities.
Utility Challenge #1: Demand is Soft and Unpredictable. Utilities are in the business of selling electricity, and must build new power plants to provide it. However, customers can cut kWh use and leave the utility with no ability to pay for these new power plants.
Electricity demand in the U.S. declined from 2007 to 2008, and further still in 2009. While 2010 numbers show a rebound, total kWh use for 2010 was still lower than peak U.S. kWh use in 2007.
The Great Recession is a major cause, and thus the overall macroeconomic risks from Peak Oil and other expected shocks to the economy must weigh heavily on utility planning. Electricity is only a service to the general economy. Will general economic growth collapse again?
Utility Challenge #2: Consumers Can Now Walk Away. In most parts of America, customers have still not implemented even the most basic of energy efficiency measures. The “low hanging fruit” of energy efficiency has yet to be harvested. When power bills get too high, even simple measures like a clothesline can drastically cut electricity use.
Electric customers can now “walk away” from their central utility not only through efficiency, but also by generating their own power. As recently noted by Yahoo Finance, on-site electricity generation with solar panels is now reaching parity with retail electric rates. Combined Heat and Power offers customers yet another cost-effective distributed power solution. The days of a captive customer base for central utilities are over.
The unspoken fear of all utility managers is the Death Spiral Scenario. In this nightmare, a utility commits to build a very expensive new power plant. However, when electric rates are raised to pay for the new plant, the rate shock moves customers to cut their kWh use. The utility then has no way to pay for the new power plant unless it raises rates even higher — causing a further spiral as customers cut their use even more or “walk away”.
Utility Challenge #3: Unused Capacity. U.S. utilities currently have a large, relatively young, and highly-efficient fleet of natural gas combined-cycle gas turbines — that sit idle approximately 57% of the time. Their power simply isn’t needed for large portions of each day.
Utilities also have impressive fields of zero-fuel-cost wind turbines — that generate a lot of inexpensive power in the middle of the night when it is not needed. However, many wind farms don’t run much when their power is most needed, on hot summer days.
On those summer days, even solar produces the most power at Solar Noon, rather than late afternoon when air conditioners are running full tilt.
When those peak power times come, utilities must “pull out all the stops”. Utilities use cheap-to-build but highly inefficient single-cycle gas peaker units, that provide some of the most expensive kWh’s on the grid, and emit almost as much GHG emissions per kWh as coal.
Even baseload power plants that run 24 hours per day are affected greatly by fluctuations in consumer demand for electricity. Nuclear and coal plants run through the middle of the night — but they aren’t paid very much for that power. An expensive baseload plant such as a new nuclear plant may need to charge about 25 cents for every kWh, but it can’t get paid that much for off-peak power so its economics don’t work.
Utility Challenge #4: Need to Replace Aging Power Plants. The President’s challenge to the utility industry to move away from dirty power and toward clean power is actually a challenge the industry is already facing, due to the age of existing plants.
The dirtiest parts of our power plant fleet are already quite old. The capacity-weighted age of power plants in the U.S. is now 38 years old for coal, and 30 years for nuclear plants. Many if not most of the older coal plants will be retired by 2035. In contrast, natural gas plants have a capacity weighted age of only 19 years, and wind plants only 6 years.
Retiring Old Coal. The 45% of our kWh’s now supplied by dirty coal must be drastically reduced. If 1.1% of total current electric generation (2.5% of current coal generation) was retired each year and shifted to clean sources, and no new coal-fired power plants were built unless they were low-carbon, the 80% Clean Energy Goal could be met.
This seems a tall order. Over the next 24 years, we would need to see a retirement or conversion of some 60% of existing coal generation. However, by 2035 the median age of the existing coal fleet would be 62 years old. This is beyond the traditional retirement age for coal plants, so it is likely at least this number of of today’s old coal plants will be phased out anyway. The opportunity will be to decide how best to replace today’s dirty and old power plants.
Retiring Old Nuclear? Our nuclear fleet is also quite old, and if it also has to be replaced before 2035, the challenge will be much greater. Because of this, it seems likely (however one feels about it) the Nuclear Regulatory Commission will extend the licenses of most existing U.S. nukes somewhat beyond the 2035 timeline. By then, we must already be on a path toward cleaner power, and can then take on that next wave of replacements.
While the NRC seems committed to extending nuclear licenses, this will be a massive experiment and reality will likely intrude. Aging plants tend to require ever increasing capital expenditures to keep in operation, as happened recently with the Oyster Creek power plant in New Jersey, which will close 10 years earlier than its current license allows. Public concern over radiation leaks, such as at the Vermont Yankee plant and the Japanese nuclear debacle, may also force nuclear plant shutdowns.
Utility Challenge #5: New Power Plants Are Much More Expensive. We are now obtaining over two thirds of our kWh’s from coal and nuclear plants built over three decades ago. It should come as no surprise that as we replace these very old plants, newer power plants are going to cost more — a lot more — than old power plants built decades ago.
We’ve gotten used to driving the old paid-off clunker. Now, when the old beater finally has to be retired, the shock to the pocketbook will come.
How Much Money Will Need to Be Invested? If we have to build brand new power plants to accomplish replacement of 60% of old coal plants, it’s going to matter a great deal what we choose to replace them:
Gas and Small Hydro. Just replacing the existing kWh’s generated by those old coal plants is likely to cost over $250 billion in up-front capital costs (in today’s dollars) if we replace those old coal plants with about 130,000 MW of the cheapest choices for new power plants — small hydro such as “Run of River” power, or gas plants using landfill gas, Combined-Heat-and-Power, or traditonal natural gas power plants.
While the small hydro and CHP plants have zero or low fuel costs, natural gas plants may require paying significant life cycle fuel costs. This used to make utility managers leery of natural gas. However, natural gas fuel is very cheap today, and expected to stay cheap for the next couple decades, so central utilities are now moving primarily to build natural gas power plants.
Natural gas plants are also compatible with wind and solar energy, as they can cycle on and off quickly. As renewable power sources come on line, natural gas plants can cut their fuel costs.
Wind and Geothermal. One step up in capital costs per annual kWh, but with zero fuel costs and therefore roughly comparable to natural gas in life cycle costs per kWh, are wind farms and geothermal power. Building enough wind turbines and geothermal (and transmission lines for these) to generate the kWh’s from the retiring coal plants might cost about $600 billion — more than natural gas, but with no worries about fuel costs, and zero GHG emissions.
Concentrating Solar Power. Another step up in capital costs per annual kWh are the concentrating solar power plants — thermal CSP, concentrating photovoltaic, and Stirling Engine — now being built in the desert Southwest. These plants are competitive in their intended market — daytime peaking power — but are currently more expensive per kWh than wind or geothermal. (They will not be installed nationwide, so a comparative cost to replace all retiring coal plants is not appropriate.)
Large numbers of gas, hydro, wind and geothermal plants, and some CSP plants, have recently been built — so we know what they cost. The renewable capacity already installed and under construction dwarfs nuclear and CCS efforts.
Two new technologies, however, require much larger and more expensive power plants, and none have yet been built in the U.S.:
New Coal. If we tried instead to build new coal-fired plants with carbon capture and storage (CCS) to replace the retiring coal-fired plants, the tally would likely be in the $700 – $850 billion range. Unlike renewables, however, coal requires paying fuel costs that would grow over time. “Clean Coal” is thus a more expensive option — and we don’t really know how expensive, because CCS is still an unproven technology.
New Nuclear. On the highest end of the scale, another unproven cost is new nuclear power. If we tried to build all new nuclear plants to fill this same generation need, the total bill to replace just those retiring coal plants would likely exceed $1.2 trillion dollars.
This Project is no Moon Shot — It’s Much More Costly. President Obama used the example of the Apollo Moon Shot program in his Address as an inspiration for what we need to do today.
However, perhaps a more fitting comparison may be the Marshall Plan, or the mobilization effort for WWII.
The entire NASA Apollo Moon program cost was approximately $190 Billion in today’s dollars. Much of this was for the development of new technologies — rather than the Clean Energy Plan’s implementation of primarily existing technologies.
Replacing retiring coal plants will likely cost about $250 -$600 Billion if we build gas and renewable plants, but could cost over $1.2 Trillion if lobbyists get their way and convince Congress the most expensive power plants — CCS and nuclear — should be built.
Another cost multiplier is demand. To handle new demand, another 30% extra will be needed if there is 1% per year growth. If instead growth averages 2.5% per year, the extra to handle the new growth would be 90% more!
If we don’t control kWh growth, and we also let lobbyists push Congress to build the most expensive power plants — this will be no Moon Shot, this project will be more like 10 Moon Shot Programs!
At a time of both public and government austerity, it seems imperative to limit the cost of this Clean Energy Plan with innovative and practical solutions.
Innovative Strategies To Make Clean Energy Goal Affordable. The practical strategies discussed below can keep the cost of meeting the Clean Energy Standard affordable to utilities and their ratepayers.
These innovations address the electricity system as a whole. If we do this right, the U.S. can take a leadership position to show the rest of the world how clean energy can be done economically.
Innovative Strategy #1: Do Customer Level Projects First. If the computer age had proceeded with the same mindset as the U.S. utility industry, IBM would have just continued building bigger and more expensive central computers. There would have been no PC’s, and no Internet.
I remember in the early days everyone was asking — “why would I ever want a computer at home?” Today that question seems ludricrous — but only because the power of innovation was unleashed across hundreds of millions of distributed computers.
Before electric rates are raised to fund hundreds of billions or even trillions of dollars in new centralized power plants, utilities must first “firm up” the demand for centrally-generated power so it is reliably known. It would be a business disaster of monumental proportions to spend all this money on central power plants and then have consumers “walk away”.
Consumers must first be given every chance to reduce their use, and to generate their own power, to reduce demands on the central power grid.
This strategy recognizes the “low hanging fruits” of energy efficiency and distributed power have not yet been harvested.
One “low hanging fruit” is the ability for utilities to tell electricity customers their current usage and offer them signals of what times of day electric costs are high or low. If electric rates are set high at peak periods and low during off-peak, customers can switch the times they do things like run their dishwasher or charge their car. The Smart Grid can even control smart appliances such as water heaters to save everyone money.
The reason customer level projects such as insulation and PV power have still not been done is that most utility customers have no access to the capital to finance these energy-saving and distributed power projects.
Utilities, however, can make money by providing 100% up-front financing through on-bill financing, folding these projects into the monthly bills of whomever lives in the property at any time.
Customer-level actions can have dramatic results. A study by the American Council for an Energy Efficient Economy (ACEEE) showed that simply implementing existing cost-effective strategies would flatten and actually reduce the Texas electricity peak demand curve (the orange area) for at least 15 years:
Utilities have for years been trying to control demand growth with “Demand Response” programs. Implementing both 0n-Bill Financing and the Smart Grid will be like “Demand Response on Steroids“.
If customers are given financing, and real-time feedback, opportunities will blossom for thousands of new vendors. “We’ve got an app for that” will become the new motto for the electric power sector.
Innovative Strategy #2: Storage to Allow Full Use of Idle Capacity, and Full Use of Wind and Solar.
This Strategy is a major money saver because it allows better use of existing combined cycle natural gas power plants that are now under-utilized. Wind farms and base load plants that must now dump power for low revenue at times of low consumer demand would also benefit.
If these already-built power plants can be better utilized, the high fuel costs from using expensive peaker plants can be avoided. Also, by better utilizing existing plants, expensive new power plant construction can be deferred.
Storage will also solve the problem of relying on intermittent power from the wind and sun — enabling these most-abundant energy sources to become our main power supplies.
Storage will allow utilities to serve customer needs at the times of day when consumers want to use electricity, with power generated from cheaper sources.
This Innovative Strategy would install “Energy Storage Generators” as a first priority for new generation in every electric grid.
Utilities might get automobile owners to buy these Energy Storage Generators for them. Electricity-using vehicles have large batteries and electronic control systems which can be designed for two-way charging and feedback to the grid. They can be timed to charge during off-peak times, or even to know when extra wind-generated power is being produced.
If utilities or car makers warrant batteries for the extra battery cycling, and utilities offer tie-in incentives, many electric car owners may even feed power back to the grid during peak power periods.
Other economical examples of Energy Storage Generators include Compressed Air Energy Storage turbines, and Pumped-Hydro turbines.
Example Diagram of Compressed Air Energy Storage
Image Credit: PG&E
Pumped hydro storage has been used for decades with lakes and dams, pumping water uphill and then letting it fall back through turbines. Now, there are also pumped-hydro generators that do not require above ground landscapes, and which can be sited virtually anywhere. These new designs use man-made drilled shafts to pump water up and down beneath the earth’s surface.
Gravity Power Energy Storage Generator
Energy Storage Generators provide dispatchable generating capacity. Many cost little more to install than traditional gas generators, so they provide a new power generation option in the low to mid range of costs, far less costly than Coal/CCS or new nuclear. They can provide enormous savings on fuel costs and new power plant costs.
Most importantly, they provide the foundation for a legacy system to continue our civilization long after finite fossil fuels and uranium run out — a 100% Renewable electricity system.
Innovative Strategy #3: Create a “Legacy” Electric System. We know that economical supplies of coal, natural gas, and uranium are going to run out, and actually quite soon. If you really think much about it — it provides little comfort to believe we have perhaps 80 years left of uranium or 100 years of natural gas. That’s no time at all.
Are we going to do the same thing with coal, natural gas, and uranium that we have done with oil — do nothing until the fuel supply shortages and drastic price increases hit?
By 2035, it will be starkly evident that coal, natural gas, and uranium are non-renewable fuels with impending finite limits. Before any new power plants are built in that decade, business risk assessments will call into question whether any power plant that uses these non-renewable fuels will be able to operate economically for its full design life.
Also by 2035 — or perhaps much sooner — climate change will either be disproven or have become very obvious. It mattered not what people thought of Copernicus’ theory about the planets circling the sun. It’s like that with scientific issues. If they have no basis, they fade away. However, if the concern is valid, it proves out.
By 2035 it will clearly be time to move to a clean, safe and 100% renewable-energy based power generation system.
If we have followed Strategies #1 (efficiency and distributed power) and #2 (Energy Storage Generators), we will already know how to do this, and do it affordably. We can continue to add more wind, geothermal, hydro, solar thermal, photovoltaic, biomass, and other renewable power generation without confusion about how to mesh these together in an electric grid.
If, however, we choose to do politically motivated boondoggles, by definition these will fail. We will have learned what doesn’t work — but not what does.
A country thrives by tapping abundant and affordable natural resources. If we go the right path the resources we can tap are enormous. According to the USGS, geothermal resources alone can supply roughly 550,000 MW (mean value of estimated resources) in the U.S. A study by Navigant Consulting found over 400,000 MW of water power resources. Solar and wind resources are even greater in magnitude.
This is personal. My two year old grandson Ashton will only be 26 years old in 2035. His generation will see the end of affordable natural gas, coal and uranium. What are we leaving them? There will be no end to the sun, the wind, the rain (hydro power), or the heat in the earth.
We can build a practical Legacy System. The time to start is now.
Article originally published at www.EnergyEconomyOnline.com
