Can Renewable Energy Solve the Climate Problem?

1. Can Renewable Energy Solve the Climate Problem? Geoffrey Heal Columbia Business School October 2010

2. 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

3. 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

4. Carbon-free power • Technologies available – • Wind • Solar • PV • Thermal • Nuclear • Geothermal • Wave • Fuel cells • CCS • Biofuels

6. 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 6 6

7. Levelized Cost of Electricity • Want the p at which PV of revenues = PV of costs: so lcoeis • Sensitive to discount rate and to assumed life • A long-run marginal cost 7 7

8. 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

9. Texas load curves summer and winter 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 high LCOE. NYC summer peak power may cost $2kWh Base load 9 9

10. 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

11. 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

12. 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

13. 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

14. 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

15. Nuclear Coal CCS Geo -Thermal Wind Solar PV Solar Thermal Solar Thermal W/STRG Natural Gas

16. 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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18. 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

19. Wind power fluctuates widely …. From D Mackay, Sustainable Energy – without the hot air www.withouthotair.com 19 19

20. Solar output fluctuates too Figures from NREL for Texas. In Spring solar will cut in to baseload, which is much less expensive and also costly to turn up an down. So some solar will be wasted leading to a lower capacity factor. Even when the sun shines it may not be possible to sell solar power National Renewable Energy Lab 20 20

21. 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

22. Pumped water storage 22 22

23. Compressed air energy storage (CAES) 23 23

24. 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

25. 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

26. 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