2013 Solar Power International-SPI October-- Chicago, IL USA POLICY PAPER # Version: 16 Sept 13

Transcription

1 Energy Economist Renewable Energy Technologies and Economics Climate Change Mitigation Purchase of Electricity and Natural Gas 300 N STATE ST APT 4434 Chicago, IL USA Land: Mobile: michael@michaelstavy.com Solar Power International-SPI October-- Chicago, IL USA POLICY PAPER # Version: 16 Sept 13 The Increase in Global Solar (PC, CSP) Power Capacity (GW) Caused by Extending the Kyoto EXECUTIVE OVERVIEW The increase in atmospheric carbon is causing global warming. An increase in the Earth s average temperature will drastically change human life as usual 1 on Earth. The Kyoto Protocol, a treaty between nations, was created (1997) to reduce global warming by reducing both yearly carbon emissions (the yearly increase in total atmospheric carbon [Gt m -CO 2 /yr n ]) 2 and total cumulative atmospheric carbon ( 2030 Gt -CO yr ) m 2 / n Fossil (coal, oil) electric generation emits carbon into the air. Solar (PV 4, CSP 5 ) electricity does not. Currently solar electricity costs 6 more to generate than fossil electricity. There is currently an extra cost to reducing carbon emissions from solar electric generation. This extra cost is for both generating solar electricity and for converting its diurnal generating pattern into constant power for the electric grid. Solar parity occurs when the cost of solar and fossil grid electricity are equal 7,8. A Protocol global carbon cap greatly expands global solar power capacity by reducing fossil electricity s cost advantage and by increasing the signatory nations regulatory support for solar power. 1 mirror image phase to the phase business as usual (BAU) or in statistical circles, along the same trend line 2 metric gigatons is set as the start of the industrial revolution 4 photovoltaic 5 concentrating solar thermal power 6 Stavy M, A Financial Worksheet for Computing the Cost (US /kwh; /kwh) of Solar Electricity Generated at Grid Connected Photovoltaic (PV) Generating Plants, Journal of Solar Energy Engineering, August, 2002, Vol. 124, Page Dufo-López R and J L Bernal-Agustín, Photovoltaic Grid Parity in Spain, Advances in Mechanical and Electronic Engineering, LNEE 178, 2013, pp Yang, Chi-Jen, Reconsidering Solar Grid Parity, Energy Policy 38 (3) pages (July 2010) Page 1 of 10

2 Page 2 of 10 First this paper presents the future counterfactual climate change mitigation scenario 9 that at COP 19 the Kyoto Protocol is extended until Because it was not extended, the Protocol ended on 31 December Historians have written counterfactual histories such as the South winning the US Civil War. Most readers (except those with vested interests in the fossil fuel industry and its verticals) will agree that this counterfactual scenario is much more agreeable than the latter. Readers should note that this paper s counterfactual scenario 10 is counterfactual to the historical fact that the Protocol ended on 31 December 2012 and not counterfactual to any specific commercial solar (PV, SCP) market study published by an energy market research firm. Second, this paper presents a GW estimate 11 of the future ( ) yearly global solar power capacity. This estimate is based on this paper s counterfactual scenario and on the historical data 12 for the yearly the installed global solar power capacity 13 and for the yearly global solar power capacity (GW) 14. Separately the historic data for the Protocol s first commitment period ( ) is also presented. FIRST-THE NARRATIVE COUNTERFACTUAL SCENARIO Because it was not extended by the signatory nations with the second commitment ( ) period, the Protocol ended on 31 December The counterfactual scenario is that at the 2013 COP 19 in Warsaw, all the signatory Annex I 15 and non-annex I nations decide to extend the Protocol for both the second commitment period and for the third commitment period that ends in A fourth commitment period from 2031 to 2050 is beyond the scope of even this counterfactual scenario. In this counterfactual scenario, the Protocol cap is now included in all World Trade Organization (WTO) agreements and in the amendments for strengthening the Montréal Protocol on ozone depleting gases (mostly hydrofluorocarbons). This paper provides SPI13 attendees with an overview of the Kyoto Protocol carbon cap architectures (cap and command, cap and trade, carbon tax), history, economics and institutions. It also shows the reader the positive effect of the Protocol carbon cap on the dramatic growth in global solar power capacity from 2013 to The Protocol extension is great for the solar industry, but not so great for the fossil fuel industry and its verticals. Under the Protocol cap, the resultant expanded regulations of the United States 16 Environmental Protection Agency (EPA) and the Federal Energy Regulatory Commission (FERC) will greatly enlarge US 9 this scenario will dramatically increase global solar power capacity 10 at COP 19 the Protocol is extended until simple Bayesian approach 12 REN21, Renewables 2013, Global Status Report (GSR), 06 June 2013, Cedex 9 Paris FR, figure 11 (PV) [page 41], figure 14 (CSP) [page 45). REN21 is a NGO research institution sponsored, in part, by the UN the installed global solar capacity (GW) in year y is GW y y 14 global solar (GW) capacity in the year y is GWy where 1995 was the first year that GW of 1995 PV power capacity became significant was the first year that GW of CSP power capacity became significant. 15 the US was an initial (1997) signatory to the Protocol but it did not agree to accept its Annex I cap for the first commitment period 16 SPI13 host country

3 Page 3 of 10 solar power capacity (GW). The US cap and trade architecture scenario has a Chicago 17 government district location for the US National Allocation Authority that writes the US National Allocation Plan 18 (NAP) and the development of a Chicago financial district venued global carbon 19 commodity market. The US alternative carbon tax architecture 20 scenario has the US federal carbon taxing authority located in Chicago to the delight of Chicagoland s 9.5 million residences. The Kyoto Protocol measures green house gases (GHG) in equivalent metric tons (t m ) of atmospheric carbon dioxide (CO 2 ), the major GHG. Other GHG (CH 4, N 2 O, HFC, PFC, SF 6 ) are standardized into equivalent t m -CO 2 by their global warming potential (GWP). Parts per million of CO 2 (ppm-co 2 ) is the other common measurement unit for atmospheric carbon (CO 2 ). ppm-co 2 can be converted into Gt m -CO 2 (and vice versa). Atmospheric carbon is measured by the 4 th Assessment Report of the Intergovernmental Panel on Climate Change (IGPCC) in ppm-co 2. Both the IGPCC and the US National Aeronautical and Space Administration (NASA) report the effect of the increase in total atmospheric carbon on global warming in ppm-co 2. The IGPCC and NASA both could have used Gt m -CO 2. average global temperature (C ) = ƒ (ppm-co 2 ) [or ƒ (Gt m -CO 2 )] NASA 21 stated that when atmospheric carbon goes above 350 ppm-co 2, climate change starts to become significant. 350 ppm-co 2 represents a safe carbon level. 400 ppm-co 2 is the approximate current level of carbon. 280 ppm-co 2 was the atmospheric carbon concentration in 1760 at the start of the industrial revolution. At 520 ppm-co 2, it is predicted that the average global temperature will rise 6 C (11 F). The current factual 22 climate change scenario 23 (BAU) without the Protocol is that global warming continues to increase; atmospheric carbon increases from ppm-co 2 in 2010 to 420 ppm in 2015; then to 450 ppm in 2020 and to 520 ppm in In 2030 there is no winter Arctic ice cap. It is beyond the scope of this paper, to make a scenario of what a 6 C (11 F) rise in the average global temperature would do to human life as usual on planet Earth. The Kyoto Protocol is an amendment to the 1992 UN Framework Convention on Climate Change (UNFCCC). The Protocol has been in effect since 2005 when the required number of countries signed it. The Protocol s first commitment period was At the end of the first commitment period, the signatory developed nations (Annex I nations) had to reduce their yearly 25 carbon emissions 5.2% below their 1990 emissions level. During the first commitment period, the United 17 SPI13 host city 18 see page 5 19 in the cap and trade architecture, the Protocol assigned (carbon emission) allowance unit (AAU) and its variations (EUA, ERU, CER) become tradeable carbon commodities 20 alternative to the cap and trade architecture with its global carbon market 21 NASA, source forth coming in the second version of this paper 22 factual means the most likely to occur, while counterfactual means that at COP 19 the Protocol is extended until with the BAU growth in global solar capacity (GW) is discussed on page 6 below 24 these counterfactual values subject to change 25 yearly not cumulative. It is cumulative atmospheric carbon that causes the greenhouse effect and therefore, global warming.

4 Page 4 of 10 States, while an Annex I nation, was not a signatory for the first commitment period. The developing non-annex I nations had no first commitment period cap. The non-annex I nations included these advanced developing nations; Brazil, China, India, Indonesia, Mexico and South Africa. South Korea was also a non-annex I nation. The signatory nations to the UNFCCC and to the Protocol commitment periods administer the Protocol at periodic Conferences of the Parties (COP). COP 17 was held in Copenhagen. COP 18 was held 26 November-8 December 2012 in Doha, Qatar. Just before COP 18, Russia, Japan and Canada announced that they would not sign up for the second commitment period. The second commitment period was to be from 2013 to Because the Protocol was not extended at COP 18 for the second commitment period, the Protocol ended at the end of the first commitment period, 31 December Even thought the Protocol ended at the end of 2012, the nations 26 under the EU-ETS 27 carbon emissions bubble have already decided to continue to reduce their emissions 20% below 1990 by COP 19, the next COP, will be held 11 to 22 November 2013, Warsaw PL. The counterfactual scenario is that at COP 19 the Kyoto Protocol is extended for its second and third commitment periods. The second commitment period is now extended from 2017 to The third commitment period goes from 2021 through Poland, the COP 19 host country, is the first Annex I nation to sign up for the second and third commitment periods thus assuring a good name for the Warsaw COP 19 in world diplomatic history. The United States agrees to become an Annex I signatory for the second and third commitment periods. Russia, Japan, Canada and all other current Annex I signatory nations sign up for the second and third commitment periods as Annex I nations remains the Annex I base year from which the % carbon emission reductions are computed. At the end of the second commitment period (2020), the Annex I nations must now reduce their yearly carbon emissions 25% below their 1990 emission levels. South Korea agrees to be an Annex I nation with the second period 1990 based 25% reduction in yearly emissions. At COP 19, Brazil, China, India, Indonesia, Mexico and South Africa all agree to be on the new Annex II. The Annex II nations must, by the end of 2020, cap their yearly carbon emissions at their 2010 carbon emission level. There are now Annex I, Annex II and the developing non-annex nations. Until the third commitment period, there is no carbon cap on the non-annex nations. At the end of the third commitment period (2030), the Annex I nations must reduce their emissions 50% below their 1990 emissions while the Annex II nations must reduce their emissions 20% below their 2010 levels. In 2026, during the third commitment period, a carbon cap on the non-annex nations starts. The non-annex nations carbon emissions can not be above their 2025 emissions by the end of the third commitment period, The first agreed goal of CPO 19 is to use the Kyoto Protocol to end global warming by reducing total atmospheric carbon to ppm by While, in 2030, it will not be business as usual for the fossil fuel industry and its verticals, human life as usual on planet Earth will be able to continue. It will not be business as usual for the solar industry either; business will be much, much better. Except for certain previously mentioned industries, all the Earth s nations will share this benefit. The second agreed goal of COP 19 is sharing, based on each nation s population, total cumulative carbon emissions and stage of economic development, the carbon reduction burden in order to get atmospheric carbon back to ppm by 2020 and to 385 ppm by this sentence is factual; not counterfactual 27 European Union Carbon Emissions Trading Scheme 28 values in this paragraph are counterfactual not factual 29 these values subject to revision

5 Page 5 of 10 The reduction in the yearly level of carbon emissions that an Annex I nation can emit is measured in increasing per cent reductions from the 1990 base year carbon emissions (ppm-co 2 /yr 1990 ; Gt m -CO 2 /yr 1990 ). The 1990 base year carbon emissions are a nation s emissions in the 1990 base year; not a nation s cumulative (total) atmospheric carbon emissions from 1760 until the base year. The Annex I 25% carbon emission reduction means that in 2020, each Annex I nation can only emit 75% of the carbon that it emitted in In 2030, each Annex I nation can only emit 50% of the carbon that it emitted in The per cent reduction can be computed using either ppm-co 2 or Gt m -CO 2 values. The computed per cent values must be the same. The same quantitative analysis applies to the Annex II nations 2010 base year and to the non-annex nations 2025 base year. Each Appendix I (Appendix II, non-annex) nation receives an amount of assigned carbon allowance units (AAU) from the UNFCCC 30 Secretariat (Bonn, DE) that is equal to the quantity 31 of its commitment period carbon cap. Each Annex I and II nation continues to design their own National Allocation Plan (NAP) in order to allocate their carbon cap internally. The first commitment period national emission control architectures (cap and command, cap and trade, carbon tax) are maintained for use in the second and third commitment period NAP. During the second and third commitment periods, new Joint Implementation (JI) and Clean Development Mechanism (CDM) projects are allowed. The JI/CDM additionality principal is clearly defined by diplomatic consensus. Certified Emission Reduction (CER-JI) and Emission Reduction Unit (ERU-CDM) allowances can now be earned at projects that reduce the emissions of ozone depleting gases and carbon black in addition to the traditional carbon reduction projects. Each nation s NAP determines the % of CER and ERU that it will accept. Depending on the design of a NAP, carbon allowances (AAU) can be traded between carbon capped nations or between their citizens. Carbon allowances, as AAU, EUA, CER and ERU are made into a commodity in certain NAP cap and trade spot and futures markets. Trading is only allowed by vintage. No naked carbon futures can be written nor are financial settlements allowed in carbon spot or futures markets 32. In the second and third commitment periods, the Protocol has better rules for quantitatively measuring and verifying (M & V) assigned emissions (AAU) as well as for violation penalties. There are already commercial information technology companies operating in the US and under the EU-ETS emissions bubble that have products to measure and report their clients yearly carbon emissions in accordance to the rules of the Kyoto Protocol and the EU-ETS. All signatories at the counterfactual COP 19 agree to a uniform metric 33 unit based system of temperature, weight and measurement units for measuring and capping each nation s atmospheric carbon emissions. At the counterfactual COP 19, the Protocol and the World Trade Organization (WTO) treaties are coordinated. Before COP 19, the US Senate, the EU Commission, the Chinese and the Japanese Parliamentary staffs all work together 34 to draft the Kyoto Protocol, WTO and Montréal Protocol treaty coordinating amendments. The WTO now allows carbon taxes on the carbon content of imports from non-signatory Annex I and II nations. The WTO is amended to remove from its membership any nation that is listed on Annex I or II which does not commit to the Protocol s 30 the Protocol is a protocol of the UNFCCC 31 for 1 st commitment period, t m -CO 2 equal to 5.9% below the nation s 1990 emission level 32 these market rules increase the price of the allowances making carbon more expensive and solar power, therefore, less expensive 33 SI-the international system of weights and measurements 34 remember that this is a counterfactual scenario

6 Page 6 of 10 second and third commitment periods. After 2025, carbon taxes on imports from non-annex nations are allowed. At the counterfactual COP 19, the Kyoto Protocol and the Montréal Protocol on ozone depleting gases (mostly hydrofluorocarbons) are also coordinated. At COP 19, the parliamentary staffs of the Annex II nations plus Canada work together to draft the Kyoto and Montréal Protocol coordinating amendments. These amendments are designed to include as capped GHG, the GWP of the ozone depleting gases that were previous excluded from the Protocol emissions cap because they were covered by the Montréal Protocol. At the counterfactual COP 19, the GWP of atmospheric carbon black (soot) is established and included in the national caps. This part of the scenario has the parliamentary staffs of the Russian Federation, Bangladesh, Iran and Ghana working together 35 to draft the necessary amendments to the Kyoto Protocol. These amendments are designed to include as capped GHG, the GWP of the carbon black emitted by the signatory nations. SECOND-THE SOLAR POWER GW OF THE COUNTERFACTUAL SCENARIO Before reading this paper, many SPI13 attendees 36 already had forecasts for the future growth in global solar power capacity from commercially published solar market studies. Readers should remember that this paper s counterfactual scenario 37 is counterfactual to the historical fact that the Protocol ended on 12 December 2012 and not counterfactual to any specific commercial solar market study. Commercial solar market forecasts are based on cautious 38 narrative scenarios that have limited government policy changes to expand global solar capacity. In these commercial studies, the expanded GW of solar capacity causes some climate change mitigation and some reduction in fossil fuel carbon emissions. These commercial solar market expansion scenarios are really the factual most likely to occur trend (BAU) scenarios compared to the very dramatic effect that this paper s counterfactual scenario will have on expanding global power capacity. Commercial solar market forecasts never 39 forecast the reduction, over time, in the average global temperature C ( F) or the reduction in atmospheric carbon (ppm, Gt m -CO 2 ) caused by the increase in their forecasted yearly increase in solar power capacity. This latter point is extremely important because in this paper s counterfactual scenario, it is the reduction in carbon under the Protocol carbon cap that is the driver that causes the solar market to expand almost exponentially. To create a within project budget 40 but accurate 41 historic global power capacity 42 data set, I took the clearly marketed data points from REN21 43 figure (PV) and figure 14 (CSP) and 35 again remember that this is a counterfactual scenario 36 OK at least C-Level solar executives had forecasts 37 At COP 19 the Protocol is extended until Most likely to occur (BAU) 39 I should never say never 40 my modestly funded project to explore the effect of a Protocol extension on solar power capacity. The funders requested to be anonymous. This project is still seeking funders 41 readers interested the methodology in my published papers should also read the Methodological Notes in REN21, Renewables 2013, Global Status Report (GSR), page version 2 of this paper will have a more complete data set

7 Page 7 of 10 eyeballed 45 the omitted years. On figure 11, PV becomes significant, at the GW level, in 1995 while on figure 14, CSP becomes significant, at the GW level, in This paper s historical data set uses 1995 as the base year from which to measure solar capacity growth. From 1995 to , global solar power capacity (GW) historic compound annual growth rate (CAGR) was 31%. Prior to the first commitment period, the global solar power capacity CAGR was 18%. During the Protocol s first period ( ), the CAGR for global solar power capacity was 43%, a 141% increase over the years prior to the Protocol. During the second commitment period ( ) of the counterfactual scenario, the global solar power capacity CARG is estimated be 22%, while during the third period ( ), the CARG is estimated to be 16%. The first period s GW values are historical. The second and third period GW values are Bayesian forecasts based on the paper s counterfactual scenario. The worksheet used to derive these Bayesian values is at the end of this paper. I recently meet a renewable energy trade association executive. I told him that I was writing a solar energy policy paper. He asked the subject of my paper. I said, The Increase in Global Solar Power Capacity (GW) Caused by Extending the Kyoto. His eyes opened up and shined. Then he asked me if I could quantify the increase. In his mind must have been a forecast from some commercial solar market study that he subscribes to. I said that the only quantification needed was in his eyes. It then became intuitively obvious to this executive that the counterfactual extension of the Protocol cap until 2030 will dramatically expand Global Solar Power generation capacity (GW). I hope that it also becomes intuitively obvious to the reader. The Bayesian approach is an attempt to quantify this intuition. THIS PAPER S COUNTFACTUAL SCENARIO IS THE UNSEEN ELEPHANT IN THE ROOM OF RENWABLE ENERGY SCENARIO S THAT FORCAST THE GROWTH IN GLOBAL SOLAR POWER CAPACITY If this paper s counterfactual scenario 47 were to become factual there would be a dramatic growth in solar market capacity 48. The paper s scenario would then be the avant-garde global policy that would create exponential solar capacity growth. Current commercial solar market forecasts are based on the best what is most likely to occur factual scenario. A low probability counterfactual scenario is not the best for predicting what will actually occur. Even when using a factual scenario, it is very difficult to forecast the future. The REN21, Renewables Global Futures Report (GFR) 49,a sister publication to the REN21 GSR, profiled future renewable energy 51 scenarios from academic, NGO, trade, energy company, 43 REN21, Renewables 2013, Global Status Report, figure 11 (PV) [page 41], figure 14 (CSP) [page 45] 44 actually these figures are algebraic graphs 45 or extrapolate the skipped year s data just like I taught my students to do. My short form CV lists my tenured and untenured teaching jobs 46 REN21 estimated the 2012 value 47 At COP 19 the Protocol is extended until to the delight of SPI13 solar executives 49 REN21, Renewables Global Futures Report (GFR), January 2013, Cedex 9 Paris FR 50 REN 21 Renewables GFR-Scenario Profiles Report,16 January 2013, Online Supplement,

8 Page 8 of 10 the EU commission, and various governments research labs. None 52 of these REN21 21 future renewable energy scenarios used this paper s counterfactual scenario 53. One would have thought that at least one of the REN21 NGO, academic or EC Commission 54 scenario contributors would have published a scenario with this paper s counterfactual scenario. The unseen elephant in room with these REN21 21 future renewable energy scenarios is this paper s counterfactual scenario that at COP 19 the Protocol is extended until Poster Data Total Solar Capacity PV CSP Total CARG yr GW GW GW % % % % , , % historic data extrapolated Bayesian input estimated CAGR Period 51 the REN21 scenarios are all inclusive renewable energy (wind, solar, algae, etc) scenarios not just a solar scenario 52 An Adobe Reader scan of both the 2013 GFR and the GFR-Scenario Profiles Report did not produce any references to the Protocol and the only references to Kyoto were to the city, not the Protocol. 53 at COP 19, the Protocol is extended until Especially the EU Commission because the Protocol continues under the EU-ETS carbon emissions bubble

9 Energy Economist Renewable Energy Technologies and Economics Climate Change Mitigation Purchase of Electricity and Natural Gas 300 N STATE ST APT 4434 Chicago, IL USA Land: Mobile: michael@michaelstavy.com Solar Power International-SPI October-- Chicago, IL USA POLICY PAPER # Version: 16 Sept 13 The Increase in Global Solar (PC, CSP) Power Capacity (GW) Caused by Extending the Kyoto WORKSHEET-Historic and Future Periods Historic Period GW CARG historic data total prior to extrapolated GW GW solar CARG Protocol Bayesian input # yrs year PV Y/Y% CSP Y/Y% capacity Y/Y% # yrs 95-'12 # yrs 95-'04 estimated xx 0.4 xx 1.0 xx 0 31% 0 18% CAGR Period % % % % % % % % % % % % % % % 5 5 CARG % % % 6 6 1st % % % 7 7 commit 95-' % % % 8 8 period 05-' % % % 9 9 # yrs 05-'12 % % % % % 141% % % % 11 2 Page 1 of 10

10 Page 10 of % % % % % % % % % % % % % % % % % % 17 8 CARG CARG Future Estimated Period GW total 2nd total counter commit GW GW solar factual period # yrs year PV Y/Y% CSP Y/Y% capacity Y/Y% # yrs period # yrs 13-' % % % 18 20% 1 22% % % % % % % % % % 21 4 CARG % % % rd % % % 23 6 commit % % % 24 7 period % % % 25 8 # yrs 21-' % % % % % % 1, % , % % 1, % , % % 1, % 29 CAGR , % % 1, % 30 PV , % % 2, % 31 20% , % % 2, % , % % 2, % 33 CAGR , % % 3, % 34 CSP , % % 3, % 35 28% 10