Future Electricity Generation & Renewable Energy Economics

Transcription

1 Future Electricity Generation & Renewable Energy Economics 2009 Mid-America Competitiveness Conference Thomas R. Casten, Chairman Recycled Energy Development, LLC Director, ACORE December 6, 2009 RED the new green

2 Presentation Summary The world faces a perfect economic, energy and environmental storm, but the Midwest can turn this into a huge opportunity Access to affordable energy services drives income for everyone Generation of heat and power causes 2/3 s of CO 2 emissions but generation efficiency has not improved in 50 years Coal, as we know it, has no economic future Current policies ignore the externality costs associated with fossil generation, sending markets the wrong signals Policy changes could make the Midwest and the U.S. a world leader in reducing carbon while improving manufacturing competitiveness and standard of living RED the new green

3 The Generation Story Observations RED the new green

4 The history of access to energy services Our standard of living depends on energy services: Heat, power, mechanical energy Homo sapiens lived on only on metabolic energy until recently: 10,000 years ago: Animals domesticated 5,000 years ago: Power from wind 2,000 years ago: Power from water The use of ancient sunlight fossil fuel is very recent: 1760:First significant use of coal 1859:Oil discovered 1885:Natural gas first used Access to energy services allowed population to explode RED the new green

5 World population has grown dramatically million ca. 1760:Watt s steam engine allows coal to be used for power B.C. A.D. Source: various authors cited by the U.S. Bureau of Census RED the new green

6 Increases in world population and energy consumption % Population up 430% Consumption per Capita up 760% 100% 100% Total Consumption up 4600% 80% 80% 80% 60% 60% 60% 40% 40% 40% Nuclear Natural Gas Oil 20% 20% 20% Hydro Coal 0% 0% 0% Wood Source: Arulf Grubler (1998), BP Statistical Review of World Energy (2008), US Bureau of Census (2008) RED the new green

7 Ninety percent of human greenhouse gas emissions during the past century Emissions of Greenhouse Gases from Fossil Fuels (cumulative, in MT CO 2 e) 100% 50% 90% GHG emissions since % Source: RED calculations based on data from BP Statistical Review and J. David Hughes, Geological Survey of Canada (ret.) RED the new green

8 Glaciers During My Life Columbia Ice Field, Jasper, Alberta 2007

9 Expected Global Growth of Energy by 2030 Per International Energy Agency April 2009 $26 Trillion capital cost new energy investment by % per year growth of primary energy: 40% more use by 2030 World energy growth equal to 5 times current U.S. demand

10 Projected Energy Investment vs. Today s Global Net Worth 50 $ Trillion 25 $35 Trillion $26 Trillion By Global Net Worth IEA New Energy Capital Estimate International Energy Agency Apr 2009

11 Scenario 450: International Energy Agency, April 09 Maximum 450 PPM equivalent CO PPM limits temperature rise to 2 degrees C Growth of primary fuel increases 20% versus 40% in base case RED the new green

12 Scenario 450 Capital Cost Estimates 50 $ Trillion 25 $35 Trillion $26 Trillion By 2030 $42 Trillion By 2030 Fuel savings 14 $T 2009 Global Net Worth IEA Energy Capital Est. Scenario 450 Cap. International Energy Agency Apr 2009

13 Scenario 450 Projections 45% rise in natural gas use $330 billion in new renewables in U.S. 2/3 s of U.S. coal retired by 2030 U.S. wind increases by seven fold RED the new green

14 Scenario 450- Electric cars Market Share Internal Combustion Engine Vehicles Electric & PHEV Hybrids Internal Combustion Engine Vehicles Electric And PHEV Hybrids Internal Combustion Engine Vehicles 35% International Energy Agency Apr 2009

15 The Energy/Carbon Story Observations RED the new green

16 Electricity generation is the largest source of CO 2 emissions 50% % of US CO 2 Emissions 40% 30% 20% 10% CO 2 Emissions by the U.S. Electric Power Sector 0% Source: RED calculations based on data from Emissions of Greenhouse Gases in the United States 2007; State Energy Data Report; and Annual Energy Review. RED the new green

17 17 2/3 s of the Fuel Used to Generate U.S Is Lost as Heat

18 Central electricity generation is inefficient and has not improved in 50 years Inefficient generation Wastes energy Inflates costs Increases pollution Why stagnant for 50 years? U.S. Delivered Electric Efficiency Source: U.S. Energy Information Agency RED the new green

19 Homer Simpson s power plant Springfield,? RED the new green

20 Electricity generation plant Craig, CO Two-thirds of the energy generated is released into the atmosphere RED the new green

21 Coal, as we know it, is coming to an end RED the new green

22 Since 2007 Proposed/Planned/Construction Phase/Cancelled Operational/In Existence/Shutdown

23 Coal Challenges 2 Times 3 Times 5 Times As Gas Has none 2.5 to 3 Times the Capital Energy CO 2 Water Mercury $$$$$

24 Clean Generation Economics Comparing Clean Energy to Full Cost of Old Coal RED the new green

25 Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use National Academy of Sciences, November 2009 Modern civilization is heavily dependent on energy from sources such as coal, petroleum, and natural gas. Yet, despite energy s many benefits, most of which are reflected in energy market prices, the production, distribution, and use of energy also cause negative effects. Beneficial or negative effects that are not reflected in energy market prices are termed external effects by economists. In the absence of government intervention, external effects associated with energy production and use are generally not taken into account in decision making. RED the new green

26 Hidden Costs of Energy: Un-priced Consequences of Energy Production and Use National Academy of Sciences, November 2009 For U.S. coal plants, the mean damage is 3.2 cents per kwh. The 5th percentile of damages per kwh is less than half a cent, while the 95th percentile of damages is over 12 cents. 5 RED the new green

27 Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use National Academy of Sciences, November 2009 we evaluated effects related to emissions of particulate matter (PM), sulfur dioxide (SO2), and oxides of nitrogen (NOx), which form criteria air pollutants. 1 We monetized effects of those pollutants... Health damages, which include premature mortality and morbidity constituted the vast majority of monetized damages, with premature mortality being the single largest health-damage category. RED the new green

28 Coal Costs, with Health and Environment Versus Clean Energy Costs $300 Delivered Costs, low Delivered Costs, high Health & Env. Costs Low Health & Env. Costs High $250 $200 Delivered Cost of Best Coal, including H&E lowest costs $150 $100 $50 $0 Coal Wind Off-shore Wind Biomass Geothermal Recycled Energy RED the new green

29 Coal Costs, with Health and Environment Versus Clean Energy Costs Delivered Costs, low Delivered Costs, high Health & Env. Costs Low Health & Env. Costs High $300 Clean Energy $250 $200 $150 $100 $50 $0 Coal Wind Off-shore Wind Biomass Geothermal Recycled Energy RED the new green

30 Recycling industrial waste energy: Cost effective clean energy Saved Energy Input Electricity Energy Recyclin g Plant Finished Goods Process Fuel Waste Energy Electricity Steam Hot Water End User Site RED the new green

31 Even Solar Power Beats Coal with CCS. $240 $210 Coal With CCS $180 Solar Power $ per MWh $150 $120 Gas CCGT Existing Coal $90 $60 $30 Night Day Night

32 The Energy/Carbon Story The Generation Story Observations RED the new green

33 Clean Energy Can Profitably Replace Worst Coal Today Profitable means to society. Lower total costs of electricity and thermal energy Before counting Hidden Costs (identified by National Academy of Sciences) most expensive coal-fired electricity costs less than any new clean energy But, most electricity from new clean energy plants costs society less than full societal costs of power from the worst existing coal plants RED the new green

34 Clean Energy Costs Will Decrease with Growing Deployment Coal-fired generation is highly mature technology, with no efficiency gains in 50 years Cost of new coal, that meets current environmental rules, is not competitive with new generation from renewable energy and from combined heat and power plants Clean energy generation is not mature, will improve with experience Efficiency of all clean energy is improving with new technology Capital costs of all clean energy are dropping with experience curve The move to stricter environmental standards will increase fossil fuel plant costs, but have no impact on costs of clean energy plants, which have no emissions. RED the new green

35 Multiple ways to Add Hidden Costs to Generation Decisions Tax each pollutant equivalent to identified health and environmental costs, allowing market forces to optimize Mandate growing share of generation come from clean energy 35 states have some form of Renewable Portfolio Standard or RPS with varying definitions of clean energy Waxman Markey and draft Senate bills have national RPS requirements Set national allowances for each pollutant that drop each year, force all generators to provide allowances equal to their pollutant output Best way is output based allowances, giving all generators average pollutant allowance of nation, allowing clean energy plants to sell permits to dirty energy plants Current plan is more complicated, making all pay government for allowances, then redistributing funds RED the new green

36 Conclusions Deploying clean energy in the Midwest, as well as the entire U.S. would cut the societal cost of electricity and thermal energy Current regulations ignore externality costs associated with generation, giving market faulty price signals The Midwest has the manufacturing for the steel, silicon, and other components required for new clean energy plants. To profitably lower CO 2 emissions and improve Midwest competitiveness, we must change the way we generate electricity and thermal energy. Renewable energy and efficiency must be the fuel of the future. RED the new green

37 Thank you Thomas Casten, Chairman Recycled Energy Development RED the new green

38 Conventional electricity generation 1960 (& 2009) Fuel 100% Waste Heat 65% Pollution Waste Heat 2% Useful Power 33% Fuel Generation Transmission Consumption RED the new green

39 Use energy twice Local generation producing heat and power Fuel 100% Waste Heat 33% Recycle Waste Heat Pollution No Line Losses 66% Efficient Useful Thermal Energy 33% Useful Power 33% Fuel Combined Heat and Power Plant RED the new green

40 Recycling industrial waste energy Cokenergy Mittal Steel, Northern Indiana Produces as much clean energy each year as all grid-connected photo-voltaic solar generation produced in 2004 RED the new green