Sunday, April 30, 2023

Climate Science Paradigm Development, Clean Energy Policy Development, and Clean Energy Technology Development, Simultaneous Timelines

 this post is Chapter 15 of my 2021 book Sensible Decarbonization

Climate Science Paradigm Development, Clean Energy Policy Development, and Clean Energy Technology Development, Simultaneous Timelines

     For perspective, I think these simultaneous timelines are important to review for several reasons: to show the evolution of climate science understanding and the changing in levels of certainty, to show what and how low-carbon technologies are developing and how fast, to show how clean energy policies are developing, and to show where we are, how far we have come, and how far we have to go. I have included the development of EV technology and Tesla’s development of both EV batteries and stationary storage. I have also included a few of my own clean energy buys to give perspective from a middle-class energy scientist who likes clean tech. Policy developments show where they have been effective, like the Australian solar boom and where they have not been effective. I trace the development of the “pause” or “hiatus” in warming seen in John Christy and Roy Spencer’s NASA satellite temperature data. I also include a timeline of climate skepticism.

1970’s

Aerosols from human activity shown to be increasing in atmosphere and to have a cooling effect. Next Ice Age is a concern for some scientists, but warming is more of a concern for others. Concerns over warming prevail late in decade.

Climate research ramped up with creation of National Oceanic and Atmospheric Administration in US.   

Methane, CFCs, and ozone shown to contribute to global warming.

Solar variation shown to affect climate.

Deforestation shown to affect climate.

1979

U.S. National Academy of Sciences predicts climate sensitivity: doubling of CO2 makes average global temperature warm between 1.5 and 4.5 deg C. That is still the general range given today, over four decades later.

1982

Greenland ice cores show that climate can change fast.

1985

Antarctic ice cores show that CO2 levels and temperature changes were simultaneous. Still unclear which one forced the other.

1988

Climate scientist James Hansen speaks to Congress, warning of the dangers of global warming. He says that it is affecting heat waves and droughts.

Governments begin to consider the dangers of global warming.

Intergovernmental Panel on Climate Change (IPCC) is established.

1990

1st IPCC report notes warming has been happening and more is likely to come.

1991

Mt. Pinatubo erupts. Hansen and others predict cooling due to the aerosols which is confirmed.

Global warming skeptics suggest warming is due to solar variation. Data from following decades refute that assertion.

Denmark deploys first offshore wind project to take advantage of stronger offshore winds.

1992

UN Framework Convention on Climate Change created in Rio de Janeiro.

1995

2nd IPCC report highlights “signal” of human-caused global warming and says increased likelihood of significant future warming.[1]

Satellite-derived atmospheric temperature measurements by John Christy and Roy Spencer at NASA show no warming. Their methodologies using microwaves to measure temperatures at different altitudes are criticized by others as having a high margin of error.

1996

GM builds and releases limited amount of EV1 fully electric vehicles.

1997

Kyoto Protocol sets up targets for developed nations to reduce carbon emissions.

1998

Remote Sensing Systems shows that Christy and Spencer’s satellite readings are off due to an error, which they acknowledge, then re-adjust their readings to show slight warming. 

Alarmist climate scientist James Hansen debates skeptical climate scientist Richard Lindzen, who thinks climate sensitivity is at the low end or lower than IPCC estimates.

1999-2000’s

More pushback against climate action by some developed countries and fossil fuel industries.

2000

Toyota releases Prius worldwide with hybrid electric engine.

2001

3rd IPCC report states that level of certainty about future warming is increasing and that impacts could be severe. Scientists show a general “paradigm shift” towards regarding global warming as a very serious concern.

Ocean warming observed, confirmed, and found to generally match atmospheric warming in models.

2000’s

State renewable energy mandates adopted by many US states in different forms. Now estimated to be responsible for about half of renewables generation in the US. By 2020 29 states have mandates.[2]

Calculating and comparing carbon footprints becomes popular. Sustainability movement takes off.

Germany begins its Energiewende with generous feed-in tariffs. It wouldn’t be until 2018 that renewables overtake coal in Germany, since coal got a temporary revival in 2011 with the phasing out of nuclear plants after Fukushima. In 2019 Coal plant phase out by 2038 announced but could be speeded up. 2020 phase-out of feed-in tariffs has some generators worried about future profitability.

2003

Heat waves in Europe cause many deaths. Since then, more vulnerable people there have access to air conditioning and urban cooling.

Largest electricity blackout in US history on a hot day in August in the Northeast and Midwest.

2004

Christy and Spencer adjusted their satellite readings further based on errors found by others.

Europe initiates the world’s first carbon trading scheme.

2006

Al Gore’s “An Inconvenient Truth” movie convinces many of the dangers of global warming but also creates more political polarization about the subject.

China passes US as world’s biggest emitter of CO2.

I bought a Toyota Prius on the first day of 2006. Battery replaced in 2017. It ran nearly 400,000 miles. The savings in gasoline costs vs. my previous vehicle exceeded the price of the car – keep in mind high gas prices in the late 2000’s and early 2010’s. Ironically the gas engine needs replaced. May sell.

2007

4th IPCC report states it would be cheaper to reduce emissions than deal with damaging effects of global warming.

Christy acknowledges warming but at a lesser rate than ground temperatures show. By this time the satellite “pause” in warming and Christy and Spencer’s data begin to be routinely touted by global warming skeptics as they still are today.

Some US energy, utility, and chemical company CEOs formed the Climate Change Initiative which advocated for action on climate change.[3]

Electricity consumption begins to plateau in EU and US.

UK overtakes Germany in relative decarbonization of the electricity sector.

2008

Non-governmental International Panel on Climate Change (NIPCC) formed to counter IPCC, which they regard as politically motivated. Its precursor organization is S. Fred Singer’s Science and Environmental Policy Project founded in 1990 with views that disputed established scientific views of global warming, ozone depletion, and secondhand smoke. They were also sponsored by the conservative Heartland Institute and in 2009 by The Center for the Study of Carbon Dioxide and Global Change led by climate scientists Craig and Sherwood Idso who argue for the benefits of CO2 and dispute scientific consensus on climate change. The NIPCC with their sponsors produced the Climate Change Reconsidered series with several book volumes from 2009 through 2015. I read Idso, Carter, and Singer’s 2015 book Why Scientists Disagree About Global Warming: The NIPCC Report on Scientific Consensus, where they made a very good argument that the scientific consensus on climate change was less solid than depicted, certainly nowhere near 97%. In 2017 Heartland Institute sent 300,000 of these books to schools and colleges across the country, presumably to counter the prevailing consensus narrative. I don’t recall the book being overly biased, though certainly a minority view.[4] [5]

Al Gore promotes his movie, book, and slideshow with an advertising blitz. Competitive Enterprise Institute and its leader Myron Ebell downplay the dangers of global warming with their own media blitz.   

Consistently high natural gas prices from about 2005 through 2008 lead to more experimentation with new extraction techniques that are seeing more success. Shale gas fracking is underway. The financial downturn lowered demand, so prices were able to drop.

2009

Incoming Obama administration economic stimulus package in response to the global economic downturn includes $90 billion for clean energy technology. Results are mixed with some $ lost during bad market timing for US solar component manufacturing exemplified by the Solyndra bankruptcy. Battery and EV research yield favorable results.

2010

Waxman-Markey Cap-and-Trade bill cancelled in US Congress.

It becomes apparent that “fracking” for shale gas with horizontal drilling and high volume multi-staged hydraulic fracturing can produce large quantities of natural gas and quickly increase supply enough to keep prices low. Increasing oil supply would follow. Shale gas and oil resources are shown to be continuous and predictable. As fracking grows public backlash against it also grows, especially in areas without previous oil and gas development. A decade later natural gas is consistently oversupplied, a third of coal-fired generation has been replaced by natural gas and to a much lesser extent renewables, and the decarbonization goals of cap-and-trade are exceeded.    

Late 2000’s to mid – 2010’s

Corporate social responsibility touted on company websites but often vaguely defined and detailed by companies. Expected in public relations but no real detail required.

Less frequency of hurricanes after Katrina and Rita in 2005 suggests climate change does not spur more of them even if there is more moisture in the atmosphere and oceans are warmer. That would hold generally true until 2020 when there was a record number of hurricanes and tropical storms in the Atlantic, although a few of those were added by new threshold of what constitutes a storm. Activist media immediately re-cites link between hurricane frequency and climate change. There is good evidence, however, for warmer oceans and a warmer wetter atmosphere to lead to stronger storms.

2009

Copenhagen conference. No binding agreements.

Australia’s rooftop solar boom begins, aided by state incentives, high electricity prices, and a good solar resource. Rooftop solar deployment increases ten-fold in Australia from 2009-2011, with most of the growth in South Australia.

2010’s

Most oil majors accept the basic tenets of global warming/climate change and some, then more, accept that a carbon price at some point is inevitable.

Competition, low-priced Chinese solar panels, and other improvements make solar cheaper, and it begins to boom in US. Solar and wind, with its Production Tax Credit, continue to benefit from subsidization in US. Both solar and wind continue to get cheaper. Late in the decade there is some parity with fossil energy sources.

Cities make low-carbon pledges in the US.

The slow but steady pace of ocean warming, and other factors show that more warming is likely even if we stopped emitting carbon due to delay in cycling through the ocean to the atmosphere. Thus, there is said to be global warming “in the pipeline.” 

More consideration of the influence of climate change on extreme weather events. Much debate.

US leads the world in CO2 emissions reductions due to fracking which allows cheap natural gas to replace coal (about 40%), major energy efficiency improvements in fossil fuel and electricity sectors and among end-users with new tech like LED lighting (about 40%), and new wind and solar generation (about 20%).

Cryptocurrency mining exposed as a totally unnecessary waste of power. However, the blockchain encryption technology that requires the computer power, does have uses in energy and cybersecurity.

Tech companies move closer to net-zero with big investments in wind and solar to power facilities and power-hungry data centers.

It becomes clear that summer sea ice melt in the Arctic and glacial melt in Greenland are accelerating. Temperatures in the north are consistently far above normal. One conclusion is that global warming is happening faster in the Arctic, as models predicted.

Global LNG trade grows by 4 times from 2000 to 2020.  

2011

Fukushima nuclear disaster helps prevent nuclear power from becoming one of the stronger solutions to climate change. Japan shuts in other nuclear plants. Germany announces nuclear phase-out.

Arctic amplification, the tendency of the North polar area to warm faster than the global average, due to multiple causes, most notably changes in summer sea ice extent, is confirmed by observational data, and accepted as indisputable. The tendency is fed by positive feedbacks.

Nissan releases Leaf EV (December 2010). Begins building them in Tennessee in 2013.

2013

Oceans and regional oscillations that produced El ninos and La ninas considered to be main reason for so-called global warming pause or hiatus in satellite data. Still debatable?

5th IPCC report shows greater confidence level in anthropogenic warming and models, and potential impacts, especially of higher warming scenarios. Global climate models continue to be refined and adjusted. Predicted range of climate sensitivity remains 1.5 deg C – 4.5 deg C, as it was in 1979. The IPCC avg. for estimated climate sensitivity is at 3.2 deg C.  

Australia’s rooftop solar boom begins to penetrate the commercial sector, 2013-2017.

2014

Tesla begins building first Gigafactory in Nevada.

I had a 4.3 kW solar array installed on south facing roof with a 12-13-year payout. It’s been 6.5 years so I’m halfway there. No noticeable loss of efficiency in that time. Zero maintenance. Fairly predictable monthly and annual output. Payout slightly longer due to Ohio changes in SREC market value.  

2015

December – The COP 21 Paris Agreement signed onto by almost every nation in the world. Commitments non-binding but most countries gather data and organize plans of some sort.

Global average temperature now 1 deg C above pre-industrial levels.

A few colder sections of winters in the US from Arctic polar vortexes characterized by big dips in the jet stream thought to be related to climate change.

Tesla announces the Tesla Powerwall, a new home lithium battery storage product.

CO2 Coalition formed as a science-based group skeptical of mainstream climate science.

Natural gas overtakes coal in US power generation.

2016

US under Trump officially announces it is exiting Paris agreement, the only country to do so.

2018

Christy and Spencer, lamenting lack of funding, get a $1.5 million grant from Trump administration. Christy notes that their satellite data could potentially be used to refute Obama climate actions.

Hurricane Harvey along the Gulf Coast produces record rain and flooding from a large slow-moving storm that may have been enhanced by climate change.

Solar accounts for over 5% of electricity in Australia (compared to 1% in US).

Tesla’s Nevada Gigafactory becomes highest-volume battery manufacturing plant in the world. Economies of scale in manufacturing help reduce battery costs.

An IPCC report considers the benefits of holding warming to 1.5 deg C. IPCC concludes that it would be preferable. The timeline for keeping warming that low according to the models suggest that swifter action is needed. Activists interpret that to mean we only have a few years till it’s too late and we are beyond safe levels. Media amplifies those concerns. There are calls for stronger mandates. (October)

GE Renewable Energy releases 12MW wind turbines for offshore deployment.

2019

ESG movement takes off in the corporate world, including the carbon-heavy energy sector. Emissions and climate assessments and risk plans expected.

John Christy appointed to EPA science advisory board by Trump administration.[6]

Wildfires and extreme weather events stir more climate activism.

Deployments of microgrids continue to grow in US and globally.

Australia experiences dispatchable energy shortages and blackouts due to heat wave, plants off-line, and over-reliance on solar.

I bought a plug-in hybrid vehicle. Installed a Level 2 charger. Enjoyed the car and the savings until early 2020 when I crashed into a deer and totaled it. Then the pandemic happened and I got laid off, so I wasn’t able to replace it.

According to the International Energy Agency US led the world in decarbonization over the past decade mostly due to fracking, efficiency improvements, and to a lesser extent, renewables.    

2020

UK’s Boris Johnson says he thinks all UK homes can be powered by offshore wind by 2030. “Homes” represent about a third of UK energy. UK expected to continue leading the world in offshore wind.

Heatwaves, wildfires, and hurricanes stir more activism and media alarmism.

Coronavirus strikes. Lockdowns reduce energy demand. Consideration of peak oil demand.

Countries, states, cities, companies, and utilities plan net-zero pledges and consider potential paths.

China says it will become net-zero by 2060.[7]

Australia’s rooftop solar boom is deemed successful and continues, with huge increases from 2017-2020.  

Petro Nova CCUS project in Texas deemed an operational success with consistent >90% capture rate and very little downtime. Project shut down temporarily due to low oil prices – CO2 used for enhanced oil recovery.

California experiences dispatchable energy shortages and rolling brownouts due to heat wave, low wind conditions, plants off-line, closing natural gas plants and over-reliance on solar.  

Arctic amplification further confirmed by data that shows clearly that the Arctic has warmed at roughly twice the rate as the rest of the world.[8]

More US utilities announce decarbonization plans and make net-zero pledges.

Electricity aggregation, including green electricity aggregation to increase renewables and meet state RPSs, grows among US municipalities.

Biden elected president in US with stated goal of ambitious climate policy action, including a pledge to make US electricity sector carbon neutral by 2035. This becomes more likely with a new Democratic Senate.

State of West Virginia still makes over 92% of its electricity with coal, despite decarbonization trends and ready access to cheap natural gas. Planned natural gas plants still facing obstacles.

Coal and oil still make up 80% of electricity generation in the state of Hawaii.

Siemens Gamesa releases wind turbines for offshore deployment that can reach 15MW with power boost. Deployment a couple of years away.

Coronavirus results in an unexpected drop in global carbon emissions. Expected to increase in 2021 as vaccine herd immunity develops.


Beyond 2020

2021

Post-pandemic economic recovery stimulus expected to increase government spending on clean energy projects. Private spending expected to increase as well.

Biden brings US back into Paris agreement. Biden suspends oil and gas leasing on federal lands and cancels approval for Keystone XL pipeline.

GM announces plan to not sell gasoline and diesel engines for all light-duty vehicles by 2035.[9]

2022

EVs expected to be 15% of European auto market share.

First commercial deployment of a 300MW Allam Cycle natural gas plant in US expected.

2023

Elon Musk predicts battery cost will be half of what it was in 2020. {not looking likely Elon}

GM expects to have 20 EV models for sale.

NextEra Energy’s green hydrogen pilot project in Florida expected to come online.

2025

China expects 20% of vehicles sold to be New Energy Vehicles (NEVs), mostly EVs.

WoodMac predicts E-trucks in the US to grow by 27 times from 2019, from 2,000 to 54,000 on the road.

EV parity with ICE vehicles possible considering cheaper fuel and maintenance costs for an EV vs ICE vehicle.

2030

EVs predicted to reach economic purchase parity with ICE vehicles. Lithium-iron-phosphate batteries predicted to overtake lithium-manganese-cobalt-oxide batteries in market share.

Deloitte predicts EVs to be 32% of US auto market share by 2030.

Global Wind Energy Council market analysis thinks as much as 22.6 GW off offshore wind could be built in the US by 2030.

GE and Siemens expect their hydrogen co-fired turbines that can burn higher blends of hydrogen with natural gas to be available for installation 2030-2035.

EU has a target of 40-gigawatts of electrolyzers by 2030.

Global fossil fuel consumption expected to peak 2030-2035. It may happen sooner rather than later.

 

2050

 

Ground zero for Net-zero 2050.

 

2060

 

Ground zero for China Net-zero.


 



[1] Weart, Spencer R. The Discovery of Global Warming. Website. Accessed October/November 2020. Note: The timeline from this site was used as a general reference in my timeline, particularly for the early parts of it. https://history.aip.org/climate/index.htm

 

[3] Pooley, Eric, 2010. The Climate War: True Believers, Power Brokers, and the Fight to Save the Earth. Hyperion.

[4] Wikipedia – entries ‘Nongovernmental Panel on Climate Change’ and ‘Science and Environmental Policy Project.’ Accessed November 2020.

[5] Idso, Craig D., Carter, Robert M., and Singer, S. Fred, 2015. Why Scientists Disagree About Global Warming: The NIPCC Report on Scientific Consensus. Heartland Institute.

 

[6] Lavelle, Marianne and Pillion, Dennis, November 2, 2020. When Trump’s EPA Needed a Climate Scientist, They Called John Christy. Inside Climate News. (Note: this article was used for much of the timeline of Christy and Spencer’s satellite data.) https://insideclimatenews.org/news/30102020/john-christy-alabama-climate-contrarian

 

[7] Regan, Helen, September 23, 2020. China will become carbon neutral by 2060, Xi Jinping says. CNN. https://www.cnn.com/2020/09/22/china/xi-jinping-carbon-neutral-2060-intl-hnk/index.html

 

[8] National Snow & Ice Data Center. Climate Change in the Arctic. https://nsidc.org/cryosphere/arctic-meteorology/climate_change.html

 

[9] Beggin, Riley, Jan. 28, 2021. GM’s bet on carbon neutrality rides green wave in Washington. The Detroit News. https://www.detroitnews.com/story/business/autos/general-motors/2021/01/28/general-motors-bet-carbon-neutrality-rides-green-wave-washington/4291686001/

 

 

 

Friday, April 28, 2023

Banning New Natural Gas Hookups and Forced Electrification: Green Authoritarianism?

 


     While it is no doubt true that electrification leads to less carbon emissions and less pollution there are also many caveats and many reasons that some versions of natural gas-powered appliances are ideal for relatively low emissions, flexibility, and cost. New 98+% efficiency low-cost natural gas condensing furnaces, natural gas heat pumps, and efficient natural gas or LP gas powered water heaters are examples of newer natural gas appliances with significant emissions improvements. The American Gas Association’s Adam Kay notes: “With the installation of condensing natural gas space and water heaters, natural gas homes can reach 11% lower emissions this year compared to the use of many air-source heat pumps. The use of natural gas heat pumps can further lower emissions by 22% compared to the cold climate heat pump configuration.” Thus, there are natural gas solutions to home heating and water heating that are emissions competitive with heat pumps. He also notes that the U.S. natural gas distribution system is 92% efficient at energy delivery compared to electricity at 38%. This is why, he says, homes with natural gas space and water heating and clothes drying can be 22% less carbon intensive than all electric homes. Of course, that all depends on the energy sources for electricity generation. The AGA also touts efficiency improvements, hydrogen blending, and renewable natural gas as innovations that can decrease emissions intensity in the future. Emissions from natural gas distribution systems in the U.S. have declined by 69% since 1990, mostly due to replacing old leaky lines with modern materials. These replacements, mostly in big cities, are costly and slow but gas utilities spend about $32 billion per year on safety enhancements including replacing lines.  


Source: Found on LinkedIn, possibly from the AGA

     

     New York state famously banned fracking more than a decade ago and when Cuomo was governor the state blocked pipelines from bringing natural gas through the state and new ones into the state. Cuomo also ordered Con Edison to hook up new natural gas customers when they said they could not guarantee adequate line pressure to serve customers in high demand situations. Now the state under Governor Huchol plans to ban natural gas hookups in new buildings. This is expected to be a statewide ban with few exceptions. The exceptions will include reliability and backup power security for key facilities like hospitals. Apparently, they are still studying reliability, as forced electrification in places where the power grid is inadequate can cause serious reliability issues. The DOE notes that 61 percent of American households used natural gas for either space heating, water heating or cooking in 2020, the most recent year for which data is available. In the Northeast, 67 percent of homes use gas, including 52 percent of households in New York State. Is it reasonable to take that choice away without due consideration of added costs and reduced reliability? A similar ban in New York City enacted in 2021 is set to take effect in December. Many environmentalist groups and coalitions lobbied hard for these bans. The “war” on fracking and natural gas is real in New York and to be fair there is a probably a lot of support in the state for such bans. But is it fair? Is it feasible? Is it sensible? Is electrification really the best way to lower carbon emissions? Does it compromise grid reliability?   

     The recent hubbub about natural gas stoves being detrimental and causing asthma in children seemed to be an activists’ campaign rather than any real fact-finding. Most studies have concluded that natural gas stoves are not harmful. Yes, natural gas combustion has emissions including nitrogen oxides as do the foods that we cook with either gas or electricity and the levels are low especially where there is adequate ventilation. Promoting the recent study was likely in part a pre-emptive justification for natural gas bans, an anchoring data point that can be cited by those advocating for bans.

 

 

References:

Innovating for a Cleaner World. Adam Kay. American Gas Association. April 20. 2023. Innovating for a Cleaner World - American Gas Association (aga.org)

New York to Ban Natural Gas, Including Stoves, in New Buildings. Liam Stack. New York Times. April 28, 2023. Gas Stoves To Be Banned in New NY Buildings - The New York Times (nytimes.com)

 

 

 

Saturday, April 22, 2023

Levelized Cost of Electricity Revisited: Accounting the Costs of Grid Integration that Increase Per Unit of Power as Variable Generation Increases

 

     Most determinations of levelized cost of electricity (LCOE) ignore grid integration costs. As share on the grid of variable generation, or variable renewable energy (VRE), basically wind and solar, grows the cost of accommodating that generation also grows. This means that the cost to accommodate a unit amount of variably generated power grows as percentage of wind and solar on the grid grows. LCOE has been criticized as a metric for investment decisions with good reason. It is a misleading metric. Some models consider accounting for avoided costs of building new generation (say for distributed resources addressing peak shaving) but those should also account for unavoidable costs (say for battery back-up, peaking plant back-up, or start-stop damage to peakers). Clearly, LCOE as a metric is inadequate and needs to be revised into something more functional. Scientist Joseph Fournier notes that those very significant extra hidden costs, including transmission and distribution, are passed on to consumers:

Ultimately, grid operators amalgamate the total costs of the system and pass these onto the retail consumer.”

“Those who use unit Levelized Cost of Energy (LCOE) of a unit facility are ignoring reality and guilty of misrepresentation.”

     In the early years of solar and wind cost accounting the cost of grid integration could be quasi-ignored but as integration costs per unit of power increase those costs become harder to ignore. Grid integration for renewables is more expensive than grid integration for more concentrated fossil, hydro, and nuclear power plants. Intermittency is the costliest variable of wind and solar when comparing to other resources. Part-time resources can’t run a full-time world without humungous spending on back-up generation resources: batteries, gas peakers, distributed energy resources that can be tapped, and the extra transmission lines and components to enable the shifting of loads when needed. Solar and wind need to be moved via transmission to where they are needed when they are being overgenerated at peak generation times or the power is lost in curtailment.

     Various methods of estimating full system costs attempt to quantify cost per MWh produced in order to compare full system costs for different energy sources. The EIA has a method and papers have been written suggesting different costs and ways to classify and attribute grid integration costs. In my 2022 book Natural Gas and Decarbonization I coined the phrase levelized cost of grid integration (LCOGI) The basic formula is: Levelized full system cost of electricity (LFSCOE) = Levelized cost of generation (LCOG) + Levelized cost of grid integration (LCOGI), or LFSCOE = LCOG + LCOGI. Grid integration costs are of several types. All energy sources have some grid integration costs, but variable generation has the highest costs.

 

Robert Idel writes in his 2022 paper in Energy:

 

“ … the function of supply in electricity markets is not to generate electricity but to provide a specified amount of electricity to a specific place at a particular time. The locational aspect adds significant additional costs to renewables that are generally less flexible about where they can be sited than fossil fuel plants. As a result, a larger grid is required to transport the electricity from, e.g., hydropower plants to the demand in urban areas. These transmission costs are partly taken care of in some LCOE estimates when a transmission cost adder is included in the LCOE. But the timing aspect turns out to be even more crucial and the focus of this paper.”

 

His explanation of the crux of the issue is pretty useful:

 

As long as the share of intermittent generation is low, sufficient dispatchable generation capacity will usually be available to step in and replace missing intermittent generation output. Economically, the fact that intermittent generation has no obligation to meet the demand can be seen as a hidden subsidy. One can even go one step further and argue that intermittent generation is of zero value if it cannot be made available to consumers who demand a steady electricity flow. To do that, however, supply and demand on the network must always be in balance. In effect, the ability to schedule other generators to continuously maintain that balance is necessary to give value to renewable output. The dispatchable generators thus raise the value of renewable generation, but the subsidy is “hidden” because the latter does not have to pay for it. Once the share of intermittent generation increases to a certain level (and dispatchable capacity is shut down), efforts have to be taken to maintain system reliability. But who should be responsible for these costs? How can the cost of integrating renewables into the system (which increases significantly with their market share) be included in the evaluation of their cost?

 

     As modern humans living in the modern world, we have expectations of affordable electricity being available to us. Up to $4 billion people around the world do not have adequate electricity access, about half of the people in the world. Intermittent electricity is obviously not an option so all intermittent sources must be backed up. Those needs drastically increase the costs of providing a certain amount of electricity for all 24 hours of a day and all seasons of the year. Thus, the real value of dispatchable electricity is much higher than that of electricity that is subject to the limitations of intermittency. While this is no doubt true, the total net difference in value is difficult to quantify. The value of electricity changes through time. The juice must be apportioned in a balanced way so on a grid electricity supply and demand must be kept in balance. This requires availability of generation to replace other generation when it becomes unavailable. It becomes unavailable on different time and intensity scales: no sun at night, less sun in the winter, less sun on cloudy days. Night and day are quite predictable. The seasons are generally predictable. The clouds are not predictable. Even though night and day are quite predictable electricity demand may or may not be predictable. We know there is a commonly occurring electricity supply-demand imbalance, the solar duck curve, on hot late afternoons in places with high solar penetration on the grid like California during high air conditioner usage after people return home from work and increase demand just as solar resources are going dark. But as we saw in August 2020 in California when this caused forced power outages, it was reserve capacity that was inadequate. There is a cost to having reserve capacity on stand-by ready to provide power. The inadequacy was partially due to the effects of heatwaves that cause outages at gas-fired plants so that dropped off some reserves, but it was mostly due to the sheer need for power. Other contingencies like low hydro output and unavailability of imported power from a nearby grid due to low wind output and their own higher needs due to heatwave, also contributed to the problem. Power system operators must prepare and make available if needed multiple power generation sources to be on stand-by ready to provide power if and when needed. Gas combustion turbine peaking plants that only run 5% of the time are a poor investment, can require significant maintenance due to starting and stopping frequency, put out more carbon emissions per MWh than combined cycle gas plants, and some or much of those emissions are attributable to changes in supply from intermittent sources. However, they are needed as an affordable way to provide reserves. There should be an accounting difference applied between more efficient gas power (combined cycle) and less efficient gas power (simple cycle gas turbine).


 


    Household Electricity Prices: U.S. Avg vs. California and Germany. Source: Alex Epstein. Fossil Future. 2022.



System LCOE or Levelized Full System COE (LFSCOE) – Models and Accounting

 

     Before I look at Robert Idels LCOE accounting I want to mention a few other attempts to quantify full system costs for economic analysis and for comparing the cost and emissions attributes of different energy sources. The following section is excerpted from my 2022 book, Natural Gas and Decarbonization:

 

New Ways to Compare: System LCOE to Account for Grid Integration Costs and Other Comparisons

 

     Through time the lack of fuel costs of solar and wind add up to operational savings. There is no need to pay-as-you-go. That is why levelized cost of electricity often show wind and solar as being the cheapest forms of energy during the full life of the projects. While this may be true, the upfront costs of wind and solar are quite high, as noted, over three times those of natural gas combined cycle. For solar in particular, but also wind, there may be grid integration costs that may not be attributed in the graphs below and those costs will increase as more of that variable generation penetrates grids. Gas is available 24/7. Solar is available in the daytime but much less in the short cloudy days of winter in the most populated parts of the US. Wind is intermittent and variable. The second of the two graphs below, shows that it is lifetime fuel costs that make lifetime LCOE slightly higher for natural gas relative to wind and solar.

 



 

2026 Expected Total Capacity-Weighted Levelized Cost of Electricity (for life of plant). Data Source: Energy Information Administration. (Note: by 2026 wind PTC is expected to be phased out and solar ITC is expected to be phasing lower and adding it in would put solar PV at 29.04)


  


  

2026 Expected Total Capacity-Weighted Levelized Cost of Electricity (for life of plant) and Comparison of Upfront Costs and Lifetime Fuel Costs. Data Source: Energy Information Administration. (Note: by 2026 wind PTC is expected to be phased out and solar ITC is expected to be phasing lower and adding it in would put solar PV at 29.04)

 

 

     The EIA’s method of calculating final or total capacity-weighted levelized cost of electricity is a complex formula. They consider and calculate levelized avoided cost of electricity (LACE) and levelized cost of storage (LCOS) where applicable. LACE seeks to estimate the value of dispatchability which addresses some of the grid integration costs. No fuel costs help wind and solar catch up economically through time, somewhere around year 30. Wind and solar are slow to break even, but they are good investments through time. As we gain better knowledge of how to integrate them effectively and lower those costs, we can reduce future costs. Perhaps we need to factor in a levelized cost of grid integration (LCOGI). This cost will vary by generation sources, supply, and demand. It will also increase through time as grid integration becomes more complex as expected with higher amounts of variable generation. This will also add to the solar and wind costs through time as integration costs are expected to rise through time which offsets both efficiency gains and cost reductions.

     In comparing levelized costs there are different ways to present those costs to suit the narrative that the comparer wishes to advance. LCOE is often not a good way to compare real world costs. There are differences in cash flow, opportunity costs, discount rate, and present value. The simple fact that wind and solar have the lowest “discounted lifetime average generation costs per unit of energy ($/MWh),” or LCOE, does not mean wind and solar are more competitive. Different kinds of energy have different values. Reliable dispatchable energy is worth more to the whole than variable generation. A 2016 paper in the International Association for Energy Economics, Why Wind is Not Coal: On the Economics of Energy Generation, does indeed attempt to quantify value of different sources of energy. In the abstract of the paper they explain this value as follows:

 

Electricity is a paradoxical economic good: it is highly homogeneous and heterogeneous at the same time. Electricity prices vary dramatically between moments in time, between location, and according to lead-time between contract and delivery. This three-dimensional heterogeneity has implication for the economic assessment of power generation technologies: different technologies, such as coal-fired plants and wind turbines, produce electricity that has, on average, a different economic value. Several tools that are used to evaluate generators in practice ignore these value differences, including "levelized electricity costs", "grid parity", and simple macroeconomic models.”

 

     The authors also note that LCOE and other common comparison methods introduce bias by not properly valuating the reliability, dispatchability, and flexibility of resources like natural gas. They introduce the concept of System LCOE as a comparison method. I’m guessing this should include my LCOGI designation. They mention two biases introduced by LCOE: 1) it favors base-load generation over peak-load generation and 2) at high renewables penetration it favors that renewables generation over dispatchable generation. To get a better understanding of the limitations of LCOE and why it needs reconciled I include a quote from the World Resources Institute from an August 2019 article by Laura Malaguzzi Valeri, INSIDER, Not All Electricity is Equal – Uses and Misuses of Levelized Cost of Electricity (LCOE):

 

The LCOE metric is concerned only with costs. By ignoring the revenue or value of the electricity generated, it implicitly assumes that all technologies provide similar services. However, picking electricity sources is not the same as choosing among brands of gasoline, as not all electricity is created equal. Electricity generated now provides a different value than electricity generated several hours from now because demand for electricity varies over time and electricity storage is expensive. Electricity generated farther from consumption centers is more expensive than nearby generation because transmission is costly. Electricity generation that is easy to predict is more valuable than unpredictable generation because it helps electricity system operators maintain the balance between demand and supply. Electricity generation that emits more pollutants is more harmful than cleaner generation. This is why LCOE on its own is insufficient for determining which technology investors or utilities should build.”

    

     A February 2021 research paper in the International Journal of Energy Research seeks to quantify the grid integration costs of solar PV. This study is from Italy where combined cycle natural gas is currently the largest electricity generator. Integration costs are separated into grid costs and balancing costs. Grid costs include transmission costs, adequacy costs, curtailment costs, and the costs of reinforcing the distribution network. Balancing costs include start-up costs and decay of efficiency costs. Italy was separated into regions for the study. One of the conclusions I gathered based on charting and graphing the solar PV integration costs was an avg. of about 31% additional costs for system LCOE than for the solar PV LCOE alone. This is for solar PV without storage. Adding storage in a solar-plus-storage has the additional costs at 24% for system LCOE but the costs of storage would cancel that out and more, especially in the short-term.  Comparing this to the EIA’s total system LCOE suggests that the EIA is leaving out some amount of integration costs, particularly for PV solar. It calculates LACE which addresses some of that and also accounts some distributed energy advantages of renewables, but the challenges outweigh the advantages in many cases at present. The EIA total system LCOE comparison shows that in 2026 it will be similar for CCGT, solar, and wind, the three cheapest widespread resources. CCGT will be a little higher in that scenario but does retain its value as a dispatchable fuel, its lower up-front costs per electricity produced, and its pay-as-you-go cashflow advantage. The Italian study suggests high integration costs for solar PV at 31% of the standard LCOE of solar PV. It is not certain how the EIA analysis calculates integration costs. With LACE they attempt to measure economic competitiveness of different technologies. They use a metric LACE-to-LCOE (or LACE-to LCOS in the case of storage), This is called the value-cost ratio. A value-cost ratio of less than one indicates that cost exceeds value and a value-cost ratio of greater than one indicates that value exceeds cost. The EIA cost-value ratios for different technologies suggest that by 2026 solar, some solar-plus-storage, geothermal, and CCGT will be the most attractive investments in some areas. Solar PV is best at 1.06, CCGT is even at 1, and onshore wind is at 0.98.  


 



  

 

System Levelized Cost of Electricity and its Components, a solar PV case study. Source: Veronese, E, Manzolini, G, Moser, D. Improving the traditional levelized cost of electricity approach by including the integration costs in the techno-economic evaluation of future photovoltaic plants. Int J Energy Res. 2021; 45: 9252– 9269. https://doi.org/10.1002/er.6456

 

     Now we return to include other attempts to quantify System LCOE. We can see that there are many things that can be accounted to get an idea of the true cost of intermittent resources. Unfortunately, many have to be apportioned or attributed to renewables costs or fossil energy costs in varying amounts. Fossil fuel power plants need transmission lines but far less total length in lines than renewables do. Apportionment can be tedious and error prone. The goal of comparing resources is to compare apples to apples, oranges to oranges, without skipping anything major or apportioning incorrectly. Fossil systems must account for the fuel, which costs varying amounts through time. Robert Idel’s analysis is perhaps starkly realistic, showing that it is the hidden subsidy that values renewables at low cost to provide when in fact they are expensive to provide. We know wind and solar cost more to build as they have high upfront costs, but renewables do not have fuel costs, so renewables increase in value through their life cycle compared to resources that need fuel.

     We know that grids with high amounts of wind and solar provide electricity that costs more for consumers than grids with lower amounts of it. One might also say that cheap natural gas has masked some of those costs for grids that increased natural gas as well as wind and solar on their grids. We also know that grid integration costs rise as more variable generation is added to the grid. How much is the question.

 

     A 2018 modeling study applied to the EU-7 plus Norway and Switzerland concluded that “the system LCOE for VRE increases linearly with the penetration level range of 20%–80%, above which it increases sharply.” This suggests that variable renewables can be accommodated at reasonable costs up to 80% penetration. Grids with high VRE share typically use wind as the main generating source and have a significant transmission buildout to accommodate that wind power. Indeed, the study also concluded that adequate transmission capacity is the key to accommodating variable generation. However, it is also often expensive and slow to add transmission capacity. The authors also noted that system LCOE estimates for grids with high VRE share can vary widely. They delineate grid integration costs as “transmission, storage, ensuring the flexibility of other units, balancing costs, and for reducing the full-load hours in thermal power plants or curtailing VRE generation.”

     Ueckerdt et al in 2013 first described the notion of System LCOE to account for grid integration costs. The paper describes LCOE as “the full life-cycle costs (fixed and variable) of a power generating technology per unit of electricity (MWh).” They also noted then that LCOE is it is/was is a flawed method that needs to be refined and that more variability = higher costs. Power systems were modeled after Ueckerdt etal’s marginal system LCOE of VRE2 for up to 60% VRE but not higher. The 2018 EU modeling study mentioned above attempts to evaluate higher than 60% VRE. The authors note that the two biggest strategies for managing variation are transmission and storage. They also note that earlier modeling did not consider trade between nearby grids, a variation management strategy enabled by transmission. Robert Idel notes that Ueckerdt etal’s System LCOE accounts for integration and balancing but is incomplete. He notes that LCOE of renewable sources of electricity depend highly on their market share. Wind generation costs remain constant when more is added but costs increase significantly. He notes a calculation from the Ueckerdt etal method where the System LCOE for wind in Germany increase from 60 EUR/MWh to almost 100 EUR/MWh if the share increases from 0% to 40%.

     The goal of System LCOE is to account for all costs, mostly grid integration costs, per unit of energy produced. Authors of a 2022 paper on redefining System LCOE point out the non-linear nature of power generation. Intermittency creates a demand for balancing that increases non-linearly with higher VRE on the grid. They advocate to make System LCOE more mathematically precise so that it can be standardized to weigh for policy. They consider that System LCOE isolated for each technology should be developed in order to make more detailed analyses. In terms of markets the great variability and ranges in estimated LCOE for power projects makes it hard to compare the economic merits of projects.

 


Avg. System LCOE (not a good metric). Source: 
Re-Defining System LCOE: Costs and Values of Power Sources. Yuhji Matsuo.The Institute of Energy Economics, Tokyo 104-0054, Japan. Energies 2022, 15(18),6845; https://doi.org/10.3390/en15186845. September 2022.




Marginal System LCOE (a better metric). Source: As above.


As can be seen from the graphs above, the Marginal System LCOE for wind doubles that of coal for a VRE share of about 75% and increases much faster after 80%. We can also see that wind was never cheaper than coal under that metric, as it is in the graph above of the inadequate and incomplete accounting of the Avg. System LCOE, where wind is cheaper than coal till about 50% VRE share and only accelerates slightly beyond 75-80% share.

     A table from Idel’s paper seems to give solar and wind very high LFSCOE’s but I am not sure the context here, it could be for higher VRE penetration.


 


     


     The bottom line perhaps should be a reminder that when people say that wind and solar are the cheapest forms of energy, that is not quite true at all, not even close really.   

 

 

References:

Levelized Full System Costs of Electricity. Robert Idel. Energy. Volume 259, 15 November 2022, 124905. Levelized Full System Costs of Electricity - ScienceDirect

Joseph Fournier - LinkedIn post, April 2023.

Natural Gas and Decarbonization. Kent C. Stewart. 2022. 

Re-Defining System LCOE: Costs and Values of Power Sources. Yuhji Matsuo.The Institute of Energy Economics, Tokyo 104-0054, Japan. Energies 2022, 15(18), 6845; https://doi.org/10.3390/en15186845. September 2022.

Lion Hirth, Falko Ueckerdt, and Ottmar Edenhofer. Why Wind Is Not Coal: On the Economics of Electricity Generation. The Energy Journal, 2016, vol. Volume 37, issue Number 3. Abstract. EconPapers: Why Wind Is Not Coal: On the Economics of Electricity Generation (repec.org)

Valeri, Laura Maguzzi. INSIDER, Not All Electricity is Equal – Uses and Misuses of Levelized Cost of Electricity (LCOE). World Resources Institute, Ausut 1, 2019. INSIDER: Not All Electricity Is Equal—Uses and Misuses of Levelized Cost of Electricity (LCOE) | World Resources Institute (wri.org)

Veronese, E, Manzolini, G, Moser, D. Improving the traditional levelized cost of electricity approach by including the integration costs in the techno-economic evaluation of future photovoltaic plants. Int J Energy Res. 2021; 45: 9252– 9269. https://doi.org/10.1002/er.6456

Levelized Costs of New Generation Resources in the Annual Energy Outlook 2021. Energy Information Administration, February 2021. Levelized Costs of New Generation Resources in the Annual Energy Outlook 2021 (eia.gov)

The marginal system LCOE of variable renewables – Evaluating high penetration levels of wind and solar in Europe. Lina Reichenberg, Fredrik Hedenus, Mikael Odenberger, and Filip Johnsson. Energy. Volume 152, 1 June 2018, Pages 914-924. The marginal system LCOE of variable renewables – Evaluating high penetration levels of wind and solar in Europe - ScienceDirect

 

System LCOE: What are the costs of variable renewables? Falko Ueckerdt, Lion Hirth, Gunnar Luderer, Ottmar Edenhofer. Energy. Volume 63, 15 December 2013, Pages 61-75. System LCOE: What are the costs of variable renewables? - ScienceDirect

 

 

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