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

2. Two steps to stabilizing climate End deforestation Decarbonize worlds 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 2

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 3

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

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6. 6 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

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

8. 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. 9 99 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 Texas load curves summer and winter Base load

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 10

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 11

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 12

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 13

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 14

15. 15 ENERGYLCOEs TECHNOLOGY ASSUMPTIONS FEDERAL INCENTIVES STATE INCENTIVES + CO2 Tax >8.4¢/kWh Various Reactors (MIT 2003,CEEPR 2009) Loan Guarantees, Price Anderson, Prod. Tax Credits Some Tax Incentives, Some Plant constr. cost recovery. 6.2¢/kWh Air-blown PC Gener. Tech (MIT 2007, 2009) Incentives Only For Clean Coal Tech. None $25/tCO2: 8.3¢kWh Plus 3-4¢/kWh To Coal Cost Coal Plant With CCS Tech (McKinsey & Co. 2008/Heal) Government Funds Future-Gen Project RPS/RECs, Prod., Invest. Tax Incentives 3.6¢/kWh- 8.3¢/kWh Commercially Mature (MIT 2006) Electricity Prod., invest. Tax Credits, Loan Guarantees, etc. RPS/RECs, Prod. Invest., & Sales Tax Incentives, Others 4¢/kWh- 7¢/kWh Utility Scale Turbines (California Energy Comm. 05) Wind energy tax credit (Federal) RPS/RECs, Prod., Invest. & Sales Tax Incentives, Others 7¢/kWh- 15¢/kWh Utility-Scale Silicon PV (Solar Advisor Model NREL) Loan Guarantees, Energy Grants, Invest. Tax Credits. RPS/SRECs, Prod., Invest. & Sales Tax Incentives, Others 12¢/kWh- 14¢/kWh CSP W/out Storage (DOE 2007) Loan Guarantees, Energy Grants, Invest. Tax Credits. RPS/SRECs, Invest., Prod. & Sales Tax Incentives, Others 15¢/kWh- 19¢/kWh Utility-Scale Parabolic-Trough (Solar Advisor Model NREL) Loan Guarantees, Energy Grants, Invest. Tax Credits. RPS/SRECs, Invest., Prod. & Sales Tax Incentives, Others 6.5¢/kWh Gas Powered Plant (MIT CEEPR May 2009) None $25/tCO2: 7.4¢kWh Nuclear Coal CCS Geo -Thermal Wind Solar PV Solar Thermal Natural Gas Solar Thermal W/STRG

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? 16

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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 18

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

20. 20 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 Solar output fluctuates too National Renewable Energy Lab

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 Cant provide baseload supply – except solar thermal, geothermal 21

22. 22 Pumped water storage

23. 23 Compressed air energy storage (CAES)

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 24

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 25

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 26