Is there such a thing as a free lunch?

Yes, at least if you can be in DC at Resources for the Future on June 4:

U.S. Greenhouse Gas Emissions Reductions: What are the Opportunities, at What Price and Through What Policies?

A central question for U.S. climate policy is the opportunity and cost of greenhouse gas emissions reductions and the best approaches to achieve them. In December, McKinsey & Company and the Conference Board released a major report — Reducing U.S. Greenhouse Gas Emissions: How Much at What Cost? This analysis finds that 30 to 45 percent of forecast 2030 greenhouse gas emissions can be reduced at costs of less than $50 per ton of carbon dioxide equivalent — and potentially far less if sizeable energy efficiency gains are captured. Our panel will describe and discuss these findings and their implications for the current policy debate.

Wednesday, June 4, 2008
12:45 pm - 2:00 pm
A light buffet lunch will be available at 12:30 p.m.

Please RSVP by sending your contact details in an email to rffseminars@rff.org.

The McKinsey study that will be discussed has gotten a lot of publicity for suggesting that there are many large free lunches to be had in the energy and emissions arena — we can reduce emissions for negative total costs — particularly with energy efficiency projects. I will be there and am very curious to hear what one of the report authors says about the study.

Here’s a previous post from Rich on the McKinsey study.

Nuclear power

The CBO just issued a new study on nuclear power in America. Via the CBO Director’s blog here are a couple highlights:

Carbon dioxide charges of about $45 per metric ton would probably make nuclear generation competitive with conventional fossil fuel technologies as a source of new capacity and could lead utilities to build new nuclear plants that would eventually replace existing coal power plants. At charges below that threshold, conventional gas technology would probably be a more economic source of baseload capacity than coal technology. Below about $5 per metric ton, conventional coal technology would probably be the lowest cost source of new capacity.

A carbon price of $45 per ton of CO₂ is very likely higher than the U.S. could (politically) implement in the near future. Current emissions prices in the EU are around $35/ton right now.  If the U.S. passed a bill with similar stringency to Lieberman-Warner — a big political ‘if’ — then the EIA says the 2020 price would be around $30/ton, while the EPA analysis suggests higher, $40-50/ton.  If I was guessing I would say it is much more likely that any politically acceptable bill will result in prices of $10-30/ton in the near term.

But I think this is actually the most interesting point about nuclear power right now:

Uncertainties about future construction costs or natural gas prices could deter investment in nuclear power. In particular, if construction costs for new nuclear power plants proved to be as high as the average cost of nuclear plants built in the 1970s and 1980s (adjusted for inflation), or if natural gas prices fell back to the levels seen in the 1990s, then new nuclear capacity would not be competitive…

And this is very possibly the state of the world we are in.  Check this recent post from the EU Energy Policy blog.  Power plant construction costs have more than doubled since 2000, with much of the rise in the last two years and much of it very related to nuclear construction costs.  China particularly is consuming so much cement and steel that global prices for construction commodities are going through the roof.

A couple years ago I was relatively sanguine about the prospects for nuclear power but I am much more skeptical now.  I think the big problems are:

1. In the short run the price of global commodities and NIMBYism mean that it is both very expensive and very difficult to build new plants.

2. In the long run bad news about climate change could make nuclear look much more attractive but here proliferation worries me.  The long run is all about China and India and other not-so-stable parts of the world.  Fine, you can nuke up the U.S. or Europe completely (a la France) but this doesn’t make a huge difference because those places aren’t the future of the emissions anyway.  To really make a dent in the emissions trajectory you are talking about a huge number of plants in parts of the world where there are major religious and ethnic tensions (Jammu and Kashmir, western China) or where governments are authoritarian or (perhaps worse) incompetent.

Essentially I think the U.S. and Europe should be thinking now about which energy technologies they’d like to export 20 years down the road.  In this regard I’d rather us do a bunch of carbon capture and storage research than try to reinvigorate the nuclear industry.

Here is the MIT study on nuclear power, recommended.

Sunshine on my double-glazed low-E windows makes me happy

Economist.com’s Tech.view columnist has a great article up today about his research into putting solar cells on his own home. The article provides an accessible overview of photovoltaic technology as the author goes through the calculations of home installation. His conclusion? Even living in sunny southern California, he estimates that going solar would cost him “$600 a month for ten years, even after setting the interest charges against tax. And all that just to feel good about saving $75 of electricity a month.”

Although the article doesn’t state it explicitly, it sounds as if the downfall of solar technology is not only the expense — around $65,000 at his home, before any subsidies or rebates — but that there are easier ways to go green. We get a clue here, as he talks about the electricity needs of his home:

It’s not even as though the place gobbles electricity. When the house was being rebuilt five years ago, the new roof came with over a foot of thermal insulation. The floor-to-ceiling windows along two sides of the structure were replaced with double-glazed “low-E” glass (the sort that blocks infra-red radiation), and thermal linings were included in all the exterior walls. Even during the summer, the air conditioner usually stays off.

Admittedly, the architect went overboard on lighting. Fully illuminated, the house demanded seven kilowatts of raw lighting-power before fluorescent lights replaced thirsty tungsten filaments. Overall electricity consumption is now a reasonable 8,300 kilowatt-hours (kWh) a year.

Based on this description it sounds like his home is already pretty efficient. And those efficiency improvements were probably undertaken primarily because they made financial sense — the installation cost was less than the expected savings on energy. But given the author’s interest in going solar and his exactitude in calculating the cost, it’s also likely that he’s much more environmentally aware and economically savvy than your average homeowner. There’s a lot of research suggesting that many other — less savvy — property owners are leaving money on the table by failing to increase the efficiency of their buildings.

From the viewpoint of both the homeowner and the electricity company, efficiency improvements and solar technology look very similar: they reduce a home’s demand for electricity from the grid. Given the large subsidies regulators seem ready to give out to solar panels — perhaps $14,000 in this author’s case — it’s easy to think that regulators could be getting a much better deal if they figured out how to buy some energy efficiency with those dollars.

NEX returns show just how good 2007 was for clean energy

The WilderHill New Energy Global Innovation Index (NEX) is an index of global clean energy companies published by New Energy Finance and WilderHill. You can read more about its components here. In the chart below, I’ve pegged daily Nasdaq, S&P and Amex Oil returns to the January 3, 2006 price for comparison purposes. I think the trends are clear enough.

The more important question, of course, is not how clean energy has done in the past but how it’s going to do in the future. Though not on the graph above, anyone who follows clean energy has witnessed what might be the beginning of a market correction on clean energy stocks so far in the new year (First Solar and Clipper come to mind). I’m no financial analyst, but it seems that the emerging consensus that the US is heading for a recession (or at least a considerable slow down) probably doesn’t bode well for the sector. The American experience has shown that people’s enthusiasm for environmental protection is positively correlated with the health of the economy. While the Democratic candidates have recently tied “green jobs” into their spiels about avoiding recession, I have to think that economic downturn will dampen public enthusiasm for policies that will increase costs, at least in the short run. Not that there’s a whole lot on the table in ‘08 anyways, given that W is still in office and congress already passed an energy bill (albeit a relatively toothless one).

Ok I’m gonna stop rambling now.

Google drops a dime or two (or a billion) on solar

From the Guardian:

The web portal Google aims to develop cheap and clean sources of energy to replace polluting fossil fuels and tackle global warming…The company’s clean technology initiative, called REC, aims to develop renewable energy sources that are cheaper than coal, the cheapest, most abundant and dirtiest fossil fuel.

This initiative was slightly disparaged by one of the discussants at yesterday’s RFF U.S. Climate Policy rollout because it seems unlikely to attain its goal of making solar power cost-competitive with coal. I agree that this is a pipe dream for the near future, but essentially carbon-free energy sources such as solar must be aggressively pursued to successfully create a suite of clean energy. Clearly Google is setting a tanglible, discrete goal (cost of solar ≤ cost of coal). They aren’t necessarily expecting to achieve this goal, but if they feel like investing hundreds of millions of dollars to edge us toward cheap renewable energy, I think that’s great. It would be encouraging if more concentrated sources of capital undertook major green initiatives instead of simply greenwashing. At any rate, isn’t this a great situation for everyone? We basically have a private enterprise willing to accept potentially massive technology spillovers due to their organization’s preference for monumental green investment. This is the kind of R&D for which the federal government normally has to accept responsibility, and if private enterprise wants to absorb the costs for society, I’m totally willing to live with that.

Rich people, meet smart people

According to The Independent, the Second Annual Fortune Forum will showcase a breakthrough energy technology:

[Kane] Kramer, who was 23 in 1979 when he conceptualised the technology that led to the creation of the first MP3 player, refused to give specific details of the new discovery, or to name the inventor, so as to maintain the element of surprise for Friday. But he indicated that it is a breakthrough in micro-technology, and that British scientists who have tested it are convinced that it will work.

“This is something … that’s the accumulation of almost a decade of work,” he said. “It’s a new science, a Super Material. It would be 80 per cent cheaper than any alternative means of production, and it will contribute in a major way to reducing climate change.

Before we climate change folks all quit our jobs, note that the last time I heard this kind of announcement, we got the freaking Segway. The greatest benefit of this previous “revolutionary technology” has been watching Gob Bluth ride a monogrammed unit on Arrested Development.

On a broader scale, I do think the idea of matching wealthy investors (the total net worth of this year’s diners is estimated at over £100 billion) with inventors is an important one:

There is an old saying that if you invent a better mousetrap the world will beat a path to your door, but he says the adage is true only for inventions that improve gadgets that are already known to work. Big corporations can be very coy about putting money into something genuinely new. “Business wants to jump on a bandwagon, not build the bandwagon,” [Kramer] said.

Imperfect information, as we have so often noted, causes serious problems when people with no access to capital have great visions.

From whence the wind

Today’s New York Times has an article about a new offshore wind farm in Sweden. Although not the major focus of the article, one of the points it makes is that Europe has developed a lot of offshore wind, while in the U.S. wind development has been mostly limited to inland areas, and particularly the central part of the country. Over at env-econ.net they recently noted the opposition that offshore wind proposals face in the U.S.

Is the difference explicable purely in terms of NIMBY-ism? Is Europe less inclined towards onshore wind because of population density and the value of land? Are coastal residents relatively more wealthy/powerful in the U.S. and hence successful at blocking development?

The article is worth reading in its entirety. Here’s another interesting tidbit about solving the dispatch problem:

…Sweden does not need to build wind parks to get wind power. It could simply buy more surplus wind power from Denmark, which it uses, as does Norway, to pump underground water into elevated reservoirs. The water is later released during periods of peak electric demand to drive hydroelectric stations.

In this way, hydro acts as a form of storage for wind energy — addressing one of wind power’s biggest shortcomings.

NIMBY quote of the day

“Sometimes I think the only reason that coal with carbon capture and storage is so much more socially accepted than nuclear power is that nuclear exists and carbon capture and storage doesn’t yet.”

– Howard Gruenspecht, Deputy Administrator, U.S. Energy Information Administration, at today’s CBO Director’s Conference on Climate Change. (About which more later…)

Electric power sector carbon emissions database

Dani Rodrik points us to an awesome new resource:

Want to know how much CO₂ is emitted by the power plant across town, and how it compares to the one in the city you are planning to move? The Center for Global Development has just launched a web site that will tell you exactly that. In fact, the site has emissions data for every single power plant in the world–some 50,000+ power plants and 20,000+ power-producing companies.

Called the CARMA (CARbon Monitoring for Action) website and database, the site focuses on the global power sector, the largest carbon emitter industry. …

This is an amazing treasure trove of data. …

No joke. This is an amateur dataminer’s dream come true. I played around with their interface for a few minutes. It seems fairly intuitive. You can look up the utility in your area and see what generation resources they hold. The site also has pre-set geographic regions which you can bring up to see all the generation resources in the area. Here is the larger DC metro area. Here is Beijing. They also have a blog which includes some tips to get you started exploring.

Go forth and datamine!

Brown thinking green?

Gordon Brown unveiled a new British energy plan in the Queen’s Speech today, as he laid out his first full governmental program. The Bill will supposedly enforce emissions reductions of 60% by 2050 and 26-32% (which I assume can be taken to mean 26%) by 2020. Crucially, the new plan includes international aviation and shipping (what will I post about now?). The bill also calls for an expanded renewables standard and facilitation of private investment in carbon capture and storage. The standard is okay; in the context of binding targets, I think a wisely designed RPS could be an effective complementary policy. The CCS incentive is good. Although we run into the problem of government trying to pick winners, CCS holds enormous potential and faces huge initial capital and risk thresholds.

This is momentous, as it makes Britain the first country to introduce domestic legally binding emissions limits. How binding is “binding”? Only time will tell.

Note: I would love to get some feedback on this from people more familiar with proposed U.S. climate legislation. (Hint, hint, Daniel)

Technology Policy: Part 2

As promised in Part 1, here is some discussion of Richard Newell’s comments from the Brookings event. More details on this and the topics discussed in Part 1 can be found in Newell’s relevant RFF Backgrounder. Full disclosure: I worked for Richard on a couple of relevant memos.

Anyway, getting right down to it, Newell’s policy suite included:

(1) Making the R&E tax credit permanent

(2) Doubling the federal climate research budget to $7 billion/yr

(3) Improving research strategy and coordination

(4) Experimenting with inducement prizes.

Technology Policy: Part 1

I attended the Brookings event with Daniel. The panel was quite impressive, as noted in Rich’s earlier post. The first discussion was a quasi-debate between Rob Stavins of the Kennedy School and Gilbert Metcalf of Tufts University as to the merits and deficiencies of permit trading versus a carbon tax. Daniel addressed this issue hours before the event in a recent post. Hence, I will skip ahead to the second panel which dealt with energy technology policy. The presenters were John Deutsch, John Podesta, and Richard Newell.

Lifestyles of the carbon-constrained

The British Transport Secretary, Ruth Kelly, has released a report claiming that the British transport system can expand considerably without increasing carbon emissions. From the Guardian:

It argues that forcing the pace of technological change is the best way to ensure that transport helps Britain meet its goal of a 60% reduction of CO2 emissions by 2050. At the moment the transport sector is responsible for 23% of CO2 emissions and its share is rising the fastest.

The report does argue that we need a price on carbon, whether via cap-and-trade or taxation. It also proposes significant expansion of congestion charges. However, the report outlines the widening of major roadways as well as an explosion in air travel. So technology is clearly going to be our savior:

Carbon capture and sequestration

Those of you who are interested in energy and environmental issues, and particularly developments in Congress on these issues, should check out E&ETV and their daily news program OnPoint. Last week they interviewed John Venezia of WRI about carbon capture and sequestration (CCS), in conjunction with the release of an 8-page overview from WRI. It’s an excellent primer on how the technology works and what lies ahead in terms of research, development, and demonstration. One key message:

Natural gas processing plants that use captured CO₂ for EOR [enhanced oil recovery] represent “low-hanging fruit,” and this type of project may be economically feasible at just $10/ton CO₂; however, the sequestration potential is limited…. Today, a cost driver of about $40–60 per ton of carbon dioxide is required to make CCS economically feasible at a much larger scale at power plants.

My take? Getting this technology to work at far lower costs would be a really big deal. China has a lot of coal sitting around, it needs a lot of power, and it is very unlikely to be willing to pay $40–60 per ton CO₂ to reduce emissions in the near (or even not-so-near) future.

Cool ideas

The journal Nature reports [subscription required]:

When a newly expanded Wal-Mart store opened in Burton, Michigan, last month, it seemed like just another case of American gigantism…

But over in the frozen-food section, something more interesting than mere wretched excess was happening. The display cases are lit not with fluorescent bulbs, but with light-emitting diodes (LEDs). The LEDs last longer than the fluorescent bulbs they replace — and are so energy efficient that Wal-Mart expects to save $2.6 million a year by installing them in 500 stores nationwide.

…LEDs make sense for Wal-Mart’s freezers because fluorescent bulbs are less efficient at cold temperatures, whereas LEDs are unaffected.

Who knew? The article goes on to say that LEDs haven’t quite caught up with fluorescent bulbs at regular temperatures, but they’re expected to soon:

An incandescent bulb produces about 20 lumens per watt of power consumed, and a compact fluorescent produces about 60 lumens per watt. Commercially available LEDs now average about 30 lumens per watt, but over 100 lumens per watt has been reached in the laboratory. Most people expect LEDs to outperform fluorescent bulbs within a few years…

Ze Germans

Congrats to the German students who won the Solar Decathlon just held in DC! Via the AP:

A team of students from Germany’s Technische Universitat Darmstadt won a weeklong competition Friday on the National Mall for the best, most efficient and well-designed and -engineered solar home.

The competition attracted 20 universities, most from the United States. Other foreign competitors came from Canada and Spain. …

The German team was cited for it use of passive heating and cooling, photovoltaics and its smooth integration of technology into the overall design of the one-bedroom home. …

A team from the University of Maryland finished second and a team from Santa Clara University in California was third.

I didn’t make it down to the National Mall this last week to see the competitors. My roommate did, and he said that his personal favorite was the Santa Clara entry. Apparently they got docked quite a few points in the “Architecture” category for not being sufficiently avant-garde creative, but he said that if you didn’t care about living in a piece of modern art and you wanted a comfortable and functional living space they seemed the best to him.

The prize is right?

In my rundown of the the Democratic contenders’ environmental platforms last week I mentioned that I’d have a follow up post on Barack Obama’s idea about using cash prizes to promote energy innovation. This is something I’ve been interested in for a few years now, although mainly in the context of pharmaceutical innovation. Recently, however, I’ve become increasingly convinced that energy markets in the face of global climate change present just the type of problem that prizes might be good at solving.

Solar Decathlon, Oct. 12-20

The National Mall is playing host to the DOE Solar Decathlon from October 12-20. Teams of college students have designed houses that must be entirely solar-powered. The houses are open for public tours every day until the 17th (schedule here). Definitely seems worth a look.

The best laid plans…

A couple of energy economists at the Cato Institute wrote an editorial in the Wall Street Journal last month on electricity deregulation. (The full non-gated version can be found here.) It contains an excellent overview of the history of electricity deregulation, and a straightforward explanation of the primary economic forces that determine the price of electricity in regulated and deregulated markets. It’s well worth reading just for these aspects.

They also discuss why deregulation has worked so poorly in many places. Their argument is that deregulating electricity retail is non-problematic, but forcing apart transmission and generation — leaving transmission regulated but opening up generation to competition, including forcing incumbent utilities to legally separate their generation and transmission businesses — causes problems because these would very likely be vertically integrated in a ‘natural’ market structure. In other words, in a truly deregulated market, there would be considerable consolidation and vertical integration between generators and transmitters — making it look much like the regulated markets did before deregulation.

I don’t know enough about the electricity sector to evaluate this proposition; it’s an interesting idea.

Lynne Kiesling over at Knowledge Problem, meanwhile, is optimistic that deregulation of both generation and transmission will be good for consumers, because of increased innovation:

Supply and demand

There’s an article in the NYTimes today about energy exploration at “the ends of the earth.” There’s lots of interesting info on various extraction technologies, as well some projections on future demand growth. Do read the article.

The article also sums up the economics succinctly:

As global demand soars and prices rise, energy companies are going to the ends of the earth to find new supplies. …

The industry’s new reach is shifting the economics of energy extraction. According to a recent study, discovery and development costs, a key indicator for the industry, tripled from 1999 to 2006, to nearly $15 a barrel. …

These higher costs mean that the industry needs higher energy prices to finance new projects.

A few years of sustained high prices for oil and natural gas have provided the impetus for a new wave of exploration.  Supply and demand work their magic again!