Are we prepared to accept the cost of moving to renewables?

Posted in Uncategorized at 6:42 pm by Administrator

The financial analysis I did recently to determine the cost of switching 80% of U.S. electricity production to wind power, together with a growing trend towards reconsideration of Renewable Portfolio Standards (RPS) has raised a serious question in my mind about the best path forward. In my blog posting I came up with a figure of $3.6 trillion to make the switch to wind power. What I didn't state in that blog post was that I actually don't think even that amount of money gets the job done.

As much as a massive "smart grid" would allow regional balancing of windy and calm parts of the continent there are times when very large high pressure fronts would leave all of the mid-west wind farms in a "dead zone" (see my Christmas, 2012 blog for a somewhat amusing take on that possibility). I do not believe that there is any way to replace that amount of wind production by shuffling energy from other parts of the continent despite what the computer models might indicate. So, as I have stated ad nauseam in my blogs, energy storage is a key component in any real transition to renewables.

The problem is that any energy storage technology we can come up with won't be cheap.

Just to put things in perspective, the world's largest battery complex was recently brought into service by Duke Energy to provide backup power for the Notrees wind farm in West Texas. This facility can provide 36 MW of power for up to 15 minutes to provide "bridging" power and to smooth the variability that is a characteristic of wind energy production. The facility cost $44 million, half of which was provided by a U.S. government grant. Therefore the cost for the batteries can be calculated as $44 Million / (15/60 x 36) MW-hours =$4.9 million/MW-hour.

The Notrees wind farm itself is a 153 MW facility which probably cost about $300 million to construct. On a windy night this facility could easily reach 80% of capacity so that in 8 hours it would generate 8 x .8 x 153 = 979 MW-Hours of electricity. This electricity would probably not be needed because it was generated in a period of low demand and would be available to be stored in a battery array. The cost of an array large enough to store this energy can be estimated as 979 x $4.9 = $4.8 Billion – about 16 times the cost to construct the wind farm.

Batteries are probably the least attractive of the energy storage options available because of the cost. But there are no other easy options available. I have previously proposed new concepts such as Funicular power, unpumped storage, and using Concentrated Solar Power with Thermal Energy Storage to compliment Photo-Voltaic solar. But none of these concepts have ever been attempted in the real world. And none of them would be cheap. I could see my estimate of $3.6 trillion ballooning to $4.5-6 trillion once the cost of storage technology has been included (although there would be a significant saving because the effective capacity factor for the wind farms would be increased – it would be impossible to determine beforehand if this would offset the cost of storage).

Is there an alternative? Yes and no.

Combined cycle gas turbine (CCGT) facilities are the most efficient and cleanest burning non-renewable electrical generation sources available. And whether we like it or not the construction cost for these plants is very low – less than $1/watt.  In fact, it would be possible to replace all U.S. coal-fired plants with CCGT plants for less than $250 Billion.  CO2 production would be cut by about 50% with the elimination of coal.

What about natural gas supply and price?  I have said previously that this resource will run out some day and well before that the price will rise dramatically.  The latest estimates are that the U.S. has 2,000 TCF or more of natural gas reserves.  Currently about 7 TCF per year is being used to generate electricity.  By replacing coal with natural gas this usage would triple to about 20 TCF per year and total production would rise to something like 35 TCF/year.  So based upon those numbers the U.S. has about 65 years of supply available.  There are a great many assumptions in that number but I think it is safe to say that supplies would get somewhat constrained and prices would go up in the next 30 years.

The financial cost difference between a future based upon renewables and one primarily dependent upon CCGT is stark; potentially $4.5-6 trillion vs. $250 billion.  But that is not the only factor.  Natural gas will run out so that concern is still valid.  Operating costs for CCGT, including the cost of gas are significant and will rise over time.  Advocates of renewables claim an almost unlimited service life for wind and solar facilities but that is not realistic either.  Wind turbines need repair and become obsolete (for example, most of the original turbines in the Altamont wind farm are being replaced).  Same goes for solar panels.  But the operating costs are certainly much, much lower with renewables.

So all things considered, have I changed my opinion about what we should be doing with the development of renewable resources?  Fundamentally, no.  I still feel that the public policy initiatives outlined in my Sustainable Energy Manifesto provide the best path forward, with one addition.

Because of the time that will be required to develop utility-scale energy storage options I believe that it would be wise to use CCGT plants to replace the oldest coal-fired plants in the U.S. generation fleet – those that will be forced to close because they cannot be retrofitted to meet MACT requirements for a reasonable cost. 

The challenge with that strategy is that without some level of price certainty it will be difficult to finance the construction of these plants.  For example, in Europe Moody’s Investors Service published a note on November 6, 2012  warning that it expected “rising levels of renewable energy output to further affect European utilities' creditworthiness”.  The situation is not much better in North America.

That leads once again to the last point in my Sustainable Energy Manifesto.  It is time to end the era of deregumania; time to admit that for life-critical services like water and electricity an increasingly short-sighted free market will not deliver the stability and reliability needed.  There is no shame in admitting that deregulation of the electricity market was a mistake.  The same cannot be said for continuing down a path that is clearly leading nowhere.



80% Renewables by 2050? Show me a realistic plan!

Posted in Uncategorized at 3:56 pm by Administrator

Many green energy advocates have latched onto a report released by NREL on March 26, 2013 that concludes that 80% of U.S. Electrical generation could come from renewables in 2050 based upon the use of technologies that are available today.

I have the greatest respect for NREL and generally take everything the organization produces as the closest thing to the truth that is available when it comes to talking about renewables. But in this case I would have to say that there is a major element of common sense missing from this report.

NREL have brilliant scientists that utilize sophisticated computer models. I don't dispute the effort that has gone into making these models as accurate as possible but I would say, having worked with similar models in the oil and gas exploration industry, that sometimes the simple facts of life are lost in the 17th decimal place.

So let's keep things simple.

There are two forms of renewable electricity generation that have been deployed en masse in the United States and around the world during the past 20 years; Photo-Voltaic (PV) solar and wind turbines. There are other technologies such as CSP solar, geothermal, biomass, small-scale hydro etc.; but when you look at the total activity in the sector more than 95% is PV solar and wind. Without very major shifts in public policy the safe assumption is that these technologies will continue to dominate.

Electricity demand curves in North America all show a similar pattern; peak demand starts in the late afternoon and keeps going up into the late evening as people get home from work, cook their suppers, turn on lights and turn up the air conditioning in the summer or the heating in the winter. Commercial and industrial demand has somewhat different patterns and in some cases more flexibility but the bottom line is that demand in the evening is high.

PV solar has no ability to store energy using any technology available today and therefore it fades dramatically in the late afternoon. By 5:30 pm PV solar is basically out of the picture.

That leaves us with wind. To understand how feasible reliance upon wind is it is useful to examine what has happened in the United States over the past 10-15 years.

Supported by Federal Production Tax Credits, Renewable Portfolio Standards, and direct subsidies, deployment of wind generation has grown dramatically during that period of time. By the end of 2012 the "nameplate" capacity (the maximum amount of generation from a wind farm under good operating conditions) has reached 60 GW.

The average demand across the United States in 2012 was about 428 GW with peak summer demand topping out at around 750 GW. Based upon the annual average, the available wind generation had the theoretical potential to meet about 60/428 = 14% of demand.

The actual contribution of wind generation in 2012 was about 3.5%. Therefore the effective capacity rate for installed wind farms in 2012 was about 3.5/14= 25% – a figure which is very much in line with effective wind capacity reported from other jurisdictions around the world.

So what would it realistically take to use wind generation to meet peak demand in 2050 using the assumptions that NREL used?

First, NREL allowed for 20% non-renewable generation so the peak summer demand then becomes 600 GW.

Next, let’s assume that a very aggressive Demand Response program has been successfully implemented throughout the U.S. allowing for a reduction of another 25% of demand at peak times (note that post-Fukushima Japan which had lost 28% of its generating capacity overnight was only able to cut peak demand by 15% and that was only in the first year). That brings peak demand down to 450 GW.

Finally, let's assume that aggressive development of biomass, small hydro, and geothermal was able to bring 50 GW of reliable renewable generation on-line (that’s far more than has ever been developed to date). That reduces peak demand to 400 GW.

Based upon an average 25% effective capacity it follows that at night in the summer it would be necessary to have something like 1,600 GW of installed wind capacity to reliably meet demand. At a construction cost of about $2/watt it would cost $3.2 trillion to build this capacity. It should be noted that the wind generation industry would have to more than triple the record 2012 installations and maintain that pace for the next 37 years in order to have an installed capacity of 1,600 GW by 2050.

This might actually be a "best case" scenario because it assumes no increase in the demand for electricity for the next 37 years. Conservation and energy efficiency might make that plausible except for one thing. It is highly probable that the transition to electrically powered vehicles would have been largely completed by that time. The amount of energy consumed by vehicles in the United States today is roughly equal to the total amount of electrical energy produced today. So that implies that the electricity demand could in fact double by 2050.

But that is only the beginning. Wind energy advocates make the argument that it's "always windy somewhere" so that the only thing needed to solve the variability problem is the ability to transport electricity from a windy area to a calm area. The NREL report includes an interactive map showing energy flows across dozens of very high capacity transmission corridors extending tens of thousands of miles (one frame from the flash video is shown below).

The map below shows wind potential as well as the average demand and existing wind nameplate capacity by state. The need to move energy from high wind potential to high demand areas thousands of miles away is obvious.

So how feasible is it to imagine this physical supergrid being built?; Here again, it is useful to look at recent experience.

In 2005 Texas authorized the construction of more than 3,500 miles of high voltage transmission lines to carry west Texas wind energy to the urban centers in central and south Texas. Having expedited the various approval processes this project is nearing completion nearly 8 years after it was started. Cost over-runs have driven the project cost up to $6.8 Billion.

In another recent example the state of New York has authorized $2.2 Billion to build a 1 GW transmission line 300 miles from the Quebec border to the city of New York. That project was announced in 2010 and is expected to be completed in 2017 if it can overcome several legal challenges being brought forward by environmental groups.

Based upon these two recent examples the construction costs for high capacity transmission lines range from $2 million/mile (Texas) to $6.7 million/mile (New York). Given that many of the envisioned cross-continental lines would traverse mountains and large rivers whereas the Texas lines crossed mostly flatlands it could be expected that the cost of building the physical supergrid would be something between these two amounts.

Assuming 100,000 miles of new transmission lines at a cost of $4 million/mile it would cost $400 Billion to complete the supergrid.

The bigger problem is that each leg of this project would have to go through lengthy reviews and would probably face citizen protests and lawsuits so that it would be safe to assume that it would take 6-10 years to build any of the legs. It is very hard to imagine that the majority of this grid could actually be built in the next 37 years no matter how hard we tried.

So where does that leave us? If we managed to triple the rate of wind installations and solve the engineering, environmental, and legal problems associated with building out a supergrid and find about $3.6 trillion to pay for it all we could possibly have an economy driven by wind energy including during peak demand nights in the summertime. (By the way, if this is actually the strategy we want to pursue then there is no point installing any PV solar and certainly no justification for subsidizing it. If wind has to carry the load in the evening and at night it will have more than enough capacity to deal with daytime demand so that all of the PV solar would be surplus.)

My common sense assessment of this scenario is simple. It will not happen.

Does that mean that I don't believe that we can transition to renewables by 2050?; Not at all. In fact I think we can transition to 100% renewables by 2050. But this goal will not be achieved by a simplistic approach whereby wind without storage is doing most of the heavy lifting.

Storage is key and that will not be easy to develop but I firmly believe that if the International community dedicated $100 billion to that problem over the next 10 years it would get solved.

Concentrated Solar Power with Thermal Energy Storage, especially if used only at night, would provide cost-effective base-load capacity that could compliment PV solar. There are other public policy initiatives that are needed, all of which are outlined in my "Sustainable Energy Manifesto".

The biggest barrier preventing this transition is complacency and a belief that we are already on the right path. We are not. Major changes are required that will require coordination and cooperation between governments on a scale never seen outside of wartime.

We can make the changes needed. We just have to understand that these changes are absolutely necessary, will not be easy, will take time and money, and will require some sacrifices in terms of convenience and, at times, giving up some creature comforts. Are we ready to accept those realities?



A Sustainable Energy Manifesto

Posted in Uncategorized at 1:52 pm by Administrator

The electrical generation and distribution system has evolved over the past 100+ years into an extremely reliable source of power – one which has been the foundation of the industrial expansion and prosperity of the developed world.   Our society is totally dependent upon this and even relatively short and localized interruptions in the power supply (for example during the Sandy superstorm) cause major disruptions to everyday life.

In the past 10 years there has been rapid development of renewable energy sources, principally Photo-Voltaic (PV) solar and wind supported by significant tax-payer and rate-payer subsidies.  The public policy goal of replacing non-renewable hydro-carbon combustion with renewable generation sources has achieved significant successes; higher efficiencies in manufacturing and more efficient deployment have resulted in lower unit costs which have in some situations made renewables competitive with traditional thermal generation assets (coal-fired, natural gas-fired and nuclear plants).

However, the success of renewables has been achieved in an environment where all traditional thermal generation assets are still in place, able to provide immediate backup power after sunset and when the wind is calm.  Even so, as renewable generation becomes a significant component ( > 10% ) of total capacity there have been increasing problems with grid stability (for example in Germany, Hawaii, and Texas). In addition, preferential access to the electrical grid by renewables has seriously eroded the operational efficiency and financial viability of base-load thermal generation plants which are designed (and financed) to run 7x24x365. 

In the U.S. the MACT regulations put in place in November, 2011 will result in the permanent shut-down of a significant portion of the coal-fired generation fleet – more than 34 GW by some estimates.  It will be very difficult to attract the investment capital required to replace this base-load generation capability in an environment of increasing price uncertainty where renewables are given preferential access to the market.

In order to continue the transition to renewables the problems of variability and reliability must be addressed in a serious way.  The roll-out of renewables should continue at a slower pace with reduced financial support in order to direct more research and development and implementation funding to programs designed to maintain the integrity and reliability of the electrical generation and distribution system as a whole.  These programs should address reducing end-user demand, development of physical transmission inter-connects and associated “supergrid” technology, and the development of utility-scale energy storage technology.

The following specific initiatives would support an aggressive and relatively painless transition to a truly sustainable energy environment.

  • Over the next three years cut both the wind energy Production Tax Credit and Photo-voltaic Feed-In-Tariffs in half. Redirect these support mechanisms to Concentrated Solar Power (CSP) developments that include Thermal Energy Storage with the proviso that these CSP systems begin operations in the late afternoon and throughout the peak demand period at night. With a combination of PV during the day and CSP at night solar energy can become a cost-effective and reliable base-load substitute in the Southern U.S. and in many other parts of the world.
  • Pass legislation that prevents regional grid operators from treating energy storage systems as an “end user” subject to grid tolls.  Utility-scale energy storage systems are essential to address the variability and reliability issues associated with renewables and should be supported by grid operators, not penalized by them.
  • Institute a Feed-In-Tariff for stored energy that is released to the grid.  These systems are as yet in early stages of development and need tax-payer and rate-payer support in order to achieve the large scale deployment that will result in more effective and lower cost systems.
  • Create an Internationally coordinated Research & Development program to develop utility-scale energy storage systems with funding in the tens of billions of dollars spread over the next decade.  The challenges associated with any viable storage technology are enormous and will require an ISS-style effort to overcome.
  • Establish a North American “Smart Grid” initiative that will include extensive upgrades not only to the systems used to control energy flow but also to build out required physical inter-connections.  The concept that “the wind is always blowing somewhere” does have some validity but would require massive and expensive inter-connection capabilities.   Given that transmission lines require significant environmental review, often encounter citizen protest, and take years to construct, this is a process that will take decades to complete.  The sooner we get started the better.
  • Designate all hydro-electric power as a renewable resource (in California large scale hydro is not eligible for the state's Renewable Portfolio Standard) and plan for the further development of hydro where it is available.  In particular, plan for the integration of hydro from northern Manitoba and Saskatchewan as backup to the plentiful wind resources of the Canadian Prairies and the U.S. Mid-West.  In other areas explore the concept of unpumped storage which implements excess hydro generating capacity to balance wind and PV solar.  This will require co-operation between Canada, the United States, and the individual states and provinces.  The goal should not be maximizing revenue for any particular generating source in a “spot market” approach, but rather for long-term stability in both supply and price for the entire system.
  • Provide additional support for utility-scale geothermal projects such as the one that has provided base-load electricity for the "Big Island" of Hawaii for the past 20 years. Like CSP and Hydro, Geothermal is one of the only reliable and renewable base-load generation sources and deserves enhanced interest and financial support.
  • Develop national education programs designed to raise the awareness of consumers regarding the responsible use of electricity with the specific aim of supporting Time-Of-Use and Demand Response programs.  This must be a "call to arms" to industry and consumers with clearly identified goals for “clipping” peak demand in both summer and winter.  During peak demand times a web site, media segments included with weather reports and outdoor billboards should be used to visually display total electricity usage and peak prices being paid in order to focus attention on the environmental and financial consequences of peak demand electricity usage.
  • Amend the building codes across North America to require geoexchange systems for heating and cooling which reduce electricity use by more than half and effectively “clip” peak demand on hot summer days and cold winter nights.  This requirement should apply to all new commercial and industrial buildings and all new residential neighbourhood developments unless a credible technical or economic justification can be made to implement traditional, energy-intensive HVAC systems.
  • Promote car-pooling through a national education program, support for a unified car-pool participant matching system, and “tolls” for Single-Occupancy-Vehicles entering major urban centers during rush-hour (with exemptions for individuals that cannot make car-pooling work for them in a reasonable way).
  • Re-establish regulatory control over the wholesale electricity market.  Deregulation has been largely ineffective in every jurisdiction it has been implemented in with no measurable benefits for consumers and significant degradation of electrical reserves in most cases.  It is simply not possible to justify multi-billion dollar investments in more efficient and cleaner generation capacity without some price certainty.  Regulated profits for privately owned firms or public ownership of generating assets served to build reliable and cost effective generation systems for more than 100 years.  We have “fixed” something that was not broken to satisfy an anti-government, anti-regulation political agenda and now we really have broken the system. 

Implementation of these proposals will take many years, in some cases decades.  There will be very significant costs and in many cases public resistance.  The bottom line, which many will have a hard time accepting, is that we have to change the way we live, the way we construct buildings, our driving behavior, and our collective allocation of resources if we really want to wean ourselves away from hydro-carbons and transform into a truly sustainable society. 

We do not have to turn our backs on most of the technology we use or even give up many of the creature comforts we enjoy.  But we will have to sacrifice a bit of convenience to choose car-pooling or public transit; we will have to accept that being hot and sweaty on some summer days when the winds are calm is alright; we might have to put on a sweater (fashionable of course) on some cold winter nights so that we can turn the heat down; we will have to pay a bit more in the short term so that our buildings can use geoexchange; and taxes and utility rates will have to go up somewhat to pay for smart grids, extended high voltage transmission lines, and energy storage research.

If this doesn’t sound very pleasant consider the alternatives. 

We can stand by and watch as the 3rd world consumption of oil and gas increases and the physical supplies get tighter and tighter.  At some point, probably in the next 10-15 years, there will be a significant imbalance between supply and demand and the price of oil and gas will escalate dramatically and quickly.  Shale gas and arctic oil will not prevent this inevitable scenario. 

We can continue to rapidly develop solar PV and wind generation because it is very easy and relatively cheap.  But without giving the support required to commercialize utility-scale storage we will destroy the stability of the electricity distribution system which will lead to regular grid failures and blackouts.

We can continue to ignore how our behavior as individuals impacts the overall supply-demand balance; by using incandescent light bulbs, washing and drying clothes in the early evening, baking at the height of peak demand on a cold winter evening, not having programmable thermostats, and a thousand other “little” things that add up to 10-15% of peak demand.

In other words we can continue on our current path with relatively few changes until we hit a brick wall.  Or we can make serious changes that will help us transition to a sustainable energy environment as painlessly as possible.

I know which path I would prefer – I don’t like brick walls.

These changes will not come about without significant public support and advocacy. If you believe that some or all of this Sustainable Energy Manifesto is valid then I encourage you to become a follower of @enrgy_manifesto on Twitter. I will put out a tweet when I publish a new post or when some significant development in this field takes place. By retweeting you can help raise awareness of these necessary changes and hopefully encourage action on the part of our politicians and industry decision-makers.




Unpumped Storage

Posted in Uncategorized at 9:09 pm by Administrator

Whenever I launch into one of my frequent rants about the need for utility-scale energy storage to support the rollout of more Solar and Wind generation there are always people that point to pumped storage as a credible solution. And every time that happens I argue very strenuously (and I hope convincingly) that pumped storage is NOT a viable solution because there are not enough locations where it works.

The Bath County facility in Virginia (the world's largest pumped storage) is an engineering marvel – I encourage anyone interested in storage to check out their site and the video which is quite inspiring. But to create a second large reservoir close to the main reservoir in other locations is difficult. There may be many sites being proposed but are they large enough to make a real impact?

To get an idea of the scale required it would take 3 Bath County sized facilities to be able to store the output from the existing wind generation capacity in Texas. It took 8 years from the time the Bath County facility was licensed until it went into production. And these days the development of large reservoirs is subject to significant resistance from some segments of the environmental community.

I support the development of as much pumped storage as we can reasonably do as quickly as possible. I just don't think it will be large enough or fast enough in North America to help us deal with wind variability in the next 5-10 years. On the other hand, pumped storage may be a significant part of the solution in Europe if they can overcome the cost/environmental challenges of building the undersea interconnects required.

In terms of North America it seems to me that there may be a way to achieve the same result using a different approach.

Every hydro facility has penstocks and generators sized to make use of the average stream flow of the river that feeds the reservoir behind the dam. It would not make sense to design in a lot more generating capacity because using more water would quickly draw down the reservoir to a level where power generation would no longer be possible. In dry years some of the penstocks are closed and in wet years water is spilled but on average the facility is designed to use all of the water supply available and no more.

Now if we decided to use existing hydro facilities in a different way it would be possible to provide backup generation for wind and solar. What I am proposing is that additional penstocks and turbines be added to large-scale hydro facilities in North America – perhaps as much as double the current capacity. In most cases this could be done using tunnels from the existing reservoir as shown below.

In order to make this work the average capacity of wind generation (typically 25-30% of nameplate) would have to be roughly equal to the excess capacity built into the hydro facilities.

When wind generation dips below the average the hydro facilities could make use of the excess capacity installed to make up the difference. This of course would lower the level of reservoirs but typically reduced wind conditions only last for a few hours or at most a few days.

When wind generation exceeds the average the hydro generation could be cut back and reservoirs could be refilled or water spilled. By balancing the two generation sources the regional grid would always have access to the same amount of power despite the variability of wind.

This exact situation is already occurring in Scandinavia where excess wind energy from Denmark is often available at night and excess hydro is available during the day. The difference with "Unpumped Storage" is that the entire system will be designed to balance excess wind capacity whenever and wherever it might occur with excess hydro built into existing facilities.

There are some significant challenges with this approach (as there are with any concept that embraces renewable sources in a major way).

  • Grid Capacity: Balancing wind generation with hydro that might be a thousand miles away will require new transmission lines – very large new transmission lines. In the worst case with a large high pressure zone sitting over the Mid-West wind generation could drop to essentially zero from a high of something like 10 GW or more (this exact situation happened in December, 2012 in Texas where a new wind generation record of 8.6 GW was followed the very next day with 6 hours of no appreciable wind at all). So Unpumped Storage would require a very significant investment in new inter-connections between regional grids
  • Reservoir Levels: Unpumped Storage would cause reservoirs levels to drop more quickly and to a lower level than with normal hydro operations. This would have ecological impacts that need study and could have a significant impact on recreational activities.
  • Energy Prices: This approach would not work in a deregulated environment where wind and hydro producers were effectively competing for market share in a "spot market". Hydro, being the reliable source, could demand almost any price when wind generation dropped dramatically. By way of example, Texas is in the process of raising the ceiling price of electricity to $9,000/MW-Hour (the average annual price in Texas is $55/MW-Hour) to try and entice utilities to build more base-load generation capacity. The concept seems to be that if you let base-load plants charge 170x the average price for the few hours that they can get access to the grid then utilities will spend the $billions required to build new facilities. Call me a skeptic but I would say "that dog don't hunt."

    In the other extreme when the wind is blowing hard the spot price can drop to zero (actually to less than zero in Texas about 10% of the time because of Production Tax Credits earned by wind producers).

  • Jurisdictional Issues: To make Unpumped Storage work the jurisdictions in which the hydro and wind were located would have to cooperate in every way; regulations, import/export policies, transmission facility planning and control, pricing mechanisms, and financial incentives would all have to be aligned across the entire region regardless of how many state and provincial borders the electrons crossed.

    Would this be easy? No. Would it be expensive? Very. But would it work? In many regions of North America the answer is a definite yes.