Transcript Carbon Issues - Pennsylvania Public Utility Commission

Controlling Carbon in the U.S. Electricity Sector
Jay Apt
Department of Engineering & Public Policy and Tepper School of Business
Carnegie Mellon University
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This afternoon, I will discuss
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Briefly, why US action matters
Why the US electricity sector matters
Whether low-carbon electricity is affordable
What drives investment decisions
How social and private goals can be aligned
2003 Carbon Emissions from Fossil Fuels
0%
5%
10%
15%
20%
25%
22.8%
UNITED STATES OF AMERICA
16.3%
CHINA (MAINLAND)
5.9%
RUSSIAN FEDERATION
5.0%
INDIA
JAPAN
4.9%
3.2%
GERMANY
CANADA
2.2%
UNITED KINGDOM
2.2%
REPUBLIC OF KOREA
1.8%
ITALY (INCLUDING SAN MARINO)
1.8%
MEXICO
1.6%
ISLAMIC REPUBLIC OF IRAN
1.5%
FRANCE (INCLUDING MONACO)
1.5%
SOUTH AFRICA
1.4%
AUSTRALIA
1.4%
Top 25 Fossil Fuel Carbon Emitting Nations (2003)
(84% of total world fossil fuel emissions)
“We are a small contributor to the overall,
when you look at the rest of the world.”
UKRAINE
1.2%
- US DOE Secretary Bodman, February 2, 2007
SPAIN
1.2%
as quoted in the NY Times, 2-3-07
POLAND
1.2%
SAUDI ARABIA
1.2%
BRAZIL
1.2%
INDONESIA
1.2%
THAILAND
1.0%
TAIWAN
0.9%
TURKEY
0.9%
ALGERIA
0.6%
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Source: Oak Ridge National Laboratory, http://cdiac.esd.ornl.gov/trends/emis/top2003.tot
But – carbon remains in the atmosphere
This is a stock-and-flow problem, so intuition about
emissions does not give a good picture of concentration.
100%
Percent of CO2 remaining in the atmosphere
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
0
10
20
30
40
50
Years
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Bathtub image courtesy J.D. Sterman, MIT. Used with permission.
Carbon decay model J IP90 relative to constant concentration from 1990 from CSIRO Technical Paper no. 31, p. 43, Table 9.4
60
70
80
90
100
The United States is responsible for 26% of
all anthropogenic carbon dioxide from
fossil fuels currently in the atmosphere.
Europe, China and India are responsible for
19%,
9%, and 3% respectively.
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Greenhouse gases are not
like conventional pollutants
Conventional pollutants like SO2 or NOx
have a residence time in the atmosphere of
just a few hours or days. Thus, stabilizing
emissions of such pollutants results in
stabilizing their concentration.
This is not true of carbon dioxide or most other greenhouse gases.
Because CO2 lasts >75 years in the
atmosphere, stabilizing
atmospheric concentrations of CO2
will require reductions in current
emissions of at least 80%.
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Why target electric power?
45%
45%
Electric Power CO2 emissions as a percentage of total US CO2 Emissions
40%
40%
35%
35%
30%
30%
25%
25%
20%
20%
15%
15%
10%
10%
5%
5%
0%
1950
0%
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Source: U.S. EIA 2006
1960
1970
1980
1990
2000
40% Demand Growth by 2025
6000
6000
Billion kWh
U.S. Net Electricity Generation
5000
5000
4000
4000
3000
3000
2000
2000
1000
1000
0
0
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
(or more, with plug-in hybrid electric vehicles)
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2015
2020
2025
Low-Carbon Electricity Generation Technologies
• Hydroelectric (6½ % of net US generation, but declining)
• Uranium (19% of net US generation, but will decline)
• Biomass, Geothermal, Wind, Solar (1.7%)
35%
35%
Percent of US Electric Power that is Low-Carbon
30%
30%
25%
25%
20%
20%
15%
1950
15%
1960
1970
1980
1990
2000
• Natural Gas with carbon dioxide capture (amine)
• Coal with carbon dioxide capture (IGCC, oxyfuel, PC+amine)
• Demand reduction (negawatts)
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Many coal units will be replaced soon
18,000
US Coal-Fired Generating Plants
Total Nameplate Capacity (MW)
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Date Placed in Service
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One Metric is Carbon Mitigation Cost
Technology
Cost / metric ton CO2 avoided
State Conservation Programs (up to 4% of load)
$5 – $20
Nuclear (with waste storage cost)
$5 – $55
Coal gasification with capture and sequestration
$15 – $55
Supercritical pulverized coal with capture and sequestration
$29 – $51
Wind power in Texas (with intermittency costs, but without storage)
$56
Natural gas with capture and sequestration
$37 – $74
Geothermal
$70 – $100
Direct Capture from the Air
$80 – $250
Utility Conservation Programs
$225 – $350
Solar in Arizona (without storage or intermittency costs)
$300 – $500
Can we afford carbon control for electricity?
80% reduction at a CO2 price of $50 per metric ton:
2.3 ¢/kWh,
or $90 billion per year,
or 0.75% of GDP.
We spent 1.5% of GDP, twice as much, to reduce
air pollution discharges in the 1970’s and 1980’s.
[Source: US EPA, The Benefits and Costs of the Clean Air Act, 1970 to 1990, chapter 2, Table 1]
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Investment decisions in low-carbon generators
• A new pulverized coal plant: 5.1 ¢/kWh
• An IGCC + CCS plant: 7.4 ¢/kWh
• At a 15% discount rate, even a $100 per ton
CO2 price expected in 2020 has a present
value of $16 per ton, far too low to affect
investment.
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Investment decisions in low-carbon generators
Our team at CMU has investigated the value of
using low-carbon technologies to control SO2,
NOx, and Hg, finding that 3P control does not
justify such investments if there is no carbon
constraint:
Installing a SCR or WFGD on an existing plant, or
building a new supercritical coal plant (SCPC) is
more profitable than building an IGCC with
provision for CCS, or SCPC with provision for
CCS.
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Similarly, Joule Bergerson and Lester Lave find that
• Tighter SO2, NOx, PM and Hg emission standards
would not favor a IGCC + CCS system over a PC
system.
• If a carbon price were imposed before a coal
generation plant were built, the price would have
to be at least $29/ton of CO2 before the company
would decide to add CCS and would choose an
IGCC plant.
• A CO2 price less than $29/ton would not change
the choice of technology: PC without CCS would
produce the lowest cost electricity.
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Plant-level and societal decision making
• Social discount rates are often lower than corporate
discount rates, leading to different decisions.
• If society wants the externalities incorporated soon, so
that billions of dollars of plants are not scrapped and
charged to customers, it has several options:
– Rapid transition to a CO2 price of $30-50 per metric ton
– Subsidy
• The current production tax credit of 1.9 cents per kWh for wind
• Federal loan guarantees for nuclear and coal gasification (EPACT05)
– Not grandfathering new high-carbon plants
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M.G. Morgan (2006). "Don't Grandfather Coal Plants." Science 314(5802): 1049.
– Requiring particular technologies by certain dates
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Policy Options
• A renewables portfolio standard
– Renewables ≠ low carbon; inconsistent definitions (biomass, hydro)
– Many objectives leads to increased costs (e.g. PA solar requirement; low
capacity factor (22-39% wind; 11-24% solar) increases cost)
• Carbon tax
– Unpalatable, especially at levels that would be effective
• Carbon cap and trade
– Initial allocation issues
• If allocation is proportional to current emissions, a windfall to those who
build new high-carbon generators now.
• Or, if relatively new plants are exempt, their value will skyrocket.
• Pressure to inflate initial allocations
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EU CO2 allowance market price
Source: US EIA International Energy Outlook 2006, Fig. 70
A fourth way: A Carbon Portfolio Standard
• Electric distributors would be responsible for supplying power
with no more than a set number of tons of CO2.
• Allows state and regional action before federal consensus is
reached.
• Can allow trading among jurisdictions with a CPS.
• Avoids the initial allocation mess.
• Does not reward grandfathered plants.
• Aligns societal and firm investment decisions.
• Negawatts directly count.
• Does not pick technology winners.
– In contrast to some state RPS legislation.
• Can be combined with subsidies and loan guarantees.
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Steps towards a CPS
• Richard Cowart proposed a CPS for the New England
Regional Greenhouse Gas Initiative (RGGI). Declined.
• California has implemented a hybrid CPS / Cap-and-trade.
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Assuming…
…a set of affordable energy technologies with low CO2
emissions how long would it take to efficiently de-carbonize
the electricity sector?
For details see the report by Morgan, Apt,
and Lave prepared for the Pew Climate
Center, "The U.S. Electric Power Sector and
Climate Change Mitigation," available at
http://wpweb2k.gsia.cmu.edu/ceic/papers/US
ElectricPower.pdf
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About 50 years. If we wait a long time and then have
to do it quicker, it will be much more expensive because
we'll be replacing plants with substantial useful life.
Thank You.
Jay Apt
Department of Engineering & Public Policy and Tepper School of Business
Carnegie Mellon University
Pittsburgh, PA 15213
412-268-3003
[email protected]
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