Archive for the ‘Electricity’ Category

Reality and distortions in Lima

Wandering the COP20 campus, listening to side events and hearing senior political, business and NGO representatives talk about the climate issue results in a mild reality distortion field impairing your judgement; you start to feel sure that we must already be on a new energy pathway, that global carbon pricing is just around the corner and that the Paris deal will deliver something approaching 2°C.

Then something happens to shatter that field and realisation sets in that there is still a long way to go before a truly robust approach to the climate issue emerges. On Tuesday evening the field was disturbed by tweets from a colleague at PWC @JG_climate reporting on negotiators squabbling over INDCs, with Brazil’s concentric differentiation approach causing some angst amongst a number of developed countries and the proposed text describing the nature of an INDC expanding by some thirty pages. This negotiation is far from over and the road ahead to Paris will likely be very bumpy. There will be a few dead-ends to watch out for as well.

Another reality hit home on Monday afternoon with the recognition that many people in the civil society groups here in Lima just don’t want to hear about the reality of carbon capture and storage (CCS). The Global Carbon Capture and Storage Institute (GCCSI) held an excellent and well attended side event on Monday afternoon which was initially mobbed by some 100+ demonstrators and their press entourage. The demonstrators crowded into the modest sized room and the hallway outside, waited for the start of the event and then promptly left as Lord Stern opened the side event with his remarks on the need for a massive scale-up of CCS. Arriving and then departing en masse allowed them to tweet that civil society had walked out on Lord Stern. The demonstrators were equally upset that Shell was represented at the event with my presentation on yet another sobering reality; 2°C is most likely out of reach without the application of CCS; also a finding of the IPCC in their 5th Assessment Report. They also took exception to flyers for my book which carries the same message.

CCS Event (small)

What was really concerning about this walk-out was that the younger people who made up the group would rather protest than listen and learn. Had they stayed they would have heard a remarkable story by Mike Monea of SaskPower who talked about the very successful start-up of the world’s first commercial scale coal fired power plant operating with carbon capture, use (for EOR) and storage. This technology needs some form of carbon pricing structure for delivery and in the case of this project the bulk of it came from the sale of CO2 for EOR. There was also a capital grant from the government. Importantly, SaskPower noted that a future plant would be both cheaper to build (by some 30%) and less costly to operate. This potentially points the way to a technology that can deliver very low emission base load electricity at considerably lower CO2 prices than the ~$100+ per tonne of CO2 that current desktop studies point to. That may also mean CCS appearing without government support sooner rather than later. Of course, the actual construction and delivery of second generation projects will still be required to confirm this.

A minor reality distortion arose from a question directed at me during the GCCSI side event. One audience member asked me about Shell’s membership of ALEC, a US organisation that operates a nonpartisan public-private partnership of America’s state legislators, members of the private sector and the general public.  ALEC doesn’t seem to think that a carbon price should be implemented in the USA, hence the question to me given Shell support for carbon pricing.  Responding to the Climate correctly reported on my response, which was along the lines of “. . that despite their position  on climate issues we still placed a value on their ability to convene state legislators”, but DeSmogBlog had their own interpretation of this. They reported on this under a headline which stated “Company ‘Values’ Relationship with Climate-Denying ALEC”.

It’s also proving a challenge to gain acceptance for the reality of markets and the role they are likely to have in disseminating a carbon price throughout the energy system. This means that carbon market thinking is still struggling to gain a foothold in text proposals for Paris, with one negotiator commenting at an event I attended that “we don’t see much call for markets at this time“. Silence on markets is the preferred strategy for some Parties, with others taking the view that specific mention and some direction is a must. More on this at another time as the Paris text develops further.

The evenings in Lima have been filled with some excellent events. With so many people in town, dinner discussions are convened by the major organisations represented here, which results in great conversations, useful contacts and plenty of new ideas to think about. The Government of Peru have organised and run a very good COP, despite early concerns that there were initially no buildings on the site they chose for the event.

Comparing apples with oranges

The Climate Group has posted an interesting story on its website and has been tweeting a key graph from the piece of work (below) with the attached text saying “From 2000 to 2012, wind and solar energy increased respectively 16-fold and 49-fold”.

Climate Group Image

The story is headed “Wind and Solar Power is Catching up with Nuclear” and argues correctly that the global installed capacity of these two new sources of electricity are catching up with nuclear. Although the article concludes with the sobering reality that actual generation from wind and solar are still just a fraction of that from nuclear, the headline and certainly the tweets are somewhat misleading.

Both wind and solar have very low on-stream factors, something like 30% and 20% respectively in the USA, whereas nuclear is close to 90%. This means that although 1 GW of solar can deliver up to 1 GW of output, this is highly intermittent, needs considerable backup and results in an average output of only 200 MW (with a low of zero half the time). By contrast a 1 GW nuclear power station is on stream most of the time and delivers about 1 GW 24/7 throughout the year. Therefore, comparing solar or wind capacity with nuclear capacity gives little insight into the actual energy being generated, which is really the point of any comparison in the first instance. The global generating picture actually looks like this (Source: BP Statistical Review of World Energy 2014);

Generation by source

Wind, but particularly solar generation are still only a fraction of nuclear generation, even with the global nuclear turndown following Fukushima. Interestingly, both wind and solar are only rising at about the same rate that nuclear did in the 1960s and 1970s, so we might expect another 30+ years before they reach the level that nuclear is at today, at least in terms of actual generation.

The comparison of capacity rather than generation has become a staple of the renewable energy industry. Both coal and nuclear provide base load electricity and have very high on-stream factors. Depending on the national circumstances, natural gas may be base load and therefore also have a high on-stream factor, but in the USA it has been closer to 50% as it is quite often used intermittently to match the variability of renewables and the peaks in demand from customers (e.g. early evenings when people come home from work and cook dinner). This is because of the ease with which natural gas generation can be dispatched into or removed from the grid. However, natural gas is also becoming baseload in some parts of the USA given the price of gas and the closure of older coal plants.

Capacity comparisons look great in that they can make it appear that vast amounts of renewable energy is entering the energy mix when in fact that is not the case, at least not to the extent implied. Renewable energy will undoubtedly have its day, but like nuclear and even fossil fuels before it, a generation or two will likely have to pass before we can note its significant impact and possibly even its eventual dominance in the power sector.

While all fossil fuels are contributing to the accumulation of carbon dioxide in the atmosphere, coal stands apart as really problematic, not just because of its CO2 emissions today (see chart, global emissions in millions of tonnes CO2 vs. time), but because of the vast reserves waiting to be used and the tendency for an emerging economy to lock its energy system into it.

Global energy emissions

Global emissions, million tonnes CO2 from 1971 to 2010

I recently came across data relating to the potential coal resource base in just one country, Botswana, which is estimated at some 200 billion tonnes. Current recoverable reserves are of course a fraction of this amount, but just for some perspective, 200 billion tonnes of coal once used would add well over 100 billion tonnes of carbon to the atmosphere and therefore shift the cumulative total from the current 580 billion tonnes carbon to nearly 700 billion tonnes carbon; and that is just from Botswana. Fortunately Botswana has quite a small population and a relatively high GDP per capita so it is unlikely to use vast amounts of this coal for itself, but its emerging neighbours, countries like Zimbabwe, may certainly benefit. This much coal would also take a very long time to extract – even on a global basis it represents over 25 years of use at current levels of production.

This raises the question of whether a country can develop without an accessible resource base of some description, but particularly an energy resource base. A few have done so, notably Japan and perhaps the Netherlands, but many economies have developed by themselves on the back of coal or developed when others arrived and extracted more difficult resources for them, notably oil, gas and minerals. The coal examples are numerous, but start with the likes of Germany, Great Britain, the United States and Australia and include more recent examples such as China, South Africa and India. Of course strong governance and institutional capacity are also required to ensure widespread societal benefit as the resource is extracted.

Coal is a relatively easy resource to tap into and make use of. It requires little technology to get going but offers a great deal, such as electricity, railways (in the early days), heating, industry and very importantly, smelting (e.g. steel making). In the case of Great Britain and the United States coal provided the impetus for the Industrial Revolution. In the case of the latter, very easy to access oil soon followed and mobility flourished, which added enormously to the development of the continent.

But the legacy that this leaves, apart from a wealthy society, is a lock-in of the resource on which the society was built. So much infrastructure is constructed on the back of the resource that it becomes almost impossible to replace or do without, particularly if the resource is still providing value.

As developing economies emerge they too look at resources such as coal. Although natural gas is cleaner and may offer many environmental benefits over coal (including lower CO2 emissions), it requires a much higher level of infrastructure and technology to access and use, so it may not be a natural starting point. It often comes later, but in many instances it has been as well as the coal rather than instead of it. Even in the USA, the recent natural gas boom has not displaced its energy equivalent in coal extraction, rather some of the coal has shifted to the export market.

Enter the Clean Development Mechanism (CDM). The idea here was to jump the coal era and move directly to cleaner fuels or renewable energy by providing the value that the coal would have delivered as a subsidy for more advanced infrastructure. But it hasn’t quite worked that way. With limited buyers of CERs (Certified Emission Reduction units) and therefore limited provision of the necessary subsidy, the focus shifted to smaller scale projects such as rural electricity provision. These are laudable projects, but this doesn’t represent the necessary investment in large scale industrial infrastructure that the country actually needs to develop. Rooftop solar PV won’t build roads, bridges and hospitals or run steel mills and cement plants. So the economy turns to coal anyway.

This is one of the puzzles that will need to be solved for a Paris 2015 agreement to actually start to make a difference. If we can rescue a mechanism such as the CDM and have it feature in a future international agreement, it’s focus, or at least a major part of it, has to shift from small scale development projects to large scale industrial and power generation projects, but still with an emphasis on least developed economies where coal lock-in has yet to occur or is just starting.

Two sides to every coin

As we near the middle of the year and therefore have, at least in the Northern Hemisphere (i.e. Germany), long days with lots of sunshine, renewable energy statistics start to appear in the media and the renewables distortion field enveloping much of Europe expands just that little bit more. The first of these I have come across was posted by a number of on-line media platforms and highlighted the fact that on Sunday May 11th Germany generated nearly three quarters of its electricity from renewable sources. Given the extraordinary level of solar and wind deployment in recent years, it shouldn’t be a surprise that this can happen. But it’s rather a one sided view of the story.

The flip side is of course December and January when the solar picture looks very different. The Fraunhofer Institute for Solar Energy Systems ISE use data from the EEX Platform to produce an excellent set of charts showing the variability of renewable energy, particularly solar and wind. The monthly data for solar shows what one might expect in the northern latitudes, with very high solar in summer and a significant tailing off in winter. The ratio between January and July is a factor of 15 on a monthly average basis.

Annual solar production in Germany 2013j

But wind comes to the rescue to some extent, firstly with less overall monthly variability and secondly with higher levels of generation in the winter which offsets quite a bit of the loss from solar.

Annual wind production in Germany 2013

The combination of the two provides a more stable renewable electricity supply on a monthly basis, with the overall high to low production ratio falling to about 2. One could argue from this that in order to get some gauge of the real cost of renewable energy in Germany, monthly production of 6 TWh of electricity requires about 70 GW of solar and wind (average installed capacity in 2013, roughly 50% each). By comparison, 70 GW of natural gas CCGT online for a whole month at its rated capacity would deliver 51 TWh of electricity, nearly a factor of 9 more than for the same amount of installed solar plus wind. But to be fair, some of that 70 GW of natural gas will have downtime for maintenance etc., but even with a 20% capacity loss to 40 TWh, the delivery factor is still about 7. For solar on its own it will be closer to 10 in Germany.

Annual solar + wind production in Germany 2013

But this isn’t the end of the story. Weekly and daily data shows much greater intermittency. On a weekly basis the high to low production ratio rises to about 4, but on a daily basis it shoots up to 26.

Annual solar + wind production in Germany 2013 by week

 

Annual solar + wind production in Germany 2013 by day

Fortunately, Germany has an already existing and fully functioning fossil fuel + nuclear baseload generation system installed, which can easily take up the slack as intermittency brings renewable generation to a standstill. But the cost of this is almost never included in an assessment of the cost of renewable power generation. In Germany’s case this is a legacy system and therefore it is taken for granted, but for countries now building new capacity and extending the grid to regions that previously had nothing, this is a real cost that must be considered.

This is perhaps an anti-leapfrog argument (being that regions with no grid or existing capacity can leapfrog to renewables).  The German experience shows that you can shift to renewables more easily when you already have a fully depreciated fossil & nuclear stock, and your demand is flat.  Otherwise, this is looking like a potentially costly story that relies on storage technologies we still don’t have in mainstream commercial use.

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As a complete aside, but certainly the “flip side” of another issue, I came across this chart which highlights the flip side of rising CO2 levels in the ocean and atmosphere due to the combustion of fossil fuels – falling levels of oxygen. This is a very small effect (given the amount of oxygen in the atmosphere) and certainly not an issue, but it’s entirely measurable which is the interesting bit. The chart is produced by Ralph Keeling, son of the originator of the CO2 Keeling Curve.

Falling oxygen levels

 

One of the best books I have read in recent years is the Steve Jobs biography by Walter Isaacson. It’s also a great management book, although I don’t think that it was really intended for that purpose. In discussing Jobs’ approach to life and business management, Isaacson goes to some length to describe the concept of a Reality Distortion Field (RDF), a tool used on many occasions by Jobs to inspire progress and even bet the company on a given outcome. The RDF was said to be Steve Jobs’ ability to convince himself and others to believe almost anything with a mix of charm, charisma, bravado, hyperbole, marketing, appeasement and persistence. RDF was said to distort an audience’s sense of proportion and scales of difficulties and made them believe that the task at hand was possible. This also seems to be the case with a number of renewable energy, but most notably the Solar PV, advocates.

The Talosians from Star Trek were the first aficionados of the RFD

It is always with interest that I open the periodic e-mail from fellow Australian Paul Gilding and read the latest post from him in The Cockatoo Chronicles. But this time, the full force of the Renewables Distortion Field hit me. Gilding claims that;

 I think it’s time to call it. Renewables and associated storage, transport and digital technologies are so rapidly disrupting whole industries’ business models they are pushing the fossil fuel industry towards inevitable collapse. Some of you will struggle with that statement. Most people accept the idea that fossil fuels are all powerful – that the industry controls governments and it will take many decades to force them out of our economy. Fortunately, the fossil fuel industry suffers the same delusion. In fact, probably the main benefit of the US shale gas and oil “revolution” is that it’s keeping the fossil fuel industry and it’s cheer squad distracted while renewables, electric cars and associated technologies build the momentum needed to make their takeover unstoppable – even by the most powerful industry in the world.

My immediate approach to dealing with a statement like this plays into the next paragraph by Gilding, where he says;

How could they miss something so profound? One thing I’ve learnt from decades inside boardrooms, is that, by and large, oil, coal and gas companies live in an analytical bubble, deluded about their immortality and firm in their beliefs that “renewables are decades away from competing” and “we are so cheap and dominant the economy depends on us” and “change will come, but not on my watch”. Dream on boys.

But the energy system is about numbers and analysis, like it or not. Perhaps Gilding needs to at least look in his own back yard before reaching out for global distortion. In a number of posts over the last year or two he was waxed lyrical about the disruption in Australia and consequent shift in its energy mix. Yet the latest International Energy Agency data on Australia shows that fossil fuel use is continuing to rise even as residential solar PV is becoming a domestic “must have”. There is no escaping these numbers!

Australia primary energy to 2012

It is true that solar PV is starting to have an impact on the global energy mix and that at least in some countries the electricity utilities are playing catch-up. But the global shift will likely take decades, even at extraordinary rates of deployment by historical standards. The Shell Oceans scenario portrays such a shift, with solar deployment over the next 20 years bringing it to the level of the global coal industry in 1990 and then in the 30 years from 2030 to 2060 the rate of expansion far exceeds the rate of coal growth we have seen from 1990-2020 (see chart).

Solar growth in Oceans

I would argue that this is a disruptive change, but it still takes all of this century to profoundly impact the energy mix. Even then, there remains a sizable oil, gas and coal industry, although not on the scale of today. Of course this is but one scenario for the course of the global energy system, but it at least aligns in concept with the aspirations of Paul Gilding. I don’t imagine he would be particularly impressed by our Mountains scenario!!

 Solar in Oceans

Many will of course argue that the proof of the RDF is in the Apple share price and its phenomenal success. But this didn’t come immediately. Apple and Jobs had more ups and downs than even the most ardent follower would wish for, with the company teetering on the brink more than once (read the Isaacson account). But it persisted and nearly forty years on it is a global behemoth. However, forty years isn’t exactly overnight and IT change seems to take place at about twice the rate of energy system change. Does that mean new energy companies won’t become global super-majors until much later this century?

 

For regular readers, this may seem like a repeat of recent themes, but there is a point which will become clearer as the new Shell scenarios are released later this week.

Over recent years, the focus for managing rising CO2 emissions has been a combination of targets, energy mix mandates, efficiency drives and various attempts at carbon pricing. The climate lexicon is full of phrases such as;

  • “We need to reduce global emissions by 50% by 2050 (relative to 1990 / 2000 / 2005 . . .)”
  • “We will reduce the CO2 intensity of the economy by 30%.
  • “By 2020, renewable energy will make up 20% of the energy supply”
  • “We must first improve energy efficiency, that can have a significant impact on emissions”
  • The “Green Economy”
  • “We must stimulate clean energy investment”
  • “We need more clean energy for development”

The question is, are these the right types of policies for solving the CO2 problem? There is no doubt that such approaches have gained traction and wide support from policy makers, but in many instances they are the result of a desire to solve a broad range of topical issues, ranging from energy security and energy access to jobs and economic growth. There is apparently then an underlying assumption that because each of these has a link with reducing emissions or low emissions that this must also be a solution to the real elephant in the room, the rising levels of CO2 in the atmosphere. This may not be the case.

All of the above approaches appear to rest on the assumption that responding to climate change depends on managing the rate of emissions from the global economy, sometimes on an absolute basis but often on a relative basis, e.g. relative to GDP. But this doesn’t correspond with how the atmosphere sees our emissions of CO2. Rather, the rising level of CO2 in the atmosphere is ultimately a stock problem, meaning that what really matters is the total cumulative amount of CO2 that is released over time from fossil sources and land use change. Additional CO2 is accumulating in the ocean / atmosphere system at a much faster rate than it is being removed. The difference is several orders of magnitude when compared with its return to geological storage through processes such as weathering and ocean sedimentation, which is why in the context of managing the problem we can treat it as a stock issue or liken it to the rising level of water in a bathtub (where even a dripping tap will eventually result in overflow). By contrast, many other emissions to atmosphere don’t accumulate, they disperse, break down or drop out very rapidly.

Over the last 250 years since the beginning of the industrial era, some 570 billion tonnes of fossil and land-fixed carbon (over 2 trillion tonnes of CO2) has been released, which in turn has led to a shift in the global heat balance and a likely 1°C of warming before the ocean / earth / atmosphere system reaches a new equilibrium state. An accumulation of a trillion tonnes of carbon equates to the 2°C temperature goal, but as a median within a broad distribution of outcomes, both higher and lower (Allen et. al., Warming caused by cumulative carbon emissions towards the trillionth tonne, Nature Vol 458, 30 April 2009). As long as the total fossil / fixed carbon released remains less than this amount over, say, a 500 year period, the climate problem is contained, at least to some extent. Towards the trillionth tonne 

Thinking about climate change as a stock problem then changes the nature of the solution and the approach. Although emissions in 2020 or 2050 may be useful markers of progress, they do not necessarily guarantee success as they are measures of flow, not stock. For example, meeting a 2050 global goal of reducing emissions by 50% relative to 1990 would be a remarkable achievement, but of only modest value if emissions then stayed at this level and the stock accumulated well beyond the trillion tonne level, albeit at a later date than might have otherwise been the case.

Current global proven reserves of hydrocarbons (BP Statistical Review of World Energy) will release some 0.9 trillion tonnes of carbon when used, irrespective of how efficiently we might use them, how many wind turbines are built in the interim or even how many green jobs are created in the process. In combination with cement production and continued land use change, this will then take the cumulative carbon towards two trillion tonnes, with the likelihood of a temperature increase of well over 2°C.

  Towards two trillion tonnes

Not using these reserves and leaving them in the ground permanently (i.e. forever) so as not to contribute to the ocean / atmosphere stock will only happen if we develop alternative energy sources that out compete them, without subsidy or support, 24/7 365 days a year. Another way forward  is to recognize that many economies around the world will choose to continue using the resources that they have, and therefore the focus should be on the development and deployment of carbon capture and storage (CCS), which returns the carbon back to the “geosphere” instead of allowing it to accumulate in the biosphere.

CCS has the potential to address CO2 emissions on a scale equal to its production and at a cost that appears more than manageable by society. Most importantly, it fits the “stock model” thinking, which means that this particular solution matches the nature of the problem itself, rather than being a derivative of it. But as I have noted in previous posts, CCS is struggling politically to gain the necessary funding and momentum. There are no large scale CCS power generation plants operating in the world today, but only a tiny handful of industrial emission CCS facilities, with most under construction. New thinking and impetus will need to emerge to ensure that CCS becomes central to climate policy development, rather than it having to compete with the long list of other objectives that seem to prevail.

The issue of accumulating CO2 in the atmosphere is a relatively simple one, which can’t be addressed by energy efficiency standards, renewable directives or similar such measures. They may impact on the short term consumption of fossil fuels in one region for a limited period of time, but they offer no guarantee of permanent reductions nor do they deliver a guarantee of a lower cumulative stock of CO2 over time – in other words, the fossil fuel that they displace locally simply gets shifted geographically and / or temporally (used later) such that the same accumulation of CO2 results. The CO2 issue is only addressed by two approaches – either leaving the fossil fuel in the ground forever or using the fossil fuel and returning the CO2 to the ground via CCS.

Electric cars becoming a reality?

Shortly before Christmas a colleague of mine photographed a busy electric charging point in Utrecht, the Netherlands. Hooked up to the charging point are a Chevy Volt (Opel Ampera in the EU) and a Fisker Karma. Many such charging poles have appeared in London in recent years but I have yet to see anything approaching a “real car” actually using them. On the rare occasion that a charging pole is being used the vehicle is typically the “golf buggy” style electric car, such as the G-Wiz. But if this picture is any indication of a trend, something is certainly happening in the Netherlands.

I did find some data on electric car uptake in the Netherlands on another blog site. As of September, there were some 5000 registered vehicles. But the originator of that data now shows nearly 7000 vehicles by the end of November. This is a growth rate of about 10% per month!!

Is the CDM now increasing emissions?

Late last week Point Carbon reported that the Executive Board of the UNFCCC’s Clean Development Mechanism has (re)agreed to allow energy efficient coal fired power plants to be included under the mechanism. Point Carbon said:

The governing body of the U.N’s Clean Development Mechanism (CDM) has agreed to allow the most energy efficient coal-fired power plants to earn carbon credits under the scheme, causing outcry from green groups who claim the carbon market could be overrun by millions of low-quality offsets. The CDM Executive Board’s decision to lift its ban that prevented coal plants from seeking credits could allow some 40 projects, mostly based in China and India, to earn Certified Emission Reductions (CERs).

The credits are awarded to projects that cut emissions of greenhouse gases and can be used by companies and governments to meet carbon reduction targets.

. . . . .

. . . . .

The Board approved six coal plants for CDM registration before agreeing in November 2011 to suspend and review the methodology that outlines how many credits the schemes could earn, effectively stopping new projects from earning credits.

While it is always good to use a resource more efficiently, this move has potentially negative consequences for the very issue it is setting out to address, a reduction in the total emissions of CO2 to the atmosphere.

In this instance the CDM is not acting as a carbon pricing mechanism, rather it is simply incentivizing energy efficiency. In a recent paper written by a colleague (featured in a July posting), the secondary impacts of energy efficiency policy as a climate change response are explored. This particular action by the CDM Executive Board falls right into one of the problem areas.

The paper presented the argument that energy efficiency action on its own could actually result in an increase in CO2 emissions. The diagram below explains this. On the vertical axis is the cost of providing an energy service, such as electricity. At the margin, this may be driven by non-fossil provision operating within the economy, such as a wind farm or the like. On the horizontal axis is a measure of the available carbon resource base. As the price of non-carbon alternative energy rises or falls, so too does the long term availability of the fossil alternative for a given technology set. At high alternative prices, more money is available to spend on expanding the fossil resource and vice versa. As the fossil resource expands, the cumulative number of tonnes of CO2 emitted will also grow, even if it takes longer for this to happen.

Assuming a given alternative cost of providing electricity (pnon-fossil), the more efficient the power stations that burn coal, the more the electricity provider can ultimately afford to pay for the coal that is used. As more coal is used and the price rises (all other things being equal), so the resource base expands (from UC1 to UC2 in the figure above) and so does cumulative CO2 in the atmosphere. Further, as the CO2 issue is basically an atmospheric stock problem, this then drives up long term warming, even if the rate at which CO2 is emitted happens to fall in the short term.

From a climate finance perspective the CDM has been a successful mechanism, albeit with some significant operational difficulties. It has paved the way for carbon pricing in many countries and has been an important catalyst for change in some areas (e.g. landfill methane). But subsidizing more energy efficient coal fired power plants, while well intentioned, may in fact have negative environmental consequences. The CDM needs to act in its purest sense, which is as a carbon price in the energy system of true developing economies.

N.B. Just prior to posting this, a colleague noted that the Executive Board may have only allowed the issuance of CERS against already approved projects to proceed, rather than allowing future projects to apply by releasing the current hold on the underlying methodology. Hopefully this is the case, but in any case the argument still stands.

This week in Australia the carbon pricing mechanism (no, it isn’t a tax, despite some similarities) is back in the news as the government releases it’s budget for the coming fiscal period. The fixed price period of $23 per tonne (and rising) represents a significant new source of income for the government, although when the mechanism was announced so too were a number of cost offset measures for the consumer and trade exposed industries. As such, the system is largely revenue neutral, but this has done little to quell the noisy opposition to the policy package. On Wednesday, the day after the Budget was released, many newspapers again raised the issue of increasing prices related to the carbon pricing scheme and therefore falling living standards, despite statements by the government over recent months that the system recycles its revenue back through the economy. Unfortunately, public perception appears to be on the side of those who argue that this is a new and unnecessary cost burden.

This isn’t the only negative view that the public have of climate change policy. The other is that energy austerity is the mechanism we must adopt to reduce emissions. The source of this is many and various, including the government itself, some NGOs and even a few business organisations. “Turn out the lights to save the planet” has become a common rallying cry and is amplified by campaigns such as Earth Hour which calls for cities to be blacked out for one hour a year to highlight the issue of energy use and climate change.

So the public are left with the view that energy austerity and extra cost are the two routes to follow if climate change is to be robustly addressed. Little wonder it is an uphill battle gaining political traction on this issue. Perhaps some new and more accurate messaging should be formulated to help sell the need for policy action.

The energy austerity issue is one that can and should be tackled. Reducing energy use and improving energy efficiency are both good things to do, but should be advocated for on the basis of managing energy costs, not attempting to address climate change. For reasons discussed in an earlier posting, local energy austerity may not even be an effective emissions reduction strategy at all. At issue with energy is the emissions from our current sources, not necessarily how much we use. After all, energy availability is almost unlimited, it’s just harnessing it economically that is the challenge.

The austerity message has its roots in various social agendas, but has kept into the environmental agenda as well. It is easy to see why this has happened, given the clear link between ecosystem welfare and overuse (e.g. logging in tropical rain forests), but for the climate change debate this particular approach may not be helping the issue at all.

The climate change issue needs to return to its roots, which is managing, reducing and ultimately eliminating anthropogenic CO2 emissions. This is done by changing the primary energy mix, implementing upstream CCS and shifting final energy use in homes and transport (where emissions are very to capture) to carriers such as electricity, hydrogen and bio.

Such a change won’t come at no cost, but elements of it can be conveyed to the public more easily. For example, running a home entirely on electricity is very doable today, both in hot and cold climates. The option of electric, hydrogen fuel cell or bio mobility is also becoming a reality – and potentially an attractive one as oil prices remain in the realms of $100 per barrel. These are very different value propositions to the austerity message.

The emphasis then shifts to the upstream and the use of renewable energy in the electricity sector together with technologies such as CCS in combination with natural gas. Here costs can be managed and change implemented over time as the grid is renewed and expanded. This can be achieved through carbon pricing, either directly in a cap and trade system or indirectly through emission performance standards. Although the scale of change is less, over the last thirty years many countries have managed to almost eliminate sulphur emissions from both the electricity and transport sectors and have done so without great public rancour. Costs have dropped and the job has just been done.

Getting the message right is essential if we want to make progress on this issue. Pedalling austerity and high cost is neither helpful or even correct.

The Energy Mix

The World Business Council for Sustainable Development (WBCSD) held its annual company delegate conference in Switzerland this week. For the WBCSD Energy and Climate team the event marked the launch of the latest WBCSD publication “The Energy Mix”. This is a document that started life back in the middle of last year, originally as a response to the reaction from a number of governments to the events in Fukushima. The initial aim was to inform policy makers on the implication of sudden changes in energy policy, such as the decision by the German government to rapidly phase out the use of nuclear power. But as the work got going, the document took on a number of additional dimensions. Many have been covered in previous postings on this blog, but the document does a nice job of bringing a lot of information together in a crisp fold-out brochure format (at the moment the PDF is in regular page format, so the fold-out aspect is rather lost through this medium).

Sitting behind this effort is the WBCSD Vision 2050 work which charts the necessary pathway to a world in 2050 which sees “Nine billion people living well within the means of one planet”. A number of key themes are explored in “The Energy Mix” brochure:

  1. The risk of carbon lock-in, in other words current and “on the drawing board” infrastructure and related emissions being sufficient to consume the remaining global carbon budget (related to a 2°C temperature goal) within the normal remaining lifespan of those assets.
  2. The need for clear energy policy framework to guide the necessary changes over the coming decades.
  3. The importance of carbon pricing within that framework.

The document uses some fifteen vignettes to illustrate a variety of points. For example, to illustrate a) that policy can make a difference and b) it takes a long time, but c) its still very hard to reduce emissions by a big amount, take the case of France. Back in the 1970s the government intervened in the energy system and have progressively forced the construction of substantial nuclear capacity and a national high speed rail network, operating in combination with (like the rest of the EU) high transport fuel taxes. While these measures were not originally intended to reduce CO2 emissions, they are nevertheless compatible with such a goal and could just as easily be the route forward for a country. France now gets about 80% of its electricity from nuclear and has one of the best rail systems in the world, yet emissions have only fallen by 28% in 40 years. Economic growth and population growth continue to eat into the gains made, which might argue for yet further measures in the longer term. However, French emissions on a CO2/GDP basis are about 60% less than in the USA. With a very low CO2 per kWh for power generation, France would be in an excellent position to further decarbonize if electric cars entered the vehicle population in significant numbers. Interestingly, the car company with perhaps the worlds most progressive electric vehicle production programme also happens to be French. 

 The key message on the required policy framework is a pretty simple one – cover the key sectors and focus on the elements of the technology development pathway (Discover, Develop, Demonstrate, Deploy). The resulting grid looks like this:

 Filling in the boxes results in something that looks like this:

The framework shouldn’t be a big surprise, many of the elements are alive in the EU (but not so well in all cases- such as the carbon price).

The new WBCSD Energy Mix document can be downloaded here.