Archive for the ‘Electricity’ Category

The last few weeks have brought great excitement for electric vehicle (EV) enthusiasts with the announcement of the Tesla Model 3 and the subsequent filling of its order book with over 250,000 vehicles. With costs coming down and vehicle range improving, there appears to be real consumer interest in EVs, including battery electric, plug-in hybrid and hydrogen fuel cell types. The International Energy Agency has been following the development of EVs for some time now and an excellent info-graphic is available with a variety of useful deployment statistics for the period up to and including 2014.

IEA EV Infographic

But how quickly would EVs have to deploy to align with the ambition of the Paris Agreement, i.e. having the passenger vehicle sector reach nearly zero direct emissions early in the second half of this century? Such an outcome would be required to be on track to well below 2°C, with a shot at 1.5°C.

In the last 2-3 years EV growth rates have been in the range 50-100% per annum, but this is quite typical of a new technology with a very small base. As the base increases, year on year percentage growth slows down quickly, even as absolute production continues to increase.

The first goal for EV deployment is to reach an installed base of 20 million vehicles by 2020, or about 2% of the global fleet. This is the target set by the Electric Vehicle Initiative of the Clean Energy Ministerial, a global energy/environment Minister forum to promote policies and share best practices to accelerate the global transition to clean energy. The initiative seeks to facilitate the global deployment of EVs, including plug-in hybrid electric vehicles and fuel cell vehicles.

By the end of 2015 the global EV stock was heading towards 1.5 million , which gives just 5 years to produce another 18-19 million cars. That will require year on year growth rates of around 50% per annum into the 2020s, resulting in additional new production of some 1-2 million vehicles per annum, i.e. to reach total annual production of 6-7 million vehicles per annum in 2020 itself.  According to the IEA info-graphic, production in 2014 was around 300,000 per annum.

If growth at such rates could continue, with additional new production surpassing 4 million per annum throughout the balance of the 2020s and into the 2030s, then by 2035 the global EV stock could be at 500 million vehicles, or nearly a third of the total expected fleet. By this time absolute annual EV growth may be slowing, influenced by an outlook that sees EV production approaching that of global passenger vehicle production. This is assuming that there is no consumer resistance to EVs, even amongst those who love the roar of a finely tuned high powered internal combustion engine (ICE).

But even if production of EVs completely eclipses that of ICE vehicles, there remains the generational timespan to turn over the entire fleet. Even in Europe, the age distribution of vehicles is very broad, so we shouldn’t expect ICE vehicles to disappear overnight. The average age has also been rising, up from 8.4 to 9.7 years in Europe over the last decade. There is also a wide distribution, for example in the Netherlands in 2012, 41% of the passenger vehicle fleet was over 10 years old, but for the same year in Poland it was 71%.

Putting all the above together in a single chart, a very rapid and accelerated switch from ICE to EV could look something like the picture below. For the sake of the calculation, I have assumed the global fleet topping out around 1.7 billion vehicles in the 2060s, a number which is highly uncertain. For instance, just as EVs are beginning to make progress in the market, autonomous vehicles are possibly offering a completely different model for car ownership, which could see far fewer cars in the global fleet. The prospect of a much smaller market could start to send ripples through the entire investment chain, slowing the uptake of EVs considerably. Equally, if personal motoring progresses rapidly in developing countries, the fleet could be much larger in the second half of the century, which may also argue for an older fleet with ICE vehicles remaining on the road for much longer.

EV Stock

Simply because of fleet growth and existing production which currently totals 65-70 million vehicles per annum, maximum ICE stock isn’t reached until well into the 2020s, topping out at about 1.2 billion vehicles vs. 900 million today. ICE numbers return to current levels in the mid-2030s, but then decline to very low levels by the 2060s.

There are many other unknowns to factor in, such as the supply chain for the EV. Current battery technology calls for lithium, but prices over the last 18 months have risen. Some Chinese Lithium Hydroxide prices have risen over 100% in the last year but some market observers have noted the volatility and uncertainty surrounding this.

With the Tesla 3 appearing on the streets in 2017, but many other models from various manufacturers also being shown, the years ahead will only get more interesting for the passenger vehicle market.

Solar thermal by the numbers

Early in February the King of Morocco, HE Mohammed VI, opened the first phase of what will eventually become a major solar energy facility in the centre of the country. On the same day, the King also laid the foundations for Phase 2. The project is a remarkable piece of engineering, with tracking parabolic mirrors reflecting and concentrating sunlight into a heating loop, which then transfers the energy into steam and ultimately electricity from turbines. The system also includes a molten salt energy storage system which provides 3 hours of turbine operation once the sun has set.

Noor Solar

The Noor Ouarzazate Concentrated Solar Complex is being developed 10 kms north-east of the city of Ouarzazate at the edge of Sahara Desert about 190 kms from Marrakesh. Phase One of the project involves the construction of a 160MW concentrated solar power (CSP) plant named Noor I, while Phase Two involves the construction of the 200MW Noor II CSP plant and the 150MW Noor III CSP plant. Phase Three will involve the construction of the Noor IV CSP plant.

The original cost of Noor I was estimated at about $1.1 billion, but various reports show that upwards of $2 billion has been spent, although a proportion of this must be for overall site development, roads, infrastructure etc. which will benefit all of the phases. A description of Phase II can be found on the World Bank website, with an estimated cost of $2.4 billion for construction and $300 million as a cost mitigation mechanism (i.e. to lower the cost of the electricity produced during the initial years of operation).

The initial 160 MW project has a net capacity of 143 MW, producing some 370 GWh of electricity output. This equates to a capacity factor of nearly 30% which is high for solar, but reflects the nature of the location and the energy storage mechanism using molten salt. Nevertheless, in terms of total annual output, this is similar to building a 60 MW gas turbine, although the gas turbine would always be limited to 60 MW, whereas the solar facility can output at higher levels through much of the day when businesses are open and drawing on the grid.

By the end of Phase 2, total capacity of the facility will be over 500 MW, at a capital cost of some $5 billion (although The Guardian puts this at $9 billion). Annual generation will amount to some 1500 GWhrs per annum. The per capita consumption of electricity in Morocco is around 1 MWhr, so this represents electricity for 1.5 million people. In the case of the USA, it would offer power to only 130,000 people. Phases 1 and 2 will occupy a land area of some 1900 hectares (about 4.4 by 4.4 kms)

The justification for the project is interesting and can be found in one of the documents on the World Bank project site. Carbon pricing figures strongly although there are no immediate plans for a robust carbon pricing system to be implemented in Morocco. The report concludes that Concentrated Solar is not economic on the basis of conventional cost-benefit analysis (the economic rate of return is negative over the anticipated 25-year horizon of the project); the economic benefits are taken as the avoided costs of the next best thermal alternative, which is CCGT using imported LNG. To be economic at the (real) opportunity cost of capital to the Moroccan government, the valuation of CO2 would need to be US$92/ton of CO2 (calculated as switching value, i.e. NPV of zero), or US$57/ton of CO2 when calculated as the Marginal Abatement Cost (MAC). The justification for the project is largely on the basis of macro-economic benefits for Morocco (jobs, technology transfer etc.) and global learning curve benefits.

The project is situated near a reservoir and is quite water intensive. Phase 1 is water cooled, but this is not the case for the later phases. However, there is ongoing water use for cleaning of the solar reflectors. For Phase 1 alone, the water use during operation represents 0.41% of the average yearly contribution to the Mansour Ed Dahbi Reservoir in the wet years, and 2.57% of the lowest recorded yearly contribution to the reservoir. The estimated total wastewater flow to be discharged to the evaporation ponds (visible in the foreground of the picture) is 425,000 m3/year.

Finally, there is the important aspect of emissions reduction. The Noor I CSP plant is expected to displace 240,000 tonnes a year of CO2 emissions. Based on the generation of 370 GWhrs per annum, this assumes an alternative energy mix of natural gas, some oil generation and a proportion of coal. For natural gas alone with its lower carbon footprint, the displacement could fall well below 200,000 tonnes. But like all such projects, this is displacement of CO2 which may result in a lower eventual accumulation. It is not direct management of CO2 such as offered by carbon capture and storage.

The Moroccan CSP is a fascinating project, but even more so as the numbers are put down on paper. With COP22 taking place in that country in November we are bound to hear more about it.

Will the Clean Power Plan deliver effective emission reductions?

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August 3rd saw the Obama Administration release its long awaited Clean Power Plan. The plan partly underpins the current US COP21 INDC (Intended Nationally Determined Contribution) to reduce emissions by 26-28% by 2025 compared to 2005. It also indicates that by 2030 the power sector emissions in the USA will be 32% lower than 2005 levels, which presumably is the beginning of the next phase of their national contribution. However, this plan if for electricity only, consumption of which represents a bit less than a quarter of final energy use in the USA.

Much of the media attention was on the proposal for existing power plants, but the rule comes in two parts; one for existing sources and a second one for new sources. For existing facilities the emphasis is on the near term (i.e. through to 2030), with the rule focussed more on portfolio transition than radical adjustment. As has been seen in recent years, the US is already on a journey of portfolio change, with significant retirement of older coal fired power stations underway and much greater utilization of surplus natural gas power generation capacity. This has been largely driven by the development of shale gas, which came at an opportune time given the age of the coal fired fleet. Back in 2010 I posted the two charts below, which contrast the ageing coal fleet (median build year around 1970-1975) with the relatively new natural gas infrastructure (median build year around 2000). The whole process has quickly and efficiently reduced emissions across the United States – a phenomena also seen in the UK in the 1990s as North Sea natural gas overwhelmed the older coal based infrastructure.

US Coal Fleet

US coal generation capacity

US Natural Gas Fleet

US natural gas generation capacity

The US journey of substitution continues today, but augmented by considerable solar and wind capacity. The new rule for existing plants encourages that transition to continue, focussing on energy efficiency in coal fired power plants (Building Block 1), continued substitution of coal by natural gas (Building Block 2) and a further push on renewables (Building Block 3). But the rule puts significant near term emphasis on renewable energy development rather than further encouraging the further uptake of natural gas. In fact, through the use of a crediting mechanism (Emission Rate Credits) within the EPA rule, the efficient displacement of coal by natural gas is curtailed, possibly even leading to a similar outcome as experienced over recent years in the EU, a higher overall energy cost and some coal growth. This happened in the EU because of near term renewable energy policies bringing more distant and costly projects forward, which in turn supressed the carbon price and the otherwise successful switching away from coal to natural gas that the carbon price was driving at the time.

In any plan to manage power sector emissions, carbon capture and storage (CCS) is almost certainly a long term requirement, so it should be encouraged from the outset. In the case of the existing source rule, there is no particular steer towards CCS. Although CCS is mentioned about sixty times in the 1,500 page document, there is a significant caveat; cost. While the rule makes several references to the cost of CCS, this is much more in the context of retrofit of facilities that have limited remaining shelf life. Although CCS is critically important over the longer term, it doesn’t make much economic sense to retrofit old facilities with the technology and as can be seen above, the new build coal fleet is relatively small.

But CCS does come into the picture when looking at the construction of new coal fired power plants. These will operate for up to fifty years, well into the period when the USA may want to reduce national emissions to very low levels, yet still make use of the vast fossil fuel resources that is has at its disposal. The EPA rule finds that the best system for emission reduction (BSER) for new steam units is highly efficient supercritical pulverized coal (SCPC) technology with partial carbon capture and storage (CCS). In such cases, the final standard is an emission limit of 1,400 lb CO2/MWh‐gross, which is the performance achievable by an SCPC unit capturing about 20 percent of its carbon pollution. This offers some opportunity for CCS to develop in the near term, depending of course on the rate at which older coal fired power stations are displaced and new ones are proposed. That in turn may be hampered by the Emission Rate Credit mechanism. A flaw in the thinking on ERCs (and also for much of the push towards renewable energy as a means of dealing with atmospheric CO2) is the assumption that a tonne of CO2 not emitted now by generating electricity from renewable energy or improving efficiency equates to a lower eventual concentration of CO2 in the atmosphere.  This may not be the case, a point I discuss at some length in my e-book, Putting the Genie Back. Given that both geographical (used elsewhere) and temporal (used later) displacement of fossil fuel is a reality, the actual offset of CO2 by using renewable energy is dependent on the future energy scenario. By contrast, a tonne of CO2 stored is over and done with. Renewable energy should certainly be encouraged, but not at the cost of pushing CCS out of the picture.

The USA is now heading towards an electricity mix that consists of efficient natural gas generation, some legacy coal, renewables, some nuclear and possibly coal with CCS. It has taken a long time to get to this position and doubtless there will be challenges ahead, but the direction appears to be set. However, I will always argue that a well implemented emissions trading system could have achieved all this more efficiently, at lower cost and therefore with less pain, but at least for now that is not to be (or is it – there are a legion of trading provisions within the rule).

What to make of recent emission trends?

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Recent news from the International Energy Agency (IEA) has shown that the rise in global CO2 emissions from the energy system stalled in 2014. This was unusual on two counts – first that it happened at all and second that it happened in a year not linked with recession or low economic growth as in 1992 and 2009. In fact the global economy expanded by about 3%.

Information is scant at this point, but the IEA have apparently determined this using their Sectoral Approach (below, through to 2014), which has been flattening for a few years relative to their Reference Approach (following chart, ends at 2012). The Reference Approach and the Sectoral Approach often have different results because the Reference Approach is top-down using a country’s energy supply data and has no detailed information on how the individual fuels are used in each sector. One could argue that the Reference Approach is more representative of what the atmosphere sees, in that apart from sequestered carbon dioxide and products such as bitumen, the whole fossil energy supply eventually ends up as atmospheric carbon dioxide. The Reference Approach therefore indicates an upper bound to the Sectoral Approach, because some of the carbon in the fuel is not combusted but will be emitted as fugitive emissions (as leakage or evaporation in the production and/or transformation stage). No information has been provided by the IEA at this point as to the Reference Approach data for 2013 and 2014.

Global Energy System Emissions

Reference vs. Sectoral IEA

Putting to one side this technical difference, the flattening trend does represent a possible shift in global emissions development and it has certainly got many observers excited that this may well be so. If this is the case, what is driving this change and what might the outlook be?

It is clear that many governments are now intervening in domestic energy system development. There are incentives and mandates for renewable energy, enhanced efficiency programmes and some level of carbon pricing in perhaps a quarter of the global energy system, albeit at a fairly low level. More recently in China there has been a strong government reaction to air quality issues, which has given rise to some reduction in coal demand, particularly around major cities. But there is another factor as well and that is price – it is perhaps the overwhelming factor in determining fossil fuel usage and therefore setting the level of emissions. Price drives conservation, efficiency, the use of alternatives and therefore demand. Many of the aforementioned energy policy initiatives have been implemented during the recent decade or so of sharply rising energy prices.

A chart of the oil price (2013 $, as a proxy for energy prices) and global CO2 emissions going back to 1965 illustrates that big price fluctuations do seem to have an impact on emissions. Although emissions have risen throughout the period, sharp energy price excursions have led to emissions dips and plateaus as energy demand is impacted and similarly, price falls have led to resurgence in emissions. This isn’t universally true – certainly from 2004 to 2008 the very strong demand from China in particular was seemingly unaffected by the rising cost of energy, although the end of that period saw a global recession and a very visible dip in demand.

Oil price vs. Emissions

The latter part of 2014 brought with it a sharp reduction in energy prices (2015 is illustrative in the chart at $55 per barrel). With a much lower fossil energy price, demand may rise and the incentive for efficiency and the deployment of alternatives could well be impacted, although there may be some lag before this becomes apparent. The combination of these factors could therefore see emissions take yet another jump, but it is too early to see this in the data. 2015 emissions data might show the first signs of this.

There is of course continued upward pressure on emissions as well, such as the growth in coal use that is now underway in India. Over the three year period to the end of 2014, coal capacity increased from 112 GW to nearly 160 GW. This is the equivalent of some 300 million tonnes of CO2 per annum. By contrast, a five year period from 2002 to 2007 saw only 10 GW of new coal capacity installed in that country. Although India is installing considerable solar capacity, coal fired generation is likely to continue to grow rapidly. One area of emissions growth that is not being immediately challenged by a zero emissions alternative is transport. The automobile, bus, truck and aviation fleets are all expanding rapidly in that country.

The other big uncertainty is China, where local air quality concerns are catalysing some restructuring in their energy system. Certain factories and power plants that are contributing most to the local problems around cities such as Beijing and Shanghai are being shut, but there is still huge development underway across vast swathes of the country.  Some of this is a replacement for the capacity being closed around the cities, with electricity being transported through ultra high voltage grids that now run across the country. Gas is becoming a preferred fuel in metropolitan areas, but some of that gas is being synthetically produced from coal in other regions – a very CO2 intensive process. The scale of this is limited at the moment, but if all the current plans are actually developed this could become a large industry and therefore a further signifacnt source of emissions.

As observers look towards Paris and the expectation of a global deal on climate, the current pause in emissions growth, while comforting, may be a false signal in the morass of energy system data being published. Ongoing diligence will be required.

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.