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October 27, 2011 / Mike Piskur

The importance of distributed generation

A wonderful infographic, created by Solar Gaines and shared on Clean Technica, provides some very handy back-of-the-envelope calculations to support my post on the inevitability of solar power. To quote the infographic:

The sun strikes every square meter of our planet with more than 1,360 watts of power.
Half that energy is absorbed by the atmosphere or reflected back into space.
700 watts of power, on average, reaches Earth’s surface.
Summed across the half of the earth that the sun is shining on, that is 89 petawatts of power.
By comparison, all of human civilization uses around 15 terrawatts of power or one six-thousandth as much.
In 14 and a half seconds, the sun provides as much energy to Earth as humanity uses in a day. 

Now, plants and animals use some of that energy, and a huge portion of available solar power falls on oceans, deserts, forests, and other places where humans do not live in significant numbers. Despite unplanned growth and new highway construction, urban areas cover a relatively small land area. According to the USDA, urban areas cover nearly 60 million acres, or 3 percent of the approximately 1.9 billion acres of land in the contiguous 48 states (note that this amount doesn’t include certain roads and government facilities) . Approximately 80 percent of Americans live on that 3 percent of the nation’s land area.

NASA

When it comes to siting energy generation, we should focus on the 60 million acres of land already covered with buildings, streets, alleys, and sidewalks. Coal cannot be burned just anywhere, and nuclear reactors must remain far from urban centers. Energy from the sun, however, reaches every city and suburb. It only makes sense that electricity gets produced where it’s consumed. In Illinois, about 2.3 million acres, or 6 percent of total land, is paved or otherwise developed, and the vast majority is situated in the state’s northeastern corner, extending outward from the urban core of Chicago and the shores of Lake Michigan. Chicagoland is the nation’s third largest metropolitan area and is home to about 9.5 million people, while the city of Chicago is home to about 2.8 million people.

Chicago, like all cities, uses vast amounts of electricity. The residential and industrial sectors consume the bulk of this power, but as electric vehicles enter the market, the transportation sector’s consumption of electrical energy will increase. Despite energy efficiency gains, Illinois’ electricity consumption is projected to remain approximately constant until 2020. The Illinois Renewable Portfolio Standard (RPS) stipulates that renewables account for 16 percent of total electricity generation in 2020, with solar energy providing about 7 percent of that amount. In its current form, the Illinois RPS relies entirely on utility-scale renewable energy production and does not include an allocation specifically for distributed generation.

Coal and nuclear generation plants create massive environmental impacts and generally are sited far from densely populated areas. There are two coal-fired power plants in or near Chicago, but most of the city’s energy supply comes from plants located many miles away from the urban core. This model of electrical generation, while effective, is incredibly expensive and increasingly antiquated. Economies of scale dictate that utility-scale plants generate energy from coal and nuclear. These same economic drivers, however, show that solar and wind energy are best produced through small-scale, distributed generation. Widespread adoption of distributed generation and smart grid technology will create a democratized electricity system in the United States.

New Rules Project via European Commission

In Democratizing the Electricity System – A Vision for the 21st Century Grid, the New Rules Project lays out the economic, environmental, and political benefits of distributed generation:

A 21st century technological dynamic offers the possibility of a dramatically different electricity future: millions of widely dispersed renewable energy plants and storage systems tied into a smart grid. It’s a more democratic and participatory paradigm, with homes and businesses and communities becoming energy producers as well as consumers actively involved in designing the rules for the new electricity system…Most importantly, this vision represents a transformation in the ownership and control of the electricity system. Instead of a 20th century grid dominated by large, centralized utilities, the 21st century grid would be a democratized network of independently owned and widely dispersed renewable energy generators, with the economic benefits of electricity generation as widely dispersed as the ownership.

This is a decidedly post-industrial vision. Distributed production is replacing centralized production in many sectors, including food, art, and information, and the economics of renewable energy indicate that distributed generation is more efficient and dependable than centralized solar and wind generation. The report identifies four primary benefits of a distributed electricity system.

1. Vast potential and deployment speed. Nearly every state could meet 20 percent of its electricity needs with rooftop solar PV alone. Two-thirds of states have sufficient wind, solar and geothermal power to get 100 percent of their electricity from in-state (and distributed) sources.

2. Favorable economics. Some renewable energy technologies (with federal subsidies) already compete toe-to-toe with fossil fuel generation, and others – like solar – are rapidly becoming less expensive. Furthermore, the vast majority of economies of scale for renewable energy technologies are captured at a modest size, well within accepted size definitions of distributed generation.

3. Local ownership and political support. The economic impact of locally owned renewable energy projects can be several times greater than absentee owned ones, and distributed generation lends itself to ownership. Such local ownership also dramatically increases local acceptance of more renewable energy production. And because it’s a more efficient use of the electricity grid, distributed generation reduces the number of political fights over new high-voltage transmission lines.

4. Value to the grid. Distributed generation is more resilient to disruption, with power generation spread over thousands of generators and over a wide geographic area. This makes it harder for a large area to be without power and easier to maintain grid stability.

The report estimates that Illinois could meet 17 percent of electrical demand through rooftop solar generation alone. This doesn’t eliminate the need for utility-scale wind and solar generation, but the favorable economics (including decreasing cost of solar technologies), combined with potential savings from transmission and distribution infrastructure and energy loss, demand that distributed solar and wind provide a significant share of electrical generation in Illinois and the United States. It is entirely possible, given the correct regulatory framework, that distributed generation, particularly solar energy, could meet or exceed the target established by the RPS. This will come about through innovative financing sources, incentives for residential and small commercial consumers, and community supported generation facilities. The demands of life in the 21st century require a new electricity infrastructure. At this moment, as renewable energy technologies begin to challenge and replace fossil fuels, we are creating a new American power grid, and along with it the future source of American prosperity and stability.

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October 20, 2011 / Mike Piskur

The inevitability of solar energy

Early human beings went to sleep at night fearful that the sun might not ever return. As the sky brightened each morning, they must have felt a profound sense of relief at the prospect of at least one more day of light and warmth. Modern humans are fortunate to live in an era when the sun’s daily return is a given. Thanks to centuries of scientific discovery, we know, in as much as we can know anything, that the sky will grow light in the morning and dark in evening every day that we are alive. Nothing is more certain.

From The Guardian

Similarly, we know that all life on earth depends on the sun. Early humans understood this on some level, which explains, at least partially, our innate fear of the dark and the sun’s central role in early mythology. Luckily, barring nuclear winter, a major asteroid strike, or some other cataclysmic event, the earth’s inhabitants can count on the sun to appear to rise and set, like clockwork, for at least the next several billion years.

Before humans figured out how to convert fossil fuels into energy on a wide scale, the sun filled most of our energy needs. Wind and water mills played their part, but it wasn’t until the Industrial Revolution that we were able to escape the sun’s daily and seasonal cycles. Coal, oil, and natural gas are millions of years of solar energy compressed into easy-to-use formats. When we burn these substances we are accelerating the pace of our own progress. This bounty of energy brought the amazing gains in material wealth, knowledge, and opportunity that defined the twentieth century. It is no coincidence that population, income, and energy use all increased dramatically since 1900.

From WiredThe fossil energy era, however, is drawing to a close. If we aren’t yet in the final act, we soon will be. Climate change and the increased difficulty (and cost) of extracting fossil fuels make renewable sources of energy a necessity for meeting the needs of modern society, to say nothing of future generations. The transition from coal and oil to solar and wind has to happen, and the sun’s central role will drive this massive undertaking. The sun will be there, heating the planet and providing energy for all living things. Solar energy will be available. It is inevitable.

On the other hand, our ability to not only capture that energy and convert it into useful forms, but to do so on a large enough scale to replace fossil energy, is far from inevitable. It will take the concerted effort of millions of people, and the investment of billions (perhaps trillions) of dollars, to develop the necessary technologies, policies, and infrastructures. This transition requires major economic reorganization, political and social will, and a new environmental ethic.

Abundant and inexpensive fossil energy makes it easy to forget the extent to which everything depends on solar energy. For the billions of humans who take fossil energy for granted and do not produce their own food, the sun can become little more than nature’s tanning bed, a nuisance on hot summer days, and a reason to buy cool sunglasses. Humankind must embrace its heliocentric roots. The sun has and will continue to make all life on earth possible, so why do some humans insist on looking elsewhere for ways to power their homes, cars, and gadgets?

October 18, 2011 / Mike Piskur

Approaching the True Cost of Coal

In August 2011, three economists published a paper titled “Environmental Accounting for Pollution in the United States Economy.” It attempts to estimate air pollution damages for each industry in the United States, and finds that:

Solid waste combustion, sewage treatment, stone quarrying, marinas, and oil and coal-fired power plants have air pollution damages larger than their value added. The largest industrial contributor to external costs is coal-fired electric generation, whose damages range from 0.8 to 5.6 times value added.

The report, largely ignored in the mainstream press, garnered attention from academics and bloggers, most notably Paul Krugman. He said the report “should be a major factor in how we discuss economic ideology” and offered this assessment:

What (the authors) do is estimate the cost imposed on society by air pollution, and allocate it across industries. The costs being calculated, by the way, don’t include the long-run threat of climate change; they’re focused on measurable impacts of pollution on health and productivity, with the most important effects involving how pollutants — especially small particulates — affect human health, and use standard valuations on mortality and morbidity to turn these into dollars.

Even with this restricted vision of costs, they find that the costs of air pollution are big, and heavily concentrated in a few industries. In fact, there are a number of industries that inflict more damage in the form of air pollution than the value-added by these industries at market prices.

In other words, the report is about quantifying and internalizing the true costs of coal, which at this moment are externalized, and therefore ignored by the polluters and ultimately paid by society as a whole. This report focuses on increased mortality from sulfur dioxide and other pollutants, but does not account for climate change effects. This is the key point: the burning of coal carries huge economic and social costs that are not reflected in the price Americans pay for electricity. This is happening now, in every part of the United States and the world.

Chicago Reader

The American economy is replete with externalized costs. In everything from food to water to gasoline, the price paid at the store or tap or pump does not cover the true cost of those goods, many of which are interconnected. Pollution is perhaps the most common cause of these ignored/punted costs. For instance, a $1.79 bottle of pop sugar water does not include the fossil fuels (in the form of nitrogen fertilizer) required to grow the massive amounts of corn needed to produce the high fructose corn syrup that sweetens the drink. Most of this corn grows in Iowa, Illinois, and Nebraska, and nutrient runoff enters streams and rivers along with upstream municipal and industrial waste. This flow of nitrates, wastewater, and other runoff ultimately finds its way into the Mississippi River and the Gulf of Mexico, where hypoxia has created a Dead Zone. This oxygen-starved area cannot support life – obviously a serious problem – and creates major environmental and economic impacts. It’s probable that connections exist behind aquatic dead zones and a federal agricultural policy that lavishly subsidizes the monoculture crops that depend on a steady diet of synthetic fertilizer. High fructose corn syrup itself is a major source of America’s obesity epidemic and other public health problems like diabetes, which carry huge social costs and contribute to the steady increase of health care costs in America. Keep in mind this is just one, albeit complex, example.

The World's Aquatic Dead Zones

Approximately 45 percent of America’s electric power comes from coal. The report estimates that aggregate pollution damages from the market sector for all industries in 2002 were $184 billion. Utilities and agriculture are responsible for $63 billion and $32 billion in damages, or 34 percent and 17 percent of the total damages produced by market activity, respectively. Moreover, these sectors have the highest ratio of damages to value added, which the authors define as the cost of outputs minus the cost of inputs, not including land, labor and capital. These ratios are 38 percent for agriculture and 34 percent for utilities. In other words, selective accounting ignores or hides a third of the true cost of electric utilities. The EIA states that “the average price paid for coal in July 2011 was $2.44 per MMBtu”, but this amount is kept artificially low. Krugman argues:

At one level, this is all textbook economics. Externalities like pollution are one of the classic forms of market failure, and Econ 101 says that this failure should be remedied through pollution taxes or tradable emissions permits that get the price right. What Muller et al are doing is putting numbers to this basic proposition — and the numbers turn out to be big. So if you really believed in the logic of free markets, you’d be all in favor of pollution taxes, right?

It’s important to be clear about what this means. It does not necessarily say that we should end the use of coal-generated electricity. What it says, instead, is that consumers are paying much too low a price for coal-generated electricity, because the price they pay does not take account of the very large external costs associated with generation. If consumers did have to pay the full cost, they would use much less electricity from coal — maybe none, but that would depend on the alternatives.

Claims that the United States is the “Saudi Arabia of coal” or that wind and solar energy can’t compete with fossil fuels depend on obfuscating the economic truth. Conventional wisdom states that renewables can’t replace coal until the world runs out of the latter, and that won’t happen for a century or more. In fact, despite the externalized costs, solar energy is on the verge of becoming cheaper than coal, and the price of renewable technologies will only decrease as technology improves and the market matures. It bears repeating that this study does not account for the effects of climate change, which if properly quantified and internalized would make coal an economic nonstarter. The sooner we acknowledge these facts, the better, and the transition to a post-carbon economy will be that much less painful.

October 17, 2011 / Mike Piskur

Australia’s Progressive Carbon Tax

The previous post about carbon taxes discussed the importance of creating a dividend or payment system to ensure that the tax would be revenue-neutral and progressive. Australia’s recently approved carbon tax includes important safeguards that will protect low- and middle-income families from price increases. In a comprehensive post about the tax, Andrew Revkin of Dot Earth linked to the Australian government’s Clean Energy Future site, which offers this explanation:

  • The Government will deliver household assistance ensuring millions of households are better off.
  • There will be tax cuts, higher Family Tax Benefit and increases in pensions and allowances.
  • The tax-free threshold will be more than trebled to $18,200 in 2012-13. Together with $445 of low-income tax offset, this means people on annual incomes of $20,542 will pay no net tax.
  • Household assistance for pensions, allowances and family benefits will be permanent and will keep pace with the cost of living, automatically rising in line with the consumer price index (CPI).
  • Tax cuts will increase over time with a second round of tax cuts in 2015-16 that will further raise the tax-free threshold to $19,400, matching the impact of the carbon price to 2020.
  • These two rounds of major tax reform will free over 1 million people from having to lodge a tax return and boost the returns to work.

Families making less than $20,000 per year pay no net taxes, resulting in a million people who no longer have to pay a tax return. A carbon tax is a market solution to a problem of market failure: it internalizes costs that are external to prices that affect behavior.  When done correctly, it reduces carbon emissions while reducing taxes on the poor. As Tim Worstall wrote in Forbes:

All of which is just excellent and what most economists have been saying everyone should be doing for the past decade or more. The problem this reveals of course is that only one country has in fact done what economists have been recommending.

This tax seems likely to become wildly popular and difficult to repeal, which is a why the anti-carbon crowd was so vehement in opposing it. While the carbon tax alone won’t end Australia’s dependence on fossil fuels or solve climate change, it will make progress toward both goals. When will these gains become apparent, and when will the politic landscape shift enough to place a carbon tax even within the realm of possibility in the United States? Here’s Revkin quoting Steven Sherwood, professor and co-director of the Climate Change Research Center at the University of New South Wales:

If I were trying to pass a carbon price, I would absolutely make it revenue-neutral and sell it from the get-go as a tax reform (replacing an existing tax with a more beneficial carbon-based tax of the same size). This nips in the bud the “big new tax” argument that would otherwise kill any carbon price plan in the US as it so nearly has even here. I would fund new energy development programs, if any, by separate legislation.

The last decade brought major swings toward both ends of the American political spectrum, but the issue of climate change has mostly lost ground in that time. Both nations suffered from droughts and floods in 2011, however those problems were far more acute in Australia than in the US. It’s tempting to be optimistic and believe that an American carbon tax is possible in the foreseeable future, but odds are good that we don’t get serious about reducing greenhouse gas emissions until every major city is rationing water and agricultural outputs take a major hit. And even then, a certain percentage of the population will argue that everything is fine and nothing should change.

October 13, 2011 / Mike Piskur

Putting a Price on Carbon

Australia’s lower house passed a national carbon tax on October 12. The tax, once approved by the senate, will place a AU$23 price on each ton of carbon dioxide emitted or for each ton of carbon contained in fuels. Currently, the price of fossil fuels ignores the social costs that result from burning a ton of coal or a barrel of oil. The societal threats posed by climate change – droughts, floods, rising sea levels, water and food shortages, and political unrest, to name a few – are not included in the price of fossil energy and all the goods and services (basically everything) that depends on them. Thus the social costs are “externalized”, an economics concept which is akin to a 15th century mapmaker claiming that “there be dragons here.” A carbon tax internalizes these costs with the result that producers and consumers will make choices that create far fewer negative consequences.

Graham Readfearn at DeSmog Blog offers this breakdown of the Australia Scheme:

From 1 July 2012, Australia’s largest emitters of greenhouse gas emissions will have to pay a fixed price of $23 per tonne of pollution produced here. The price will rise to $25.40 per tonne in 2014/15. From 1 July 2015, an emissions trading scheme will be introduced where the government releases a fixed number of permits which major emitters will need to purchase through auctions. In the early stages, major industries will be given permits for free, but the assistance gets scaled back.  The number of permits released by the government will be capped to enable Australia to cut its emissions by five per cent by 2020, based on 2000 levels.

A carbon tax is more efficient than a cap-and-trade program. A tax offers more flexibility than a predetermined cap on emissions, and avoids significant year-to-year price fluctuations. This makes it easier for polluting firms to adapt and change their actions. This CBO report from 2008 summarizes the advantages of a carbon tax.

A tax on emissions would be the most efficient incentive-based option for reducing emissions and could be relatively easy to implement. If it was coordinated among major emitting countries, it would help minimize the cost of achieving a global target for emissions by providing consistent incentives for reducing emissions around the world. If other major nations used cap-and-trade programs rather than taxes on emissions, a U.S. tax could still provide roughly comparable incentives for emission reductions if the tax rate each year was set to equal the expected price of allowances under those programs.

The flexibility in reducing emissions that a tax affords is important because the cost of cutting emissions by a given amount could vary from year to year depending on such factors as the weather, the level of economic activity, and the availability of low-carbon technologies. A tax would provide a steady, predictable price for emissions. An inflexible cap, however, could result in volatile allowance prices, making a cap-and-trade program more disruptive to the economy than a tax would be.

Critics claim that putting a price on carbon will serve as a regressive tax by disproportionately affecting the lower layers of the economic spectrum. Producers will pass along increased costs to consumers. Wealthy people will be able to afford more expensive energy, but poorer folks, already strapped for cash, will struggle to pay more for transportation and food. Then again, the wealthy drive and fly more often, and are likely to have a larger carbon footprint than the poor, therefore those who can afford a more luxurious lifestyle would provide most of revenue from a carbon tax. To ensure that a carbon tax is equitable or progressive it must be revenue-neutral, which means the revenues are returned to the public rather than retained by the government, with the returns taking the form of a rebate or dividend. The Carbon Tax Center provides a clear and concise explanation of such a policy:

A carbon tax should be revenue-neutral. Revenue-neutral means that little if any of the tax revenues raised by taxing carbon emissions would be retained by government. The vast majority of the revenues would be returned to the public, with, perhaps, a very small amount utilized to mitigate the otherwise negative impacts of carbon taxes on low-income energy users.

Two primary return approaches are being discussed. One would rebate the revenues directly through regular (e.g., monthly) equal “dividends” to all U.S. residents. In effect, every resident would receive equal, identical slices of the total revenue pie. Just such a program has operated in Alaska for three decades, providing residents with annual dividends from the state’s North Slope oil revenues.

In the other method, each dollar of carbon tax revenue would trigger a dollar’s worth of reduction in existing taxes such as the federal payroll tax or state sales taxes. As carbon-tax revenues are phased in (with the tax rates rising gradually but steadily, to allow a smooth transition), existing taxes will be phased out and, in some cases, eliminated. This “tax-shift” approach, while less direct than the dividend method, would also ensure that the carbon tax is revenue-neutral and could offer other benefits. For example, reducing payroll taxes could stimulate employment.

Like any tax, particularly those that affect the status quo, the biggest polluters and their PR people decry the carbon tax as a job destroyer. Putting a price on carbon, they claim, is another way of asking industry to move to countries with less stringent or no environmental protections. Even if this were true in the short-term, it ignores the simple fact that the transition to a post carbon economy is already underway – whether they like it or not. Yes, the world still relies on coal, oil, and gas to power cities, vehicles, and everything else, but the solar and wind industries account for a bigger share of global energy production every day.  Renewable energy will soon be (if is isn’t already) equally or less expensive than fossil energy. The countries and companies that lead the clean energy and technology revolutions will thrive while those still clinging to the 19th century business model soon will realize that they have become obsolete.

October 11, 2011 / Mike Piskur

The Global Carbon Bubble

This article from The Guardian highlights a sobering report produced by the Carbon Tracker Initiative. The report – Unburnable Carbon – Are the world’s financial markets carrying a carbon bubble?- posits that 80 percent of the world’s fossil energy reserves are “unburnable” if the planet is to drastically reduce carbon emissions and avoid catastrophic climate change.

The report details three salient facts: in order to reduce the risk of exceeding two degrees celsius warming to a 20% chance, our carbon-burning budget for the next 40 years is 565 GtC02. Total proved fossil fuel reserves are estimated at 2795 GtC02, nearly five times the remaining budget, implying 80% of these reserves should be left in the ground. Seventy-four percent of these reserves are state owned, while 26% is owned by the 100 largest listed coal companies and 100 largest listed oil and gas companies.

The report estimates the value of proven fossil energy reserves at $27 trillion, which means that the state funds and companies that own the oil, coal, and gas are overvalued by $20 trillion. Markets ignore this risk today, and likely will continue to do so into the foreseeable future barring a drastic shift in the regulatory and economic landscape.

Rising fossil fuel stock prices indicate that the markets assume we will blow past the 2 degree warming limit without blinking, while scientists estimate that three billion people will lose access to fresh water at four degrees warming

The consequences of a four degree global temperature increase are unknown, but they almost certainly include severe droughts, water shortages, crop failures, species extinctions, and more intense, devastating, and costly natural disasters. This should provide more than enough motivation to move toward a post carbon economy. The world’s largest firms are starting to get this it but are taking baby steps when the world needs giant leaps. Washington’s inability to accomplish much of anything renders a Manhattan Project-type effort all but impossible. It seems that the burden falls on individuals and communities to create bold solutions and ensure that the bursting of the Carbon Bubble doesn’t take the global economy and environment along with it.