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Deep de-carbonization of electricity grids

IN BRIEF

Previously we analyzed the individual components of the electricity grid: coal, nuclear, natural gas, wind, solar and energy storage. This year, we look at how they fit together in a system dominated by renewable energy, with a focus on cost and CO2 emissions. The importance of understanding such systems is amplified by President Obama’s “Clean Power Plan”, a by-product of which will likely be greater use of renewable energy for electricity generation.

In this PDF, we focus on Germany and its Energiewende plan (deep de-carbonization of the electricity grid in which 80% of demand is met by renewable energy), and on a California version we refer to as Caliwende. We compare these systems to the current electricity mix, and to a balanced system with a mix of renewable and nuclear energy. (see chart below)

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Our primary conclusions:

  • A critical part of any analysis of high-renewable systems is the cost of backup thermal power and/or storage needed to meet demand during periods of low renewable generation. These costs are substantial; as a result, levelized costs of wind and solar are not the right tools to use in assessing the total cost of a high-renewable system
  • Emissions. High-renewable grids reduce CO2 emissions by 65%-70% in Germany and 55%-60% in California vs. the current grid. Reason: backup thermal capacity is idle for much of the year
  • Costs. High-renewable grid costs per MWh are 1.9x the current system in Germany, and 1.5x in California. Costs fall to 1.6x in Germany and 1.2x in California assuming long-run “learning curve” declines in wind, solar and storage costs, higher nuclear plant costs and higher natural gas fuel costs
  • Storage. The cost of time-shifting surplus renewable generation via storage has fallen, but its cost, intermittent utilization and energy loss result in higher per MWh system costs when it is added
  • Nuclear. Balanced systems with nuclear power have lower estimated costs and CO2 emissions than high-renewable systems. However, there’s enormous uncertainty regarding the actual cost of nuclear power in the US and Europe, rendering balanced system assessments less reliable. Nuclear power is growing in Asia where plant costs are 20%-30% lower, but political, historical, economic, regulatory and cultural issues prevent these observations from being easily applied outside of Asia
  • Location and comparability. Germany and California rank in the top 70th and 90th percentiles with respect to their potential wind and solar energy. However, actual wind and solar energy productivity is higher in California (i.e., higher capacity factors), which is the primary reason that Energiewende is more expensive per MWh than Caliwende. Regions without high quality wind and solar irradiation may find that grids dominated by renewable energy are more costly
  • What-ifs. National/cross-border grid expansion, storing electricity in electric car batteries, demand management and renewable energy overbuilding are often mentioned as ways of reducing the cost of high-renewable systems. However, each relies to some extent on conjecture, insufficient empirical support and/or incomplete assessments of related costs

Other implications of high-renewable systems:

  • Transmission costs excluded. We exclude investments in transmission infrastructure often required to accompany large amounts of renewable energy capacity, which could substantially increase the estimated cost of high-renewable systems. Wind capacity factors may also degrade with a large wind build-out since the most optimal sites are often developed first.
  • Other uncertainties . As thermal power (gas, coal) is further relegated to a backup power role, there are uncertainties regarding how such high-cost, low-utilization assets will be financed and maintained by the private sector

“Underlying all of the recent moves toward renewable energy is the conviction that such a transition should be accelerated in order to avoid some of the worst consequences of rapid anthropogenic global warming. Combustion of fossil fuels is the single largest contributor to man-made emissions of CO2 which, in turn, is the most important greenhouse gas released by human activities. While our computer models are not good enough to offer reliable predictions of many possible environmental, health, economic and political effects of global warming by 2050 (and even less so by 2100), we know that energy transitions are inherently protracted affairs and hence, acting as risk minimizers, we should proceed with the de-carbonization of our overwhelmingly carbon-based electricity supply – but we must also appraise the real costs of this shift. This report is a small contribution toward that goal.”

Source: Vaclav Smil, Distinguished Professor Emeritus in the Faculty of Environment at the University of Manitoba in Winnipeg and a Fellow of the Royal Society of Canada

 

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Michael Cembalest
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