Several reports (see here and here) and certain websites (here) allege that renewable technologies can meet our growing electricity needs and also meet stringent reduction targets for carbon dioxide. For example, Climate Progress, a website populated by Joseph Romm, an assistant secretary of energy during the Clinton administration, indicates that the answer to our growing electricity needs will come from energy efficiency (including cogeneration), wind power, concentrated solar power (CSP), and biomass co-firing, which taken together will meet a projected 1 percent annual growth rate in demand while also reducing carbon emissions.
These reports are in sharp contrast to forecasts produced by the Energy Information Administration (EIA), an independent agency of the U.S. Department of Energy. EIA’s most recent Annual Energy Outlook (AEO) indicates the U.S. generating sector will be dominated by coal and natural gas-fired technologies, representing two-thirds of our electricity generation through 2030, followed by generation from nuclear power, contributing almost another 20 percent. Only 14 percent of total generation would come from renewable sources, including hydropower, by 2030, up from 8 percent in 2007. The EIA forecasts include the efficiency and renewable technologies cited by Romm, plus others; but they do not include major policy and regulatory changes.
What gives rise to the differences between these projections? First, Romm assumes (based on California’s experience) that efficiency improvements can reduce the increase in electricity demand to near zero through 2020. Romm states: “If every American had the per capita electricity of California, we’d cut electricity use some 40%.” Many of California’s efficiency improvements were the normal types of strategies: better insulation; energy-efficient lighting, heating, and cooling; and so forth. And these are also incorporated in EIA’s demand forecast for electricity. Nevertheless, the EIA, after incorporating efficiency improvements, expects electricity generation to grow at 0.9 percent per year through 2030.
According to Romm, however, California also instituted a regulatory concept called electricity decoupling. Under this arrangement, utility company profits are not closely tied to how much electricity they sell; rather, the utilities are allowed to take a share of any energy savings they help consumers and businesses achieve. The bottom line is that California utilities can make money even when their customers use less electricity. Or, to put it in other words: California electric-utility companies can charge for electricity not used. While that may benefit the utility company, it distorts normal economic price signals. For example, with the addition of a pro-rated conservation charge, a consumer who has invested in energy efficiency could be faced with higher electricity bills than a consumer who has not conserved and who uses more electricity. This arrangement distorts the consumers’ benefits from traditional conservation measures, such as lowering their heating temperatures and/or raising their cooling temperatures. (For more on decoupling, see here.)
Perhaps decoupling may work in California where weather is milder than in many other states, housing is more geared to apartments and smaller homes due to high residential property values, and where many manufacturing firms have departed owing to high energy prices. But, decoupling could add hardship for Americans living in cold-weather states that heat with electricity and for Americans living in warm-weather states that need electricity to cool homes. Indeed, if consumers can’t afford to heat and/or cool their home adequately, they may be confronted with illness or death. Decoupling could also cause more manufacturing firms to leave the country as energy prices increase, making their ability to compete at home more challenging.
Combined Heat and Power
In addition, Romm favors combined heat and power, a technology that is incorporated in the modeling used by California to analyze compliance with its climate-change legislation, A.B. 32, which requires statewide greenhouse gas emissions to reach 1990 levels by 2020. That forecast has 4.4 gigawatts of combined heat and power constructed in California by 2020. In comparison, EIA’s forecast (see Table A9) has 0.7 gigawatts of combined heat and power constructed in the entire United States by 2020.
Romm next promotes wind power as a technology that has been growing at a staggering pace, with over 8 gigawatts constructed in 2008 alone. That statistic is true, and Romm correctly reports wind power as an intermittent technology. However, Romm cites a Department of Energy study that calls for 20 percent of U.S. power to be generated by wind by 2030. To reach that level, almost 300 gigawatts of new wind power (new, that is, beyond 2008 levels) must be constructed. EIA’s forecast (see Table A16) has about 20 gigawatts of new wind power constructed by 2030. A comparison of Romm’s cost assumptions for wind compared with those of EIA show Romm’s costs slightly lower by about 0.7 cents per kilowatt-hour (kWh) or 8 percent lower when subsidies and transmission are taken into account. (Specifically, EIA’s wind costs are 9 to 11.5 cents/kWh unsubsidized, while Romm’s are 7.5 to 10 cents/ kWh, unsubsidized and excluding transmission. EIA includes some transmission at 0.8–0.9 cents/ kWh. On the same basis, the comparison is 8.2 to 10.7 cents/ kWh for EIA, compared with 7.5 to 10 cents/ kWh for Romm.)
Concentrated solar power is another technology that Romm is encouraging. He cites a report by Environment America entitled “Solar Thermal Power and the Fight against Global Warming,” which indicates that the United States could build 80 gigawatts by 2030. EIA’s forecast has 0.33 gigawatts of solar thermal built by 2030, most likely all demonstration projects. A comparison between Romm and EIA regarding the costs of this technology shows vast differences. Romm cites contract costs in the Southwest and assumptions from California’s A.B. 32 study. Compared to EIA’s cost assumptions for solar thermal, Romm’s costs are 5 to 10 cents per kilowatt-hour lower or 30 to 40 percent lower. (Romm states that solar thermal is being contracted at 14 to 15 cents/ kWh in the southwest and that the California Public Utilities Commission assumes a cost for solar thermal at 12.7–13.6 cents/ kWh—including 6 hours of storage capacity—with the possibility of its dropping 20% by 2020, according to its A.B. 32 report. EIA’s subsidized price with transmission is 18.5–23.7 cents/ kWh. Transmission accounts for 1 to 1.1 cents/ kWh.)
Romm also touts biomass co-firing as “probably the cheapest, easiest, and fastest way to provide new renewable base-load power without having to build any new transmission lines.” Biomass co-firing is the use of biomass fuels along with coal in existing coal-fired generators. Romm and EIA both agree that up to 15 percent of the fuel used in a coal-fired generator can be biomass. They quote a cost range of $100 to $700 per kilowatt for adapting existing coal-fired technology to use biomass. But Romm adopts a median cost of $180 per kilowatt, while EIA sees the cost as dependent on the size of the host plant and the co-firing increment installed. Both recognize that the feedstocks need to be residues within a radius of about 50 miles around the plant since transportation costs limit the range. Dedicated feedstocks are more expensive than residues (e.g., construction and demolition wood, pallets, sawdust shavings from secondary wood processing). But both forecasters assume fairly similar feedstock costs.
Romm’s estimate of additional biomass co-fired capacity is 8 to 12 gigawatts by 2010, or 2 to 4 percent of total coal-fired capacity expected in that year, and 26 gigawatts by 2020, 8 percent of coal-fired capacity. EIA sees a possible 0.7 percent of coal-fired generation by 2010. By 2025, EIA’s reference case sees biomass co-generation peaking at 4.6 percent of coal-fired generation, dropping to 3.3 percent in 2030, as biomass gasification combined-cycle technology is built and competes with co-firing for lower cost feedstock. EIA’s forecast has 6.5 gigawatts of biomass gasification combined-cycle built by 2030.
Many of Romm’s technologies have been around for years, without much penetration. The EIA, which assumes existing policies and regulations, forecasts only small amounts of future penetration, with total renewable technologies, including hydropower, representing only 14 percent of the electricity mix in 2030.
So, how does Romm expect to meet these efficiency and renewable targets? Obviously, he expects major policy changes. But these policy changes will cost the American public higher electricity rates. How much higher depends on the policy, the location of the consumers, and their usage.
Without those policy changes, EIA is forecasting that electricity prices will increase at a rate of 0.6 percent per year in real terms through 2030, and 2.2 percent a year in nominal terms. How much more will Romm’s strategy cost? And will there be enough base-load power to supply the needs of future generations if current legislative and legal battles continue to restrict supply of coal-fired and nuclear-generated electricity? These questions are hard ones for the proponents of energy transformation via government intervention.