2021-02-23 Green Premium

From Gates’ book p.74

<< It’s not immediately obvious why there’s such a thing as a Green Premium in the first place. Natural gas plants have to keep buying fuel as long as they’re running: solar farms, wind farms, and dams get their fuel for free. Also, there’s the truism that as you take a technology to broad scale, it gets cheaper. So why does it cost extra to go green? One problem is that fossil fuels are so cheap. Because their prices don’t factor in the true cost of climate change — the economic damage they inflict by making the planet warmer — it’s harder for clean energy sources to compete with them. And we’ve spent many decades building up a system to extract fossil fuels from the ground, get energy from them, and deliver that energy, all very cheaply.

Another reason is that, as I mentioned earlier, some regions of the world simply don’t have decent renewable resources. To get close to 100 percent, we’d have to move lots of clean energy from where it’s made (sunny places, ideally near the equator, and windy regions) to where it’s needed (cloudy, windless ones). That would require building new transmission lines, a costly and time-consuming task — especially if it involves crossing national borders—and the more power lines we install, the more the price of power goes up. In fact, transmission and distribution are responsible for more than a third of the final cost of electricity. And many countries don’t want to rely on other countries for their electricity supply.

But cheap oil and expensive transmission lines aren’t the biggest drivers of the electricity Green Premium. The main culprits are our demand for reliability, and the curse of intermittency.

The sun and the wind are intermittent sources, meaning that they don’t generate electricity 24 hours a day, 365 days a year. But our need for power is not intermittent; we want it all the time. So if solar and wind represent a big part of our electricity mix and we want to avoid major outages, we’re going to need other options for when the sun isn’t shining and the wind isn’t blowing. Either we need to store excess electricity in batteries (which, I’ll argue in a moment, is prohibitively expensive), or we need to add other energy sources that use fossil fuels, such as natural gas plants that run only when you need them. Either way, the economics won’t work in our favor. As we approach 100 percent clean electricity, intermittency becomes a bigger and more expensive problem.

The clearest example of intermittency is when the sun goes down, cutting off our supply of solar-generated electricity. Suppose we want to solve that problem by taking one kilowatt-hour of excess electricity that’s generated during the day, storing it, and using it that night. (You’d need much more than that, but I’m picking one kilowatt-hour to make the math easy.) How much would that add to our electric bill? >>

<< That depends on two factors: how much the battery costs, and how long it’ll last before we have to replace it. For the cost, let’s say we can buy a one kilowatt hour battery for a $100. (This is a conservative estimate, and I’ll ignore for a moment what happens if we have to take out a loan for this battery.) As for now our battery will last, let’s assume it can go through 1000 charge and discharge cycles.

So the capital cost of this one-kilowatt-hour battery will be $100 spread out over 1,000 cycles, which works out to 10 cents per kilowatt-hour. That’s on top of the cost of generating the power in the first place, which in the case of solar power is something like 5 cents per kilowatt-hour. In other words, the electricity we store for nighttime use will cost us triple what we’re paying during the day-5 cents to generate and 10 cents to store, for a total of 15 cents.

I know researchers who think they can make a battery that lasts five times longer than the one I’ve described here. They haven’t done it yet, but if they’re right, that would drive the premium down from 10 cents to 2 cents, a much more modest increase. In any case, the nighttime problem is solvable today, if you’re willing to pay a big premium, and with innovation I’m confident we can reduce that premium.

Unfortunately, nighttime intermittency isn’t the hardest problem to deal with. The seasonal variation between summer and winter is an even bigger hurdle. There are various ways to try to deal with it — like adding in power from a nuclear plant or a gas-fired electric plant fitted with a device that captures its emissions — and any realistic scenario will include these options. I’ll get to them later in the chapter, but for the sake of simplicity for now I’ll just use batteries to illustrate the problem of seasonal variation.

Say we want to store a single kilowatt-hour not for a day but for a whole season. We’ll generate it during the summer and use it in the winter to run a space heater. This time, the battery’s life cycle isn’t an issue, because we’re charging it only once a year. >>

<< But suppose we have to finance the purchase of the battery. Now we’ve tied up $100 in capital. (Obviously you wouldn’t finance a $100 battery, but you might need financing if you were buying enough to store several gigawatts. And the math is the same.) If we pay 5 percent interest on the capital, and the battery costs $100, that’s an additional $5 cost to store our single kilowatt-hour. And remember how much we’re paying for solar power during the day: just 5 cents. Who would pay $5 to store a nickel’s worth of electricity?

Seasonal intermittency and the high cost of storage cause yet another problem, especially for big users of solar power—the problem of overgeneration in the summer and undergeneration in the winter.

Because the earth is tilted on its axis, the amount of sunlight that hits any given part of the planet varies across the four seasons, as does the intensity of the sunlight. Just how big the variation is depends on how far you are from the equator. In Ecuador, there’s essentially no change. In the Seattle area, where I live, we get about twice as much sunlight on the longest day of the year as on the shortest day. Parts of Canada and Russia get about 12 times more.”

To see why this variation matters, let’s do another thought experiment. Imagine there’s a town near Seattle — we’ll call it Suntown — that wants to generate a gigawatt of solar power year-round. How big should Suntown’s solar array be?

One option would be to install enough panels to produce a gigawatt during the summer, when sunlight is plentiful. But the town would be out of luck in the winter, when it’ll get only half as much sunlight. That’s undergeneration. (And the town council is well aware that storage is excessively expensive, so they’ve ruled out batteries.) On the other hand, Suntown could put up all the solar panels it needs for the short, dark days of winter, but then by the time summer arrives, it would be generating way more than necessary. Electricity would be so cheap that the town would be hard-pressed to recoup the expense of installing all those panels. >>

<< Suntown could deal with this overgeneration problem by turning off some of its panels during the summer, but then it’d be sinking money into equipment that gets used only for part of the year. That would raise the cost of electricity even more for every home and business in town; in other words, it would add to the town’s Green Premium.

The situation with Suntown isn’t merely a hypothetical example. Something similar has been happening in Germany, which through its ambitious Energiewende program set a goal of 60 percent renewables by 2050. The country has spent billions of dollars over the past decade expanding its use of renewables, increasing is solar capacity nearly 650 percent between 2008 and 2010. But Germany produced about 10 times more solar in 2018 than it did in December of 2018.in fact, at times during the summer, Germany’s solar and wind plants generate so much electricity that the country can’t use it all. When that happens, it ends up transmitting some of the excess to neighboring Poland and the Czech republic, whose leaders have complained that it’s straining their own power grids and causing unpredictable swings in the cost of electricity.

There’s another problem caused by intermittency, and it’s even harder to solve than the daily or seasonal variety. What happens when an extreme event forces the city to survive several days without any renewable energy at all?

p.83 << Deploying today’s renewables and improving transmission couldn’t be more important. If we don’t upgrade our grid significantly and instead make each region do this on its own, the green premium might not be 15 to 30%, it could be 100% or more. Unless we use large amounts of nuclear energy (which I’ll get to in the next section), every path to zero in the United States will require us to install as much wind and solar energy power as we can build and find room for. It’s hard to say exactly how much of America’s electricity will come from renewables in the end, but what we do know is that between now and 2050 we will have to build them much faster — on the order of 5 to 10 times faster — then we’re doing right now. >>


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