Tag Archives: climate change

How much should utilities pay for distributed solar power?

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Close-up of completed project - Gibbs Dairy goes solar

In the energy and climate circles, there is a lot being written lately about the threat to the traditional utility model from distributed, renewable energy sources.  David Roberts has been running a series describing the problem and looking for solutions.  Chris Nelder also has a good read on the topic.

One of the key issues is the idea that utilities want to avoid “stranded assets”, or infrastructure they still have to pay to maintain with a shrinking pool of customers.  As some customers get more power from solar, sales of electricity shrink, leaving utilities with the same distribution infrastructure to maintain using less revenue.  Some utilities, the latest being a municipal utility in San Antonio profiled by David Roberts, argue they shouldn’t pay customers the “market” rate for electricity their customers generate with rooftop solar, but instead should pay them a wholesale rate, or the same as they pay for other electricity on the grid.

The thinking here is that paying the wholesale price will put renewable energy on an even playing field, and help keep the old utility model more financially whole, since wholesale prices are typically much lower than market prices.  For example, the 5-year average wholesale price for electricity in the grid area that serves Minnesota was $53.62 per MWh for the period ending in 2010, according to FERC.  This is for the “peak” time of day, meaning the afternoon, which is also the time solar is most productive.  That’s equal to roughly 5 cents per kWh, which is the unit at which typical household sales are measured.  Last month I paid about 11 cents per kWh to Xcel before taxes, fees and other charges like WindSource.

At 5 cents/kWh, rooftop solar would take a very long time to pay off.  Many fewer people would likely choose to install it.  However, those in the renewable energy world will tell you that 5 cents/kWh doesn’t pay the owner of a system for some of the benefits solar energy has over wholesale electricity.  We should actually be looking at a “value of solar” that includes not just the wholesale energy price, but reimbursement for other values.  There is movement right now in Minnesota to legislate that a true “value of solar” be computed for future projects.  So what other value does solar energy have that utilities might value?

For one, it can be more efficient.  Whenever you transmit electricity or long distances, you lose some due to resistance (heat).  EIA estimates these loses at 7% nationally and 7.4% in Minnesota.  That means utilities are generating more kWhs than are needed to make up for the losses, and thus the customer is paying more for each kWh.  If you’re generating power very close to where you use it, you minimize these losses and the extra generation.  Distributed solar energy should actually be valued 7% above wholesale prices by a utility if you think it will reduce these line losses.  If you include that 7% bump, 5 cents becomes almost 6 cents per kWh.

The other value is the reduced environmental cost of solar generation.  There is plenty of discussion about what the optimal cost of carbon should be, and it all depends on what you adopt as your discount rate.  Here is a must-read on discount rates, also by David Roberts.  If you think that climate change will have a net drag on the economy in the future, your discount rate is likely low, and the optimal cost of carbon gets up into the $50 to $100/ton range.  Carbon levels per unit of electricity produced vary quite a bit across the county, but in Minnesota and parts of the upper Midwest, they averaged 0.738 metric tons per MWh in 2009 (the latest year for which EPA has data).  At that rate, a high carbon tax might add between 3.5 and 4.5 cents per kwh.

If you add all this up, (an economically optimal price on carbon, savings from transmission losses, and a wholesale price consistent with the 5-year peak average), you get a value of solar energy between 9.5 and 13 cents per kWh.  That’s at or above the market rate I’m paying in Minnesota right now.  Check out my extremely messy spreadsheet if you want to see the math.

Keep in mind there are other values of solar energy I haven’t considered in my calculus.  The Minnesota House legislation includes the savings from delaying capital investments in distribution infrastructure, savings from not having to build more generation, fuel price hedge value savings (not having to bet on fuel costs), and the value of local employment generated by manufacture and installation of solar energy.

How much would a 10% solar standard reduce Minnesota’s greenhouse gas emissions?

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Presenting Curt Tosh's farm-based solar project - Solar Works in Central Minnesota!

This week a bill was introduced to the Minnesota legislature to establish a 10 percent solar energy standard by 2030.  This would be on top of the existing requirements for utility renewable energy, bringing the total amount of energy coming from renewables in the state to at least 35 percent in 2030.

This bill is being promoted for it’s job creation aspects, but clearly a key benefit is the reduction in greenhouse gas emissions from the electricity generation sector (which currently produces 32% of the state’s greenhouse gas emissions).  So, by how much would a 10% solar standard reduce Minnesota’s emissions?  Would it allow us to meet our greenhouse gas reduction goals?

The first (and easier) part of trying to put some numbers to this is estimating how much electricity Minnesota will use in 2030.  EIA summaries tell us that Minnesota consumed a little under 68 million megawatt hours in 2010.  Power projections produced for the Annual Energy Outlook tell us that in MRO West (our electricity grid region), the annual growth in electricity consumption will be very modest through 2030, typically under 1% annually.  If you assume these growth rates apply to Minnesota, we may consume over 73 million MWh in 2030, or 8 percent growth over 20 years.

ElectricitySalesThru2030

10 percent of that is 7.3 million MWhs in 2030.  Figuring out exactly how much greenhouse gas this would save is trickier.  In 2010, electricity generation accounted for 32% of the total 155.6 million metric tons of CO2 equivalent emissions.  Rough math using EIA consumption figures provides a greenhouse gas coefficient for Minnesota electricity of 0.73 metric tons of CO2e per MWh.  However, this figure will surely go down over the next 20 years as utilities work to meet the existing renewable energy mandates already on the books.  Xcel Energy, which has to meet a more aggressive renewable energy standard then the rest of the state, already has a coefficient closer to 0.5 mt/MWh, which will be declining (see slide 17) to something like 0.42 mt/MWh by 2025.

So, assume the state’s net greenhouse gas coefficient for electricity is somewhere around 0.5 mt/MWh in 2030 (assuming other utilities and imported electricity are both dirtier than Xcel).  If 10% of our electricity demand is met by solar energy, this would be a savings of 3.6 million metric tons of CO2e.  3.6 m metric tons is about 2.3% of our 2010 emissions total, or about 7% of emissions from the electricity sector in 2010.

Using an net coefficient average emissions factor for calculation may be too simplistic, but it’s the best I’ve got right now.  Those more in the know say that renewable energy like solar will most frequently replace natural gas production, rather than coal or nuclear, as gas is easier to cycle on and off.  I’m not sure whether this would increase or decrease the benefit of this level of installed solar (but I’m working on it).

Update: I was pointed to this journal article by Carbon Counter, which attempts to calculate “marginal emissions factors”, rather than average factors. It turns out, since the Midwest is coal-heavy, usually an “intervention” (adding solar, for example) would displace coal power first, rather than gas.  The marginal emissions factor they calculate for the Midwest is about 13% higher than the 0.73 mt/MWh I mention above.  The Midwest is somewhat unique in this regard, as most regions show gas as the most common “marginal fuel source”.  It also has the highest marginal emissions factor of all the regional electricity generators looked at in the study.  A 12% increase over 3.6 million mt is 4.03 million mt.

At something near 3 or 4 million metric tons of emissions saved, would a 10% solar standard help us meet our state emissions reduction goals?  Nowhere near on its own, but it would be a significant step in the right direction, especially when combined with strong action in other sectors like transportation and agriculture.  Think of it as part of the Minnesota version of the wedge game.

National Climate Assessment: trouble ahead

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duluth flood - mpr

A draft of the US National Climate Assessment was released about a week ago, and the outlook for changes headed to the Midwest and country as a whole is not good.  Minnpost has a good look at the Midwest section (emphasis mine):

Climate change will tend to amplify existing risks from climate to people, ecosystems, and infrastructure in the Midwest. Direct effects of increased heat stress, flooding,

drought, and late spring freezes on natural and managed ecosystems may be altered by changes in pests and disease prevalence, increased competition from non-native or opportunistic native species, ecosystem disturbances, land-use change, landscape fragmentation, atmospheric pollutants, and  economic shocks such as crop failures or reduced yields due to extreme weather events.

These added stresses, when taken collectively, are 

projected to alter the ecosystem and socioeconomic patterns and processes in ways that most people in the region would consider detrimental.

Much of the region’s fisheries, recreation, tourism, and commerce depend on the Great Lakes and expansive northern forests, which already face pollution and invasive species pressure – pressures exacerbated by climate change. Most of the region’s population lives in urban environments, with aging infrastructure, that are particularly vulnerable to climate-related flooding and life-threatening heat waves.

CC Midwest temp rise

Over at MPR, Paul Huttner also has a good overview, highlighting the coming “climate shock” of project 5-degree warming headed to Minnesota.

 

Bottom line?

This magnitude of warming will likely cause some dramatic… and potentiallyalarming changes in our Minnesota Landscape.

Our forests will shift north. Pine forests may dissapear, and transition to hardwood forests in significant sections of northern Minnesota.

Prairies will also overtake areas that are now forested…possibly even the parts of Twin Cities metro.

Increases in the frequncy of extreme rainfall events will create more events like the multiple “500 to 1,000 year” flood events seen in Duluth and southern Minnesota in the past 9 years.

The changes we’re already observing in Minnesota will continue…and the pace of change is likely to quicken in the next 30 years. Our children will live in a very different Minnesota than our parents did.

How are we doing to address this challenge?  Haven’t US greenhouse gas emissions gone down recently?  Yes, but unfortunately not enough, and we can’t just worry about US emissions.  From the report’s mitigation section (emphasis mine):

Even absent a comprehensive national greenhouse gas policy, both voluntary activities and a variety of policies and means at federal, state, and local levels are currently in place that lower emissions. While these efforts represent significant steps towards reducing greenhouse gases, and often result in additional co-benefits, they are not close to sufficient to reduce total U.S. emissions to a level consistent with the B1 scenario analyzed in this assessment. 

And remember, hitting that B1 scenario is critical if we want to avoid the most dangerous impacts and potentially runaway climate change.  For more on what the world might look like if we stay on the emissions path we’re on, take a look at the World Bank’s most recent report on 4-degree warming.

Linking spending decisions, greenhouse gases, and social games

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Via the inbox, I get word of a company trying to develop an app/website to make the greenhouse gas impacts of your spending decisions plain.  Of course, they’d like your support to get started.

Many frustrated Americans would like to take climate action
into their own hands, but it’s hard to know where to start. Enter Oroeco.com.

“The basic idea is that every dollar we spend on products or services impacts the environment and society for better or for worse,” says Oroeco’s CEO, Ian Monroe, who also teaches courses on climate change and renewable energy at Stanford University. “The problem is that these impacts aren’t apparent when we’re deciding what to buy, particularly now that global supply chains have shifted problems half a world away. We are building a tool that automatically connects purchase data from debit and credit cards (via Mint.com) to scientific climate impact data – so you can track the climate footprint of your groceries, gas, airfare, home energy, clothing, etc. You can also see how you compare to your friends and earn points and prizes.”

There are lots of services to track home energy usage/impacts, like Opower and the now defunct but awesome Microsoft Hohm.  I’m not familiar with others that go beyond energy use to purchasing decisions.

Some communities try to inventory consumption impacts, like King County and the City of Minneapolis, but an app/game will probably be a lot more effective at reaching residents and consumers.

What is a carbon tax worth?

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California has begun a historic cap and trade market in carbon, completing the first auction, with permits going for $10.09 per metric ton.  I’m not sure cap and trade and the offsets it allows are the right way to go. But when I read this, I wanted to understand what such a program might mean for an average Minnesota energy consumer (after all, California is a distant and foreign land).

Xcel Energy, the electricity provider for most of the Twin Cities metro, produced 0.5266 metric tons of CO2e per MWh in 2011.  At $10 per mt, that’s about $5.31 per MWh, or roughly half a cent per kWh.  The EIA says the average Minnesota residential consumption is 813 kWh per month.  This seems awfully high, but we’ll go with it.  At that rate, the average residential customer would pay an extra $4 per month on their electricity bill.

Natural gas is trickier to estimate an average for, although some 2005 data says perhaps 650 therms per year, per household, using metro assumptions about people per household.  That seems low.  We used over 1,000 therms the last two years, but our house is old.  At 0.005 mt of CO2e per therm, the tax would increase the price of natural gas 5 cents per therm.  If you use 1,000 therms per year, that’s about $4.50 more per month.

So if something like $10 per metric ton was imposed in Minnesota, residential customers might see a utility bill increase of $8 per month, or $96 per year.  The California Public Utilities Commission has proposed a means to eliminate that cost.  Residential customers would actually be paid a dividend from the revenue generated by the auctions, which they say would more than offset the cost of the carbon tax.  Commercial and industrial users are a whole other ball of wax I haven’t touched here, and higher energy prices probably means higher product prices.

All this is not to say that a carbon tax or cap and trade system is appropriate for Minnesota (or the US).  $10 per ton is likely too low, their could be serious equity issues with offsets and increasing energy prices, and other tricky stuff.  But at $10/ton, direct energy costs to residents probably wouldn’t break the bank.

$20 billion to protect NYC from climate change

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From WNYC:

City Council Speaker Christine Quinn laid out a massive $20 billion proposal Tuesday to combat the effects of climate change on New York City’s infrastructure as the region continues to assess damage and plan clean-up after Hurricane Sandy…

The plan was framed around two key issues: how to prevent flooding and how to safeguard infrastructure. It includes studies to assess what solutions – from manmade sea walls to natural defenses like sand dunes – could best protect the city’s most vulnerable neighborhoods.

Thinking about backup power

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The New York Times reports that post-Sandy “a chimpanzee could sell generators by the truckload.” From their story on the disaster-preparedness economy:

Ms. Giangeruso, who notes that last year, after the “Snowtober storm” on Halloween, her house was powerless for six days. “If we are talking in the neighborhood of $6,000, it is worth every dollar. If I could get it right now, I’d write a check,” she says. “The wives in this area don’t want jewelry for Christmas. They want generators.”

I was curious why this article didn’t mention renewables as a backup at all. Unlike generators, they can be used in non-emergency times to offset some of your utility costs. They also don’t require you to have a large tank (or pipe) of fossil fuel on-site at all times in case of power outage.

On Amazon, you can know purchase a 255 watt solar panel for $334. A 75 ah heavy duty battery will cost you $200. If I’m doing my math correctly, two of these batteries could run an efficient refrigerator for almost two days. You’d never have to worry about your mobile phone (a modern lifeline) running dry.

Given my household’s usage, just four solar panels would offset 30% of our annual electricity usage. A very rough ballpark estimate puts the installed cost, with batteries, at $4,000. Using current electricity prices, that system would have a 23 year payback without rebates, and 8 years with Xcel and federal rebates. Peace of mind during extended outages (however rare) should also add some value.

Depending on your willingness to accept risk, $4,000 or so for such a system might make sense. Does it make sense for a utility? Many mobile data/phone providers are starting to back up their towers with batteries specifically in response to emergency outages. New Jersey also apparently has 200,000 solar panels installed on utility poles throughout the state. Certainly large installations like this could have a climate benefit, but do they make a dent when it comes to emergency power? It seems liked they would have to be paired with distributed battery storage and some way to curtail per-unit usage in an affected area (no plasma screens during emergencies).

The geography and spatial allocation of greenhouse gas emissions

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Researchers at Arizona State University have created a simulation to map CO2 emissions in cities to individual buildings and roadway segments (or “fine spatial and temporal quantification” in academic terms).  Called the Hestia Project, the simulation uses local data from buildings, air pollution reporting, and hour-by-hour traffic data to quantify emissions.

Cities are hungry for detailed emissions data, as in most cases what they can get from utilities is whole-city data, not broken down by neighborhood or building.

The idea is that while cities might be able to guess at where their CO2 emissions mostly come from, it’s more useful to know precisely where the hotspots are — a neighborhood of older houses, for example, or a handful of energy-wasting factories, or a frequently snarled intersection or merge point on a highway. By concentrating on these, a city could make significant improvements in its overall emissions picture with relative ease.

“We want to help them get the greatest reductions per dollar, the biggest bang for the buck,” said project leader Kevin Gurney, of Arizona State University.

A finer grain of detail will help target local emissions-reduction strategies.  However, as our emissions measurement tools get better, we need to make sure not to miss the key land use-transportation connection that drives a big portion of greenhouse gas emissions.  If a “frequently snarled intersection” looks like a significant emissions source in your community, the easy answer is widen the road, add some turn lanes, and voila, the source is reduced.  Freeway-widening might have a similar, short-term impact.  But adding capacity to the roadway to reduce total emissions will obviously backfire.

Another related issue deals with accounting or “responsibility” for emissions.  Suburban locations may look pretty green, since by comparison, not much of the regional travel occurs inside their boundaries.  All the “hotspots” are core freeways and intersections.  If we look at emissions based purely on geography, we miss the fact that suburban growth drives urban transport emissions.  That’s why in the community greenhouse gas accounting world, the newest methodologies use a “demand-based” method for accounting for transportation emissions, which more accurately assigns emissions to communities base on regional travel patterns.  It would be great to see the Hestia project “reassign” some of the roadway emissions to the origin and destination locations and see how the map colors change.