July 3, 2017
ENERGY WATCH #1 by Karel Beckman
Europe and U.S. lose their big CCS hopes
July 3, 2017
“A scheme to collect millions of tons of greenhouse gases and bury them under the North Sea off the coast of Rotterdam is Europe’s best hope of showing it can make carbon capture and storage (CCS) technology work.”
Thus reported Reuters on 19 July 2016.
Reuters was referring to the ROAD project, backed by energy giants Uniper (formerly Eon) and Engie as well as the Dutch government and the European Commission, which would capture 1 million tones of CO2 from a Uniper power station in Rotterdam.
Almost exactly a year later, on 27 July 2017, the Dutch Ministry of Economic Affairs announced that Uniper and Engie have withdrawn from the project.
Although Dutch Minister of Economic Affairs Henk Kamp insists – in a letter informing the Dutch parliament – that the government wants to “continue to stimulate the development of CCS”, there is very little chance that ROAD or any other CCS project will get off the ground now in the Netherlands. After the UK government earlier pulled the plug on CCS projects backed by Shell, what this means, as the Bellona Foundation, a Norwegian NGO favouring both renewable and CCS, notes, is that “Europe has lost its last proposed coal CCS project”.
There is still some CCS activity going on in Norway, but that’s in industry, not in power production.
Carbon capture and storage (CCS), let me remind you, is still regarded by the world’s top analysts, both from the International Energy Agency (IEA) and the IPCC (Intergovernmental Panel on Climate Change), as a key technology to achieve sufficient CO2 emission reductions to limit global warming to 2 degrees.
For example, the IEA, in its recent Energy Technology Perspectives, calculates that CCS should supply 14% of the total CO2 emission reductions in the world. According to the IEA, 600 GW of coal-fired power plants should be equipped with CCS by 2050. Right now there are only some demonstration plants.
The Engie website, in fact, notes that, “According to the [IPCC], CO2 capture and storage could potentially respond to 10% to 55% of the total reduction effort to be attempted for the 21st century. In line with its sustainable development policy, ENGIE is working hard to develop research on this topic.” Working hard, but not hard enough, apparently.
Neither Engie nor Uniper, by the way, bothered to issue a press release on their decision to pull out of ROAD, so we don’t know what their real motives are. They have only said “they can’t justify the expense”, according to Kamp’s letter, but perhaps that says it all. What also seems likely is that the companies do not really believe coal power has a future in the Netherlands, even if it’s equipped with CCS.
And the news for CCS gets worse. In the U.S., Southern Company has announced it will abandon its flagship CCS project at the Kemper power plant in Mississippi.
As Utility Dive writes, “Once the great hope of the “clean coal” industry, the Kemper plant’s grand ambitions now appear dead for good.”
Utility Dive notes that “the 582 MW plant was designed to convert locally-mined coal into a synthetic gas and capture over half of its carbon emissions. But years of cost overruns and construction delays led Mississippi regulators to direct the utility to draw up a plan for the plant to run solely on natural gas, prompting Southern’s decision.”’
Mississippi Power, Southern’s subsidiary in the state, will “now continue to operate the Kemper plant as a combined cycle natural gas facility. Shareholders have already lost $3.1 billion on the plant and the utility could be on the hook for $3.4 billion more if the utility cannot reach a settlement with regulators.”
Utility Dive notes that “the plant was envisioned as a flagship demonstration for both CCS and gasification technologies, allowing utilities to continue burning coal in the face of a tightening carbon budget and stricter emission rules.”
Certainly Gordon Hughes, a former adviser to the World Bank and professor of economics at the University of Edinburgh, could not have better timed the report he wrote for the UK-based Global Warming Policy Foundation (GWPF), which came out on 28 June. Called “The bottomless pit, the economics of carbon capture and storage”, it is a full-frontal attack on the whole idea of CCS.
GWPF is a somewhat controversial organisation in the UK ( “climate deniers”), but in this case that’s perhaps not really relevant, since they are actually not opposed to coal as such. They do tend to be opposed to costly climate policies, so there may be a bias there. Nevertheless, Hughes does have interesting things to say.
He is surely wrong to claim that “electricity systems with high levels of intermittent wind or solar generation are alarmingly unstable”, but it is true that in these newly emerging systems “coal plants – especially of the size for which CCS might be economic – cannot attract investment. Instead, grid stability and reduced price 32 volatility requires investment in flexible gas plants – either CCGTs or high-efficiency turbines.” Engie and Uniper may have had exactly this idea when they decided to get out of ROAD.
For middle- and low-income countries, which don’t have such high levels of intermittent renewable energy yet, the situation is a little bit different. For them CCS is simply too expensive, Hughes argues. It also requires skills they may not have: “No doubt China and India could do this, but there is a reason why they prefer to stick with subcritical coal plants for much of their generation: they are cheap to build, easy to operate and relatively forgiving of poor operational management. The operational performance of even standard CCGTs in middle-income countries tends to be well below the frontier. This will be even more of a problem for supercritical or IGCC coal plants, which are difficult to run with even the best technical skills. Adding CCS will merely make the shortfall in performance even worse.”
These countries have another alternative which looks more attractive, notes Hughes: nuclear power in addition to gas-fired power: “For countries that have already made a large commitment to nuclear power – especially China and India – it will make much more sense to concentrate their efforts on bringing down the capital costs and improving the operational performance of their nuclear plants.”
What about the potential of CCS with gas plants? Here, Hughes notes, “the overriding problem is one of scale and usage. On the positive side it seems that the parasitic consumption would be only 12–15%, over a fairly wide range of plant sizes, while the capital cost of adding carbon capture for relatively large plants (> 600 MW) would be about $1,000 per kW on an NOAK basis.” (NOAK means n-th of a kind, i.e. after a reduction in costs due to economies of scale and learning, as distinguished from FOAK, or first of a kind.)
“The disadvantage”, notes Hughes, “is that plants of this size are not attractive to investors operating in markets in which the expected load factor for a new gas plant is only 50–60%. In rich countries with strong incentives for non-dispatchable renewable energy, no one is building large gas plants and expecting them to operate on baseload. The only way in which new gas plants attract finance is when they are supported by extended term capacity contracts. In future, policymakers could require that such plants are fitted with carbon capture. This would be very expensive – at least doubling the cost of the capacity contracts – and it would require substantially longer lead times to commission new capacity – up from 2–3 years to 4–5 years. In addition, the duration and scale of capacity contracts would have to match the minimum efficient scale of gas plants with CCS.”
In short, according to Hughes, the prospects for CCS look bleak indeed. It is a technology, he writes, that has been overtaken by time. “Three or even two decades ago and in other circumstances, the prospects for CCS applied to coal generation might have been much brighter. However, in 2017 there is still no carbon capture unit installed at a coal plant operating on a commercial scale…. The timescale required to prove the technology and to bring costs down to NOAK levels is likely to be 20–30 years. Who is supposed to cover the cost of learning up to 2040 or 2050? It is not obvious that either the taxpayers or the electricity consumers in OECD countries would be advised to foot the bill. The only country with both the resources and a potential interest is China. But at the moment it seems that they have chosen the route of nuclear power instead.”
ENERGY WATCH #2 by Karel Beckman
“It’s just a marketing tool for large generators”
July 3, 2017
Operators of coal and other large power plants (nuclear, gas) have made a pitch in recent years arguing that their services are needed to supply “baseload” power to the market to ensure the stability of the grid in the age of intermittent renewables.
Indeed, in April, U.S. Energy Secretary Rick Perry ordered the Department of Energy to carry out a departmental review of the electricity grid, targeting federal regulations and support for renewable energy that Perry said could imperil baseload power in the future.
However, the whole idea of baseload has increasingly come under fire from supporters of the energy transition. They argue that baseload power is just a marketing tool for the fossil fuel industry and that with sophisticated grid management the reliability of the grid can be assured even without so-called baseload power to back it up.
They are now vindicated by a new report from the Brattle Group, a well-known consultancy, commissioned by the Natural Resources Defence Council (NRDC), a NGO that of course is not very favourably disposed towards fossil fuels.
The Brattle Group report argues that baseload is in effect an outdated concept:
“The term baseload generation is used with several different meanings. It historically functioned as shorthand for a category of resources that provided electricity production at relatively low operating costs. The output of baseload supply was thus used to meet the minimum of daily electricity demand levels. The term is reminiscent of a time when the resources it referred to, primarily coal and nuclear plants, were thought of as essential staples of bulk power supply. Due to the historical use of the term, baseload generation is often perceived to be connected with the concepts of system need and system reliability. For instance, use of the term can sometimes imply that coal and nuclear power plants play the same role in achieving the optimal supply mix today as they did before. However, this is not the case; the cost advantages once enjoyed by coal and nuclear plants have declined. The use of the term baseload generation may even distract regulators’, planners’, and markets administrators’ attention from meeting emerging system and public policy needs in the most cost-effective manner.”
In other words, baseload used to refer not only to “reliability”, but also to cheap power. But, as the report notes, “The economics of traditional coal-fired and nuclear plants have been growing less favorable, particularly over the past several years, due largely to changing market fundamentals. These trends are strong and persistent…. The combination of low natural gas prices, low electricity demand growth driven by many economic factors, increased levels of energy efficiency and conservation, and rapid growth in renewable resources have substantially reduced the marginal costs and wholesale prices of electricity throughout the country. While these low prices benefit customers, they challenge the economic viability of some coal and nuclear generating plants, particularly the older, less efficient ones and those that would need significant capital expenditures to continue operating while meeting environmental or public safety requirements. Thus, decreasing wholesale power prices has been a major financial driver in the early (and previously unanticipated) retirement of some coal and nuclear facilities.”
The Brattle Group notes that we should not keep these old plants open because they are supposed to be necessary for a cost-effective and reliable supply. “Instead, system planners, market administrators such as regional transmission organization, and other system operators should focus on a framework that: (a) effectively and efficiently defines and measures system needs and (b) develops planning tools, scheduling processes, and market mechanisms to elicit and compensate a broad range of resources that have become available to meet those needs.”
Fortunately, the report adds, “planners and operators have been hard at work at such innovations and have moved past the concept of baseload to focus on the attributes of resources and the services they provide to the system that help the modernized electricity system operate more reliably, efficiently, and nimbly. While coal and nuclear power plants—as well as a broad range of other resource types—are recognized for providing a wide range of reliability services to the grid, the traditional definition of power supply resource adequacy is being revisited by some system operators and planners. Still, additional work is needed in planning and markets to better recognize and compensate resources for the value they provide to the system, and to incorporate the environmental impacts of electricity generation, including resources’ ability to reduce the system’s greenhouse gas emissions, consistent with public policy goals.”
In short, the conclusion is that “coal and nuclear plants do not provide unique operational services that are specifically identified by or correlated with the term baseload generation. The term does not reflect the broader range of services that various resources can provide.” This of course does not necessarily mean that coal and nuclear plants are unneeded or useless. They can still play an important role in the market – but they can’t simply rely on their status as baseload power. They will have to come up with a new pitch.
ENERGY WATCH #3 by Karel Beckman
“The idea that cities lead on climate is a myth”
July 3, 2017
“The idea that cities are leading on climate change is applauded over and over and over. There’s just one problem. It’s not actually happening.”
It’s always useful to come across myth-busting articles. This is one written by Sam Brooks, former director for the Washington DC’s energy division, for Greentechmedia.com.
Brooks notes that after the withdrawal of Trump from Paris, many commentators said there was no need to despair, as cities and states across the U.S. would take over from the federal government. And it’s true that many cities claim they are doing great things for the climate. But according to Brooks the truth is that they have done very little.
The climate gains that have been achieved in the U.S. are due to renewable portfolio standards, which are a state matter, and higher fuel efficiency standards for cars, which are part of national policy. The substitution of coal by gas has also helped reduce CO2 emissions in the US, and again this is not something that cities have anything to do with.
Thus, cities play only a marginal role in climate policy: “A central issue is that cities seldom have jurisdictional authority over energy infrastructure. There are few municipally owned utilities — and most regulators are chosen at the state level. Even with respect to the critical issue of building codes, mandates are frequently determined by counties, states, and the International Code Council.”
However, the author adds that cities can play a vital role if they want to. What they could do is:
- improve energy efficiency to reduce total electricity demand
- increase in-city renewable distributed generation (DG) to reduce the need for imported green power
- provide all customers a 100% renewable power purchasing option
Most city climate plans, in fact, do focus on reducing demand increasing renewable supply within their borders, writes Brooks. The problem is they have not made much progress.
“The American Council for an Energy-Efficient Economy (ACEEE) recently released its 2017 City Energy Efficiency Scorecard…. Electricity consumption, a primary source of carbon emissions, is flat or growing in each of ACEEE’s top 20 cities with available information. In a host of frequently lauded cities, building electricity use is up over the last five years of data: Los Angles (+3 percent); New York City (+1 percent); San Francisco (+1 percent); Boston (+2 percent); Denver (+3 percent); Austin (+5 percent); and D.C. (+1 percent). On a per-capita basis, residential electricity use is down in Austin (-9 percent) and San Francisco (-9 percent), but it’s up in Boston (+7 percent), Los Angeles (+9 percent), and D.C. (+17 percent).”
As regards solar power, “according to the 2017 report, Shining Cities, only a few cities have more solar per capita than the national average. For example, while Los Angeles accounts for 10 percent of its state’s population, just 2 percent of California’s solar is in L.A. Solar panels may dot farmlands and deserts, but the sun is not yet powering most urban areas. Just 0.3 percent of NYC’s power comes from solar, and the situation is similar in other cities, including San Francisco (1.2 percent); Boston (0.4 percent); Denver (1 percent); Austin (0.3 percent); D.C. (0.4 percent); Chicago (0.1 percent); and Baltimore (0.2 percent).”
Brooks notes that “this lack of progress hasn’t stopped cities from making increasingly aggressive climate goals. Most notably, many cities now have “100 percent renewable” pledges. Unfortunately, at this juncture, it’s not entirely clear what these commitments really mean.”
In practice, notes Brooks, cities tend to go green by purchasing renewable energy certificates (RECs). “When I led the energy division for government facilities in Washington, D.C., we became entirely “green-powered” by purchasing one wind REC to account for each megawatt-hour of electricity we bought from the grid”, he writes.
The same is happening in many other cities. Ultimately, “all of this means that cities can meet nebulous climate goals by purchasing credits. This is a worrisome path…. Our focus should be on impactful action.”
Brooks also points out that when it comes to actually finding out how much electricity is used in cities, we have no idea, since most of them don’t report any figures. ”Not a single city reports its electricity consumption more frequently than annually. Tons of cities do not appear to publicly report their electricity consumption at all, including Portland and Philadelphia. Others, like Chicago, have not reported data since 2010.”
The author suggests there should be a website “that simply displays electricity consumption data for every city in America. On a regular basis, awards should be given to the top-performing cities.”
All of this applies to the U.S. of course, but what about Europe? European cities work together in the Energy Cities initiative.
On the website of Energy Cities you can find a wealth of information on what the cities are doing to reduce energy consumption and promote renewable energies.
Certainly when you look at the plans, the European cities involved do not intend to achieve their targets by buying certificates. They are undertaking many different kinds of local activities. They also have ambitious plans.
However, when it comes to actually finding out the results that they have achieved, things become more difficult. I could not find any easily accessible information on this. You need to check out each city separately to find data. For example, I was able to find data on the energy use and emissions of the city of Bristol in England, one of Europe’s climate leaders, but they only go to 2013.
Frankfurt, another climate leader, has no lack of initiatives, but here I could not find any concrete results either.
It seems that hard data of city’s achievements are hard to come by. That does not mean European cities have not accomplished anything – we just don’t know for sure – and we can’t compare them to each other.
ENERGY WATCH #4 by Karel Beckman
Beyond Elon Musk
“The real story behind Tesla’s acquisition of SolarCity”
July 3, 2017
With summer holidays coming up, you may want to go for some long reads.
Business magazine Fast Company published an interesting in-depth report written by Austin Carr on “The real story behind Elon Musk’s $2.6 billion acquisition of SolarCity and what it means for Tesla’s future – not to mention the planet’s.”
Worth reading – but you can also get the short version here.
SolarCity was founded in 2006 by Elon Musk’s cousins Peter and Lyndon Rive “to bring solar power to the masses”. It was a success for a long time, but had run into problems, with debts mushrooming to $3.4 billion and slower sales. Tesla took over the company last year.
Musk defended the acquisition because he said it makes sense to combine electric cars with solar panels and batteries (PowerWall). For many analysts, however, buying SolarCity is yet another risky bet, which Musk is famous for. “Solar power might be an undeniable part of our future”, writes Carr, “but SolarCity itself isn’t.”
Reading Carr’s fascinating account recalls to me the scenes around that other famously ambitious energy company, Enron, which went bankrupt in December 2001 – the biggest bankruptcy in the energy industry. Enron was famous for its huge parties – and SolarCity seemed to be acquiring some of that same bluster:
“If there was one sign that the company was flying too close to the sun, it was, many felt, an extravagant sales-team huddle in Las Vegas around March 2015”, writes Carr. “In a scene straight out of HBO’s Silicon Valley, Barnard, then SolarCity’s chief revenue officer, burst onto the stage in front of Lyndon, Peter, and 1,300 employees (Musk would arrive later) at Hakkasan nightclub, rapping over Nicki Minaj and Drake’s hit “Truffle Butter” while surrounded by provocatively dressed dancers. At another point, he appeared dressed as Helios, the Greek sun god, wearing a green suit of armor designed by the same people who created the Iron Man costume for that movie. “The party was cool,” recalls hip-hop artist Chingy, who also performed. “Lots of energy, a beautiful crowd. We shined like the sun.”
According to Carr, “The company’s growth rate—it was hiring 100 sales reps a week to help hit aggressive targets—led to some dubious tactics when it came to marketing SolarCity’s zero-money-down concept. Many sources felt that the drive to hook customers often eclipsed any concerns about whether they would follow through with the lease purchase. “You had all these poorly trained reps basically going, ‘Just sign here! Don’t worry, you can cancel any time!’ ” says a former sales director. “People were treating it like signing off on iTunes’ terms and conditions.”
The company’s average cancellation rate increased to 45% or higher; its door-to-door sales team saw rates of 70%, multiple sources say. (The SEC is reportedly probing the lack of public disclosures around cancellation rates in the solar industry. A spokesperson for SolarCity says that rates have improved, and that the company reports on “installed assets,” rather than “preinstallation cancellation rates.”) With competition in the solar space increasing, SolarCity engaged in a pricing war with many of its rivals, a race to the bottom that hurt deal profitability.”
In 2016 SolarCity was forced (because of cash flow problems) to change its once successful business model, which had been based on leasing solar panels to customers: “SolarCity had always stressed that it was generating long-term “retained value” from its leased rooftop solar systems, which it co-owned with its financial partners. The company essentially acted like a clean-energy utility that billed homeowners monthly. Now, in its pivot to profitability, instead of leasing panels to consumers, SolarCity’s core strategy would be to sell them, primarily through loans, which would lower SolarCity’s debt burden and generate interest. But that also meant customers would ultimately own their systems—i.e., no more monthly payments. In May, Serra, then CFO, tried to explain this change on an earnings call. Some analysts expressed confusion about this seemingly existential shift, with one asking, “What exactly is the business model of SolarCity?”
Since Tesla took over SolarCity (the solar company is now being rebranded as Tesla Solar), Musk last year launched the Solar Roof concept to great fanfare, but to date not a single solar roof has been installed and some analysts are already saying that the Solar Roof “is not a serious product”. Other media report that Tesla Solar products are “beginning to arrive” at Tesla outlets.
Another ambitious SolarCity project that Musk took over and that is still in doubt is the building of a second gigafactory in Buffalo, New York. The factory will cost $1 billion, of which $750 million has been provided in subsidies, but its construction is far behind schedule and local residents are anxious to see whether the factory ever gets built.
As Carr sums up the situation: “It’s easy to want to believe in the future Musk imagines. And the new Solar Roofs—combined with Powerwalls and Tesla cars—may truly be a key development in helping wean us off fossil fuels. But it’s just as easy, given how that future seems to grow more fantastical and distant with each word he utters, to become cynical. Musk understands this. As he frames it on the earnings call, there will always be “a group that says [this future] is obvious, and a group that says it’s impossible.”
PS Speaking about Tesla, the Swedish study that came out recently, which we reported on here on Energy Post Weekly, which was critical of the climate effect of electric car batteries, has come in for strong criticism from EV supporters. The study claimed that you had to drive a Tesla for more than 8 years before it started paying off in emission reductions (compared to an ordinary petrol or diesel cars). According to for example this article on Cleantechnica, the study is completely wrong. Elon Musk himself has also tweeted that “much less energy is required for lithium-ion batteries” than the researchers claimed and that his gigafactory “is powered by renewables anyway”, a fact ignored in the study.