A new study details why it's prudent to invest in carbon-free electricity now

A new study details why it’s prudent to invest in carbon-free electricity now
Credit: WalterPro4755/Flickr

With a single executive order issued at the end of March, the Trump administration launched a robust effort to roll back Obama-era climate policies designed to reduce U.S. carbon dioxide (CO2) emissions. Chief among those policies is the Clean Power Plan, which targets coal and natural gas-fired electric power plants that account for about 40 percent of the nation's CO2 emissions. Private and public-sector investors may see the executive order as a green light to double down on relatively cheap fossil fuels and reduce holdings in more costly, climate-friendly, non-carbon generation technologies such as wind, solar and nuclear. But they may want to think twice before making such transactions.

Electricity-sector investments in fossil-fuel-based infrastructure tend to be for the long-term, directing funds to power plants designed to run for more than 40 years, or 10 presidential terms. Return on such investments could be significant if U.S. emissions regulations remain weak (e.g. Trump's rollbacks persist in coming decades), but could shrink considerably if stringent, emissions-limiting climate policies are imposed for a substantial fraction of a plant's lifetime. Such policies would boost return on investment in non-carbon electricity generation technologies; but without them, clean energy investors run the risk of incurring unnecessary costs in technologies that are ultimately not required.

With long-term carbon-reduction policies uncertain, what is the wisest course of action for near-term electricity sector investment? Double down on carbon, go carbon-free, or mix it up?

By explicitly considering uncertainty in the future landscape, a new study in The Energy Journal by present and former researchers at the MIT Joint Program on the Science and Policy of Global Change offers a picture of the relative risks of these choices, and how much non-carbon generation should be developed in the near-term to minimize those risks. Using a novel framework that incorporates a computable general equilibrium (CGE) model of the U.S. economy into a computer program that evaluates decisions in the electric power sector under , the researchers determined that the optimal electricity sector investment for the next decade would allocate 20-30 percent of new generation to non-carbon sources.

That's how much electricity sector decision-makers must hedge their bets to balance the risk of overinvesting in non-carbon electric power in a world where turns out to be weak, with the risk of underinvesting in non-carbon electric power in a world where climate policy is stringent.

"The risk of underinvesting in non-carbon is greater than the risk in overinvesting," says Jennifer Morris, the study's lead author and a research scientist at the Joint Program. "If you build a lot of non-carbon infrastructure and there's not a strict policy, then you have sunk some of your investment in unnecessary costs, but the operational costs are low and you'll continue to use that generation. But if you overinvest in fossil fuel infrastructure and a strict policy such as a carbon tax is imposed that requires dramatic emissions reductions, you'll end up with a lot of stranded assets. You'll need to not only shut down but also invest more in non-carbon technology, which will cost you more because you didn't make previous non-carbon investments."

Few previous studies on electricity investments consider uncertainty in future carbon emissions limits, and of those that do, most use only a few scenarios and/or only examine the electric power sector, not the full economy, and therefore are not able to quantify economy-wide impacts. In this work, MIT researchers use a CGE model that represents the U.S. full economy and embed it within a dynamic programming framework where policy uncertainty is represented by sampling possible future carbon emissions limits. In this framework, different policy scenarios are each associated with a unique probability or likelihood of being implemented.

The model systematically explores different investment decisions under sampled policy scenarios, and for each decision/policy combination, computes and compares cumulative costs over two investment periods extending from 2015 to 2030. Based on this analysis, the model identifies the optimal initial investment decision. Results show a clear advantage in shifting a considerable amount of dollars from carbon to non-carbon sources in the near-term.

"Today there's a lot of uncertainty in how policy will unfold," says Morris. "Decision makers can either do nothing or allocate electricity sector investments to be best positioned for potential future policy changes. The key message of this study is that in the face of future climate policy uncertainty, it is wise to invest in some non-carbon generation now."


Explore further

Energy scenarios provide useful decision-support tools for policymakers and investors

More information: Jennifer Morris et al. Hedging Strategies: Electricity Investment Decisions under Policy Uncertainty, The Energy Journal (2018). DOI: 10.5547/01956574.39.1.jmor

This story is republished courtesy of MIT News (web.mit.edu/newsoffice/), a popular site that covers news about MIT research, innovation and teaching.

Citation: A new study details why it's prudent to invest in carbon-free electricity now (2017, April 21) retrieved 18 August 2019 from https://techxplore.com/news/2017-04-prudent-invest-carbon-free-electricity.html
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Apr 21, 2017
More pathetic left wing garbage. They hate jobs and growth.

Apr 21, 2017
Since this is a more political / economically oriented article rather than science oriented, perhaps you should address the policy of decades long gov't contracts that invest in certain technology whereas any technology constantly makes leaps and bounds forward.

Dug
Apr 21, 2017
When an article title references non-existent phenomena, it's really difficult to not think the rest of the article will be the at the same level of incompetence. There is no such phenomena carbon-free man-made energy and certainly not at commercial scales. All man-made energy requires some amount of carbon - in the equipment or process of producing energy. I understand the need for lower carbon energy production by-products. I don't understand the need to exaggerate its claims or benefits.

Apr 22, 2017
The more "left wing" the region of the US, the more jobs and growth it has shown. The more right wing regions are the stagnant ones with terrible jobs getting worse. The more "left wing" states pay more in taxes than the take in, a surplus used to prop up the failed states run by more right wing governments.

Porgie:
More pathetic


Apr 22, 2017
The article title is referencing the operation of the electricity generation, which is what the article is about. The article is not about the manufacture of the electricity generation equipment.

Dug:
When an article


Apr 22, 2017
1) It's only four years. You can hardly even build the damn things in four years.

2) Natural gas is the biggest reason why CO2 emissions are down in the first place, as it displaces coal in energy production anyways and produces 30% the CO2 per kWh, AND all the "carbon-free" alternatives are dependent on natural gas to run 70-80% of the time anyways.

The low capacity factor of renewables directly means, that if you size the resource to the point that your grid can handle - that your combined peak output matches your average full demand, then the average output is just 20-30% of that and the other 70-80% must come from other sources. Since there isn't any room to build more hydroelectric plants and people don't want nuclear power, and batteries cost ridiculous amounts - what's left is exactly coal, oil, and natural gas.

You can't actually get rid of them just yet, so punishing them is just making things cost more and making people lose their jobs for no effect.

Apr 22, 2017
"The article title is referencing the operation of the electricity generation, which is what the article is about. The article is not about the manufacture of the electricity generation equipment."


That's no excuse. The carbon emitted during construction still counts, as it's still carbon in the atmosphere. Suppose you used a ton of carbon to produce hydrogen for your fuel cell car - you can't really claim that the car emits no CO2 just because it doesn't belch it out of the tailpipe.

Likewise, things like solar panels are made with carbon, in process energy, and in the chemical reactions used to reduce silicon metal. Wind turbines need concrete which produces CO2 to make... etc. and so they have a certain amount of lifetime CO2 emissions, and thereby an associated cost in CO2 for every kWh.

That won't really change until you can make solar panels and wind turbines actually using solar and wind power, which is at the moment not practically feasible.

Apr 22, 2017
Natgas is up 3.5 KQuads from 25 (+14%) since 2010. Sustainable solar/hydro/wind/geothermal/biomass are up a combined 2.23 KQuads, a 22.6% increase, even as overall energy demand shrinks by 0.1 KQuads:

http://www.vox.co...-diagram

So natgas is up 57% more than sustainables, only +50% counting the most sustainable of all: efficiency/conservation. The sustainables account for less Greenhouse pollution than natgas does, even counting their embodied energy pollution. I don't have the math here, but sustainables are at least close to the pollution elimination that natgas is. And they are gaining as their economies scale and R&D investments are amortized across the returns phase of their product lifecycle.

Eikka:
Natural gas is the biggest reason


Apr 22, 2017
Solar is distributed generation that mostly doesn't even go across lossy distribution grids, which also reduces the grid buildout and its Greenhouse pollution. It generates at or close to the peak demand. So its output replaces the least profitable "peaker" generator plants that can be taken offline (with their maintenance). These least profitable are also the worst polluters. So solar capacity largely replaces a disproportionate amount of pollution.

It takes years to build out a transformation of a giant energy system like petrofuels. It is fully underway. People - yourself included - who have fought the transition have made it take longer, leaving more pollution pumped into the atmosphere and oceans for years longer than necessary. We could have got rid of the dirty generation earlier, and switched those jobs to ones that cost less, are less dangerous and unhealthy, just by properly internalizing their costs.

Eikka:
The low capacity factor


Apr 22, 2017
Of course solar panels and wind turbines are made actually using solar and wind power. Solar + wind = 2.7% of US elecricity, so something like that proportion of solar panels and wind turbines are made using that electricity. Since solar generates during the hours manufacturing plants run the proportion is actually higher than that.

Eikka:
That won't really change


Apr 23, 2017
"The sustainables account for less Greenhouse pollution than natgas does"


It's difficult to call them sustainables, or make that split, when the system absolutely depends on natural gas to function in the first place.

The "sustainables" simply do not work on their own - they're not economically sustainable without artifical subsidies, and not technically sustainable if there wasn't natural gas powerplants on the grid to pick up the slack.

Apr 23, 2017
"So its output replaces the least profitable "peaker" generator plants that can be taken offline (with their maintenance)"


Actually not. These "peaker" generator plants are actually used to meet rapid load _variations_ on the grid, i.e when fast ramp rates are needed. They take care of the rapid fluctuations in power demand that exists at the peak of the demand curve, and also at the up and down ramps when the overall demand situation changes fast - such as leading up and coming down from the midday high demand period. That's because other powerplants are slow to adjust.

When solar power is added to the grid it shows up as a drop in power demand from its users: it first levels off the midday peak, but then it creates two new peaks - one in the morning and one in the afternoon - and so MORE fast peaking capacity needs to be used and that is naturally more expensive.


Apr 23, 2017
Before solar and wind peaker plants were simply the worst performers, kept offline except the small amount of time needed to level supply to meet rapidly varying load. Coal and diesel plants. Yet peaker plants today are almost all natgas, even combined cycle (CCGT) up to 85% fuel efficient. Solar and wind's appearance on the grid has pressured the shift to eliminate the worst performing peakers. Which leverages those sustainable techs into even more impact by shifting coal and oil fuel to natgas to support them. The combination is less expensive than the previous mix without sustainables.

Energy transformation is complex. Reality is complex.

Eikka:
Actually not.[/

Apr 23, 2017

The "sustainables" simply do not work on their own - they're not economically sustainable without artifical subsidies, and not technically sustainable if there wasn't natural gas powerplants on the grid to pick up the slack.

They're "sustainables" because they using them can be sustained without exhausting their necessary resources.

Nothing "works on its own". Nothing is a panacea. For example we've tolerated nukes for over half a century even though they're far from "too cheap to measure" with endless subsidies. Oil and natgas are subsidized six ways from Sunday, just starting with $BILLIONS in annual direct cash handouts, but continuing with the entire structure of our military/industrial complex, national labs, USGS, etc.

Engineers always have to use the deprecated tech to introduce the new tech. Today it's natgas complementing the first decades of sustainables. We're rapidly moving to storage and a more efficient distributed grid.

Eikka:
It's difficult

KBK
Apr 23, 2017
the deeper understanding is that Obama was a closet globalist, and so was/is Hitlery.

they both worked for the Soros crowd and who is involved with Soros.

this means using the USA a stick that tears the rest of the world apart at the same time the US is torn down. (kill the warrior afterward, as it is dangerous!)

One way of doing that is to use the 'cover' story of 'enforcing green technology', upon the USA.

So trump nixes the tear-down/destruction cover story. (green tech as a central focus -drastically weakens the US ability to make war)

The other side of the coin is the energy/oil guys bought trump, and the warmongers are on board... and are using him as a vehicle... and the Goldman Sachs/FED crew are involved as they play both sides against the middle.

Basically, humanity as ground up dirt/dust/grease.. in their wheels of war and destruction.

a bunch of psychopath fascists with humanitarian cover stories. Just like human parasites always do.

Apr 23, 2017
"These "peaker" generator plants are actually used to meet rapid load _variations_ on the grid, i.e when fast ramp rates are needed."
---------------------
Nope. You are confusing peaking plants with "spinning reserve", which has generators running as motors until needed.

Apr 23, 2017
Obama was no closet globalist: he made the US more global and the world with it. There was nothing closet about it. He was a corporatist, no fascist. There has been no *enforcing* green tech on the USA, there has been only some voluntary incentives - and far too little of it.

Clinton was no closet globalist either. As Secretary of State she spearheaded Obama's globalist policies. Nothing closet about it. Another corporatist, not a fascist.

Fascists are extreme nationalists, relentless "up is down" propagandists, forced labor militants, devoted to prizing nothing but property, scapegoating some minority into subhuman status for extreme torture and genocide. They make mere corporatists look like hippies. Obama and Clinton are global corporatists, but pretty moderate ones.

Trump is a straight up fascist. His administration is straight up fascists, including the Exxon CEO who makes Clinton look like a hippie.

False equivalence is false.

KBK:
the deeper understanding

Apr 23, 2017
So photovoltaic power is retailing at $.47/watt. Once installed maintenance is negligible. What is the issue? This can be scaled to the individual homeowner and large corporations don't like that as it takes away their ability to create megaprojects with megasubsidies from government. Thats facist? Globalist? sure....

Apr 23, 2017
When arguing about companies considering replacing existing generating capacity or building new facilities it is best to ignore all the distracting noise about climate change and CO2 emissions. Simple economics clearly shows the direction to take.

Planning : advantage solar
Location : solar
Construction : solar
Operation : solar
Maintenance : solar
Expansion : solar
Decommission : solar
Public Relations : solar
Profit : solar

The only reason to hesitate is the rapid decline in the cost of solar. But there the trade-off is higher existing operating cost.

Apr 24, 2017
"The more 'left wing' the region of the US, the more jobs and growth it has shown. The more right wing regions are the stagnant ones with terrible jobs getting worse. The more 'left wing' states pay more in taxes than the take in, a surplus used to prop up the failed states run by more right wing governments."

https://en.wikipe...wth_rate

Seems to me, your assertions are just like what liberals/progressive/left wingers want to believe. The exception of course is DC, which grows by taking other people's money by force, rather than the honest way of earning it. I noticed you didn't provide any link to support your assertion.

Apr 24, 2017
One thing the article does get right, is that politicians jerk around the companies so much, the investors who have to make a long term investment, become less likely to invest. I prefer free markets, where consumers choose the winners, rather than political markets where the politicians pick the winners (at a cost to consumers). Political markets are a great deal for the politicians and their rich friends, but they're bad for prosperity.

Apr 24, 2017
"Nope. You are confusing peaking plants with "spinning reserve", which has generators running as motors until needed."


No, that's not correct. "Spinning" reserve means the amount of power margin in the powerplants that are already supplying the grid. I.e. if your powerplant is running at 80% capacity, the other 20% of it is spinning reserve.

Spinning reserve includes all types of generators, including the peaking powerplants. The grid operator leaves enough power margin in the system to match the largest generator they have, so that in an event of failure the rest of the system can pick it up, and give time to bring the replacement reserve online.

The spinning reserve is a fail safe measure, not a load following scheme. For example, the CAISO system spinning reserve is just 3% of the total metered load. The daily demand variation is 30-50% of the metered load.

Apr 24, 2017
"He was a corporatist, no fascist. "
"Fascists are extreme nationalists"

Technically, fascists are state corporatists. The whole point of the ideology is to run the society as if it was one giant corporation, lead by a strong dictator boss who meters rewards for the loyals and destroys everyone else.

The difference to neoliberals like the Clintons is that the latter don't have to admit they want to be dictators, because they know their manipulation of the markets does the same job anyhow, and those who are loyal to their system get rewards while the rest perish.

The whole terminology is a bit confusing, so you have to mind that "social liberals" are what you would call plain old center-left democrats - people who fundamentally believe in the market but also think the poor need welfare etc. Then the neoliberals are those who went center-right and started believing the corporations will take care of everything.

Apr 24, 2017
State corporatism is necessary but not sufficient to constitute fascism. South Korea for example and Japan (both even more so in 1970s-1980s) are state corporatism but not fascism. The USA has been increasingly corporatist but not quite fascist, though (ironically) in the 1940s with the Japanese-American concentration camps it was in some ways more fascist. During the Indian genocide the USA was quite fascist for generations in its vast frontier, after nearly a century (and before) of outright slavery.

Some neoliberals are fascists: the Project for a New American Century behind Bush/Cheney's Iraq invasion is a fascist org. The Clintons don't have either the required nationalism or even socialism required to be fascism.

Nor do the Clintons prioritize propaganda far above reality as fascists do. CNN is corporatist, while Fox is fascist. Trump is a fascist, which is why overt fascists, foreign and domestic, are his biggest fans.

Eikka:
Technically


May 03, 2017
"State corporatism is necessary but not sufficient to constitute fascism."

Well, state corporatism is when the state and the ruling elite acts as the arbiter between the workers and the owners, by assimilating them into the political structure. I.e. the owning class becomes incorporated into the ruling class. What makes it fascism is when the ruling class is openly violent in its actions and makes no excuses for its use of force.

"The Clintons don't have either the required nationalism or even socialism required to be fascism."

That sentence makes absolutely no sense. Socialism is the antithesis of fascism, even though the practical results are often the same, but that's due to a different mechanism. The socialist elite pretends to be the people to serve its own interest with the power invested in them, while the fascists make no pretense because they argue the society is meant to work for the elite in the first place and those who are not with them can go **** themselves.


May 03, 2017
Eikka does not like the rest of us progressing in energy production and making society clean.

My PV system works much better than promised or expected.

May 03, 2017
"That sentence makes absolutely no sense. Socialism is the antithesis of fascism, even though the practical results are often the same, but that's due to a different mechanism."

NSDAP - National Socialist German Workers' Party - are the textbook fascists. And there is little difference between stalinism and nazism. Single party rule, demagogue leaders, turn the entire country into an army for the purpose of purging and conquering.

Fascism is another 'ism word that has no intrinsic meaning. These words are created for fiddling with, to keep people arguing while obscuring the true nature of world events.

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