By Matt Owens December 12, 2014
This is an excerpt from the chapter titled "Stepping Out of the Trap: Overhaul" of my new book (available as an e-book from Amazon for FREE through December 14, 2014). This chapter focuses on the fundamental physical components of a profitable global energy system overhaul. The print version is due out December 26, 2014.
Wind energy is the primary, ready to install renewable energy resource today. It’s cheap, extremely quick to deploy, easy to integrate into an electric grid, and there’s plenty of it to go around. The levelized cost of electricity from wind power is about the same or cheaper than that from coal, the current fuel source of choice for much of the world’s electricity generation. According to the most recent US Energy Information Administration (EIA) cost comparison between electricity sources (called levelized cost), electricity from conventional “dirty” coal (the cheapest type) is estimated to cost 19% more than onshore wind, while electricity from “clean” coal (which would capture a fraction of the greenhouse gas emissions in a process called carbon capture and storage, abbreviated as CCS) would cost nearly double, at 84% more than onshore wind. By this same set of estimates, only natural gas electricity is less expensive, by about 20% compared to onshore wind, and if CCS costs are added, natural gas becomes 14% more expensive than wind (US Energy Information Administration, 2014 — “Levelized...”).
The price of American natural gas is lower now than it was a few years ago because hydraulic fracturing has increased supply, but this is not the bonanza it has been made out to be. The price of natural gas was already rising sharply before widespread use of hydraulic fracturing, and it has not actually come down very much since. Instead, it seems to have started to rise again. It must inevitably rise, because, like all other fossil fuels, there is a limited supply and insatiable demand from rapidly developing nations. Even the EIA projections call for natural gas prices to rise in the US — and at a faster rate than all other types of energy sources.
Levelized cost figures for wind and other renewable energy sources have an important caveat attached to them, however. They assume that wind power is “non-dispatchable,” meaning it would not be used for more than a small percentage of total electric consumption. Therefore, the calculations only include the cost of adding the turbine, upright pole, pad, installation, and connection to the grid (financing and labor costs are also included). To power most of the nation’s electric needs with wind power would require additional infrastructure for energy storage and long distance transmission, which would add to the cost but not be prohibitively expensive. On the other hand, because the levelized estimates assume such low market penetration, economies of scale, which would lower the cost of making, installing, and connecting wind turbines, as well as the cost of associated infrastructure, don’t enter the picture.
Additionally, fuel for a wind turbine is free, and unlike fossil fuels, wind doesn’t run out. Hence, the cost to extract and supply it to the market will not rise in real terms of energy, capital, and time. The situation with fossil fuels is the opposite since the cheap sources have already been mined, refined, distributed, and burned. Now that they’re gone, only harder-to-extract sources remain. It’s true that technologies like hydraulic fracturing have increased the global fossil fuel supply, and supply can continue to increase for a long time into the future, but, being harder to reach, additional supplies can only be extracted, refined, and brought to market as long as fossil fuel prices continue to rise.
If we are willing to accept the obvious truth that fossil fuels are being burnt and the cost to extract them is rising despite the fact that demand is increasing, then we should be willing to accept that the market supply is getting tighter. Tight markets tend to be volatile, and volatility is not good for business when it comes to the energy at the base of our economic food chain. What this means for developed economies is that frictional costs are rising quite high as production and demand fluctuate erratically in response to volatile input costs.
The levelized cost of energy estimates do not factor in volatility. Equally problematic, they are based by necessity on estimates of future costs of fossil fuels, which could easily be too low. The EIA, which makes the estimates, has repeatedly (and dramatically) underestimated the rise in energy prices caused by the increasing relative bidding power of developing nations over the past decade.
The cost of fuel is quite important for making any comparison between energy sources — the average cost of fuel for fossil fuel power plants in the US is between 75% and 90% of operating expenses (based on EIA data for 2002 to 2012), whereas it is zero for wind and solar energy. Once a wind or solar farm is built, ongoing costs are trivial for the next twenty years.
In light of this volatility, it’s ironic that critics of renewable energy have claimed that our energy supply cannot be stable if based on wind and solar. Such criticism is not really directed against a grid of renewable energy, instead, it’s directed against our existing situation where there has been no overhaul to construct a distributed grid with storage. Such an overhaul would balance hourly, daily, regional, and seasonal variations in renewable energy production. Renewable energy is inherently more stable and reliable than fossil fuel energy.
Solar power, while more expensive than wind, would be an important part of the grid precisely because it would help balance wind energy output. Wind and sunshine tend to occur at opposite times, on both annual and daily scales. Spread over a distributed grid, local fluctuations due to cloud cover, wind variability, and nighttime even out remarkably well.
The cost of solar energy today is a function of the industry’s fairly small market size. With a much larger production rate, economies of scale would significantly lower prices and bring the levelized cost of electricity from solar in line with coal, and then beat it. This is one of the reasons escaping the fossil fuels trap requires an overhaul, not a gradual change. Until more solar panels are manufactured, their price will only drop gradually. Without their price being much lower, market penetration will remain low, and thus production will stay low and prices will remain high.
An additional way to use solar energy besides photovoltaic panels is to use very simple mirrors, sometimes curved and arranged on a remote-controlled grid programed to reflect sunlight onto a tower containing thermal fluid. The focused sunlight heats the fluid to extremely high temperatures, producing something almost like magma, the heat from which is then released in a controlled fashion to drive a turbine and produce electricity on command. The thermal fluid can store a large amount of heat and thereby provide a constant 24-hour supply of electricity to the grid, further helping balance the grid. Only a few of these thermal plants have been built, but they’ve been in use for decades, and there is nothing especially radical about their design or materials. Their high levelized cost at a national level for the US is due partly to the presently small market size for such plants and partly because they are not as effective at northern latitudes. At sunny southern latitudes closer to the equator or even in the American Southwest or in Mexico, for example, they can be far more cost-effective.
Next to solar and wind, a few other profitable sources exist, though nothing quite as globally viable. However, several of these, such as geothermal, tidal, and biogas, can produce energy at a constant or predictable rate and would further help balance the electric grid.
...want to keep reading? You can get the entire book for FREE via Amazon as an e-book from now until December 14, 2014: http://www.amazon.com/dp/B00M0ESMWM — the print version is due out December 26th.