Technologies and Policies for a Sustainable Energy Future
Technologies and Policies for a Sustainable Energy Future in the U. S. and the Southeast Marilyn A. Brown, Regents’ Professor and Brook Byers Professor of Sustainable Systems Georgia Institute of Technology Vanderbilt University January 22, 2018
2016=Hottest Year on Record; 2017=2 nd The Southeast Is no longer an anomaly! http: //www. silive. com/news/2018/ 01/2017_second _warmest_year_ on_re. html 2016 temperatures compared to normal around the globe (NOAA) NCA 4 Climate Science Special Report (2017): “This assessment concludes, based on extensive evidence, that it is extremely likely that human activities, especially emissions of greenhouse gases, are the dominant cause of the observed warming since the mid-20 th century” 2
Meeting the Global 2°C Goal Primary Energy Demand (left axis & solid lines) Energy-Related CO 2 Emissions (right axis and dashed lines) Gigatons of Carbon Million tonnes of Oil Equivalent (MTOE) Red ~ Current Policies Blue ~ The Paris Accord – The “First Pivot” Green ~ The 2ºC Goal – The “Second Pivot” The Paris Accord is an important “first pivot”, but it is not enough to limit the global temperature increase to 2°C above the pre-industrial revolution. Source: Adapted from the International Energy Agency’s World Energy Outlook
The Least-Cost Second Pivot Distributed energy resources will likely dominate the “second pivot” Estimated Least-Cost “Second Pivot” Emissions after the First Pivot Emissions with the “Second Pivot” -- To the 450 Scenario Adapted from: IEA (2015) Energy and Climate Change: A Special Report
Emerging Two-way Electricity Supply Chain Source: DOE. 2017. Quadrennial Energy Review: Transforming the Nation’s Electricity System, Figure S-3
The U. S. Power System is Already Being Transformed • >14 million electric customers are supplying power back into the grid. • Distributed solar capacity is now nearly 1% of total U. S. generating capacity (14 GW). • >80 GW of combined heat and power now accounts for ~8% of total U. S. generating capacity. • >16 million customers participate in wholesale or utility demand response or time-varying rate programs. • The charging cycles of 535, 000 EVs are now being managed. Source: Brown, Marilyn A. , Shan Zhou, and Majid Ahmadi. 2018. "Smart grid governance: An international review of evolving policy issues and innovations, " Wiley Interdisciplinary Reviews (WIREs): Energy and Environment, Forthcoming.
The Challenge: Grid Integration Source: Brown, Marilyn A. 2018. “Enhancing Efficiency and Renewables With Smart Grid Technologies and Policies, ” WIRES, Forthcoming.
The Power of Consumers and “Intermediaries” Smart meters provide two-way communication: ü ü ü Powerful when combined with real-time electricity pricing Wi. Fi enabled; control from computers & cell phones Can interface with in-home, in-office, and smart phone displays of online consumption Google/Nest Learning Thermostat Sensors for temperature, humidity, motion, and light eliminate wasted energy (and improve comfort). “Intermediaries” and non-utility aggregators are multiplying. 8
What Roles Could EVs Play? • First, they can reduce GHG emissions compared to ICEs. • But also, they can support the grid. • How much are these grid services worth? • What business models can be used to create value in regulated and competitive markets?
Visions of the Future Distributed, connected vehicles 1, 000 EVs x 10 k. W On-Board Charger = 10 GW Controllable Load Source: Mateo Jaramillo, Tesla, June 19, 2017 10
Managing These Resources in Real Time is Complicated Capacity Factor of Solar at Net Peak Hour • Peak day loads by network are shifting (California duck curve) At 25% solar in Texas, the on -peak capacity of solar could drop to 5%. * Percent Solar Penetration • Resources need to be managed in real time *Source: DOE. 2017. Staff Report to the Secretary on Electricity Markets and Reliability
Geospatially Managing Demand • Resources need to be deployed into specific zones— the duck walks • Dispatched to address local constraints Con. Ed’s Brooklyn Queens Demand Management Program 12
Investment Cost and Affordability: Constant Concerns Two competing cost pressures: • Repairing and replacing aging energy infrastructure associated with central power plants and transmission • Incorporating “smart” technologies and distributed energy assets
Wind and Solar are Becoming Competitive with Natural Gas Levelized Cost of Electricity ($/MWh) Dispatchable Nation Lazard: Low (2016) Lazard: High (2016) EIA (2022) EIA: VA-Car. (2022) Non-Dispatchable (Including Integration Costs) Onshore Utility-Scale Wind Solar Natural Gas CC Nuclear Biomass Direct 48 97 60 24 46 78 136 101 58 54 57 57 96 96 102 101 54 66 68 67 Source: Marilyn A. Brown, Alice Favero, Valerie Thomas, and Aline Banboukian, 2018, 14 The Economics of Four Virginia Biomass Plants, Forthcoming.
It’s Hard for Baseload to Compete The PJM Supply Curve in 2016 Based on Variable O&M Costs Source: Marilyn A. Brown, Alice Favero, Valerie Thomas, and Aline Banboukian, 2018, 15 The Economics of Four Virginia Biomass Plants, Forthcoming.
Changing the Jobs Narrative The U. S. has about 75, 000 jobs in coal mining. Automation has had a major impact on this workforce: autonomous trucks work the Powder River Basin…. See: 30 -minute CNN discussion: 175, 000 live “hits” https: //www. facebook. com/cnn/videos/10156318782866509/? hc_ref=NEWSFEED 16
Advanced Energy Jobs > 1 million U. S. workers spend a majority of their time installing energy-efficient equipment and services. Technologies include: • • • Advanced windows & insulation High efficiency HVAC Smart thermostats Efficient lighting and controls Energy Star appliances, etc. ~250, 000 U. S. workers are working in the solar industry Source: Environmental Entrepreneurs (E 2) and E 4 The Future. 2016. Energy Efficiency Jobs in 17 America.
How to Move Markets: The Carbon Dividends or Clean Power Plan? A Carbon Tax with Revenues Recycled to Households “I really don’t know the extent to which it is man-made, and I don’t think anybody can tell you with certainty that it’s all man-made, … the risk is sufficiently strong that we need an insurance policy and this is a damn good insurance policy. ” James Baker, February, 2017 Redistribute taxes on a per capita basis? Redistribute per source of CO 2?
Pricing CO 2 & Strengthening Energy-Efficiency Policies • Carbon pricing with stronger energy-efficiency policies could achieve deep decarbonization goals at a relatively low cost. Cost of climate policy = utility resource costs + energy efficiency costs – carbon tax recycling (Environmental benefits > welfare losses. ) Source: Brown, M. A. , Kim, G. , Smith, A. M. , & Southworth, K. (2017). Exploring the impact of energy efficiency as a carbon mitigation strategy in the US. Energy Policy, 109, 249 -259. 19
Which is better? A Carbon Tax or a Cap-&-Trade System Equivalences Internalization of marginal abatement cost Distribution of burden across industries and households Carbon Tax Cap & Trade = = Benefits from broad sectoral coverage = Connection with offsets = Linkages across Jurisdictions = Both seek to internalize marginal abatement costs to incentivize emission reductions Both equalize the marginal abatement costs across abatement options and distribute the cost by raising prices Share the benefits and challenges of achieving cost-effectiveness through a broad scope of coverage Under both instruments, the linkages to offsets can be established by specific provisions Neither instrument can easily link systems across jurisdictions
A Carbon Tax or Cap-&-Trade System? Differences Carbon Cap & Tax Trade Administrative costs + - Price certainty + - + - Emission certainty - + Flexibility to respond to new information - + Avoid leakage from nested regulations - + Revenue neutrality and tax reforms to achieve “double dividend” Flexibility of abatement strategies Cap-and-trade requires an additional administrative system and a registry for tracking and monitoring allowances and market trades Carbon tax provides relative price certainty compared to the potential price volatility of cap-and-trade (unless a price ceiling and floor is used) Revenue collected from the carbon tax can be used for broader tax reduction or reforms inducing a “double dividend” which may not be possible in cap-and-trade system unless the allowances are fully auctioned Carbon taxes offer flexibility by allowing sources to choose their own abatement strategies Cap-and-trade limits carbon emissions while carbon taxes cannot guarantee achieving an abatement target Cap-and-trade system can be more flexible to respond to new situations, such as sudden technology breakthroughs and new carbon reduction goals Carbon tax cannot effectively control the leakages with limited scope of coverage while the cap-and-trade can expand the scope the coverage more easily
A Carbon Tax or Cap-&-Trade System? Unsettled Issues Past policy experience Political support Ability to address social equity and distributional concerns Regional winners and losers Carbon Cap & Tax Trade ? ? ? ? Past experiences with the two instruments show large regional heterogeneity. Support varies across locations and constituencies Little consensus about distributional effects; both instruments may raise the energy burdens of low-income households depending on the detailed policy designs of reimbursements and the market dynamics Little analysis has addressed the regional winners and losers that could emerge from a tax versus cap-and-trade system
Policy Design Matters The carbon cap would retire more coal than a $10 per metric ton of CO 2 tax and would also add more natural gas, renewables, and end-use efficiency. While the cost per ton of CO 2 reduction would be lower with carbon taxes: • electricity rates would rise more because of higher fuel costs • fewer gains in energy efficiency when price elasticity is its only driver. 23
Carbon Tax Winners and Losers: Policy Design Matters Carbon tax wealth transfers (blue lines) could be significant, but can be minimized (green lines). Policy costs range from a cost of ~$150 per capita to a benefit of ~$250 per capita. Policy costs per capita in 2030: Highest Carbon Intensity Per Capita (Decreasing clockwise) 24
Conclusions • The clean power transformation has begun. • A great deal is at stake, and policy design matters in terms of: ü overall costs ü the energy fuel transition ü the regions that win or lose. • Blending the engineering and natural sciences with economics, social sciences, law, and policy analysis can spotlight issues and reveal new possibilities.
For More Information — and some late night reading? ? 26 Dr. Marilyn A. Brown, Regents Professor Brook Byers Professor of Sustainable Systems School of Public Policy Georgia Institute of Technology Atlanta, GA 30332 -0345 Marilyn. Brown@pubpolicy. gatech. edu Climate and Energy Policy Lab: www. cepl. gatech. edu 2016 2015 2013
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