Looking into the Energy Crystal Ball

Unless you get your news from the Economist or another capitalist-oriented source there is a good chance that you think that renewable sources of energy are too little, are too unreliable, and that the US needs a lot of new energy to fuel our economy. Not so, according to Wall Street. Venture capitalists are shunning both new coal and nuclear plants as prohibitively expensive and high-risk. Not only high-risk to the environment, but to returns on investment as well.

Are you sitting down? Here is the new reality. The U.S. added more megawatts of wind-power capacity in 2007 than was added by new coal-fired plants in the past five years combined. It’s not that environmentalists were building wind turbines faster than utilities could build big coal-fired central thermal generating plants. Very simply it was that capital investors see a more lucrative return in renewable energy than they do in either coal or nuclear, and the money is going toward the best investments. And the news is likely to only get better because the central thermal generating plants use a very mature technology unlikely to yield much new efficiency, whereas renewable sources and end-use innovative efficiency continues to improve dramatically – driving down their costs. Construction costs of large central plants have also risen rapidly, and for nuclear in particular. The most recent nuclear plant to be completed, in Finland, was $2 Billion over budget (and 2 years behind schedule).

Improving energy efficiency at the end-use (i.e. LED lighting), wind, and cogeneration are already less expensive to build/incorporate and operate than the big power plants. The costs identified for different energy sources, below are taken from a figure, provided by the Rocky Mountain Institute.

Nuclear plant : 11-14 cents KwH
Coal plant : 9 cents
Combined cycle gas plant : 9-10 cents
Wind farm : 7 cents
Industrial co-generation : 5-8 cents
Building-scale co-gen : 6-12 cents
Industrial co-gen with heat recovery : 3 cents
End-use efficiency: -1 - 3+ cents

Note that kilowatt hours of end-use efficiency can be bought for less than 4 cents, and in some cases actually have negative costs (meaning that money is saved as soon as they're implemented - no pay back time). Large wind farms come in at about 2 cents less per kWh than coal thermal power plants. Nuclear appears to be about twice as expensive as wind. The Economist observed in 2001 that "Nuclear power, once claimed to be too cheap to meter, is now too costly to matter."

The Rocky Mountain Institute reports that the investment required to save a kilowatt-hour averages about two cents nationwide, but has been less than one cent in hundreds of utility programs (mainly for businesses), and can even be less than zero in new buildings and factories -- and in some retrofits that are coordinated with routine renovations.

The other ill-informed assertion that is used to misrepresent wind and solar energy sources is that they are unreliable. Actually, their production, while variable, is quite predictable based on average insolation and wind patterns. When incorporated in an energy network, and in concert with other “steady” renewable sources such as biomass, geothermal and hydro, solar and wind perform as reliably as fossil fuel or nuclear, both of which are subject to extended down-periods as a result of maintenance or mal-function. Consider that three German states derived nearly 30% of their electricity from wind in 2007. The state of Schleswig-Holstein is reported to have relied on wind for 39% of the power used; and their goal for 2020 is 100%. The facts that the wind does not always blow, and the sun sets daily is addressed by “firming,” as it is known in the industry. Firming is the engineering of processes to permit energy storage (heat or kinetic) and generally designing the energy network to accommodate the cycles of availability.

Incorporating renewable energy and conservation into the mix of power that will support our society will look different than what we’re familiar with. Instead of relying entirely on centralized plants generating hundreds of megawatts, there will be fewer big central plants, and more decentralized sources. Other more efficient technologies, such as on-site co-generation, small-scale renewables and end-use efficiency will become common. Importantly, these smaller, decentralized sources are able to reduce CO2 emissions more quickly and more cost-effectively – dollar for dollar, than massive, expensive central generating plants, whether they be coal with carbon capture or nuclear.

Demand-side management also offers opportunities for both substantial investment and freeing up a lot of wasted energy for more effective use. The part we are already becoming familiar with is more efficient appliances. You may already have purchased Energy Star rated appliances for your home. The Electric Power Research Institute (EPRI) reports to its clients – the utilities, that the potential for electric efficiency and conservation is likely 40% of existing electricity demand. Although we can not rely on squeezing out the inefficiency in electricity use to increase electricity availability forever, 40% will go a very long way.

The other big break-through will come with smart metering. Smart meters are installed like conventional electric meters. They are able to transmit use information back to the electric utility and to permit the utility to make pre-arranged adjustments in the use of electricity at the metered location (such as reducing air-conditioning load). Advanced meters will be able to also communicate with smart appliances in the home or business to adjust electricity flow. During periods of high demand, the utility will be able to distribute demand reductions across all end-users in ways that do not disrupt users’ activity.

The future is green, not radioactive. Ask any venture capitalist. This time the market is on the solution side of the problem.