Monday, January 28, 2013

Hidden Subsidy and Greenpeace "Point of no Return"

Greenpeace is out with a new report about climate change. The report "Point of no Return" is focused on preventing the largest planned carbon producing projects from going forward.
The report has a nice 3 page executive summary and lots of pretty graphs (and scary photos).
And a huge amount of information...I've only skimmed it, but one particularly noteworthy "nugget" that I found buried in the appendix (pg. 44) is a wonderful example of a "hidden subsidy" that the coal industry gets year in and year out...

While Arch, Ambre, and Peabody hope to reap sizable
profits in overseas markets, the US public would unfairly
shoulder much of the financial burden. The economics of
these export proposals rest, in part, on a massive public
subsidy delivered through the US Department of Interior’s
coal-leasing program that charges the companies a
pittance for a valuable resource. Coal companies are given
cheap access to taxpayer-owned coal, and allowed to
strip mine it from public lands, through auctions run by
the Bureau of Land Management (BLM). The BLM allows
companies to propose and set the terms of the lease to
maximise their profits. As a result, only three federal coal
auctions in the past 20 years have had more than one
bidder. Knowing there won’t be competition, companies
are free to enter the lowest possible bid for this coal. In
2012, the BLM gave Peabody access to 721 million tons
of taxpayer-owned coal for $1.10 a ton.
The Institute for Energy Economics and Financial Analysis
(IEEFA) estimates that the federal BLM’s undervaluing
of Powder River Basin coal has amounted to a public
subsidy of $28.9bn to the coal industry since 1980,
on the backs of US taxpayers.

I decided to highlight this "hidden subsidy" with a post, because I bet 99% of the public has no idea this is going on.  Also, it drives me nuts when I see all those ads about how important "clean" affordable coal power in the US is...yeah when nearly all the costs are socialized (yet the profits are privitized...) it is easy to appear affordable.  Furthermore it is one thing for taxpayers to subsidize the extraction of coal if the coal is used to generate "cheap" power in the US, quite another thing if the coal is used to generate "cheap" power in China....which is increasingly where our coal is going.

Monday, January 14, 2013

Is solar a "long enough lever"?

As 2013 begins, the world has installed about 100GW of solar panels.  Roughly 2/3 is in Europe, with 32GW of capacity located in Germany, and 17GW in Italy.  Since only 40GW of solar existed at the end of 2010, 60GW was installed in 2011 and 2012. 

Solar panels currently cost around $0.65/watt wholesale, down from $1/W this time last year and $1.85ish/W this time in 2011 (and ~$4/W in 2008).  Multiple sources report the installed cost of solar in Germany below $2/W.  (Because of generous and uniform subsidies Germany is considered the largest and most efficient solar market.)  The US solar market installed 3.2GW in 2012--less than half what German installed--and recent press reports cite a large solar project (i.e. over 500MW permitted but as yet unbuilt) sold to a power company owned by Warren Buffet for ~$4/W.  Other recent reports say the First Solar is planning via First Chile (a company it just purchased) to build a 30MW solar plant in Chile in 2013 at a cost of $2.50/W (w/o subsidy).  [It was not clear if a profit margin is included in this "cost".]

Recent reports say China plans to install 10GW in 2013 (double what it installed in 2012), which would likely make it the largest solar market.  Given that labor is much cheaper in China than Germany, and that Germany is already under $2/W, it seems certain that the installed cost for China will be under $2/W--possibly by a lot.

The second 100GW of installed solar will cost less than $2/W (on average)--which is remarkable since just 2 years ago the panels themselves cost nearly $2/W (and 5 years ago the panels cost $4/W). 

What does sub $2/W solar mean going forward? 

1) The Sun is a unique power source, in that the amount of solar power available to Earth is roughly 1000 times all the energy we currently use, and we will never run out of it.  2) Demand for power is highest (and therefore most valuable) during the day when solar provides power.  3) Typical solar panels are expected to last 20 years, although good solar panels have been shown to produce ~90% of their original power after 20 years--which means solar panels may last 30-40 or even 50 years (albeit at a declining fraction of their original power).

Using the 20 year assumed lifetime and 1000 sun hours/year, $2/W installed implies a cost of ~$0.10/kWh for solar power (ignoring financing).  Many countries get 1200-1300 sun hours/year (some prime locations get as much as 1800-2000), certainly most of the world's population lives in regions that get at least 1200.  If you get more sun, or your panels last say 25-30 years, then $0.10/kwh (including financing) is an upper limit on cost.

The point to all this is that sub $2/W installed, solar can supply as much power/energy as desired, when it is most desired for no more than $0.10/kwh, and potentially as little as $0.05/kwh (excellent sun or 40yr+ lifetime).  Best of all (for consumers at least) this is already is real in Germany and in China right now!

This reality is shaped by several changes which happened in the past 10 years.  First of all Europe, and Germany especially, decided to offer solar power production a generous and uniform subsidy (which it has steadily decreased), and secondly China decided to generously subsidize the manufacture of solar panels to the point that capacity to make panels now significantly exceeds demand.  Finally solar power is a small fraction of our power supply (~2% gross global capacity, <0 .5=".5" been="been" date.="date." effective="effective" effects="effects" have="have" its="its" marginal="marginal" means="means" to="to" which="which">
But there are clear indications in Germany that solar is decreasing the price of peak power, and hints that it may even be lowering the average cost of power--mostly one hears the squealing of utilities that see their traditional peak power profit centers crumbling as result of readily available solar reducing peak demand.  Solar on the grid lowers the peak from what it would have been without the solar available, which means peak prices are lower.  (without solar, that last bit of peak power would have been supplied by an expensive peeker plant)  While this is most noticeable at moments of peak power demand, it occurs to a lesser extent throughout the day, taking lots of nibbles out of the non-solar aggregate demand.

Although solar is still a small fraction of all the power generated in Germany (3% in 2011, likely 4% in 2012) throughout the year, it is having an outsized effect by producing the most valuable power (thereby reducing the demand for otherwise valuable non-solar power)...Solar is a lever, and it is moving Germany's power markets, by reducing the daytime demand utilities see.  Just as a small change in the amount of oil available will often lead to large swings in the price of oil, so too a small amount of solar can lead to large shifts in what utilities can charge for their non-solar power.

This should be celebrated by consumers and environmentalists, but it will no doubt cause heartburn for utilities dependent on fossil fuels, and their suppliers.  Over time, assuming solar can continue to be installed for under $2/W, this will cause increasing financial havoc at utilities that don't themselves invest in solar.  It won't happen all at once, but considering how quickly solar has become affordable, it will happen faster than most utility executives expect.

If one believes that climate change is a clear and present danger to our planet, then there is hope that (given the recent past and already real present) solar may be a long enough lever to move the planet into a safer, more sustainable future, in the next couple decades.

Tuesday, January 01, 2013

Rebecca Tarbotton will be missed

The Rainforest Action Network (RAN) was founded in 1985 to address climate change issues from the perspective of saving rainforests.  For the last couple years it was run by a Rebecca Tarbotton. I learned about RAN a couple years ago while campaigning to shut down the Fisk and Crawford coal plants here in Chicago.
I was really saddened to learn that Rebecca died in a freak accident on Dec 26th. The environmental movement needs more people like Rebecca.   I was certainly inspired by the work Rebecca did, and am posting a link to a fitting memorial over at Grist.  The 16min video (at the end) of a speech by Rebecca in October trumpeting a "win" by the RAN in their ongoing campaign to save rainforests--is especially poignant now.