Navigant Research Blog

Winners and Losers under the U.S. EPA’s Clean Power Plan

— September 5, 2014

The most cost-effective and accessible way for states to replace retiring coal plants and comply with the U.S. EPA’s proposed carbon regulation (the Clean Power Plan, or CPP, released in June 2014) is through demand-side measures.  These include the energy efficiency programs that the EPA uses to calculate emissions rate targets in the CPP as well as other measures, such as demand response.  Analysis by Navigant and others shows that measures that cut demand growth will cut compliance costs.  However, most states cannot meet their targets by energy efficiency alone.

It’s in electricity customers’ best interest for states and utilities to implement the CPP with as much emphasis on energy efficiency and demand response as they are physically and financially able to.  For this primary reason, states and utilities will expand programs where they already exist and introduce new programs where there are gaps.

Accelerating Retirements

The costs to comply with the CPP, in addition to costs to comply with other environmental regulations as well as competition with low-cost natural gas, will drive approximately 45 GW of additional coal retirements by 2025, beyond anticipated retirements without the CPP (according to Navigant’s analysis).  The aging U.S. coal fleet already faces troubled times, with low natural gas prices expected to continue and the Mercury and Air Toxics Standards (MATS) requiring hundreds of coal plants to install costly emissions controls or shut down.  As coal plant owners look ahead to a carbon-constrained future, they are weighing complex decisions about whether it makes sense to invest in improvements in the near term when the long-term future of their coal fleets is uncertain.  Much depends on what the EPA’s final regulation will look like and how states will choose to implement it.

While the discussion around coal retirements tends to center on replacement by natural gas, wind and solar will also play a role.  The CPP will drive solar and wind generation above and beyond existing renewable targets, even in states that do not currently have a Renewable Portfolio Standard.  Growth will be particularly strong in areas that have high potential for solar and wind, such as the Desert Southwest and the Texas Panhandle, and where higher power prices make renewables more cost-effective.  Although much of the new solar capacity will be distributed customer-scale generation, wind installations will continue to be larger, utility-scale deployments.

New Questions Raised

The power sector has been expecting federal-level climate change policy or regulations for years.  This has been a major area of uncertainty for future generation planning.  However, the release of the proposed CPP has not led to any concrete assumptions for the future, and it has likely generated more uncertainty than it has quelled.  How will the EPA fashion its final regulation?  Will states choose to band together to implement the regulation, and will the basis for their implementation be rate-based or mass-based targets?  How will energy efficiency be measured and verified?  How will differences between states be reconciled in a system where electricity is constantly moving across state lines?  The answers to these questions will drive broad changes in the power sector and have ripple effects across the national economy.  These ripples will be felt by all industry players that are electricity customers (i.e., everyone) and, indirectly, by the healthcare industry (handling fewer conditions brought on by poor air quality) and the insurance industry (facing lessened impacts of climate change).

It’s not surprising that the CPP will transform the domestic power generation landscape, reducing coal use, lowering demand growth (due to energy efficiency and conservation programs), and increasing gas-fired and renewable generation.  Thinking globally, the plan could be just what the international community has been calling for: leadership on climate change from the United States that will push other nations (notably China and India) to follow suit.

 

Solar PV Helps Eliminate Kerosene Lamps

— August 20, 2014

About 250 million households, representing 1.3 billion people, lacked reliable access to electricity to meet basic lighting needs in 2010, according to the International Energy Agency.  Until recently, kerosene lamps were one of the few options for illumination in communities with household income as low as $2 per day.  Kerosene is highly detrimental to health and the environment, subjecting people to multiple pollutants, including fine particulate matter, formaldehyde, carbon monoxide, polycyclic aromatic hydrocarbons, sulfur dioxide, and nitrogen oxides.  Exposure to these pollutants can result in an increased risk of respiratory and cardiovascular diseases, cancer, and death.  Despite these hazards, kerosene is the leading source of illumination for most people in developing countries.

There’s now growing momentum to displace the estimated 4 billion to 25 billion liters of kerosene used each year, driven by a combination of government policy, clean energy businesses, and investment.  Kenya, Ghana, India, and Nigeria are a few of the countries that have announced initiatives to phase out kerosene and replace it with solar and other clean energy options, as covered in Navigant Research’s report, Solar Photovoltaic Consumer Products.

  • Kenya’s kerosene phase-out program, announced in 2012, aims to eliminate the use of kerosene for lighting and cooking, replacing the fuel with clean energy products.  Norway has pledged $44.5 million toward the initiative.
  • India’s National Solar Mission seeks to achieve 20 GW of solar power by 2022, in part through the installation of rooftop PV systems.  It has also set the specific goal of providing 20 million solar lighting systems in place of kerosene lamps to rural communities, with the goal of reaching an estimated 100 million people.
  • The Ghana Solar Lantern Distribution project provides subsidies to support sales of 200,000 solar lanterns between 2014 and 2016 using money formerly allocated for fuel subsidies.

Kerosene remains the most important lighting fuel for off-grid and under-electrified households and small businesses in Africa, and accounts for approximately 55% of total lighting expenditure for those living on less than $2 per day, according to Lighting Africa.  Kerosene has been increasing as a percentage of household expenditure.  Ted Hesser developed the following chart with data from the United Nations, Saviva Research, World Bank, and the U.S. Energy Information Administration, highlighting the growth in kerosene prices.  Between 2000 and 2012, kerosene prices increased 240% in the developing world, from an average price of roughly $0.50 per liter in 2000 to about $1.20 per liter in 2012.  In high-cost markets – including Burundi, Guatemala, and Panama – kerosene costs can be as high as $1.80 to $2.10 per liter.

Price of Kerosene by Country, Selected World Markets: 2000-2012

 

(Source: Ted Hesser)

Beyond CO2

The climate impact of kerosene lamps has been dramatically underestimated by considering only CO2.  Recent studies estimate that 270,000 tons of black carbon (i.e., fine particulate matter that results from the incomplete combustion of fossil fuels, biofuels, and biomass) are emitted from kerosene lamps annually – leading to a warming equivalent of about 4.5% of U.S. CO2 emissions and 12% of India’s, according to a Brookings Institute study.

The Brookings study points out that kerosene lamps are not the largest emitters of black carbon.  The leading source is residential burning of solid fuel, such as wood and coal for cooking – which emits 6 times more black carbon than lamps.  Similarly, diesel engine black carbon emissions are 5 times that of lamps.

Solar PV and other lower-emissions consumer products, such as improved cook stoves, are making their way to the market through a variety of private, non-profit, and public initiatives.  Education and awareness of the options available to consumers are the biggest challenges to changing the behavior of customers in remote communities.  But the combination of new business models, government leadership, and technical innovation are leading to a growing number of success stories that could lead to significant reductions in black carbon emissions.

 

United States, China Collaborate on Carbon Capture

— August 5, 2014

In a previous blog, I outlined some of the recent efforts to reduce carbon emissions in the United States and China.  Following that trend, earlier this month the United States and China signed eight partnership agreements to reduce greenhouse gas emissions.  Of the eight agreements, four promote collaboration in carbon capture and storage (CCS) technology.  As China alone consumes nearly half of the world’s coal and the United States consumes 11%, these agreements mark an important step in promoting international cooperation to combat climate change.

As Richard Martin noted in a previous blog post, the Chinese government has been looking at options to combat air pollution by curbing coal consumption for quite some time.  Despite the need to reduce coal consumption overall, throwing the combined weight of the United States and China at developing CCS technology to mitigate the effects of coal combustion is a move in the right direction.

Strengthening Ties

The majority of the CCS agreements are focused on regional projects that involve collaboration between research institutions in the United States and China.  One agreement, between the University of Kentucky and China’s Sinopec Corporation, features a demonstration project that will capture, utilize, and store 1 million tons of CO2 annually from a coal-fired plant in Shandong, China.  The project is projected to continue through 2017, and researchers hope to develop CCS technologies that can be used on a broader scale.  The University of Kentucky, along with the Shanxi Coal International Energy Group and Air Products & Chemicals Inc., is also working on a coal-fired power plant able to capture 2 million tons of CO2 per year.  Another of the efforts is an undertaking between the Huaneng Clean Energy Research Institute and Summit Power Group LLC to develop clean coal power generation technology. In the Shaanxi province, West Virginia University along with Yanchang Petroleum and Air Products and Chemicals will pursue an oxy-combustion coal technology project.

Issues Remain

Developing CCS technology in a world where the two largest emitters of CO2 also have massive natural coal reserves seems like a good way to mitigate emissions problems.  However, problems remain with the technology, including water intensity, high cost, and slow deployment rates.  Although coal companies and other fossil fuel advocates charge that President Obama is waging a “war on coal,” the administration has made it clear that coal and natural gas will remain a prominent part of America’s energy future for years to come. The same remains true in China, where the 12th Five-Year Plan emphasizes clean technologies and energy efficiency, but realistically acknowledges that China’s vast coal reserves will continue to be tapped to facilitate growth and economic development.

 

EV Emissions Reconsidered

— July 2, 2014

Quantifying the degree to which plug-in electric vehicles (PEVs) improve ambient air quality conditions over conventional gas or diesel-powered vehicles is an important, but difficult, question to answer.  An interview with Electric Power Research Institute’s (EPRI’s) Marcus Alexander, who will discuss the preliminary findings of a study seeking to clarify how PEVs affect environmental conditions at EPRI’s Plug-In 2014 Conference in San Jose, demonstrates the complexity of this subject.

Much of the calculation has to do with where the PEV is driven, as this dictates the carbon intensity of the electric grid used to power the vehicle.  However, in most locations throughout the United States and the globe, the operating emissions of a PEV versus a conventional vehicle on a per-mile basis lean either substantially or marginally toward conventional vehicles.

However, there are nuances to this equation beyond simple pounds of pollutant emitted per unit of energy consumed.  For instance, when a conventional vehicle consumes a gallon of gasoline or diesel, the pollutant emissions calculation is fairly straightforward.

Net Zero

Additionally, the pound of pollutant emitted varies considerably from the mobile source (vehicle) to the stationary source (power plant).  For example, Alexander states that carbon monoxide and volatile organic compounds are more tightly linked to vehicles than power plants, while sulfur dioxide emissions are associated with fossil fuel combustion at power plants.  Supplanting gas or diesel miles driven with electric miles driven can therefore reduce emissions of particular pollutants while increasing others.

However, when a PEV consumes a kilowatt-hour (kWh) of electricity, it may have a net zero impact on pollutant emissions, depending on a complex interaction of emissions regulations and available generation capacity.  Growth of wind generation over the last decade has created excess capacity, often at night when the wind blows strongest and demand is lowest.  Data from the U.S. Energy Information Administration (EIA) indicates that in 2012, net generation exceeded net load by around 2.3%.  Navigant Research estimates in the report Electric Vehicle Market Forecasts that nearly 300,000 PEVs will be in use in the United States in 2014.  Assuming an average annual PEV mileage of 12,000 and the EIA’s projections on electricity energy demand in the United States, PEVs would represent less than 0.03% of total U.S. electricity demand.

New Sources

Further, while the emissions profile of burning 1 gallon of gasoline will stay relatively consistent over time, the emissions profile of consuming 1 kWh of electricity from the grid will change as new generation assets are added to the grid and old assets retired.  In the last 2 years, nearly 15,000 MW of coal generation has been retired, with a little over 5,000 MW added.  Over the same period, 22,000 MW of renewables generation were added.  If U.S. electricity demand stays on the plateau of the last decade, the replacement of aging high-emissions assets in favor of renewables will be much easier, and the grid’s emissions profile is likely to change quickly.

EPRI’s study seeks to quantify these factors and others (such as energy consumption from lithium ion battery development) to provide the most accurate analysis of how existing PEV technologies will influence environmental conditions.  Alexander clarifies that this study, while quite comprehensive, does not investigate potential opportunities presented by PEVs, such as utilizing them for grid energy storage or ancillary services, that have yet to become market realities.  Findings from the study will be fundamental to defining the efficacy of PEVs in attaining a number of U.S. goals for air quality standards and carbon emissions reductions.

 

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