Response to ‘A comparative analysis of electricity generation costs from renewable, fossil fuel and nuclear sources in G20 countries for the period 2015–2030’

A Greenpeace report commissioned from 100%RE academics from Lappeenranta University of Technology (of course) on electricity generation costs was recently published in Journal of Cleaner Production. Details of the computations were kindly made available as a supplementary spreadsheet. The results left something to be desired. I wrote a response which has now been published. “Response to ‘A comparative analysis of electricity generation costs from renewable, fossil fuel and nuclear sources in G20 countries for the period 2015–2030’” (doi:10.1016/j.jclepro.2018.07.159). Link should work for few months after which you either need access to the journal or download it from here. Take away lesson as usual: Be critical and do not automatically trust the results or conclusions.

Added 18.10.2018: The free share link does not seem to work from WordPress so if you don’t have access otherwise you can download it from here.

Sähkön hinta ad nauseam: LUT Neocarbon edition

Lappeenrannasta Christian Breyerilta on tullut uusi paperi “A comparative analysis of electricity generation costs from renewable, fossil fuel and nuclear sources in G20 countries for the period 2015-2030”: Ram et al.  (Sitä on rahoittanut Greenpeace e.V., jonka Twitter-tili sanoo edustavansa Saksan Greenpeace:ä.) Tämä uusi paperi käsittelee eri sähkön lähteiden kustannuksia. Paperissa summataan kaikenlaisia menoeriä yhteen, lasketaan mukaan loppusijoitus, ulkoiskustannuksia, jätemaksuja, CO2 maksuja jne. jne… lopputuloksena saadaan “levelized cost of electricity” (LCOE) esimerkiksi EU:ssa. Julkaistun paperin siivellä on annettu Excel taulukko laskujen yksityiskohdista, jonka vuoksi olikin helppoa paneutua teemaan huolellisemmin. Muutama kriittinen huomio. (Anteeksi. Niitä on lopulta enemmän kuin aluksi luulin. Uusia tulipaloja syttyi aina, kun luulin sammuttaneeni yhden.)

LCOE kustannuksia EU:ssa Ram et al. mukaan. Ensimmäinen palkki vuodelle 2015 ja toinen on arvaus vuodelle 2030.

• • Ydinvoiman kohdalla käytetään 10% korkoa, kun muille se on 7%. Syynä kehämäinen päätelmä siitä, että ydinvoimaa vastustetaan ja siksi korko on suurempi…ja siksi ydinvoima on kallista ja sitä pitää vastustaa. Ainakaan TVO ei tuollaisia korkoja lainoistaan maksa. Alle 3% näyttävät olevan tällä hetkellä. Lisäksi vaikka tuo olisikin totta, niin kyse on ydinvoiman vastustajien aiheuttamasta ulkoiskustannuksesta eikä ydinvoiman kustannuksesta.  Onko liikaa toivottu, että pidetään pelikenttä tasaisena?
  • Ydinvoiman pääomakustannus on ensin laitettu melko järkevään 4000-6000€/kW haarukkaan. Sen jälkeen sitä nostetaan 20-40%, koska Olkiluoto. Artikkelissa siteerataan uutista, jossa OL3:n hinnaksi kerrotaan 8.5 miljardia eli 300% alussa arvioitua korkeampi. Lähtöhintaa Ram et al. eivät kuitenkaan asettaneet uutisen mukaiseksi eli 2100 €/kW. Käytetty pääomakustannus oli siis paperissa ensin lähellä OL3:n hintaa, jonka päälle sitten lisättiin satunnaista lisää. Ei aivan korrektia.
  • Käyttökustannukset annetaan prosentteina pääomakustannuksista. Kun pääomakustannuksia paisutetaan, paisutetaan samalla käyttökustannuksia korkeammaksi kuin mitä niiden on syytä olettaa olevan.
  • Litium akuille (utility scale) annetaan vuonna 2015 hintahaarukka 390-590 €/kWh.  HELEN otti vuonna 2016 käyttöön litium akun, jonka kapasiteetti on 600kWh ja hinta noin 2 miljoonaa. Tuo tarkoittaa noin 3300 €/kWh. Tuo reaalimaailman datapiste ei osu edes likipitäen annettuun haarukkaan. Missä on muuten se yritys, joka toimittaa asiakkaalle litium-varaston 390 €/kWh hintaan (itse asiassa toimitti, koska kyse on vuodesta 2015)? Tiedän, että pöhinämedia tuollaisia hintoja esittää, mutta olisi kiva nähdä joku oikea esimerkki näiden tueksi.
  • Tuulivoiman kapasiteettikertoimelle EU:ssa (vuonna 2015) on annettu haarukka 26%-70% niin, että mediaani on 41%. EU:ssa keskiarvo on todellisuudessa jossain 24% nurkilla…??? Mediaani on siis ehkä 66% liian korkea mikä heijastuu vastaavan kokoisena vääristymänä lopputuloksissa. No mutta, jos kerran tietokone sanoo, että se on 26-70%, niin mikäs minä olen sitä kyseenalaistamaan? Kysyin tästä Breyerilta Twitterissä, mutta sen jälkeen, kun  hän pyysi minua olennaisesti toistamaan kysymykseni en ole valitettavasti saanut vastausta.  Lähteenä mainittiin Stetterin väitöskirja, mutta siellä OECD Euroopan keskiarvo kapasiteettikerroin tuulivoimalle 2030 on järkevästi 27.9% (taulukko sivulla 66).
    
    

    “The procedure for estimating FLH was complex, but took into account both geographic and temporal variation of the resources. Data was derived from (Stackhouse, 2016; Stetter, 2012), which gave irradiation and wind speed data on an hourly resolution for the years indicated. The geographic resolution of the data…” EU:ssa tuulivoiman maksimi kapasiteettikerroin on tämän jälkeen yli 70%???!!! (Brasiliassa yli 80%. Big if true. Saksassa minimi on paperin mukaan 32%, kun maan toteutunut keskiarvo on oikeasti 19%.)

  • Laitoksen purkamisen kustannuksia ei ole laskuissa diskontattu. Tämä on virhe. (Vaikuttaa kuitenkin melko vähän lopputuloksiin.)
  • Korko on kaikkialla melko korkea 7% mikä ei ole konsistentti pitkäjänteisen ilmastopolitiikan kanssa, mikä edellyttää sukupolvien yli ulottuvaa aikahorisonttia ja (tavalla tai toisella) alhaista diskonttokorkoa. Näissä laskuissa tulisi varioida käytettyä korkoa niin, että sen vaikutus lopputuloksiin on selkeästi esitetty.
  • Aurinkosähkön osalta Suomessa toteutuva kapasiteettikerroin ei sisälly annettuun EU:n haarukkaan. Muuten aurinkosähkön kapasiteettikerroin oletukset ovat vähemmän vinksallaan kuin tuulivoiman vastaavat.
  • Aurinkosähkö+varasto combo ei sisällä riittävää varastoa niin, että tuotanto vastaisi kulutusta. Kustannus on otettu jonkinlaisena summana aurinkosähkön ja varaston hinnoista, mutta koska varaston koko on riittämätön sen vaikutus hintoihin on tietenkin suhteellisen pieni. En oikein muuten ymmärrä tämän kaavaa Excelissä eikä sitä myöskään avata paperissa. Esimerkiksi combon sanotaan ymmärtääkseni tuottavan FLH/2+FLH/2*efficiency verran sähköä. Eli jos varaston “efficiency” on nolla, tuotto on puolet täydestä tuotosta ilman varastoa. Eli on jotenkin oletettu, että puolet tuotannosta johdetaan akkuun, mutta ei ole selvää mistä tämä oletus tuli tai oliko akun koko riittävä ottamaan tuon verran tuotantoa sisään? Mitä tuossa oikeastaan tapahtuu? Kun varasto on ilmainen ja sen tehokkuus on 100%, miksi luku ei ole tismalleen sama kuin aurinkosähkön LCOE mikä laskettiin ilman varastoa? Minun Excelissä lukuihin jää pieni ero.  Riittämätön varasto tarkoittaa etteivät lopulliset kustannukset ole vertailukelpoisia. Eri vaihtoehdot eivät toimita kuluttajalle samaa arvoa mikä jää helposti lukijalle epäselväksi, koska sitä ei kerrota.
  • Ulkoiskustannusten kohdalla Ram et al. viittaavat Grausz:in raporttiin, jossa myös arvioidaan eri vaihtoehtojen hintoja. Tulokset ovat tuossa alla ja ydinvoiman kustannus näyttää alhaisimmalta. Ulkoiskustannukset ovat kuitenkin kaikilla hiilettömillä vaihtoehdoilla melko pienet eivätkä vaikuta hirveän paljon lopputuloksiin.
    

    Kustannuksista Grauszin mukaan. Mikä olikaan se huokein vaihtoehto valitun lähteen mukaan?

  • Akuille ei ole laskettu mitään ulkoiskustannusta. Kai niiden tuotanto nyt jotain ympäristöhaittoja aiheuttaa?
  • Hiilidioksidille on laitettu hinta (vuodelle 2030) perustuen Sternin raporttiin (olkoonkin, että paperin viite Stern, N., 2007 on itseasiassa Nordhausin kirjoittamaan kritiikkiin Sternin raportista). Tämä kuitenkin perustui Sternin olettamaan alhaiseen korkoon. Miksi ratkaisupuolella käytetään 7-10% korkoa, mutta hiilen hintaa laskiessa alhaista? Eikö tässä pitäisi olla konsistentti? (Epäilen, että tämä ei ole mitenkään Ram et al. paperin erikoisuus.) Ongelman suuruutta arvioitaessa tunnustetaan tarve pitkälle aikahorisontille, mutta ongelmaa ratkaistaessa ei? Hiilimaksun vaikutus hiilellä tuotetun sähkön hintaan vuonna 2030 on paperissa noin noin 60€/MWhe eli vaikutus on merkittävä. Ilman merkittävää hiilimaksua hiili on alhaisen kustannuksen vaihtoehto (huolimatta myös sille lätkäistystä 10% diskonttokorosta).

Katsotaan mitä tapahtuu, kun oletukset korjataan ensin järkevämmäksi ja sitten osin arvovalintoihin liittyvää diskonttokorkoa aletaan muuttamaan. Seuraava animaatio näyttää mitä tapahtuu tuuli- ja ydinvoimalle, kun vääristävät oletukset poistetaan.

Poistetaan vääristävät oletukset Ram et al. paperista. (lähinnä lasketaan tuulen kapasiteettikerroin 0.25-0.38 haarukkaan, ydinvoiman pääomakustannus 3000-6000€/kW, käyttökustannukset irroitetaan pääomakustannuksesta…)

Ydinvoima ei olekaan enää erityisen kallis tapa dekarbonisoida. Seuraavassa animaatiossa lähtökohta on korkealla korolla laskettu kustannus, jonka jälkeen laskemme koron sille tasolle missä päätöksenteon aikahorisontti on pitkä (sama mitä Stern käytti eli 1.4%).

Siirrytään kvartaalikapitalismista sukupolvien yli ulottuvaan ilmastopolitiikkaan laskemalla laskuissa käytettyä korkoa.

Jos tavoitteena on pitkän tähtäimen kustannusten minimointi samalla, kun energiantuotantoa dekarbonisaatioidaan, näyttää melko selvältä, että ydinvoiman on oltava osa energiapalettia. Jos katsomme tilannetta muidenkin vaihtoehtojen osalta niin vuonna 2015 saan kahdella eri korolla seuraavan kuvan kaltaiset tulokset. Ydinvoiman kustannus on tuulen kanssa vertailukelpoinen jopa Breyerin omilla luvuilla, kunhan tuulen liioitellut kapasiteettikertoimet korjataan. Aurinkosähkö on selvästi kalliimpaa.

Vuoden 2015 luvut. Neljä ensimmäistä palkkiryhmää käyttää Ram et al. arvoja paitsi korko on konsistentisti sama kaikilla vaihtoehdoilla ja aurinkosähkön kapasiteettikerroin Suomelle sopiva. Kaksi viimeistä korjaa artikkelin eriskummalliset oletukset ydinvoimalle ja tuulivoimalle takaisin maaplaneetalle. (Sininen palkki alhainen hinta, keltainen korkea ja vihreä siltä väliltä.) Ydinvoima ja tuuli hyvällä paikalla alhaisimman kustannuksen valinnat.

Vuonna 2030 taas arvomme seuraavaa. Sama juttu…ydinvoima pysyy halpana vaihtoehtona vaikka Breyer et al. haaveilevat aurinkosähkölle suuret hinnanalennukset ja VAIKKA emme olettaisi ydinvoimalle mitään suotuisaa kustannuskehitystä. Etenkin katoille asennettavat paneelit ovat selvästi muita vaihtoehtoja kalliimpia.

Sama kuin edellinen, mutta vuodelle 2030 arvatuin parametrein. Ydinvoima on LCOE laskun pohjalta halvin tapa harjoittaa ilmastopolitiikkaa. Siinä emme myöskään nojaa kuviteltuihin hinnan alennuksiin tai kuviteltuihin varastointi- ja integrointiongelmien ratkaisuihin.

Ydinvoima ei siis ole erityisen kallista ja sen kohdalla emme nojaa toiveisiin jatkuvasti alenevista hinnoista tai kuvitteellisiin teknologisiin läpimurtoihin esimerkiksi sähkövarastoissa. Teknologiariskit ovat sen kohdalla pienempiä. Päinvastaiset väitteet ovat laiskaa puhetta eikä niiden paikkaansa pitävyyttä ole vaivauduttu oikeasti tarkistamaan.

P.S. Jos joku haluaa tutustua laskuihin tarkemmin. Tässä linkki joihinkin edustaviin Matlab-macroihin.

Lazard: how to mislead with numbers

Financial advisory and asset management firm Lazard regularly publishes a set of slides on the levelized cost of energy. These slides are routinely used to market wind and solar power (and are often annoyingly called “a report” which in my opinion gives them an undeserved aura of academic respectability). Alex Trembath has already pointed out that Lazards results are strange In this post I will point out some of the reasons why this is so.

In the early versions (v. 1-5) of their slides Lazard subtracted subsidies from the costs and then happily reported how competitive wind power was (point #2 on my short list). This was very naughty of them. Apparently somebody got too embarrassed by it and the trick was suspended. I think remorse is good and I am willing to forgive people acting in good faith. However, Lazard makes this harder for me since they seem to have replaced one form of misdirection with others.

Let me start by showing a slide slide Lazard uses to justify their figures.

Fig. 2: Lazard assumptions. 2015 incarnation.

Their range for wind power capacity factor is 30-55%. Wow! While 30% is close to what is typical in US, 55% seems awfully high. U.S. department of energy publishes “Wind technologies market report” which gives far more detailed picture so let us have a look. Figure 32 from the report seems useful and it shows a range of capacity factors in US. I will add into the figure red lines to mark ranges given by Lazard before and after they stopped the trickery with subtracting  subsidies.

Fig. 3: Wind capacity factors according to “2014 wind technologies market report”

Hmmm…real data doesn’t seem to support 30-55% range. What Lazard has done is to use a lower range which is roughly typical in US and upper range higher than anything in the “Wind technologies market report”. The real lower range is missing. It should be around 10%, but they decided to use different “criteria” at one side of the distribution. Remarkably this nonsense seems to have started when they stopped subtracting subsidies from costs. Then assumed capacity factors started a rapid increase even though in the real data such increase has been very modest. If I have to guess, they did this in order to torture the numbers to conform to the narrative Lazard wanted to tell. They needed extra layer of nonsense to compensate for their earlier nonsense with subsidies. Otherwise “costs” would have shown a sudden jump.

Fig. 4: Trend in US wind power capacity factors

What about the cost assumptions? The next figure compares the Lazard’s range with longer time series from US. The real data basically tells that in US wind power today costs about the same as 15 years ago. If you want a narrative a declining prices, you have to cherry pick 2009 as the high point and ignore the cost increases before that. (This is indeed what many including Lazard and even IPCC do.)

Fig. 5: Costs for US wind power projects. I marked Lazard’s range with green colour.

The range that Lazard gives for the costs is again distorted. Their lowest cost seems to be the lowest cost in US while the upper range is roughly a typical US cost. The real upper range has been mysteriously removed. The combined effect of these tricks is to make costs appear lower than what they typically are. Finally I typed Lazard’s upper range numbers into simple LCOE calculator provided by the national renewable energy laboratory. Lazard assumed “60% debt at 8% interest rate and 40% equity at 12%”. Since I don’t know exactly what that means and I am too lazy to figure it out, I will just use 10% discount rate. (That seems to give about the same result for nuclear power LCOE as Lazard states.) Why is it that I get 9.1 cents/kWh instead of something close to 7.7 cents/kWh that Lazard claims?

Fig 6: Why cannot I get about 7.7 cents/kWh? What am I doing wrong?

Does any of this matter? Who cares what some Wallstreet analyst says? Unfortunately, it does matter since gray literature a’la Lazard is being used as an excuse to deny the validity of more solid research. This is not only done by the media, but also by some academics. Here is an example of Stanford professor Mark Jacobson justifying ignoring results from “Deep decarbonization pathways project” for US, which did use proper sources for their data. (In fact, you might want to read his whole timeline during those days. I call that intellectual bankruptcy.) And make no mistake. Lazard knows exactly what they are doing. They know the figures and set out to deliberately twist them in order to mislead. This is unethical. By muddying the boundary between serious research and advocacy, they do disservice to both.

 

Addition: By the way…note that when Lazard claims 61% decrease in wind power costs since 2009 they don’t only cherry pick 2009 as the starting point, but also compute this by taking the average of their upper and lower ranges. This makes no sense. Computing such number for the median would be more sensible, but Lazard is very keen on NOT showing the actual distributions. They prefer to party with the outliers.

Kumulatiivinen nykyarvo: aurinkosähkö vs. ydinvoima

Törmäsin FinSolarin esitykseen aurinkosähkön mahdollisuuksista Suomessa. He jakavat myös hienosti kustannusten arviointiin Excel-tiedostoa, joka laskee sijoituksen “kumulatiivisen nykyarvon”. Heidän tehtävänään on toki markkinoida omaa vaihtoehtoaan joten ei ole yllättävää, että he eivät esitä kysymystä voisiko nykyarvo kenties olla korkeampi, jos sijoitammekin rahat johonkin muuhun vaihtoehtoon. Excel-tiedoston pohjalta on tietenkin helppoa tehdä sama lasku samoin periaattein myös ydinvoimalle. Meidän täytyy vain vaihtaa kapasiteetin vuosituotanto, elinikä sekä pääomakustannukset. Tiedosto ei ota huomioon käyttökustannuksia, mutta koska ne ovat alhaisia sekä aurinko- että ydinvoimalla vertailuun tällä ei ole suurta merkitystä.

Tässä siis minun FinSolarin tiedoston pohjalta täydentämäni taulukko, jossa vertaan aurinkosähkön ja ydinvoiman “kumulatiivista nykyarvoa”. Yhteenvetona esitän kaksi kuvaajaa tuloksista. Ensimmäisessä sähkönhinta nousee 2% vuodessa ja jälkimmäisessä hinta pysyy vakiona. Pikaisella katsomisella vaikuttaa melko selvältä kumpi vaihtoehto on kannattavampi.

Kumulatiivinen nykyarvo suhteessa pääomakustannuksiin nollakorolla. Oletin aurinkosähkölle pääomakustannuksen 1500€/kW ja ydinvoimalle 4000-5600 €/kW.

Kumulatiivinen nykyarvo suhteessa pääomakustannuksiin nollakorolla ja ilman sähkönhinnan vuosittaista 2% nousutahtia. Oletin samat pääomakustannukset kuin edellisessä kuvassa.

Ideological assumptions manipulator (IAM)

In its latest assessment report IPCC concluded that in order to get climate change under control world needs massive expansion of nuclear power, renewables, energy efficiency, and CCS. I am a numbers guy and therefore I was delighted when I found a useful database for many of the mitigation scenarios IPCC relied on in its latest report. There is a database for the scenarios and additional information and assumptions used on many scenarios can be found in another database. I found this very interesting since articles reporting on the scenarios often explain the underlying assumptions of the models poorly. I will focus now on how the modellers approached nuclear power. I didn’t have the patience to go through all scenarios and I focused on those with 450ppm CO₂ target that contained all technologies optimally (allegedly). I found that quite a few modellers dealt with nuclear power in a way that left me wondering if their modelling is simply poorly disguised ideological propaganda.

Some main approaches used to influence how well nuclear power does in the models relative to variable renewables (wind and solar):

1. In many models nuclear capacity increases massively. Hundreds and hundreds of reactors are constructed, but amazingly nobody learns anything! Capital costs for nuclear power are typically kept almost constant throughout the decarbonization pathways. On the other hand learning effects and technological evolution are assumed for other energy sources. For wind and solar power these are often assumed to be very dramatic and there are learning effects even for fossil fuels. So this tough love only seems to apply to nuclear power.
2. Many models assume large cost reductions for wind and solar. In the end, this is not much more than a wishful guess.
3. Some models assume anomalously large capacity factors for wind and solar. See for example, “Message Ampere2-450-FullTech-OPT” scenario. Capacity factors for wind are almost 40% while for solar power they use about 25-31% over the course of the century. Since real figures are more like half of the assumed figures, the model drastically underestimates the costs for wind and solar. (IMACLIM scenarios seem to do the same)
4.  Some models (IMACLIM in particular) assume very low capacity factor for nuclear.  “IMACLIM Ampere2-450-FullTech-OPT” has a nuclear capacity factor of just 45% in 2100 while for wind and solar they have 36% and 38% respectively! This doesn’t just roughly double the cost of nuclear in these models, but also underestimates the costs for wind and solar.
5. Some models (REMIND and MERGE-ETL) postulate a world running out of uranium together with no technology development for nuclear. This “peak uranium” then limits the role nuclear power plays in decarbonization.

Figure 1: Nuclear power in Remind Ampere2-450-FullTech-OPT scenario. Massive increase and then…

Let me discuss the sillyness of the last trick in more detail. Figure 1 shows what REMIND scenario got for nuclear power when all technologies were used “optimally”.  So massive increase in nuclear power until middle of the century and then rapid decline. Decline is caused by uranium supplies running out as soon as light water reactors with once-through fuel cycle have used 23 million tons of uranium. This is very strange for several reasons.

First, this number doesn’t seem to bear any clear connection to known uranium resources which are about third of this figure. Modellers probably felt that using known resources as an upper limit would have been too stupid to pass the laugh test.

Second, mineral resources have a habit of increasing together with demand since increasing demand stimulates increasing investment in exploration and technology development.  In the past one hundred years copper production has increased by an order of magnitude. All this time world has been “running out” of copper in about 40 years. Uranium is not especially rare element and there is no reason to believe we are running out of it anymore than we have for other metals such as tin which has about the same crustal abundance.

Third, from where does the assumption of no technology development come from? Wasn’t this supposed to be a scenario where all technologies are allowed? For nuclear power technologies that that improve the fuel efficiency by about two orders of magnitude are already known.

Fourth, why is there resource constraint only for nuclear power? The resource constraints are more severe for wind and solar power (and for bioenergy). In Figure 2 I show an image I picked up from a european study on critical metals for energy technologies. The elements with greatest supply risks are used in the construction of wind and solar power. (By the way, the only nuclear related element on the list is the low risk hafnium for control rods.) Figure 3 I picked up from a fairly recent Alonso et al. paper. Authors estimated that dysprosium (used in magnets) demand in renewables heavy mitigation scenarios is expected to be a whopping 2600% higher than projected supply already in 2035!

Figure 2: Critical metals for European “strategic energy technologies” according to European commission Joint research centre study.

Figure 3: Expected demand and supply for dysprosium according to Alonso et al. (2012).

What would happen if we were to apply modellers approach for renewables? Let us just take silver as an example. Silver reserves are estimated at about 530000 tons. Let us assume that “real” resource is 4 times this (remember uranium resource was set at 3 times the known reserves) and that half of this can be used for photovoltaics. There are after all other uses for silver as well. Since 1GW of solar power requires about 80 tons of silver, this means that at maximum we can have about 13TW of solar capacity as opposed to almost 90TW cumulative capacity REMIND modellers extrapolated. Instead of being the largest contributor to the primary energy supply its contribution would fall into 5-10% range. The amount of silver required to construct the solar power in REMIND FullTech scenario is about 13 times larger than the estimated global silver reserves. Now can there be ways around these constraints? Probably there are and maybe we could use less silver, but using substitutes might imply higher costs and worse performance and furthermore, if one was not permitted to use already demonstrated technologies for nuclear power why should imaginary advances be permitted for other alternatives?

What might we get if we remove this silly constraint from the model? Obviously I cannot repeat the exercise with the tools I have available, but we can get a rough estimate. Lets take the growth rate (4.8%) for nuclear power REMIND modellers established between 2020-2050 and just let it grow with the same rate until the end of the century. This is not extraordinary in the context of this model since for wind+solar the growth rate through the century was 7.6% even though capital costs are such the nuclear power seems to have a lower levelized cost of energy (5% discount) throughout the decarbonization pathway. I show the result in Figure 4. Nuclear power would end up dominating the energy supply.

I have a feeling that resource constraint was introduced specifically for this reason. Modellers first did their calculations without the constraint and ended up with a result that they found distasteful. They did not want to go on record with the scenario that might “rock the boat” or give people funny ideas. By introducing the resource limitation for nuclear power they could clip its wings and keep it supposedly as an option while limiting its role to the margin. In fact that strange 23 mton uranium resource limit seems to suggest that over the century LWR:s cannot produce more than maybe around 5% of the primary energy. I suspect that modellers worked backwards and set the resource limitation based on the maximum share of the energy supply they were ready to grant for nuclear power. Not cool.

Figure 4: There, I fixed it!

Then there is PRIMES…sigh. This is a model I encountered few years ago as I was reading EU:s 2050 energy strategy. I remember glancing at the referee report and being troubled by the brief remark on page 6. Referee had asked about rather optimistic cost assumptions to which response was that if capital costs for wind are set higher then the future learning curve can be steeper. To me this suggested that modellers were perhaps fitting model to the fantasy. In the AMPERE database PRIMES scenarios for EU are also included. I was naturally most interested in the Ampere5-Decarb-AllOptions scenario which according to authors is a scenario “with all technological decarbonisation options available and used according to cost optimality; this scenario provides the least cost decarbonisation pathway for the EU.” Sounds interesting! However, as you look at the actual results you notice something weird. The capital costs assumed are such that nuclear (again) has the lowest LCOE throughout the decarbonization pathway. Despite this modellers claim that nuclear generation in EU will decline by 20% by 2050. How is this even possible?

Figure: Modelling EU energy future with PRIMES?

Then I noticed a strange footnote on page 15: “PRIMES assumes that nuclear development has been significantly affected in the aftermath of the nuclear accident in Fukushima in March 2011. Both PRIMES and TIMES-PanEu impose national constraints regarding nuclear, such as countries’ decisions not to use nuclear power at all…” Please tell me that I am reading this wrong. They didn’t just exclude nuclear power from large parts of EU in their “all options” scenario for political reasons and then sell it as the cost optimal one?

I have now outlined several ways in which scenario modellers seem to suppress nuclear power from their reference scenarios where all options and technologies are supposedly on the table. This has also consequences for the other scenarios and comparisons between them. Since modellers suppressed nuclear power already in “the tech neutral” scenarios adding additional anti-nuclear policy, can be presented as not really having major cost consequences.

Figure 2: The empty box on the left has nuclear power in it and the box on the right had it removed. Amazingly it looks almost the same as the other empty box!

Since I am a bad boy I will conclude with some rough estimates on what would it take to replace (gasp!) solar and wind power at the end of the model scenarios with nuclear power that generates the same amount of electricity. I simply estimate the required nuclear capacity (90% CF) and use modellers assumptions about capital costs. Required yearly outlay is roughly total capital required divided by the lifetime of the plant. I will use 30 year lifetime for wind and solar and 60 years for nuclear. (Numbers are in billions of 2005$…I think.)

Model	Wind+solar capital	Nuclear capital	(Wind+solar)/year	Nuclear/year
Remind 450-FullTech-OPT	74540	62753	2485	1046
Message 450-FullTech-OPT	40620	64150	1354	1070
IMACLIM 450-FullTech-OPT	5680	5765	189	96
Primes Decarb-AllOptions (EU)	1430	826	48	14
Primes HIEFF-NoCCS-NoNUKE (EU)	1555	900	52	15

In all models the required yearly outlay (at 2100 or 2050 for PRIMES) for energy supply is dramatically lower if we replace wind and solar capacity with nuclear power. This despite the fact that MESSAGE and IMACLIM assumed unrealistically high capacity factors for variable renewables. It is remarkable than even though this kind of chicanery was going on behind many models, IPCC still ended up concluding that nuclear power must expand massively. This is perhaps partly because not all scenario builders were intellectually dishonest about this issue and some models ended up, for example, with ten fold increases in nuclear capacity. On the other hand I am afraid that all 450ppm scenarios are utterly unrealistic….and don’t get me started on their absurd bioenergy projections.

P.S. I spent some time copying the data I was interested in from the database. Interface seems a bit uncomfortable for that. Here is a link to some of the data I extracted.

P.P.S.  For laughs you might want to check IMACLIM model with 550 ppm goal and CCS excluded. Since the original one was very strongly dependent on CCS one would imagine that ruling it out would have interesting consequences for the energy mix. See what modelers assumed for the capital costs of nuclear here to suppress that out of control (critical?) nuclear growth early in the century.

LOL

Note added 6.10.2019: It would seem that the capital cost data for the AR5 scenarios has been removed from the database. At least I cannot find it anymore. Can someone explain where is it now?

Tuulivoima ja sähkön markkinahinta

Usein huomaan väitettävän, että kuluttajat saisivat tuulivoiman syöttötariffit “takaisin” alentuneena sähkön markkinahintana. Tuulisena päivänä alhaisten käyttökustannusten tuulivoima, kun painaisi markkinahinnan alas. Tämä argumentti on osin kummallinen siksi, koska tuulivoiman tuottajat saavat ymmärtääkseni tukiaisena 105.3 €/MWh ja markkinahinnan välisen erotuksen. Tuulinen päivä voi siis laskea markkinahintaa, mutta veronmaksaja maksaa joka tapauksessa enemmän. Sähkön hinta ei muodostu pelkästään markkinoilla. (Esim. Saksassa syöttötariffit muodostavat kuluttajien sähkölaskusta merkittävästi suuremman siivun kuin sähkön markkinahinta.)

Minua alkoi kuitenkin kiinnostamaan se kuinka suuri merkitys tuulivoimalla on sähkön markkinahintaan. Voidakseni muodostaa perustellun suuruusluokka-arvion suunnistin Tanskaan ja imuroin sieltä sähkön spottihinnat sekä tuulivoimatuotannon ja sähkönkulutuksen tiedot vuodelta 2013. Oheinen kuva näyttää spottihinnan ja tuulivoiman osuuden kulutuksesta kuukauden mittaisissa paloissa koko vuoden ajalta. Sininen viiva on lineaarinen sovitus dataan.

Tuulivoiman osuus vs. markkinahinta (Tanska 2013, 1 kk palat). Hinta €/MWh. (Huom. x-akselin % on typo.)

Tästä opin, että Tanskassa tuulivoima alentaa markkinahintaa keskimäärin -25.4 €/MWh x tuulivoiman osuus kulutuksesta.  Jos oletamme meidän markkinoiden reagoivan suunnilleen samalla tavalla voimme tehdä joitain arvioita. Esim. jos tuulisena päivänä Suomessa on tuulivoimaa 500MW, kun kokonaiskulutus on 10GW Tanskan esimerkki antaisi ymmärtää keskimäärin 1.3 €/MWh laskua markkinahinnassa. Koska yleensä tuulivoiman osuus olisi paljon alhaisempi, keskimäärin vuoden aikana “alennus” olisi pikemminkin noin 0.3 €/MWh.

On muuten hyvä huomata, että tämä hinnanalennus on osin kuvitteellista, koska sähköntuottajien alhaisemmat tulot tarkoittavat ettei olemassaolevan infrastruktuurin ylläpitämiseen kannata välttämättä investoida. Vaihtelevat uusiutuvat rakennetaan kuitenkin sillä oletuksella, että konventionaalinen tuotanto on valmis paikkaamaan vaihtelevien uusiutuvien puutteet. Hinnanalennus on ehkä tässä mielessä nähtävä hetkellisenä anomaliana, joka poistuu kun kapasiteetin ylläpidon kustannukset tavalla tai toisella sälytetään kuluttajien maksettavaksi. Kuten oheisesta kuvasta näkyy, nämä systeemitason kustannukset ovat merkittävästi suurempia kuin tuo markkinahinnan aleneminen.

Kiinnostavaa on myös huomata, että vuonna 2013 Tanskan naapurissa Ruotsissa sähkön keskimääräinen spottihinta oli hiukan korkeampi kuin Tanskassa. Sen sijaan Ruotsissa sähkön hinta vaihteli merkittävästi vähemmän. Standardipoikkeama Ruotsissa oli noin 8.9 €/MWh, kun se oli Tanskassa 11.7 €/MWh. Ruotsissa hinta ei missään vaiheessa kohonnut 110 €/MWh korkeammalle, kun taas Tanskassa katto oli 160 €/MWh. (Tähän hintaan päädyttiin silloin, kun tuulivoiman tuotanto oli hyvin alhainen keskellä arkipäivää.) Ruotsissa hinta oli alimmillaan noin 0 €/MWh ja Tanskassa -62 €/MWh.

Tuulivoiman kustannukset, kun systeemitason kustannuksia otetaan huomioon. Lähde: F. Ueckerdt et al.

Cost of energy in EU according to Ecofys

Recently a report on energy costs prepared for EU commission by the consulting company Ecofys crossed the news threshold in many places. Usually it has been reported as being “the EU report”, but EU commision states “The views have not been adopted or in any way approved by the European Commission and should not be relied upon as a statement of the European Commission’s views. The European Commission does not guarantee the accuracy of the information given in the studies, nor does it accept responsibility for any use made thereof.” So the report has not been “endorsed” by EU commision (although paying Ecofys for the report is bad enough). Ecofys did the work on WWF bioenergy-heavy renewables-only energy vision and is widely linked and quoted by environmentalists in Europe.

Following quote from WWF report captures quite well, why I am not a fan. “Ecofys estimates that we would need around  250 million hectares of agriculture land,  which is equivalent to about one-sixth of  the total global cropland today, as well  as 4.5 billion cubic metres of biomass from already disturbed forests. But what  is possible on paper, even after the most  rigorous analysis, is a different matter in  practice. We have yet to identify where  this land is, and how it is being used at the moment.“: WWF. This is then followed by WWF nevertheless endorsing such a vision.  I had a look at this new report. Below few comments.

1. As you can see from the Figure 1, they find that nuclear power is not heavily subsidised and is among energy sources with low external costs. According to Ecofys external costs are only little higher than with the worst renewable (biomass). This is not news, but it is interesting that even Ecofys is forced to acknowledge this. (See later for their desperate attempts to change the results…)
   

   Figure 1: Summary of costs, subsidies, and external costs

2. It has been widely quoted (example here) that according to this report wind power is cheapest source of energy. It is perhaps helpful to note that  Ecofys gets this result by discounting nuclear costs with 9-11% rate while discounting wind power with a much lower rate of 5-7%.
3. As you can see from Figure 2, according to Ecofys external costs of nuclear is dominated by “depletion of energy resources” category. This was very strange result.
   

   Figure 2: External costs

   It turns out that they calculate a cost of depletion as 0.05 euros/(kg oil. eq.) both for fossil fuels and nuclear power! Ecofys used a tool called “Recipe” to calculate external costs and interestingly in case of nuclear power they decided to specifically deviate from what developers of Recipe said was the appropriate methodology. ” Unlike metals, we cannot use the concept of grade to express the quality of oil and gas resources. Conventional oil and gas will simply flow out of the well up to a certain point. After that point is reached it is still possible to extract more, but this will increase the production costs and the production energy requirement. Once the energy price increases, it also becomes possible to extract other unconventional resources, such as tar sands, the use of gas liquids, converting gas to oil or coal to oil etc. This means the increase of costs and energy is not caused by a gradual decrease of ore grade, but because more and more mankind will have to switch from conventional resources to unconventional resources…Uranium was formed in the same way as all other metals, the characterisation factor for Uranium is thus included in the impact category for mineral depletion and not fossil fuels.” Recipe in fact gives external cost for Uranium extraction and finds that it is similar to oil per kg.  However, since energy density is different by a factor of 10000-million (roughly…who cares) depending on reactor type, Ecofys inflated otherwise irrelevant externality into one that dominates external costs of nuclear power. Not cool. Perhaps they did this in order to inflate the external cost of nuclear power to be at least higher than renewables they promote?

4. Historical subsidies for nuclear are mostly based on the idea that state participation lowered interest rates for the projects and that difference between imagined market rate and state interest rate constitutes a subsidy. The logic here is not convincing and also requires the value choice that “market interest rate” is the correct one and states participation is an interference into natural order of things.  Whatever your opinion happens to be on that one it is important no notice, that when Ecofys calculates external costs for depletion of resources they assume owners of resources use too high discount rate and that socially optimal one is lower. So now the market no longer knows better. On the other hand when they calculate the levelized cost of energy (LCOE) they use different interest rates for different technologies.  Maybe it is true that some wind power developer can get cheaper loan from the bank, but they do so because state has guaranteed them customers as well as the price with feed in tariffs.   According to Ecofys such political interference was supposed to be a subsidy and real interest rate was the one without political support structures. In case of nuclear power it is the political uncertainty that increases the perceived risks and consequently it is suffering a “negative subsidy” due to politics. Strangely here Ecofys nevertheless takes interest rates as “correct ones” rather than interpreting the resulting LCOE as the one after political interference. So note how the ground keeps shifting, but always in such a way as to inflate costs for nuclear power and fossil fuels.
5. ECOFYS ignores some external costs. For example, there is an external cost for occupying agricultural land (0.1 €/m^2). This cost is due to monetizing the lower biodiversity of agricultural land as opposed to natural habitat.
   

   Figure 3: External costs? What external costs?

   However, there is no cost that I can see associated with removing biomass from forests for burning. They rationalize this by “We assumed wood pellets are made of residue wood and did not allocate agricultural land  occupation to the production of this wood …”  So a precondition for this resource is a forest industry creating huge externality and “waste” stream, but none of this is reflected as an externality for bioenergy.

6. Existence of higher system level costs from intermittent renewables is acknowledged in the text, but these are not counted as costs, subsidies, nor as external costs. They are, as far as I can see, simply not included in any category.
7. After renewables subsidies (41 billion euros/year) largest subsidy category (27 billion) was for “Energy demand support”. This is almost entirely due to lower tax rate for some uses of fossil fuels. I think this is the way also OECD defines subsidies, but in my opinion it is deeply misleading. If I am not taxed according to maximum rate, am I receiving a subsidy? If we use the Ecofys definition for energy subsidies, yes I am. Where I live (Finland) state gets more than 4 billion euros income from energy taxes that mostly tax fossil fuel use. However, this is not counted as a “negative subsidy” for fossil fuels. If we would stop burning oil, state would lose billions in tax revenue. If oil burning is then replaced with some other energy source requiring subsidies (for example) of 5 cents/kWh, state would need to find billions more. In total such transition could easily cost the state as much as we spend on education, but when computing subsidies there would have been no change. Definition is insane.

Energian kustannus, tukiaiset ja ulkoiset kustannukset (ECOFYS)

Kuva 1: Rahaa se vain on

Sanoin palaavani vielä tähän teemaan…tervetuloa siis takaisin! Aikaisemmin huomautin ECOFYS:n urheasta, mutta epäonnistuneesta yrityksestä paisutella ydinvoiman ulkoisia kustannuksia. Mutta raportissa on muutakin hauskaa. Ensinnäkin mitä siellä tarkoitetaan tukiaisilla? Tämä on laaja teema ja eri tukikategorioita on monia. Ydinvoiman kohdalla sitä kuitenkin dominoi yksi kategoria. Argumentti on, että infrastruktuuria ei olisi rakennettu ilman valtion osallisuutta ja näin riskiä olisi siirretty valtiolle. Sitten lasketaan (diskontattu) kustannus käyttäen arvausta markkinoiden vaatimasta korosta yksityiselle toimijalle ja kustannus käyttäen alhaisempaa korkoa, jonka valtion mukanaolo mahdollistaa. Tukiainen olisi sitten näiden erotus. Tällä tavalla ECOFYS laskee ydinvoimalle noin 200 miljardin euron historiallisen tukiaisen. (Tällä hetkellä uusiutuvien tuet ovat heidän mukaansa 41 miljardia vuodessa eli tuo ydinvoiman historiallinen tukiainen on ylitetty parissa vuodessa. Eiköhän lasku pian uusita niin, että ydinvoiman historiallisia kustannuksia voidaan kasvattaa. Käynnistän kellon nyt…)

Huomatkaa kuitenkin arvovalinta tämän laskun perusteissa. Lähtökohta on, että ensinnäkin kaikkiin projekteihin on olemassa yksityinen (korkeampi) valtioiden politiikasta irrallinen korko. Lisäksi oletetaan, että tämä korko tiedetään ja että se antaa “oikean” kustannuksen. Nämä oletukset voi joko hyväksyä tai olla hyväksymättä, mutta ne olisi yhtä kaikki hyvä tunnistaa. Minusta koko lasku on hyvin kyseenalainen. Voihan joku sanoa, että esimerkiksi julkinen terveydenhuolto on hurjasti tuettua siksi, koska se rahoitetaan (kiitos valtion mukanaolon) alhaisemmin rahoituskustannuksin, mutta vaihtoehtoisesti voidaan todeta, että kansantalous kokonaisuudessaan säästää merkittävästi tämän seurauksena.

No, ehkä et jaa minun kantaani (hiukan horjuva sellainen) tässä asiassa ja pidät tukiaislaskua vakuuttavana. Minusta on kuitenkin kiinnostavaa huomata kuinka ECOFYS sitten laskee ulkoiset kustannukset. Energian- tai mineraalien hupenemiselle lasketaan kustannus sen perusteella, että resurssien omistajat käyttäisivät korkeaa diskonttokorkoa joka kannustaa heitä kuluttamaan resursseja nopeammin kuin mikä olisi sosiaalisesti optimaalista. Kun lasketaan ulkoisia kustannuksia, lähtökohta on siis päinvastainen kuin historiallisia tukiaisia laskettaessa. Nyt “markkinoiden” korko on väärä (ja liian korkea) ja joku muu (ulkoisen kustannuksen laskija) tietää mikä oikean koron tulisi olla.

Tämän hetkisiä kustannuksia taas lasketaan erilaisilla korkoilla riippuen teknologiasta. Esimerkiksi ydinvoiman kustannusta lasketaan käyttäen 9-11% korkoa, kun taas tuulivoimalle käytetään 5-7% korkoa. Mutta mistä tämä korkoero tulee? Joku tuulivoimalaa rakentava voi varmastikin saada rahoitusta halvemmalla, mutta tämä on seurausta siitä, että valtio on siirtänyt projektin riskiä muualle takaamalla asiakkaat ja tuotteen hinnan syöttötariffeilla. ECOFYS:n itsensä mukaan tämän prosessin tulisi olla tukiainen, koska todellisen koron tulisi olla korko ilman näitä poliittisia tukirakenteita. Nämä korot hyväksytään sen sijaan mukisematta “oikeina” eikä niiden kustannuksia lasketa sen enempää tukiaisiksi esimerkiksi tuulivoimalle kuin negatiiviseksi tukiaiseksi vaikkapa ydinvoimalle. On siis tärkeää huomata, että on kustannuseriä, jotka ovat oikeasti riippuvia teknologiasta ja sitten on näitä korkoon  liittyviä “kustannuksia”, jotka riippuvat rajusti siitä poliittisesta ympäristöstä missä teknologiaa sovelletaan.

Kuva 2: Mikä ulkoinen kustannus?

Ulkoisiin kustannuksiin taas lasketaan mukaan mitä lasketaan ja jä jätetään muut ulkopuolelle. Esimerkiksi bioenergian kohdalla mukana on kategoria maanviljelysmaan käytöstä (0.1 €/neliömetri vuodessa). Tässä kustannus muodostuu siitä, että mikäli bioenergiaa ei tuotettaisi maan voitaisiin antaa hakeutua luonnonvaraiseen tilaan missä sen biodiversiteetti olisi korkeampi. Sen sijaan ulkoisissa kustannuksissa ei ole mitään kategoriaa metsien käytölle. Mikäli metsät muutetaan puupelloiksi minkäänlaisia biodiversiteetti ongelmia ei nähtävästi ECOFYS:n mukaan ole (kunhan emme hakkaa metsiä täysin nurin). I beg to differ. ECOFYS rationalisoi tätä seuraavasti:

“We assumed wood pellets are made of residue wood and did not allocate agricultural land  occupation to the production of this wood (i.e. all agricultural land occupation is allocated to  the main wood product). The agricultural land occupation impact of the growing of the wood  used for wood pellet production (used in dedicated biomass plant, biomass CHP and wood pellet boiler) was excluded. While this may not reflect all biomass use in the EU, we  understand it reflects the majority sources in 2012“

Toisin sanoen tämän bioenergian ennakkoehtona on laaja metsäteollisuus, joka tuottaa nämä jätevirrat. Tähän metsäteollisuuteen liittyy (tietenkin) valtava ulkoinen kustannus, mutta sitä ei lasketa millään tavalla bioenergian kustannukseksi. Tämä on hiukan vastaavaa kuin jonkun yrityksen yritys esiintyä vastuullisena ja eettisenä alentamalla pääkonttorin hiilijalanjälkeä, luomalla sinne progressiiviset tasa-arvo-, diversiteetti- yms. politiikat…samalla kun koko yrityksen toimitusketju on muuten per….stä.

Entä systeemitason kustannukset? Vaihtelevien uusiutuvien aiheuttamat kustannukset kasvavat niiden osuuden noustessa ja ovat korkeilla penetraatioilla merkittävästi suurempia kuin vaihtoehdoilla (lue lisää vaikka täältä ja täältä). ECOFYS mainitsee tämän ja ei kiistä näiden kustannusten olemassaoloa. He eivät kuitenkaan laske näitä kustannuksia sen enempää vaihtelevien uusiutuvien hintaan, tukiaisiin kuin ulkoisiin kustannuksiinkaan. He muodostivat näistä jonkin kuvitteellisen kategorian raportin ulkopuolelle.

ECOFYS:n mukaan julkista tukea maksetaan yhteensä 122 miljardia. Tästä uusiutuvien tuen jälkeen merkittävin erä on “kulutuksen tukeminen” (energy demand support) 27 miljardilla. Tästä melkein kaikki on seurausta siitä, että kaikkia fossiilisten polttoaineiden käyttötapoja ei veroteta korkeimmalla veroprosentilla. Tämä taitaa olla se tapa millä myös OECD määrittelee tukiaisen, mutta minusta tässä pitäisi olla tarkempi, koska maksajan kannalta kyse on hyvin eri  asiasta

Kuva 3: Logiikkaa, kiitos…

kuin suorissa tulonsiirroissa. Jos valtio ja kunnat eivät verota minun tulojani 50% mukaan, saanko minä tukiaisia? Jos käyttäisimme ylläolevaa määritelmää energiatukiaisista, niin kyllä saisin. Koska joku muu maksaa korkeampaa prosenttia ja teoriassa minunkin prosenttini voisi olla korkeampi, niin saan tukiaisia. Kiitos valtio ja Espoon kaupunki!

Kun tukiainen määritellään maksimiveroprosentin ja toteutuneen veroprosentin erona (kuten ECOFYS tekee), suurin osa varmastikin ajattelee tukiaisten poistamisella verojen korotusta niin, että kaikki maksavat korkeamman prosentin. Toisaalta määritelmässä on kaksi termiä ja tukiainen voidaan aivan yhtä hyvin poistaa laskemalla kaikkien verot sinne alimmalle prosentille. Kuvitteleeko joku, että fossiilisten kilpailukyky katoaisi, jos poistaisimme tukiaiset näin? Suomessa valtio saa (lähinnä) fossiilisia verottamalla yli 4 miljardin verotulot. Tätä ei kuitenkaan lasketa negatiiviseksi tukiaiseksi öljylle yms. tai tukiaiseksi vaihtoehdoille. Jos haaveilemme, että öljynkäyttö loppuu, valtion budjettiin ilmestyy miljardien reikä. Jos öljy korvataan vaihtoehdolla jota tuetaan esimerkiksi tasolla 5 senttiä/kWh, kustannuksia tulee lisää noin 3 miljardia. Valtion kannalta siirtymä siis aiheuttaisi helposti noin opetusministeriön kokoisen reiän budjettiin, mutta tukiaisia laskettaessa mitään muutosta ei muka tapahtunut. Tapa millä tämä tukiainen lasketaan on siis hyvin harhaanjohtava etenkin, kun sitä huoletta verrataan suorien tulonsiirtoihin kustannuksiin.

Raportin kokonaiskuva ei siis ole mielestäni johdonmukainen. ECOFYS:n näkemys esimerkiksi siitä mikä oikean koron tulisi olla muuttuu siirryttäessä kategoriasta toiseen, mutta se ei tee niin satunnaisesti vaan aina tavalla joka antaa mahdollisuuden lisätä kustannuksia tai tukiaisia fossiilisille ja ydinvoimalle samalla, kun uusiutuviin liittyviä menoeriä lakaistaan maton alle. Tämä palvelee propagandatarkoituksia, mutta on vähemmän rakentavaa mikäli toiveena on perusteltu kuva energiasektorin kustannuksista, tukiaisista ja ulkoisista kustannuksista. (On siitä huolimatta taas huomautettava, että tästä kiemurtelusta huolimatta he joka tapauksessa päätyvät toteamaan, että ydinvoiman tukiaiset ja ulkoiset kustannukset ovat alhaisia.)

Lisäys 21.10.2014: Kun muuten ydinvoiman tukiaisten yhteydessä ECOFYS puhuu riskien siirrosta, niin mitä riskiä he mahtavat tarkoittaa? Kyse ei voi olla kustannuksista, jotka liittyvät ulkoisiin kustannuksiin, koska ne ECOFYS laski pieniksi ja toisekseen niiden piti olla kustannuksia joita ei oltu laskettu muuten mukaan. Kyse on suurelta osin poliittisesta riskistä. Pelosta siitä, että toimintaympäristö muuttuu politiikan seurauksena sijoitukselle huonompaan suuntaan. Jos valtio on jollain tavalla mukana projektissa, riski siitä, että projektia aktiivisesti sössitään valtion taholta pienenee. Tämän sössimisriskin alentamista siis kutsutaan ECOFYS:n kielenkäytössä tukiaiseksi. Kustannus toki häviää sillä sekunnilla, kun pyrkimykset sössimiseen loppuvat.

Trying to understand system wide costs of energy

Some time ago in Brave New Climate Peter Lang wrote an interesting post on the CO2 abatement costs in Australia. He found that nuclear power is not the cheapest abatement method under Australian circumstances. His post was followed by interesting discussion and several wondered that can one arrive at sufficiently decarbonized electricity supply by always choosing the lowest cost alternative, should we not only include options that actually get all the emissions reductions we need, and what is the proper way to account for and discount costs. Since I have wanted to understand cost calculations better for quite some time, I decided to use this problem as one of my own exercises. For background you might want to read my earlier postings on related things (here and here, or in finnish here and here). Here I attempt to sketch system wide cost and CO2 abatement consequences of wind and nuclear based options. (In case you want to play and have access to Matlab, you can download some poorly documented macros I used.)

Throughout I will use the discount rate of 7.5%, a payback period of 20 years for wind power, 50 years for hydro and nuclear (this is longer than usual, but assumption is not hugely important for my needs), and 40 years for natural gas and coal. I won’t bother to list all the input parameters here, but most of them I have picked up from the typical market prices for different fuels as well as from the National Renewable energy laboratory. As a calibration I find following levelized costs of energy:

Source	Capacity factor	LCOE ($/kWh)
Coal	0.85	0.066
Gas	0.85	0.071
Wind	0.29	0.102
Hydro	0.5	0.046
Nuclear	0.9	0.063

Few remarks are in order. There is no single LCOE since the costs are different in different places and different cost components keep changing. In Asia, for example, the costs of nuclear can be considerably lower than the above estimate, but under American style regulatory framework maybe higher. For gas prices I used a value of 8$/MMBtu. This is higher than the current gas prices in US, but lower than the European ones. The LCOE for wind power is lower than the typical feed-in tariffs in Europe and electricity spot price in the Nordic regionfluctuates around 7.5 cents/kWh. The fact that Finnish utilities want to build nuclear power also suggests that compared with alternatives economics for it are favorable in our circumstances. Changing the assumptions can of course change the above values somewhat, but overall I think the numbers pass the sanity check. In what is to follow the figures above are not even that important since they mainly set the starting point and after that the cost trends are determined by the changing energy mix and the capacity factors.

I will now compare two different scenarios for decarbonizing the electricity supply. In the first scenario we start with the fossil fuel dominated system where coal provides baseload power corresponding to the minimum yearly demand (as before I take the demand pattern from the Bonneville power authority load). I make drastic approximation that the output power of coal burning power plants does not vary at all and that the load following is only done with hydro (with capacity of 15% of average demand) and natural gas. Somewhat unrealistically I also assume that the hydrocapacity is always available. (This assumption makes the systems appear to have somewhat lower emissions than in reality where hydro power might have a capacity factor of around 50%.) I then start increasing the amount of electricity generated with wind. The production profile of wind power is derived from combining the Irish, south-eastern Australian, and Bonneville power authority wind production. The details are explained in an earlier posting. The wind production is taken to have a priority access to the grid. To generate the remaining electricity, we use coal at a power corresponding to the minimum demand once the contribution of wind power has been subtracted from the demand. The rest is generated with hydro and natural gas in that order. I further assume that production can always respond so rapidly that no capacity has to be in the spinning mode. (Our imaginary state has an average demand of 10000MW.)  In the first movie, I demonstrate how the mix of different sources of electricity evolve under this scenario. (link to the 1st movie).

In the second scenario the starting point is the same, but rather than increasing the amount of wind power, we increase the amount of nuclear power. Like coal, this nuclear power is taken to produce constant power so that it first displaces baseload coal and then starts replacing natural gas. When nuclear power starts to replace gas used for load following its capacity factor starts to take a hit. The 2nd movie illustrates the mix of different sources of electricity in this scenario. (link to the 2nd movie).

These two scenarios are naturally not the only ways to satisfy electricity demand, but they are possible ways and with the numbers shown in the movies production always matches demand. Since the required capacities and capacity factors change with increasing wind or nuclear penetrations, the LCOE for different sources do not stay the same. For the society (although not necessarily for the individual investor) what matters most is the cost of typical kWh rather than the LCOE for each individual component of the electricity supply. I will take the cost of typical kWh to be the weighted average of each separate LCOE. The weights are given by the relative amounts of electricity produced from each source.

I think one clear error in what I do, is to implicitly assume that the underlying energy infrastructure stays the same over the payback period. As we decarbonize the electricity generation, capacities and capacity factors change with time and this should, in principle, be taken into account. On the other hand, since we do not live in a planned economy postulating construction plans decades in advance would also be dubious. The best the society might be able to do, is to try to reduce uncertainty and ensure that the market pressures always act in the right direction of ever lower GHG emissions.

So what do I find? In Figure 1, I summarize how the system evolves under the first scenario while Figure 2 summarizes the costs involved. For the wind based solution increasing share of wind power first lowers the space occupied by the base load power plants. This implies shutting down coal power plants and replacing them with gas plants.If methane leakage is bravely assumed not to be an issue, at this phase some CO2 emissions are avoided due to swapping for somewhat cleaner fuel. At higher penetrations capacity factors of wind, gas, and hydro power are reduced and costs continue to increase. (Btw. Getting someone to invest in new gas infrastructure might be tricky if the investors expect the demand growth early on the decarbonization path to be short lived. Presumably they do not believe this to be the case which, if accurate, would be bad news for the climate.) Even with very large wind power capacity one needs a reliable backup that can produce almost all the power consumed. For this reason after rapid rise in the capacity of power plants burning natural gas, their capacity declines only very slowly with increasing wind penetration.

Figure 1: Capacities, capacity factors, and the share of fossil fuels as the fraction of wind generated electricity increase.

Figure 2: LCOE under the wind based scenario.

For the nuclear based scenario 2, the corresponding results are shown in Figures 3 and 4. Now the system wide LCOE actually decreases slightly until nuclear power produces around 75% of the demand (at this point around 10% is produced with natural gas). After this the cost increases with the reduced capacity factors in NPPs. However, the kind of cost escalation apparent in the wind power based solution is absent since there is no need to maintain large amounts of reliable capacity running at low capacity factors. In these examples I made no assumptions about learning curves. If the capital costs of nuclear power are reduced by about 10% for each doubling in capacity until 10000MW (around 30% reduction in capital costs in total), the final LCOE of the decarbonized system is actually lower than the starting point. Similar cost reductions of wind power over the decarbonizing pathway used here do not avoid escalation of costs since cost increases are largely caused by the reduced capacity factors. It seems that one can also make a plausible case that the increased cost at high nuclear penetrations is an artifact of the simplifying assumptions I made. Eventually smart grid solutions can increase the share of base load power, NPPs can load follow, and lower capital cost NPPs which are better suited for load following can be engineered.

Figure 3: Capacities, capacity factors, and the share of fossil fuels as the fraction of nuclear generated electricity increase.

Figure 4: LCOE under the second scenario.

Finally in Figure 5, I compare the most relevant metrics of both scenarios. The costs diverge dramatically with the fraction of chosen carbon free energy. Nuclear based solution ends up with fairly constant LCOE over the pathway leading to decarbonization, while costs escalate with wind based solution. The installed carbon free capacity is drastically higher in wind based solution, suggesting greater challenges in construction and grid design. Finally, the fraction of electricity generated from fossil fuels is higher in the wind based solution. Together with increasing costs this implies dramatically lower “bang for the buck” at large wind penetrations. In contrast by the time nuclear power produces the same amount of electricity as the yearly demand, share of fossil fuels has dropped to less than 2%.

Figure 5: Comparison between wind and nuclear based scenarios.

It should be noted that in the above in addition to many simplifying assumptions I ignored the additional transmissions costs for the wind based scenario. I am quite clueless as to what kind of grid upgrades are needed, but it seems clear that with wind capacity in excess of 5 times the average demand changes would be substantial. Where I live the transmission costs amount to around one third of my electricity bill so changes in transmission costs would have a large impact on the cost of electricity.

In this post I also focus on electricity production only. To decarbonize our societies we will also have to decarbonize heating and transport. If we were to use excess wind power to heat water, it is easy to see that the rise in the cost of warm water would be even greater than the cost increases in electricity (home work exercise). In case of nuclear power warm water could be a by-product of electricity generation (although this reduces the electrical power somewhat). Furthermore, if this warm water is produced close to the wind turbines, transporting it to consumers will cost more than moving electricity around. Similar conclusions apply for liquid fuels.

Do these kind of cost differences matter? I find it shocking that so many (typically wealthy westerners) seem to have an attitude that energy costs are almost irrelevant and that the question is basically analogous with a choice of buying a PC or a Mac. Some even seem to view rising energy costs as a good thing. We spend roughly 8% of our GDP on energy and this energy use pretty much makes all the rest possible. It is useful to remind how much we actually spend on some things that are widely valued. I will take the figures from my home country of Finland, but they are probably quite representative of industrialized countries in general.

Spending on	Share of GDP
Public health care	7%
Education	6%
Pensions	12%
Pensions (2030 esimate)	15%
Development aid	0.5%
Ministry of environment	<0.2%

In the past few decades the income differences have increased also in Finland so that today our richest 10% have around 2-3% greater share of the GDP than in 1990. My impression is that most environmentalists find this terrible. The aging population causes our pension costs to increase and this increase is cause of anxiety for many both left and right. So we can very easily see that the energy costs in our society are comparable to many big spending categories for which it is already hard to find resources. Large increases in energy costs can easily have far greater social consequences than most people probably realize. Fantasizing that this is something to be promoted not only borders on insane, but is morally dubious. I have yet to find an explanation for why a society that spends more on energy rather than, for example, on education and health care is a better place for its inhabitants?

You might try to rescue the fantasy by somehow assuming that the same GDP could be produced with so much lower energy consumption that the total costs remain the same. However, as is clear from the above estimates this would require so drastic reductions in energy use that it cannot be taken seriously as a basis for responsible climate policy. There is nothing to suggest that this is doable and especially in the case of poorer countries that this is desirable. (Also, why would economically justified energy savings measures be incompatible with nuclear power is not clear to me.)  Once the discussion strays into this territory, I often end up confused by the inconsistency of the arguments in favor of the paleogreen consensus. Construction of ideologically favored energy sources is typically touted (not entirely convincingly) as being good for the economy, but the same people might in a different context condemn economic growth and express desire for degrowth. Which one is it? Surely one cannot have it both ways?

Do I seriously believe that the societies will choose the path of ever increasing energy costs? Of course not. As soon as the effects of cost increases become apparent and start to affect other priorities people have, different choices will be made. As I see it, choosing the wrong way initially implies wasteful spending and unnecessary CO2 emissions since it delays the day when we eventually do choose policies that can eliminate the GHG emissions from the energy sector for good.