Amory Lovins

Debate Over Economic Value of Renewables Brings Out Heavy Hitters

A recent article in The Economist describes a blog post by Charles Frank of the Brookings Institute in which he questions the  methods that have been used to compare renewable energy sources with more traditional sources like coal, gas and nuclear.

Drawing on the work of Paul Joskow of MIT, Frank claims that the generally accepted levelized cost models, which essentially divide the total lifetime system cost by the total amount of electricity produced, do not adequately discount the value of renewables sources like solar and wind based on their intermittent nature. Joskow’s reasoning is that since these intermittent sources vary their output at different times of the day and the year, that should be reflected in their value, since the demand for, and the price of electricity also varies throughout the day, at least in the commercial market.

So, given that wind, for example, produces electricity mostly at night, when the power is less valuable, that should be reflected in the value of a wind investment. Solar, on the other hand produces mostly at mid-day, when the power is most valuable, so it may be getting short-changed by the levelized cost approach.

Frank started with Joskow’s premise, then went on to perform a detailed analysis of various energy sources, based on avoided emissions and avoided costs, which revealed, he says, that contrary to popular belief, solar and wind are the least cost-effective way of producing low carbon electricity, followed by hydro, nuclear, and finally at the top of the list is combined cycle gas turbine power. Written from the perspective of building new electric generation capacity, Frank concludes, “Assuming that reductions in carbon dioxide emissions are valued at $50 per metric ton and the price of natural gas is not much greater than $16 per million Btu, the net benefits of new nuclear, hydro, and natural gas combined cycle plants far outweigh the net benefits of new wind or solar plants.”

The problem with an analysis like this is, given the rapidity with which renewable energy costs are dropping, trying to compare them with traditional sources is akin to trying to catch a falling knife. Frank’s data was obsolete by the time the ink dried on the page.

In addition, the analysis is highly sensitive to the eventual market price for carbon, which could swing the results dramatically. Also not considered is the impact of energy storage which could easily neutralize the liabilities that form the basis for Frank’s thesis.

Bulk Electric Storage Not a Requirement For Widespread Use of Renewables

 

(3BLMedia/Justmeans) - Physicist Amory Lovins has been at the leading edge of energy alternatives since well before most people ever heard of climate change. Far from an idealist, he is a hard-nosed scientist who has done the math to show what is possible if we are willing to think outside the box. His two latest books, Winning the Oil Endgame, and Reinventing Fire, lay out in detail the ways that our society can wean itself off of oil, coal and nuclear through a smart deployment of renewables, efficiency, with a bit of natural gas thrown in as a bridge fuel, all while growing the economy by double digits.

Lovins, along with his crew at the Rocky Mountain Institute put together a prototype 100 mpg Hypercar back in 2007, introducing groundbreaking technologies that car companies have been racing to catch up with ever since.

Now as the world has begun heeding his advice, Lovins has rolled up his sleeves to identify the various conceptual, physical, economic, political, and technological roadblocks that threaten progress and is busy dispelling them wherever he can. The latest is the idea that due to the intermittent nature of various energy sources, we can’t reliably implement renewables on a large scale without massive investments in energy storage.

Here again, Lovins has done the math, with a series of simulations. While it’s true that many renewables are intermittent, new smart grid technologies are quite responsive. Lovins presents the solution in terms of choreography, his word for a dynamic matching of electricity supply with demand. The fact is that sunshine and wind do come and go, but they do so in a fairly predictable manner. About as predictable, says Lovins, as the demand is. He also points out that since no power generation source is completely reliable, that grid has already been designed to accommodate that.

Europeans Propose Softer Targets for Emissions Reductions

The European Commission has proposed revisions to the EU’s commitments to emissions reduction targets citing the high cost of fossil fuel alternatives at a time of economic uncertainty. The new EC proposal involves moving from binding targets for individual countries to an all-Europe standard that would grow from a 20 percent reduction by 2020 to a 40 percent reduction by 2030.

There’s clearly a lot of pressure behind the scenes by people worried about the economy, governments who fear they will not be able to achieve their targets, and the oil and gas industries, who have vested interests in maintaining their hegemony as long as they can.

The move to end the binding targets that were set, country by country, in exchange for a Europe-wide goal raises an important question. How are they going to enforce it? If 2030 comes and all of Europe falls short, who are they going to penalize and how are they going assess the penalty? The implementation of this seems quite vague.

The new proposed target of 40 percent reduction sounds good, after all, it’s double the 20 percent goal by 2020, which they’re well positioned to meet—and 40 percent reduction is pretty aggressive compared to what we’re doing in the U.S. But if you look at what Europe has already accomplished, they’re already on track to meet that. There’s no acceleration in the rate of reduction. The message is, just stay the course and by 2030, with continuing reductions, we should hit 40 percent. The only caveat there is that the current trend is based on the fact that Europe's  economy is pretty slow right now. Should the economy pick up, it’s going to be more of a challenge to hit that target.

That concern is shared by Gunther Oettinger, the EU's Energy Commissioner. Oettinger has said that the easy reductions came first, and that additional reductions will be increasingly difficult. He also said that Europe's carbon contribution, which is 10.5% of the world total today, would drop to 4.5% if the goal is met, too small to really make a difference.

Others would argue that all entities have a moral obligation to do everything they can. That's the position taken by Brook Riley, who is the Friends of the Earth chairman in the region. Riley has said that Jose Manuel Baroso, president of the European Commission, who announced the proposal, is subscribing to the “old think” industry spin that there has to be a tradeoff between climate action and economic recovery. That’s based on an outdated model.

I personally agree with Riley. There’s a mind set that says, “this is the way our economy must operate,” a premise based on centralized energy sources managed by big companies. First of all, it’s shortsighted—many people have weighed in to say we can absolutely improve the economy while we switch to a more sustainable energy policy. Amory Lovins of the Rocky Mountain Institute is one of the more notable voices. His two books on the subject, WinningThe Oil Endgame and ReInventing Fire lay out the path forward. These books describe how we can move to an 80 percent renewable-based economy by 2050, at a profit, while saving $5 trillion in the process. The problem is, you have to really look outside the box, something that Lovins does particularly well.

Subscribe to Amory Lovins