Air Pollution Costs the West Almost $1 Trillion Annually

Air Pollution Costs the West Almost $1 Trillion Annually | 07/12/14
by John Brian Shannon John Brian Shannon

Air pollution has a very real cost to our civilization via increased healthcare costs, premature deaths, lowered productivity, environmental degradation with resultant lowered crop yields, increased water consumption and higher taxation.

However, air pollution is only one cost associated with fossil fuel use.

Smokestack Image Credit: Alfred Palmer
Smokestack image credit: Alfred Palmer

There are three main costs associated with energy

  1. The retail price that you pay at the gas pump or on your utility bill for example (which is paid by consumers)
  2. The subsidy cost that governments pay energy producers and utility companies (which is ultimately paid by taxpayers)
  3. The externality cost of each type of energy (which is paid by taxpayers, by increased prices for consumers, and the impact on, or the cost to, the environment)

Externality cost in Europe and the U.S.A.

A recent report from the European Environment Agency (EEA) states that high air pollution levels (one type of externality) in the EU cost society €189 billion every year and it’s a number that increases every year. (That’s $235 billion when converted to U.S. dollars)

To put that number in some kind of context, the cost of the air pollution externality in the EU annually, is equal to the annual GDP of Finland.

Let’s state that even more clearly. The amount of taxation paid by EU taxpayers every year to pay for airborne fossil fuel damage is equal to Finland’s entire annual economic output!

It’s getting worse, not better, notwithstanding recent renewable energy programs and incentives. Even the admirable German Energiewende program is barely making an impact when we look at the overall EU air quality index.

Of the 30 biggest facilities it identified as causing the most damage, 26 were power plants, mainly fueled by coal in Germany and eastern Europe. — Barbara Lewis (Reuters)

That’s just Europe. It’s even worse in the U.S., according to a landmark Harvard University report which says coal-fired power generation alone costs the U.S. taxpayer over $500 billion/yr in externality cost.

Each stage in the life cycle of coal—extraction, transport, processing, and combustion—generates a waste stream and carries multiple hazards for health and the environment. These costs are external to the coal industry and thus are often considered as “externalities.”

We estimate that the life cycle effects of coal and the waste stream generated are costing the U.S. public a third to over one-half of a trillion dollars annually.

Many of these so-called externalities are, moreover, cumulative.

Accounting for the damages conservatively doubles to triples the price of electricity from coal per kWh generated, making wind, solar, and other forms of non fossil fuel power generation, along with investments in efficiency and electricity conservation methods, economically competitive.

We focus on Appalachia, though coal is mined in other regions of the United States and is burned throughout the world.” — Full Cost Accounting for the Life Cycle of Coal by Dr. Paul Epstein, the Director of Harvard Medical School Center for Health and the Global Environment, and eleven other co-authors

The report also notes that electricity rates would need to rise by another .09 to .27 cents per kilowatt hour in the U.S. to cover the externality cost of American coal-fired electricity production.

The externality cost for solar or wind power plants is zero, just for the record

Dr. Epstein and his team notes: “Coal burning produces one and a half times the CO2 emissions of oil combustion and twice that from burning natural gas (for an equal amount of energy produced).”

There’s the argument to switch from coal to natural gas right there

Also in the Harvard report in regards to the intrinsic inefficiency of coal:

Energy specialist Amory Lovins estimates that after mining, processing, transporting and burning coal, and transmitting the electricity, only about 3% of the energy in the coal is used in incandescent light bulbs.

…In the United States in 2005, coal produced 50% of the nation’s electricity but 81% of the CO2 emissions.

For 2030, coal is projected to produce 53% of U.S. power and 85% of the U.S. CO2 emissions from electricity generation.

None of these figures includes the additional life cycle greenhouse gas (GHG) emissions from coal, including methane from coal mines, emissions from coal transport, other GHG emissions (e.g., particulates or black carbon), and carbon and nitrous oxide (N2O) emissions from land transformation in the case of MTR coal mining.” — Full Cost Accounting for the Life Cycle of Coal report

It’s not like this information is secret. All European, American, and Asian policymakers now know about the externality costs of coal vs. renewable energy. It’s just that until recently everyone thought that the cost of switching to renewable energy, was higher than the cost of fossil externalities.

It’s not only an economic problem, it’s also a health problem

Air pollution impacts human health, resulting in extra healthcare costs, lost productivity, and fewer work days. Other impacts are reduced crop yields and building damage.

Particulate matter and ground-level ozone are two of the main pollutants that come from coal.

90% or more of Europeans living in cities are exposed to harmful air pollution. Bulgaria and Poland have some of the worst pollution of the European countries.

An estimated 400,000 premature deaths in European cities were linked to air pollution in 2011. — CleanTechnica

Externality cost in China

Remember the Beijing Olympics where the city’s industry and commercial business were shut down to allow visitors and athletes to breathe clean air during their stay (and Wow!) look at their clear blue sky for the first time in decades. Great for tourists! Bad for Beijing business and industry, with the exception of the tourism industry (for one month) of course.

The Common Language Project reported in 2008 that premature deaths in China resulting from fossil fuel air pollution were surpassing 400,000 per year.

China faces a number of serious environmental issues caused by overpopulation and rapid industrial growth. Water pollution and a resulting shortage of drinking water is one such issue, as is air pollution caused by an over-reliance on coal as fuel. It has been estimated that 410,000 Chinese die as a result of pollution each year. — clpmag.org

The die is cast since it is becoming common knowledge that renewable energy merely requires a small subsidy to assist with power plant construction and grid harmonization — while fossil fuels continue to require truly massive and ongoing subsidies to continue operations.

Subsidy cost of fossil fuels

Already there is talk of ending fossil fuel subsidies, which in 2014 will top $600 billion worldwide

Want to add up the total costs (direct economic subsidy and externality cost subsidy) of fossil fuels?

Add the $600 billion global fossil fuel subsidy to the to the $2 trillion dollars of global externality cost and you arrive at (approx) $2.5 trillion dollars per year. Then there is the more than 1 million premature deaths globally caused by air pollution. All of that is subsidized by the world’s taxpayers.

Compare that to the total costs of renewable energy. Well, for starters, the economic subsidy dollar amount for renewable energy is much less (about $100 billion per year globally) and there are no externality costs.

No deaths. No illness. No direct or related productivity loss due to a host of fossil fuel related issues (oil spills, coal car derailment, river contamination, explosions in pipelines or factories) for just a very few examples.

The fossil fuel industry is a very mature industry, it has found ways to do more with ever-fewer employees, and it gets more subsidy dollars than any other economic segment on the planet.

By comparison, the renewable energy industry is a new segment, one that requires many thousands of workers and it gets only relative handfuls of subsidy dollars. And, no externalities.

It becomes clearer every day that high-carbon fossil must be displaced by renewable energy

No longer is it some arcane moral argument that we should switch to renewables for the good of the Earth; Fossil fuel is proving to be a major factor in human illness/premature deaths, it sends our money abroad to purchase energy instead of keeping our money in our own countries, and the wholly-taxpayer-funded subsidy cost of fossil is out of control and getting worse with each passing year.

The time for dithering is past. It’s time to make the switch to renewable energy, and to start, we need to remove the worst polluting power plants from the grid (and at the very least, replace them with natural gas powered plants) or even better, replace them with hybrid wind and solar power plants.

To accomplish this, governments need to begin diverting some of the tens of billions of dollars annually paid to the fossil fuel industry to the renewable energy industry.

Germany’s Energiewende program was (and still is) an admirable first step. Once Germany has completed it’s energy transition away from oil, coal and nuclear — having replaced all of that generation capacity with renewable energy and natural gas, only then can it be hailed a complete success — and German leaders should go down in history as being instrumental in changing the world’s 21st century energy paradigm.

Dank an unsere deutschen Freunde! (With thanks to our German friends!)

If only every nation would sign-on to matching or exceeding the ongoing German example, we wouldn’t have 1 million premature deaths globally due to fossil fuel burning, we wouldn’t have almost 2 trillion dollars of externality cost, we wouldn’t need $600 billion dollars of direct subsidies for fossil fuel producers — and we would all live in a healthier environment, and our plant, animal, and aquatic life would return to their normally thriving state.

Taxes would reflect the global $2.5 trillion drop in combined fossil fuel subsidy and fossil fuel externality costs, employment stats would improve, productivity would increase, the tourism industry would receive a boost, and enjoyment of life for individuals would rebound.

It’s a truism in the energy industry that all energy is subsidized, of that there is no doubt. Even renewable energy receives tiny amounts of subsidy, relative to fossil.

But it is now apparent that over the past 100 years, getting ‘the best (energy) bang for the buck’ has been our nemesis. The energy world that we once knew, is about to change.

The world didn’t come to an end when air travel began to replace rail travel in the 1950’s. Now almost everyone travels by air, and only few travel by train. And what about the railway investors didn’t they lose their money when the age of rail tapered-off? No, they simply moved their money to the new transportation mode and made as much or more money in the airline business.

Likewise, the world will not come to an end now that renewable energy is beginning to displace coal and oil. Investors will simply reallocate their money and make as much or more money in renewable energy.

As Nuclear steps aside, Renewable Energy steps up to power Europe

As Nuclear steps aside, Renewable Energy steps up to power Europe | 16/08/14
by John Brian Shannon John Brian Shannon

Nuclear reactors are starting to shut down in Europe

It began in earnest in the wake of the Fukushima disaster when Germany inspected its problem-plagued nuclear power plants and decided to take 9 of its nuclear power plants offline in 2011 and the rest offline by 2022.

There is plenty of public support in the country for Germany’s planned nuclear closures, even with the additional fee added to each German electricity bill to pay for nuclear power plant decommissioning, which completes in 2045.

Switzerland likewise has decided to get out of the nuclear power business beginning in 2015 and decommission their nuclear power plants by 2045.

Other European nations are also looking at retiring their nuclear power plants. But the news today is about the UK, Belgium, Germany and Spain.

Heysham_Nuclear_Power_Station UK operated by EDF
Heysham Nuclear Power Station in the UK which is operated by EDF of France. Image courtesy: CleanTechnica.com

In the UK, four (French-operated) EDF reactors built in 1983 have been shut down after one of them was found to have a crack in its centre spine. (EDF stands for Electricity de France which is a French utility responsible for managing many nuclear reactors)

At first only the affected unit was taken offline (in June) but upon further inspection it was determined that the other three were at risk to fail in the coming months. Whether or not these four reactors can be repaired economically — all were scheduled to be decommissioned before 2020.

The shortfall in electrical generation due to these unscheduled nuclear power plant shutdowns has been met by 5 GW of new wind power generation, which has seamlessly stepped in to fill demand.

Additional to that, 5 GW of solar power has been added to the UK grid within the past 5 years. And that’s in cloudy olde England, mates!

In Belgium, 3 out of 5 of their nuclear power plants are offline until December 31, 2014 due to maintenance, sabotage, or terror attacks — depending who you talk to.

Belgium’s Doel 4 reactor experienced a deliberate malfunction last week and workers in the country’s n-plants are henceforth directed to move around inside the plants in pairs.

Also, their Tihange 2 reactor won’t be ready to resume power production until March, 2021. See this continuously-updated list of nuclear power plant shutdowns in Belgium.

Further, the utility has advised citizens that hour-long blackouts will commence in October due to a combination of unexpected n-plant shutdowns and higher demand at that time of year.

Belgian energy company Electrabel said its Doel 4 nuclear reactor would stay offline at least until the end of this year after major damage to its turbine, with the cause confirmed as sabotage.

Doel 4 is the youngest of four reactors at the Doel nuclear plant, 20 km north of Antwerp, Belgium’s second-biggest city.

The country has three more reactors in Tihange, 25 km southwest of the city of Liege.

Doel 1 and 2, which came on line in 1975, are set to close in 2015. Tihange 1, which also started operation in 1975 and was designed to last 30 years, got a 10-year extension till 2015.

The two closed reactors Doel 3 and Tihange 2 were connected to the grid in 1982 and 1983. Doel 4 and Tihange 3, which came on line in 1985, were operating normally until the closure of Doel 4 last week.

The shutdown of Doel 4’s nearly 1 gigawatt (GW) of electricity generating capacity as well as closures of two other reactors (Doel 3 and Tihange 2) for months because of cracks in steel reactor casings adds up to just over 3 GW of Belgian nuclear capacity that is offline, more than half of the total.

In Britain, EDF Energy, owned by France’s EDF, took three of its nuclear reactors offline for inspection on Monday after finding a defect in a reactor of a similar design. – Reuters

In Germany, the nuclear power generation capacity missing since 2011 has been met by a combination of solar, wind, bio, natural gas, and unfortunately some coal. But that sounds worse than it is.

According to the Fraunhofer Institute, renewable energy produced about 81 TWh, or 31% of the nation’s electricity during the first half of 2014. Solar production is up 28%, wind 19% and biomass 7% over last year.

Meanwhile, with the exception of nuclear energy, all conventional sources are producing less. The output from gas powered plants was half of what it had been in 2010 and brown coal powered plants are producing at a similar level to 2010-2012. – CleanTechnica.com

Let’s see what our friends at the Fraunhofer Institute have to say in their comparison of the first half of 2013 vs. the first half of 2014.

German electricity production H1 2013 - H1 2014
Fraunhofer Institute compares energy production between the first half of 2013 and the first half of 2014.

Although unspoken by power company executives operating in Germany, Spain, and some other European countries, the panic felt by traditional power generators is due to the massive changes in ‘their’ market since 2009.

Things move slowly in the utility industry — ten years is seen as a mere eyeblink in time, as the industry changes very little decade over decade. Recent changes must be mind-blowing for European power company executives.

European-union-renewables-chart
European Union renewables by Eurostat — Renewable energy statistics. Licensed under Public domain via Wikimedia Commons This map displays 2012 results with a total of 20-30% renewable energy for 2012, but in 2013 renewable energy in Portugal registered 58.3% overall. By 2014, Portugal expects that 70% of its energy will come from renewable energy.

It occurs to me that the end of the conventional energy stranglehold on Europe parallels the ending of Star Wars VI.

Help me take this mask off

It’s a mask to hide behind when conventional power producers don’t want the facts aired.

Fossil and nuclear don’t want their Subsidies or Externalities advertised. Global fossil fuel and nuclear subsides topped $600 billion dollars in 2014, while the externality cost of fossil and nuclear may be as high as $2 trillion dollars annually. That’s a lot of hiding, right there.

Fossil fuel and nuclear power power producers don’t want the subsidies they’re paid to be publicly advertised — and they don’t want the renewable energy industry to have subsidies at all

Externalities are simply another form of subsidy to the fossil fuel and nuclear power industries which often take the form of massive public healthcare spending or massive environmental spending to mitigate the gigatonnes of toxic airborne emissions, or to monitor or repair environmental catastrophes such as oil spills.

Spain has ended it’s Feed-in-Tariff subsidy scheme for renewable energy, while keeping conventional power producer subsidies in place.

Not only that, suddenly homeowners aren’t allowed to collect power from the Sun or harvest power from the wind unless it is for their own use. Electricity cannot be collected by Spanish residents and then sold to the grid for example, nor to anyone else.

Spain’s government has taken it yet another step in a bid to keep the conventional energy companies from drowning in their tears. After a meteoric rise in wind and solar capacity, Spain has now taxed renewable energy power producers retroactively to 2012 and ruled that renewable energy will be capped to a 7.5% maximum profit. Renewable energy returns over the 7.5% threshold becomes instant tax revenue for the government. (Quite unlike conventional energy producers in the country which can make any amount of profit they want and continue to keep their subsidies)

While all of this has been going on, Spain and Portugal have quietly lowered their combined CO2 output by 21.3% since 2012 (equal to 61.4 million fewer tonnes of CO2) thanks to renewable energy.

But you’ll die

Not only has European renewable energy now stepped up to fill the multiple voids due to nuclear power plant maintenance and sabotage shutdowns, it has scooped incredible market share from conventional power producers.

In January 2014, 91% of the monthly needed Portuguese electricity consumption was generated by renewable sources, although the real figure stands at 78%, as 14% was exported. – Wikipedia

Unwittingly, the German and Spanish power companies have provided the highest possible compliment to the renewable energy industry, which, if publicized would read something like this;

We can’t compete with renewable energy that has equal amounts of subsidy. Therefore, remove the renewable energy subsidy while we keep ‘our’ traditional subsidies, until we can reorient our business model – otherwise, we perish!

Nothing can stop that now

Ending the European renewable energy Feed-in-Tariff schemes will only temporarily slow solar and wind installations as both have reached price-parity in recent months — and that, against still-subsidized conventional power generators!

Even bigger changes are coming to the European electricity grid over the next few years. Nothing can stop that now.

Tell your sister; You were right about me

Conventional power producers in Europe provided secure and reliable power for decades, it was what has powered the European postwar success story — but having the electricity grid all to themselves for decades meant that Europe’s utilities became set in their ways and although powerful, were not able to adapt quickly enough to a new kind of energy with zero toxicity and lower per unit cost.

Renewable energy, at first unguided and inexperienced, quickly found a role for itself and is now able to stand on its own feet without subsidies. Quite unlike conventional power generators.

Considering the sheer scale of the energy changes underway in Europe, conventional energy has been superceded by a superior kind of energy and with surprisingly little drama.

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Denmark Sets the Policy Pace on European Climate Goals

by Guest Contributor Jeff Spross.

Renewable Energy Denmark style shutterstock_171261104
Renewable Energy. Copenhagen, Denmark. Kapa1966 / Shutterstock.com

Originally published on ThinkProgress.

Agreement in Denmark’s parliament this week cleared the way for passage of climate targets that would outstrip the recent goals set by the European Union.

The bill would establish a legally binding requirement that Denmark cut its greenhouse gas emissions by 40 percent below 1990′s levels by 2020, and that the government return to the question every five years to set new 10-year targets. The legislation would also establish a Climate Council — modelled on a similar body in Britain — to advise the government on the best ways to continue reducing Denmark’s reliance on fossil fuels.

The bill is backed by the Social Democrats, the Conservative People’s Party, the Socialist People’s Party, and the Red-Green Alliance.

Denmark’s present and former governments have already committed the country to a goal of 100 percent renewable energy generation by 2050, and the new bill is seen as a concrete step to achieving that goal.

“This is a law to make Denmark low carbon society by 2050,” Mattias Soderberg, a senior climate advisor at DanChurchAid, a humanitarian organization in Denmark, told Responding to Climate Change. “With this law Denmark is starting to outline how this process will be done.”

A 40 percent reduction from 1990 levels by 2020 is on par with carbon emission cuts the National Research Council advised America to take on in 2010. It’s also noticeably more ambitious than the target the European Parliament recently passed — to cut emissions 40 percent below 1990 levels by 2030 — for the European Union as a whole.

The broader EU target remains non-binding until it’s approved by the governments of the individual countries that make up the group. And debate remains on exactly how the target should be divvied up amongst the member states. So Denmark moving forward with more ambitious cuts at the individual level would put it ahead of the curve set by most of its peers on the Continent.

Denmark is also part of the Emissions Trading System (ETS), Europe’s cap-and-trade system for cutting carbon emissions, which will likely serve as the main driver of both Denmark’s reductions and the EU’s as a whole. Unfortunately, the unexpected drop in economic activity from to the 2008 recession, along with some inherent design flaws, drove the price of carbon permits under the ETS to remarkable lows. That removed the incentive for firms in Europe to cut their carbon emissions, leaving the entire system stalled in limbo.

The ETS’ problems have served as a learning experience for other, newer cap-and-trade systems like California’s. And reforms are in the works in the EU to get the ETS back on its feet.

Meanwhile, Denmark has already been making substantial progress on the climate front. According to numbers that Responding to Climate Change pulled from the Danish Energy Agency, renewable energy accounted for 43.1 percent of Denmark’s domestic electricity supply in 2012, and for 25.8 percent of all energy consumption in the country that year. The year before that, renewables provided 23.1 percent of Denmark’s electricity consumption.

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This article, Denmark Is About To Outstrip European Climate Goals, is syndicated from Clean Technica and is posted here with permission.

Renewable Energy Supercedes the Utility Business Model

Originally published on Rocky Mountain Institute by Guest Contributor Amory B. Lovins

Renewables are making headway in Europe and bringing a low-carbon electricity system to the forefront. Renewables were 69 percent of new capacity added in 2012 in Europe and 49 percent in the United States.

Not surprisingly, this threatens utilities unwilling to let go of outmoded business models and fossil-fuel generation.

Renewable Energy. Electrical pylons as sunset.
Renewable Energy. Electrical pylons can carry any kind of electrical energy – either non-renewable, or renewable. One has high carbon/high subsidy/high health-care costs, while the other doesn’t have any of those. Image by ShutterStock.

Laments for Europe’s money-losing electric utilities were featured in an October 2013 cover story in the Economist. It said Europe’s top 20 energy utilities have lost over half their 2008 value, or a half-billion Euros—more than Europe’s banks lost.

Many utilities therefore want renewable competition slowed or stopped. Indeed, some European giants, like Germany’s E.ON and RWE, are in real trouble, and five of Europe’s top ten utilities have suffered credit downgrades.

So have some U.S. utilities—most recently Jersey Central Power & Light and Potomac Electric Power Co. – from the likes of Fitch, Moody’s, Standard & Poor’s, Credit Suisse, and others.

Should old, long- and often still-subsidized oligopolies be bailed out or shielded from competition when they bet against innovation and lose?

Those big European utilities were supposed, but failed, to prepare for renewables by reinvesting their hundreds of billions of Euros’ windfall from billing customers for the first decade’s tradable carbon emission credits they’d been given for free. Now they’re griping that disruptive technologies are upending their old models—just as innovators had warned them for the past few decades.

Disruptive technologies are meant to upset the status quo to bring worthwhile change. Should we have rejected mobile phones because they threatened to displace landline phones? Didn’t digital cameras make film cameras largely obsolete? Shouldn’t print newspapers have to invent new business models to confront the rise of the Internet?

Of course utility companies that refuse to let go of an archaic system are losing investors’ money. To be sure, some market reforms, like a well-designed, technology-neutral electric capacity market, could be worthwhile.

But botched investment strategy should not be rewarded. Nor should shareholders be surprised that utility stocks no longer perform like bonds when twenty-first-century technology and speed collide with twentieth- and nineteenth-century institutions, rules, and cultures.

Fortunately, those shareholders were already compensated for accepting well-known risks like new technologies, new environmental rules, and other regulatory and policy shifts—and they needn’t be paid twice.

Renewables Aren’t The Only Challenges To Incumbents

As the Economist acknowledges, those utilities’ financial crisis is due not only to renewables, which are often scapegoated for trends they reinforced but didn’t cause.

Overinvestment in fossil-fueled generation would have weakened utilities’ finances anyway as the global economic slowdown damped electricity demand growth and the efficiency revolution began to reverse it—on both sides of the Atlantic. U.S. weather-adjusted electricity use per dollar of GDP fell 3.4 percent in 2012 alone. In many regions, efficiency is outpacing service growth, shrinking utilities’ revenues.

U.S. shale gas has also displaced much coal-fired generation (though efficiency displaced nearly twice as much in 2012). Unsold American coal flooded European markets, temporarily displacing higher-priced gas.

Meanwhile, solar power took the utilities’ profitable afternoon-peak market and slashed its price premium.

And since Germany, among others, gave renewables both full grid access and dispatch priority (logically, because they’re cheaper to run than any fueled generator), low loads coinciding with high renewable supplies sometimes make wholesale markets clear at negative prices.

This further distresses utilities that must pay to keep their inflexible old plants running—much as they’d prefer to shift all the costs of adaptation to their new competitors. Their distress will rise as renewables keep getting cheaper and as old contracts to sell electricity at well above today’s prices expire.

Renewables Are Advantageous

The Economist article stated, “The growth of renewable energy is undermining established utilities and replacing them with something less reliable and much more expensive.” Undermining stubborn established utilities? Yes, to achieve important public benefits. But shifting to less reliable and much more expensive generators? Hardly.

Well-stoked fears of grid instability and unreliability due to renewable power are as widespread as evidence for them is unfindable. In the Central European grid, where pervasive electricity trading helps operators choreograph the ever-shifting mix of renewable and nonrenewable supplies, German electricity (23 percent renewable in 2012) and Denmark (41 percent) are the most reliable in Europe—about ten times better than in the United States (whose 2012 electricity was 6.6 percent hydro and 5.3 percent other renewables). Even on the edge of the European grid, Spain (48 percent in the first half of 2013) and Portugal (70 percent) kept their lights on just fine. This experience might help the puzzled Economist writer who claimed, “No one really knows what will happen when renewables reach 35 percent of the [German] market, as government policy requires in 2020.” Answer: probably nothing except lower emissions and lower prices.

The “much more expensive” claim, too, evaporates on scrutiny. In the U.S., new Midwestern windpower now sells at a 25-year fixed nominal price (thus a declining real price) as low as $22/MWh, and new Western solar power at below $70, both net of subsidies generally less than nonrenewables get. In many states, wind and solar beat efficient new gas-fired power plants. In countries like Brazil and Chile, unsubsidized wind and solar power routinely win power auctions. In Europe too, they have a strong business case; cloudy Germany has installed 35 GW of photovoltaics but hasn’t subsidized them since 2004. The Economist agrees that German solar power now costs less than residential tariffs (which are half taxes), and less than the feed-in tariff it still receives (because it still costs more than wholesale prices)—so solar power could keep growing even without the tariff.

“Much more expensive” is a more apt description for much nonrenewable generation, especially as the misdesigned European carbon market gets repaired so emissions are no longer nearly free. Exhibit A is the Hinkley Point nuclear plant that the British government wants 84-percent-state-owned Électricité de France to build, supposedly with part-Chinese financing, to generate 7 percent of U.K. electricity. To get ÉDF to agree, the British government had to offer a 35-year inflation-adjusted fixed power price twice today’s wholesale market level, plus a 65-percent loan guarantee, plus other concessions, many still secret.

Even if this extravagance survives EU scrutiny as “illegal state aid,” the project may not win private construction financing. Investors may reason that nuclear electricity costing seven times the unsubsidized Midwestern-U.S. windpower price (the U.K. has Europe’s best wind resources) or 3–4 times the unsubsidized western-U.S. solar price, both falling, is so ridiculous that a subsequent U.K. government could wriggle out of the deal, putting private capital at risk—or simply that forcing the market to absorb so much extraordinarily costly electricity could prove unworkable. If the British government let all options compete at transparent prices, it could find such cheap efficiency, demand response, renewables, and cogeneration that this year alone in America, five old operating nuclear plants have been terminated as uneconomic just to run, even though their high capital cost was paid off long ago. New reactors’ capital costs are so prohibitive that eight years of 100-plus-percent construction subsidies have failed to make them privately financeable, and nine proposed new units were also terminated this year.

Calls for more nuclear power have largely abated in Europe, where flagship nuclear projects in Finland and France are at least twofold over their budgeted cost and time. Nuclear diehards still pull most policy levers in France, but its national utility isn’t charging enough to cover its nuclear repair costs, is about a trillion Euros underfunded for decommissioning its aging reactor fleet, can’t afford to replace it, and needs to consider what to do instead. Hint: renewables leader Germany, moving off nuclear and beyond coal, is the only consistent net exporter of electricity to three-fourths-nuclear-powered France.

Renewables Are Winning

Utilities’ dwindling profitability is the flip side of renewables’ benefits to customers. As renewables burgeoned, Germany’s wholesale electricity prices fell nearly 60 percent in the past five years. This enriched many German industries—thousands of which also shifted billions of Euros’ annual costs to German households via tripled exemptions from paying grid fees and renewable surcharges. (Only 15 percent of the German renewables surcharge is actually households’ share of premium prices for renewables, mostly for old contracts at higher prices; the other 85 percent reflects falling wholesale prices and industrial exemptions.) But the wholesale price drops are reaching most German households too in 2014, stabilizing their bills.

Moreover, German citizens can choose to microinvest as little as $600 in renewables, locking in a stable and attractive return for 20 years. Most German renewable capacity—investments largely spurned by big utilities—was bought instead by citizens, communities, or cooperatives. And Germany’s 382,000+ new renewable jobs, welfare relief, corporate and export earnings, tax revenues, and wholesale price drops yield not just long-term but current macroeconomic net benefits to the national economy.

The Need For New Business Models

Rather than lament that traditional utilities aren’t the low-risk investments they once seemed, and asking how we can protect their profits, we should be seeking to help progressive utilities and disruptive upstarts shape a new electricity system powered increasingly by clean, distributed renewables, doing exactly what they were meant to do: provide reliable, resilient, safe, clean power at moderate prices. That is the way the world market is trending.

Not only Germany but also in two more of the world’s top four economies—China and Japan, as well as India—non-hydro renewables now outproduce nuclear power. In 2012, China’s windfarms outproduced its nuclear plants (the world’s most aggressive program), and coal plants were run less: China added more generation from non-hydro renewables than from nuclear plus fossil sources. In the first ten months of 2013, 54 percent of China’s capacity additions were renewable (a third of those non-hydro). The coal-fired fraction of China’s electricity could drop by two percentage points in 2013 alone. Globally, in each of the years 2011, 2012, and probably 2013, renewables won a quarter-trillion dollars of private investment and added over 80 billion watts of capacity. Solar additions are now overtaking windpowers, scaling even faster than cellphones.

To adapt to these epochal shifts in both supply and demand, electricity providers everywhere, not just in Europe, need new business, revenue, and regulatory models, being developed in efforts like RMI’s e-Lab industry forum. For example, buildings using zero net electricity (an increasingly widespread practice) pay zero net revenue to utilities selling electricity by the kWh. That requires a different revenue model—perhaps like the Fort Collins (Colorado) municipal utilities’ proposed new approach, where the utility can provide a range of services and investments on the customer side of the meter, helping the customer navigate efficiency and distributed generation investments while providing low-cost finance and on-bill repayment. This e-Lab-aided innovation may offer a sound and scalable path beyond net metering, which breaks at scale.

An 80-percent-renewable, half-distributed, nearly decarbonized, highly resilient U.S. grid could cost virtually the same as business as usual, but could best manage its risks—security, technology, finance, climate, health, fuel, and water—and, uniquely, prevent cascading blackouts. Such transformative benefits justify transitional growing pains—not protection for incumbents already paid to accept the known competitive risks they got wrong.

Clinging to and investing in antiquated business models should be neither rewarded nor celebrated. After all, it’s not as if their authors didn’t know big changes were coming. Ordering new coal plants in the face of renewable mandates and emerging carbon trading is akin to buying up carriage-makers just as automobiles began to relieve London’s horse-manure crisis.

Image courtesy of Shutterstock.

This article, Renewables’ Disruption Of The Utility Business Model Is A Good Thing, is syndicated from Clean Technica and is posted here with permission.

HSBC Knocks Europeans for ‘Low Ambition’ on Climate Change

by Guest Contributor Sophie Vorrath.

Renewable Energy needed here!
HSBC’s report says European efforts to lower emissions are insufficient to speed along renewable energy adoption and thereby avoid the most severe levels of climate change. It is already too late to avoid moderate climate change — as those emissions are already in the air and in steadily increasing concentrations over recent decades.

Originally published on RenewEconomy.

Europe’s climate policy proposals reflect the lowest level of ambition required to keep global warming at 2°C, while its goals on renewable energy are “disappointing” and bad news for the industry, according to a new report by banking giant HSBC.

Released on Wednesday, the report is based on the publication of the European Commission policy framework for climate and energy in the period from 2020 to 2030, which it describes as “a first indication of the EU negotiating position in the run up to a global climate deal in Paris 2015.”

In a nutshell, the EU 2030 climate and energy package proposals are for a 40 per cent reduction in greenhouse gases (GHG’s) and an EU renewables share of at least 27 per cent in energy consumption, with no individual country goals.

The HSBC report describes the 40 per cent by 2030 GHG aim as “modest” but expected, adding that it “implies a 2% CAGR (compound annual growth rate) for GHG reduction from now on, increasing ambition from the 0.2% pa rate of reduction left for delivery of the 2020 goal.”

But in the context of the long-term goal of an 80 per cent cut in greenhouse gases by 2050, the bloc’s proposals “offer the lowest level of climate ambition” possible, says the report.

“This is the lower end of the GHG emission reduction range (80- 95%) expected from the developed countries by 2050, to limit the global temperature increase to 2°C,” says the report.

“The 2030 GHG reduction target needs to be translated into national GHG targets for the non-ETS sectors before 2021. In addition, member states need to draw up their national plans for competitive, secure and sustainable energy for the period up to 2030.”

On renewables, HSBC describes the 27 per cent goal for the proportion of renewable energy in the overall mix by 2030 as “disappointing,” noting that it suggests growth of renewables in the energy mix will actually slow from a rate of 5 per cent per annum in 2010-2020, to 2 per cent during the 2020-2030 decade.

“The proposed target implies a decline in the growth rate of renewable installations from 2021-30 compared with 2011-20,” says the report (see charts below). “For electricity, from 2020-2030 we estimate 150GW of total new renewable capacity addition, compared with 210GW during the previous decade.”

And while the report notes that this scenario is “marginally better” than the EU trends to 2050 scenario, which points to just a 1 per cent renewable energy growth rate in 2020-30, it stresses that the 2030 package is, on balance, “a negative” for Europe’s renewable energy industry, with no new target for energy efficiency.

“(The research) shows more differences in views in Europe on renewable energy targets than for GHGs,” says the report. “For instance, the UK and Poland have strongly opposed any mandating of renewable targets, whereas Germany and France favoured it.”

The proposed package also provides nations like the UK with the option to choose nuclear technology over renewable expansion. In particular, says the report, there appears to be “increased risk for the offshore wind technology given its higher capital costs and project development risks.”

“Recently, Germany announced its plan to scale down its 2020 offshore wind target from 10GW to 6.5GW, while also limiting annual wind and solar installations to 2.5GW each.”

“We now see increasing downside risks for offshore wind targets in the UK, the largest offshore wind market, not only in entire Europe but also globally. In case of a scale down in the UK offshore wind expectations, supply chain development and technology cost reductions are likely to slow down, thereby adversely impacting the offshore wind installations globally.”

In the absence of country-specific renewable targets, the report points to the carbon price as “an important driver for the economics around renewable capacity additions.”

“The European Commission, rather ambitiously in our view, expects carbon prices to increase to €40/tonne in 2030 under the proposed framework, from an estimated price of €5/tonne in 2020,” says the report. “Prices at €40/t would help accelerate a switch from coal to gas and renewable technologies.”

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This article, HSBC: Europeans Dragging Their Feet On Climate Action, is syndicated from Clean Technica and is posted here with permission.