by Peter Lang

Wind turbines are less effective and CO2 abatement cost is higher than commonly assumed.

Wind turbines are significantly less effective at reducing CO2 emissions than commonly assumed. This means the CO2 abatement cost (i.e. the cost per tonne CO2 avoided by wind turbines) is higher than commonly recognised. It is likely the CO2 abatement cost of wind turbines is commonly underestimated.

Effectiveness here means % reduction in CO2 emissions divided by % electricity supplied by wind turbines. Wind turbines supplied 2.9% of Australia’s electricity in 2012-13 (latest figures available). It is likely wind energy was around 80% effective at avoiding CO2 emissions. That is, each unit of electricity generated by wind turbines avoided about 80% of the emission that would have been emitted generating a unit of electricity in the absence of wind.

The actual CO2 abatement cost is higher than commonly estimated. In fact, the abatement cost is inversely proportional to the proportion of electricity supplied by wind power. At 80% effective the actual abatement cost would be 25% higher than the analysts’ estimates if their estimates did not take effectiveness into account. At 50% effective the actual abatement cost would be twice the estimates. The chart below illustrates the relationship between effectiveness, CO2 abatement costs increase and the proportion of electricity generated by wind (fictitious numbers but approximately correct for Australia’s National Electricity Market).

Economic analyses conducted for the 2014 Renewable Energy Target (RET) Review projected that wind power will supply about 15% of Australia’s electricity by 2020 if the RET legislation remains unchanged. At 15% of electricity generated by wind, international studies of other electricity grids suggests effectiveness could be nearly as low as 50%. At that rate the CO2 abatement cost would be double the estimates (if those estimates did not take effectiveness into account).

The cost of abating CO2 emissions with wind power in Australia in 2020 could be 2 to 5 times the carbon tax, which was rejected by the voters at 2013 Federal Election; 6 to14 times the current EU carbon price; and more than 100 times the price of the international carbon futures out to 2020.

The Senate ‘Select Committee on Wind Turbines’ has been established to inquire into impacts of wind turbines in Australia. My submission (No. 259) focuses on the effectiveness of wind turbines at reducing CO2 emissions from electricity generation in Australia and the impact of the effectiveness on estimates of abatement cost ($/tonne CO2) by wind energy.

I would appreciate constructive critiques of my submission so I may have an opportunity to submit an addendum, with any needed clarifications and corrections, before the 4 May deadline.

Below is an edited version of the Executive Summary.

“The Renewable Energy (Electricity) Act 2000 states:

“The objects of this Act are:

(a) to encourage the additional generation of electricity from renewable sources; and

(b) to reduce emissions of greenhouse gases in the electricity sector; and

(c) to ensure that renewable energy sources are ecologically sustainable.”

Object (b) is, arguably, the principal objective because if it is not justifiable, on the basis of objective evidence, (a) and (c) are not justifiable either. This submission presents evidence that wind turbines are less effective at meeting objective (b) than is commonly assumed. Therefore, the CO2 abatement cost estimated from economic analyses is frequently understated (CO2 means ‘carbon dioxide equivalent’ in this submission).

It is often assumed that effectiveness of wind energy is 100%, i.e., a MWh of wind energy displaces the emissions from a MWh of the conventional energy displaced. But it is usually much less, and values as low as 53% have been reported (Wheatley, 2013). Effectiveness means % reduction in CO2 emissions divided by % electricity supplied by wind.

Empirical analyses of the emissions avoided in electricity grids in the U.S. and Europe indicate that (1) wind turbines are significantly less effective at avoiding emissions than is commonly assumed and (2) effectiveness decreases as the proportion of electricity generated by wind turbines increases.

Unfortunately, neither the Clean Energy Regulator (CER) nor the Australian Energy Market Operator (AEMO) collect the CO2 emissions information needed for an accurate empirical estimate of effectiveness. Without good data for the emissions from power stations at time intervals of 30 minutes or less, estimates of emissions avoided by wind are biased high (i.e. overestimated) and have large uncertainty, i.e., we don’t know what emissions reductions are actually being achieved by wind generation.

Under the Renewable Energy Target (RET), the proportion of wind generation is increasing so it is projected to supply about 15% of electricity by 2020 (interpreted from the 2014 RET Review Report, Figures 11 and 13). In this case, effectiveness might approach as low as 53% by 2020.

When effectiveness is properly factored into calculations, wind energy has a high abatement cost; I provide a simple analysis using Levelised Cost of Electricity (LCOE) which estimates abatement cost of wind power at $168/t CO2 by 2020.

In comparison, the RET Review summarised economic analyses of the abatement cost of the Large Scale Renewable Energy Target (LRET) at $32-$70/t CO2. These analyses, however, are likely underestimated as they do not appear to take effectiveness into account, or at least not fully. If the economic analyses do not take effectiveness into account, and if effectiveness decreases to 53% by 2020, the estimates of abatement cost would nearly double to $60-$136/t CO2 with effectiveness included.

To put these abatement costs in context, the ‘carbon’ tax was $24.15/t CO2 when it was rejected by the voters at the 2013 Federal election. The current price of EU ETS carbon credits and the international carbon credit futures are:

European Union Allowance (EUA) market price (10/3/2015) = €6.83/tCO2 (A$9.50)

Certified Emissions Reduction (CER) futures to 2020 (9/3/2015) = €0.40/tCO2 (A$0.56)

Therefore, the LRET in 2020 could be 2 to 5 times the carbon tax, which was rejected by the voters in 2013; 6 to14 times the current price of the EUA; and more than 100 times the price of CER futures out to 2020.

Clearly, the RET is a very high cost way to avoid greenhouse gas (GHG) emissions. The rational policy decision is to close the RET to future investments. Or, as an interim measure, wind the target back to a real 20% of electricity generation.

I urge the Select Committee to consider: has the RET passed its use-by date? Why not allow Direct Action to do what it is designed to do, to achieve emissions reductions at the lowest cost?

Recommendations:

In consideration of the issues outlined in this submission, I recommend that:

1. The Government task an appropriately qualified agency, such as the Productivity Commission and/or Bureau of Resources and Energy Economics (BREE) with estimating the full economic cost of wind energy ($/MWh) as well as the CO2 abatement cost ($/t CO2 avoided).

2. To get an early indication of the abatement cost of wind energy, contract an appropriately qualified consultant to:

assemble the best estimates it can of the ‘high quality’ data required for a sophisticated analysis (this may include seeking information from generators with appropriate ‘commercial in confidence’ agreements), and

estimate the CO2 abatement cost with wind power (including all the hidden costs and the effects of higher electricity costs on the Australian economy).

3. Either, repeal the RET legislation which will:

avoid what will become an escalating compliance cost of emissions monitoring if it remains in place, and

allow Direct Action to operate without the RET being a major market distortion.

4. Or, if repeal of RET is not politically acceptable, close the RET to new entrants and incorporate the existing and committed RET installations into Direct Action.

5. Change the name of Direct Action to ‘CO2e Emissions Reduction Scheme’ (CO2e ERS). This should be technologically neutral with the primary selection criteria being objectively justifiable CO2e avoidance cost (i.e. $/t CO2e avoided).”

Constructive critiques welcome. The full submission is No. 259 here.

About the Author: Peter Lang is a retired geologist and engineer with 40 years’ experience on a wide range of energy projects throughout the world, including managing energy RD&D programs and providing policy advice to Government. Energy projects included: hydro-electric, geothermal, nuclear, coal, oil and gas and a wide range of energy end-use management projects.

JC note: As with all guest posts, keep your comments relevant and civil.