by Peter Lang

J. P. Morgan recently published an excellent report ‘Deep de-carbonisation of electricity grids‘. Below are excerpts from the report and some comment added by me.

Excerpts from the Introduction

“In our last few annual energy notes, we analyzed the individual components of the electricity grid: coal, nuclear, natural gas, wind, solar and energy storage. This year, we look at how they fit together in a system dominated by renewable energy, with a focus on cost and CO2 emissions. The importance of understanding such systems is amplified by President Obama’s “Clean Power Plan”, a by-product of which will likely be greater use of renewable energy for electricity generation.

This year, we focus on Germany and its Energiewende plan (deep de-carbonization of the electricity grid in which 80% of demand is met by renewable energy), and on a California version we refer to as Caliwende. We compare these systems to the current electricity mix, and to a balanced system with a mix of renewable and nuclear energy. These charts summarize cost (Y-axis) and emission (X-axis) results:

Our primary conclusions:

A critical part of any analysis of high-renewable systems is the cost of backup thermal power and/or storage needed to meet demand during periods of low renewable generation. These costs are substantial; as a result, levelized costs of wind and solar are not the right tools to use in assessing the total cost of a high-renewable system

Emissions. High-renewable grids reduce CO2 emissions by 65%-70% in Germany and 55%-60% in California vs. the current grid. Reason: backup thermal capacity is idle for much of the year

Costs. High-renewable grid costs per MWh are 1.9x the current system in Germany, and 1.5x in California. Costs fall to 1.6x in Germany and 1.2x in California assuming long-run “learning curve” declines in wind, solar and storage costs, higher nuclear plant costs and higher natural gas fuel costs

Storage. The cost of time-shifting surplus renewable generation via storage has fallen, but its cost, intermittent utilization and energy loss result in higher per MWh system costs when it is added

Nuclear. Balanced systems with nuclear power have lower estimated costs and CO2 emissions than high-renewable systems. However, there’s enormous uncertainty regarding the actual cost of nuclear power in the US and Europe, rendering balanced system assessments less reliable. Nuclear power is growing in Asia where plant costs are 20%-30% lower, but political, historical, economic, regulatory and cultural issues prevent these observations from being easily applied outside of Asia

Location and comparability. Germany and California rank in the top 70th and 90th percentiles with respect to their potential wind and solar energy (see Appendix I). However, actual wind and solar energy productivity is higher in California (i.e., higher capacity factors), which is the primary reason that Energiewende is more expensive per MWh than Caliwende. Regions without high quality wind and solar irradiation may find that grids dominated by renewable energy are more costly

What-ifs. National/cross-border grid expansion, storing electricity in electric car batteries, demand management and renewable energy overbuilding are often mentioned as ways of reducing the cost of high-renewable systems. However, each relies to some extent on conjecture, insufficient empirical support and/or incomplete assessments of related costs

Other implications of high-renewable systems:

Transmission costs excluded. We exclude investments in transmission infrastructure often required to accompany large amounts of renewable energy capacity, which could substantially increase the estimated cost of high-renewable systems. Wind capacity factors may also degrade with a large wind build-out since the most optimal sites are often developed first.

Other uncertainties. As thermal power (gas, coal) is further relegated to a backup power role, there are uncertainties regarding how such high-cost, low-utilization assets will be financed and maintained by the private sector

This paper gets into the weeds of hourly generation and intermittency. I found that it’s difficult to have a well-informed understanding of renewable systems without doing so. My goal: to give you a layman’s perspective of high-renewable systems while still adhering to the physical and engineering realities of electricity generation, stripped of the hyperbole which often accompanies the subject.”

PL comments

Transmission costs are excluded from the JP Morgan analysis which, as they say, “could substantially increase the estimated cost of high-renewable systems.” The average additional cost of transmission at 30% penetration of nuclear is $2.1/MWh and onshore wind is $31.8/MWh (i.e. 15 times higher) according to OECD/NEA, 2012, ‘System Effects in Low-carbon Electricity Systems’).

Wind capacity factors will also degrade with a large wind build-out because ‘energy spillage’ increases as the proportion of wind energy increases.

The greatest uncertainty is whether or not it is feasible to operate a large grid with 80% non-hydro renewable energy. Nuclear has proven it can – it’s been generating around 75% of France’s electricity for some 30 years as well as exporting large amounts of cheap, reliable power to its neighboring countries, and helping to maintain grid stability.

Excerpts from the body of the report:

“• Cost almost double current system. The direct cost of Energiewende, using today’s costs as a reference point, is 1.9x the current system. Compared to the current system, Energiewende reduces CO2 emissions at a cost of $300 per metric ton”

PL Comment: $300/t CO2 is around 30x the current EU carbon price.

“1f. Is there a cheaper way to do it? A balanced system, with nuclear power

Nuclear Power. For some, the discussion stops here, since they have scientific, financial, environmental or geopolitical objections. That said, we analyze a balanced system as well: Germany maintains the wind, solar, hydro and biomass it now has; relies on nuclear to meet 35% of demand by turning back on some of its idle plants; and uses a 50/50 natural gas/coal mix for the remainder. Balanced results are shown in the last row, along with no-storage and storage scenarios for Energiewende, and the current system.”

PL extract from the table on Germany (p9):

Renewables proportion Nuclear proportion Electricity cost $/MWh CO2 emissions $/t CO2 reduce. Current; No Stor; Curr cost 25% 16% $108 Energiewende; No Stor; Curr cost 80% 0% $203 $300 35% nuclear; No Stor; Curr cost 40% 35% $136 $84

PL Comment: Energiewende with 35% nuclear instead of 0% nuclear, would be 79% the cost of electricity and less than 28% of the CO2 abatement cost.

“However, EIA and Carnegie Mellon cost estimates may not reflect reality. The rising trend in OECD nuclear capital and operating costs is a topic we addressed last year. In the US, real costs per MWh for nuclear have risen by 19% annually since the 1970’s5 . Even in France, the country with the greatest reliance on nuclear power as a share of generation and whose centralized decision-making and regulatory structure are geared toward nuclear power, costs have been rising and priorities are shifting to renewable energy6 . Globally, nuclear power peaked as a share of electricity generation in 1995 at 18% and is now at 11%, primarily a reflection of slower development in the OECD.”

PL comment: I agree with this point. I suggest the primary reason for the high cost of nuclear is politics reacting to 50 years of disingenuous anti-nuclear advocacy, which has had the effect on many people as noted in the opening sentence: “For some, the discussion stops here, since they have scientific, financial, environmental or geopolitical objections”.

PL extract from the table on California (p15):

Renewables proportion Nuclear proportion Electricity cost $/MWh CO2 emissions $/t CO2 reduce. Current; No Stor; Curr cost 34% 10% $97 Energiewende; No Stor; Curr cost 80% 0% $142 $477 35% nuclear; No Stor; Curr cost 40% 35% $116 $174

PL Comment: Caliwende with 35% nuclear instead of 0% nuclear, would be 82% the cost of electricity and less than 36% the CO2 abatement cost.

Comparing the last two rows of the tables for Germany and California suggest the costs would be lower if the renewables proportion was reduced and the nuclear proportion increased.

“Deep de-carbonization of the electricity grid via renewable energy and without nuclear power can be done, but we should not underestimate the cost or speed of doing so in many parts of the world. At the minimum, the costs involved suggest that efforts to solve the nuclear cost-safety puzzle could yield large dividends in a post-carbon world. Such is the belief of the scientists, academics and environmentalists who still see a substantial role for nuclear power in the future (see Appendix V).”

From ‘Appendix VI: Energy learning curves’, p24:

“The next chart was produced in 2003 for the European Commission’s 2030 World Energy, Technology and Climate Outlook report. It’s a bit outdated, but does a good job conveying how analysts used historical data available at the time to project learning curve progress in the future.

PL comment on this chart:

Eyeballing from the chart, the end of the solid lines (i.e. year 2000) are approximately:

Nuclear capital cost = €3,200/kW

Wind capital cost = €1,000/kW

Nuclear capacity = 350,000 MW

Wind capacity = 11,000 MW

Nuclear plants have a life expectancy two to three times longer than wind farms. And nuclear plants have a capacity factor about three times higher than wind farms. Therefore, an investment of €3,200m in nuclear power supplies 6x to 9x the quantity of electricity that the €1,000m investment in a wind farm supplies. That is, €3,200m invested in nuclear would supply the same total energy as €6,000m to €9,000m spent on wind farms.

But it’s much worse than that, because the wind farm also needs backup and energy storage to enable it to be comparable to the reliable, dispatchable energy supplied by a nuclear plant. The capital cost of back-up generation would roughly double the cost of the renewables system; energy storage would be much higher cost.

It gets worse still when you compare the CO2 emissions avoided with and without nuclear. Nuclear power displaces baseload generation. A MWh of electricity generated by nuclear avoids all the emissions of the coal fired plants it displaces. Therefore, the CO2 abatement effectiveness of nuclear is greater than 100% because it avoids more than the average emissions intensity of the grid. In contrast, the CO2 abatement effectiveness of wind power is much less than 100%. Various studies suggest CO2 abatement effectiveness declines to about 50% when wind power supplies about 20% of the electricity (Wheatley, 2013 and Wheatley, 2015). It continues to decline as the proportion of wind power increases. At 50% CO2 abatement effectiveness the CO2 abatement cost is double what it would be if 100% effective, ‘Wind turbines’ CO2 savings and abatement cost’.

PL Comment on negative-learning rate of nuclear power

The chart below shows how the cost of nuclear power has escalated since the 1970’s.

Source: Grubler, A. (2012). ‘The French Pressurized Water Reactor Program. Historical Case Studies of Energy Technology Innovation’ in: Chapter 24, ‘The Global Energy Assessment’. [link]

Comparison with learning rates for other technologies:

Charlie Wilson, 2013, ‘from innovation processes to innovation systems’

PL comment: cause of nuclear’s negative learning rate

As Bernard Cohen shows, the cost escalation since the 1970’s is mostly due to regulatory ratcheting: ‘Costs of Nuclear Power Plants – What Went Wrong?’:

“No nuclear power plants in the United States ordered since 1974 will be completed, and many dozens of partially constructed plants have been abandoned. What cut off the growth of nuclear power so suddenly and so completely? The direct cause is not fear of reactor accidents, or of radioactive materials released into the environment, or of radioactive waste. It is rather that costs have escalated wildly, making nuclear plants too expensive to build. State commissions that regulate them require that utilities provide electric power to their customers at the lowest possible price. In the early 1970s this goal was achieved through the use of nuclear power plants. However, at the cost of recently completed plants, analyses indicate that it is cheaper to generate electricity by burning coal. Here we will attempt to understand how this switch occurred. It will serve as background for the next chapter, which presents the solution to these problems.

Several large nuclear power plants were completed in the early 1970s at a typical cost of $170 million, whereas plants of the same size completed in 1983 cost an average of $1.7 billion, a 10-fold increase. Some plants completed in the late 1980s have cost as much as $5 billion, 30 times what they cost 15 years earlier. Inflation, of course, has played a role, but the consumer price index increased only by a factor of 2.2 between 1973 and 1983, and by just 18% from 1983 to 1988. What caused the remaining large increase? Ask the opponents of nuclear power and they will recite a succession of horror stories, many of them true, about mistakes, inefficiency, sloppiness, and ineptitude. They will create the impression that people who build nuclear plants are a bunch of bungling incompetents. The only thing they won’t explain is how these same “bungling incompetents” managed to build nuclear power plants so efficiently, so rapidly, and so inexpensively in the early 1970s.”

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