Should we choose to have 20% of our power production ideologically clean, or 80% of our electricity needs atmospherically clean? The answer is: we should do both.

Environmental Policy May Contain Traces of Nuts

Steve Clemens | United Business Institutes

Environmental Policy May Contain
Should we choose to have 20% of our power production ideologically clean, or 80% of our electricity needs atmospherically clean? The answer is: we should do both.
Environmental Policy May Contain Traces of Nuts
Steve Clemens, Professor Environmental Economics
United Business Institutes

Do we choose solar energy because it is beautiful or because it can clean up our air? Many Western societies are investing taxpayers' euros in reducing emissions of greenhouse gases. But are the right choices being made? Some renewable energy technologies are up to 10 times more expensive 'per unit of clean air' than others. So why does policy promote the most expensive option? Granted, burning money does not create CO2...

When we take purchasing decisions we tend to somehow compute price versus utility, or cost versus benefit, even if we're not aware of it. While shopping for a handbag, for instance, the choice between Dolce & Gabana and Louis Vuitton can be an arduous decision for a person who is clearly not looking for the most efficient device to store wallet, lipsticks and handkerchiefs in.

When it comes to more corporate decisions, like choosing product strategies or making real estate choices, a more numerical and analytical approach is usually welcomed. Cost will be a major factor, but not the only one. A quick round of questions with business people in my social network has helped me understand what companies look at, for example, when choosing business premises. Cost seems to be a ceiling-factor only, 'we cannot afford more so don't look at the more expensive options, under which many other variables exist such as: access to highways, looks/status, comfort, security, parking facilities, but also outdoor environment, recreational amenities nearby and downtown access.

Also in our personal lives we are accustomed to making an implicit little calculation inside when buying our cars, clothes, hi-fi, sports equipment, etc. Is the cost premium for the Nike label on these running shoes worth it in quality and longevity? Some people make it a point to buy only the more expensive branded goods as a way of conveying a message about themselves.

Authorities, governments, public officials show quite a different pattern when it comes to choosing among various options. When there is an ideological aspect to the decision, cost does not figure as an issue so much, with the decision to 'go to war' as a prime example. But decisions in matters of a mere execution or civic service nature, like municipal water treatment or streetlight technology, then the cost factor comes to the foreground as dominant. In fact, many such construction or engineering contracts get awarded only after public tender, to make sure the decision process is based on cost, and not on 'friendly' handouts.

Up to today, matters of energy production and their levels of greenhouse gas emissions were also categorized as cost-only decision procedures. But with a changing world opinion, thank you Al Gore, Nicholas Stern and IPCC, this too is changing.

Energy production nowadays has become omnipresent in media and political agendas, dwarfing the importance of conservation, biodiversity, toxins releases and many other environmental issues. Business leaders and politicians from all orientations are scrambling to feed off the enviro-fad and make strong statements or sensational propositions. It's like their image consultants have given them a mantra: "fossil fuels bad, solar good, fossil fuels bad, wind good, ..."

The result is this: megawatt-size power plants on photovoltaic panels covering swathes of land. Is this a beautiful sign of the future, or a very expensive eye-sore?

A very large solar power plant in Germany.

Maybe we're going overboard.

When the single most urgent global challenge upon us is global warming, and when we know that this climate change is caused by excessive carbon and other greenhouse gasses in the atmosphere, and the continuous adding of excessive carbon emissions by human activity, should it matter how fine-looking, organic or otherwise beautiful the solution is? That is the billion dollar question.

  • PV panels converting solar rays straight to electricity,
  • solar thermal collectors turning light into heat,
  • wind turbines turning wind into electricity,
  • biomass turning organic crops and waste into electricity and heat,
  • geothermal taking free heat from deep down,
  • wave energy harvesting ocean swells for electricity
  • tidal energy, or moon energy, sea goes up, light goes on sea goes down, light goes on again.

... we might all have our own preference. You might think PV is the most beautiful because of its blue looks and silent operation, I might think biogas from agricultural waste streams are super because it makes such perfect sense.

But as a society that finds itself at the brink of a global climate disaster, with limited resources at its disposal, should we not first look at what policy measures will bring us closest to the desired result? Which climate change bang do we get for our energy buck?

If our biggest problem was that it is a big fat shame that we're not using the abundance of free solar energy reaching the earth every day, or that we were getting poisoned by agricultural waste streams, or that our eating habits are killing nature while choking our body's arteries, then... Well, these issues are indeed true as well.

The point is: our problem is greenhouse gases. A simple listing of technologies and their pollution per produced energy amount should do the trick.

Let us take a look at a very popular technology, the renewable energy (RE) systems of PV.

PV panels cost quite a fair amount per installed capacity. €5/W is not too high for large facilities, 500KWp and more. Smaller systems, typical for residential application may cost twice that much, including inverter, charge controllers and other necessary hardware. Obviously, PV only produces electricity when the sun is out, but that is absolutely normal, and beside the point.

Countries like Germany and Japan first came out with PV promoting policies in the early nineties. There were subsidies for buying and installing PV, often also when delivering the power to the grid.

Nowadays Germany, Luxemburg, Croatia, France, Italy, Belgium and Greece are just a few of the growing number of countries providing an interesting feed-in tariff for PV, guaranteed by law.

This is how much the following societies think a megawatthour of solar electricity is worth:

  • Belgium: up to€450/MWh
  • Croatia: up to €450/MWh (<10KWp)
  • France: up to €550/MWh (for BIPV )
  • Germany: up to €540/MWh (for BIPV)
  • Greece : up to €500/MWh (<100KWp on islands)
  • Italy: up to €450/MWh
  • Luxemburg: up to €560/MWh (<30KWp)

There is a remarkable comparison to be made between the above subsidy levels for PV in Germany, European RE leader, and for instance hydroelectric energy getting only €76/MWh (larger than 500KWp), offshore wind reaching only €87/MWh, onshore wind getting a mere €60/MWh or biomass getting between €115 and €39/MWh, depending on size.

So far we have been looking at feed-in tariffs measured per MWh delivered to the electricity grid. But what about the energy that does not translate to electricity? Thermal solar panels typically get promoted with a one-off purchasing subsidy. Geothermal energy used for district heating is rarely awarded a unit price at all. Electrical energy clearly gets all the attention.

I think we might have been focusing on the wrong parameters here. Electricity does not cause climate change, greenhouse gases do. Greenhouse gases are known, measurable and have a direct link with the greenhouse effect.

The below graph shows us the CO2 emitted per fuel type most used in the world. Data like this is widely available and undisputed.

kg of CO2 per MWhe produced. Source: IAE

What would be the effect of regulating around CO2 instead of MWhs? For starters, we would have better data to help us make better decisions. I could find average CO2 emissions, country by country, but more specifics would have required extensive research and computations. And if I didn't have the stomach to go the distance for this article, you can forget about any politician going for a clearer picture.

Taking the indicator data from the International Energy Agency (IEA) we can determine the average amount of CO2 polluted per MWh produced, all fuel types and technologies confounded.

  • Belgium: 116,05 million tons of CO2, 89,37 TWh consumed = 1,298 tCO2/MWh
  • France: 0,809 tCO2/MWh
  • Italy: 1,409 tCO2/MWh
  • Luxemburg: 1,511 tCO2/MWh
  • Greece: 1,648 tCO2/MWh
  • Germany: 1,463 tCO2/MWh

And according to the European Commission Statistical Pocketbook 2006, EU Energy and Transport Figures:

  • EU average:2.757 TWhe, 3.863 million tons CO2, or 1,401 tCO2/MWh
  • Global:17.450 TWhe, 26.583 million tons CO2, or 1,523 tCO2/MWh

So let us calculate from €/MWh to €/tCO2, using the EU average carbon intensity of 1,401 tCO2/MWh :

  • the Belgian €450/MWh subsidy for PV becomes €321/tCO2
  • Greece's €500/MWh subsidy for PV becomes €357/tCO2
  • France's €550/MWh subsidy for BIPV becomes €393/tCO2
  • Luxemburg's €560/MWh subsidy for BIPV becomes €400/tCO2

Again, compared to the social cost of greenhouse gases via:

  • hydro-electric: €54/tCO2
  • wind: €43/tCO2
  • biomass: €28/tCO2

Why would governments promote PV in such a ways as to be 6 to 10 times more expensive than any other type of renewable energy (RE)? Because there are not enough rivers to dam for hydroelectric power. Because people are disturbed by the ugliness of wind turbines. Because it is difficult to drop old habits. Because it is not about solving a problem but rather about getting votes from an ill-informed public.

Arguments often used to promote PV:

  • They create employment. More than other RE technologies? Should this come from the Environment budget or Employment budget?
  • Their technological complexity has potential for future technologies. So have MP3 players, but we don't pay for MP3 players with taxpayers' Environment budget.
  • Their seasonal profile matches cooling needs. Power ac with PV? Right.
  • Nobody's against them. True
  • Their complexity hedges us from low-cost competition. Right, like the biggest semiconductor fabs are not in Taiwan.

The time has come to get the story right: we need to apply a mix of solutions, as opposed to one big favourite. And we need the reward system to reflect direct climate change effects.

The EU has committed to a steep path towards renewable energy, 20% by 2020. Obviously it is up to the member countries to choose the technological options, and as we've seen, they are making the path steeper than necessary by promoting expensive greenhouse gas diminishing technologies.

But what about the remaining 80% of power in the EU?

Carbon Capturing and Sequestration (CCS) is repeatedly stated as economically not viable because of its high cost per ton of CO2 extracted from the atmosphere. CCS costs, at current state of technology development, between €30 (oil) and €60 (gas) per ton of CO2.

NGO's like Greenpeace and Friends of The Earth are dead against CCS. They say it perpetuates the search for fossil fuels and our dependence on them. This is true, in the long run. But in the long run, we're all dead, as J.M. Keynes said. In a time horizon less than 100 years it is a fact that we are going to keep a heavy dependence on fossil fuels, as seen in the EU 20-80% split above.

The only problem I have with CCS is that it allows the Bushes of the world to introduce words like clean coal and sustainable oil.

So, should we choose to have 20% of our power production ideologically clean, or 80% of our electricity needs atmospherically clean? The answer is: we should do both. This is really about the pie getting higher, as they say in Washington. Money spent on (smart) RE for a clean future, and on CCS for a clean present. One does not exclude the other.

Yes, it is going to be more expensive than the 'do nothing' strategy, although the Stern report and IPCC reports would rightly disagree. But societies have taken choices in the past which were not based on cost. Most Western countries abolished child labour in the late 19th century. That was 'costly' to industry at the time. But we can find examples in current history as well. What about the European Parliament moving up and down to/fro Brussels and in Strasbourg? And what about the European Institutions translating everything into 25 or more languages? And what about France's 35-hour workweek?

If you know of a better opportunity for our society to make a healthily costly choice than attacking climate change, please let me know. (wars do not count).


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