Lesley McAllister on CPRBlog {Bio}

The Reliability of the Sun and the Wind

The following is reposted from the Environmental Law Prof Blog.

The electric utility industry often complains that renewable energy proponents don’t pay enough attention to the intermittency of renewable resources.  A common refrain is “the sun doesn’t always shine and the wind doesn’t always blow.”  The industry then reminds us that, for a reliable electricity grid, supply and demand must be in balance at all times. The implication is that this will be impossible if we rely heavily on renewable energy.

A new report published by the Civil Society Institute models a year 2050 scenario in which renewable energy is used to generate about half of all electricity in the US, and the lights still reliably come on.  In the scenario, about 22% of demand is met by solar (almost all PV), 16% by wind, 8% by hydro, and 5% by biomass. The rest is supplied primarily by natural gas and nuclear energy.  The scenario includes no coal-fired generation.

The authors explain that the intermittency problem of solar and wind is greatly reduced when you consider generation on a regional rather than local scale. Also, weatherpeople are actually pretty good at forecasting available solar resources (i.e. cloud cover) and wind resources (i.e. wind speed) on the time scale that’s needed for sophisticated grid operators to balance supply and demand – namely, several hours ahead of time.  It also helps that as a general matter, solar electricity is most plentiful and reliable when we most use electricity: during daylight hours. To the extent that disparities between energy supply and demand occur in the 2050 scenario, the report shows that reliability can be achieved using interregional transfers of electricity, energy storage, demand response, and other available approaches.

So it seems we can build electric power systems that bank on the reliability of the sun and the wind.  A new refrain could be “the sun’ll come out tomorrow, bet your bottom dollar that tomorrow, there’ll be sun!” and we can recall that our forebears didn’t name places Windy Mountain, Windy Plains, and the Windy City for nothing. 


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Subsidizing in Spurts: Our Production Tax Credit Policy, or Lack Thereof

This post was written by CPR Member Scholars Alexandra Klass and Lesley McAllister.

Taxes and energy are subject to constant partisan debate. Both are at play in politically-charged discussions about the government’s role in promoting renewable energy, particularly wind energy. Since 1992, the federal government has granted a production tax credit (PTC) (currently 2.2¢ per kilowatt/hour (kWh)) for production of certain renewable energy. The credit initially focused on wind, closed-loop biomass, and poultry-waste energy resources; in 2004 Congress expanded the program to include open-loop biomass, geothermal, and several other renewable energy sources. With this support, the wind energy industry has begun to take off.  By 2011, installed wind capacity exceeded 45 gigawatts (GWs), accounting for about 4% of U.S. installed electricity capacity, 3% of total U.S. generation, and more than 10% of total generation in several states. And in 2012 alone, the industry added more than 13 GW of wind energy, surpassing the previous record of 10 GW in 2010.

Yet unlike the significant tax benefits for fossil fuels, which have been in place for many decades, the PTC has never been a permanent part of the tax code. Instead, it was created with set expiration dates, and expires on those dates unless Congress specifically reauthorizes it. This resulted in the PTC expiring at the end of 1999, 2001, and 2003, and almost expiring in numerous other years, including 2012.  Although Congress extended the deadline for one more year as part of the “fiscal cliff” budget negotiations in January 2013, this temporary fix means that the debates over the long-term use of tax benefits to encourage renewable energy will continue.

These expiration cycles have had a significant impact on project investment, wind energy jobs, and technology development.  Generally, investment increases in the 12 months leading up to the real or threatened PTC expiration and then drops afterward. These cycles create uncertainty, and research has shown that this uncertainty, even more than the lack of the PTC in “off” years and the pending expiration in other years, drives investment volatility and hurts the industry.  While 2012 was a record year for wind installations, most of the investments in those projects came in the previous year and the uncertainty over the PTC expiration in 2012 means that developers have not planned significant projects for 2013.

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Obama on Clean Energy: Actions Speak

Cross-posted from Environmental Law Prof Blog.

Unlike climate change, clean energy policy has received a fair bit of attention in the presidential campaign. Obama made clear that he supports renewable energy as part of his "all of the above" approach, while Romney would end an important federal subsidy for wind power and otherwise increase reliance on coal, oil and gas. But for those who are disappointed that Obama didn’t say more about our need to transition away from fossil fuel and towards renewables, remember the old adages “actions speak louder than words” and “put your money where your mouth is.” Here are some facts about Obama’s actions and expenditures:

First, we must recall that subsidies for fossil fuels have been a fixture in US energy policy. As discussed in a recent report by venture capital firm DBL Investors, these subsidies have come in many forms including direct payments and preferential loans; favorable tax treatment; and government investment in R&D and infrastructure. Coal mining companies have enjoyed generous tax treatment since the early 1930s, and the government’s investment in geological surveys and railroads also greatly facilitated coal-fired electricity. Natural gas combustion technology benefited from billions of dollars worth of jet engine technology research funded by the Department of Defense research. The report finds that, in total, the oil and gas industries received about $350 billion in subsidies between 1918 and 2009.

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The End of the Acid Rain Program

Cross-posted from Environmental Law Prof Blog.

Do you realize that the Cross-State Air Pollution Rule finalized by the Environmental Protection Agency  last week represents the end of the famed Acid Rain Program? It's a good thing because the Acid Rain Program had outlived its usefulness by several years and its allowance market had collapsed.

Legislated into existence by the Clean Air Act Amendments of 1990, the Acid Rain Program (ARP) was a major experiment with cap-and-trade regulation. It began in 1995, and its first few years were quite a success. With the ability to bank allowances for future years when they might be quite valuable, the power plants included in the program reduced their pollution by more than they had to. In the first five years of the program, EPA’s annual caps allowed them to emit a total of 38 million tons of sulfur dioxide, but the power plants actually only emitted 26 million tons. So when the program was expanded to include smaller power generators in 2000, the big utilities were sitting pretty with about 12 million ton of allowances in the bank (for a blow-by-blow of overallocation in this and other cap-and-trade programs see my article, The Overallocation Problem In Cap-And-Trade: Moving Toward Stringency, 34 COLUM. J. OF ENVTL. LAW 396 (2009).

But in the end, many of the big power plants probably didn’t make as much money selling their banked allowances as they thought they would. In the early 2000s, there was some demand for allowances because all those smaller generators weren’t allocated quite enough allowances to cover their emissions. A power plant selling in the early 2000s could have made about $150 per allowance. If they were really smart (or lucky), they sold allowances in the mid-2000s. In these years, the Bush Administration was implementing the Clean Air Interstate Rule (CAIR), which allowed the use of ARP allowances and made them more valuable. From 2005 to 2007, allowances traded for an average of more than $600. (For price information see EPA's auction results.)

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Energy Efficiency on the Rebound?

Cross-posted from Environmental Law Prof Blog.

Energy efficiency policy is one of the few areas where we might still expect some progress at the federal level toward reducing greenhouse gas emissions in the next few years.  Predictably, energy efficiency has become the target of criticism. Republican senators argue that phasing out inefficient incandescent light bulbs is anti-consumer even though it would save consumers money on their energy bills.  And in a New York Times article, John Tierney took aim at energy efficiency standards by implying that energy efficiency improvements don’t actually save energy on account of the “rebound effect.”    The rebound effect expresses the idea that energy efficiency improvements result in a reduction in the price content of energy in the final consumer product or service, and consumers may respond to this cost savings by consuming more of that product or service (the direct rebound effect) or more of other products and services (the indirect rebound effect).  This increased consumption negates the presumed one-to-one relationship between efficiency improvements and energy savings. 

While theoretically plausible, the important question regards the actual size of the rebound effect.  Tierney suggests that the rebound effect may swallow the energy savings of energy efficiency, but the available empirical evidence does not bear this out.  The direct rebound effect has been much better studied than the indirect rebound effect (see Sorrell et al. 2009). In the transport sector, where the rebound effect has been most studied, the effect is likely to lie between 10 and 30%.  In other words, 70 to 90% of the energy savings achieved by a more efficient car are actually saved (and not negated in the form of higher consumption).  When more efficient heating is installed, about 80% of the energy savings remain intact.  From my perspective, a 70 to 90% energy savings looks pretty good. 

As for the indirect rebound effect, Sorrell et al. 2007 find that there are few published studies and that they are flawed. In other words, there is little empirical support for the indirect rebound effect.  According to Sorrell it has two components:  the embodied energy in energy efficiency improvements (the energy required to produce and install the measures that improve energy efficiency) and “secondary effects,” which refer to the change in demand for other goods and services spurred by energy efficiency improvements.  From what I can tell, these secondary effects seem to amount largely to the idea that consumers will spend whatever money they have on something, and that something is likely to require the use of energy.  While I can certainly see bemoaning the energy consumption of overconsumption (and I probably will in a future post), I just can’t see blaming it on energy efficiency.

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