Tuesday, July 19, 2016

Killing Nuclear, ignoring emissions and avoiding carbon pricing

In Germany, where renewables have mostly replaced nuclear power, carbon emissions are rising, even as Germans pay the most expensive electricity rates in Europe. In South Australia, the all-wind strategy is taking its toll. And in California, the costs of renewables are also apparent. - Eduardo Porter - New York Times
Recently a multitude of exceptional articles have been written on the challenges facing nuclear power plants in the United States, mostly without mentioning an alternative to competing subsidies.

  • A $30/tonne CO2 equivalent price would equate to adding $12-$15 per megawatt-hour on the most efficient natural gas-fired generators. $30 is a familiar figure thrown about in Canada.
  • The United States Government's Interagency Working Group on Social Cost of Carbon has a complex methodology of working out values: using a 4% discount rate they provide a 2016 value of $38/metric ton CO2, but that's in 2007 dollars - it's about $44/t CO2e in 2016 dollars, putting the social cost  per megawatt-hour of natural gas-fired generation at $17.5-$22.5/megawatt hour.
now... to the news

A very educational read is Will Boisvert's Renewables Subsidies Are Killing Nuclear and Threatening Climate Progress, Bloomberg New Energy Finance Study Shows:
Why are nuclear plants going broke? The immediate reason is cheap gas. The plunge in natural gas prices caused a collapse in the price of natural gas-fueled electricity, which has slumped below the production costs of nuclear plants. Bloomberg predicts that in the sprawling PJM grid wholesale prices will be $28.50 per megawatt-hour in 2017, lower than average nuclear production costs of $35.50 per megawatt-hour. Facing losses like that, nuclear utilities are closing up shop.
But the impact of market forces has been worsened by public policy that neglects nuclear power and adds to the pressure it faces. Federal, state and local governments have massively intervened in energy markets to support renewable power with subsidies and mandates, but given virtually no support to existing nuclear plants. These biases tilt the playing field for commercial competitors of nuclear plants.
The $23 per megawatt-hour federal Production Tax Credit for wind farms, for example, can be larger than the total wholesale price nuclear plants get for their power in some regions, according to Bloomberg data. (It’s also larger than the $5-15 per megawatt-hour subsidies Bloomberg reckons nuclear plants need to break even.)
I'll read most anything by Will Boisvert -in English- but I don't see a link to the Bloomberg New Energy Finance Study (nor could I locate it), and there's no mention of carbon pricing.

Wednesday, July 13, 2016

New York bringing hope back to US nuclear operator

New York state is acting to keep existing nuclear generators operational in an important power play that's interesting for a number of reasons.

July 8th (Friday afternoon, as policy announced) NY regulators propose generous Upstate nuclear subsidies | Syracuse.com
SYRACUSE, N.Y. – State utility regulators today released a proposal to subsidize Upstate nuclear plants with annual payments totaling an estimated $482 million a year.
The proposal from the Public Service Commission staff seems likely to please nuclear plant operators, who say their facilities deserve subsidies for providing carbon-free power, and to infuriate anti-nuclear advocates who want more resources devoted to wind and solar.
The public has a brief opportunity to comment -- until July 18 – an indication that the PSC is likely to rule on the proposal at its Aug. 1 meeting.
Exelon Corp., which owns three of the four Upstate nuclear reactors, recently told the commission that the oldest two facilities might close unless subsidies were approved by September.
Exelon had said similar things about a proposal put to the Illinois legislature to incent existing nuclear units there by guaranteeing a $42/MWh rate for the generators. Illinois' legislature didn't act, and Exelon announced the closure of Illinois units.

The initial Syracuse.com story embedded Public Service Commission staff's recommendation - knows at POLITICO as Cuomo's nuclear subsidy plan. From the recommendation:
Replacement of the zero-emission attributes with equivalent amounts of fossil-fueled attributes would result in an increase of approximately 31 million metric tons of CO2 emitted into the atmosphere over the next two years, according to a report issued by The Brattle Group.
Staff is proposing to subsidize zero-emissions attributes from Zero Carbon Electric Generating Facilities when there is a public necessity to encourage their preservation. Payments for zero-emissions attributes would be based upon the U.S. Interagency Working Group’s (USIWG) projected social cost of carbon (SCC). This approach is consistent with the Commission’s approach in setting guidelines for Benefit-Cost Analysis. 
This may be the first payment scheme designed to price energy by the social cost of carbon. The formula is:
RGGI is the Regional Greenhouse Gas Initiative - so if it was trading carbon at what the USIWG considers the social cost of carbon the ZEC would be zero. If the combination of the RGGI credit costs, expected market pricing and capacity payments (in the "rest of state", or ROS zone) was equal to, or greater than, the USIWG's social cost of carbon, the price would be zero.

Tuesday, June 21, 2016

Diablo and the end of California nuclear

This morning Forbes posted Rod Adams' NRDC Announces PG&E Has Agreed To Kill Diablo Canyon:
The Natural Resources Defense Council (NRDC) has just issued a press release stating that they have signed a deal with [Pacific Gas and Electric Company], IBEW local 1245, the Coalition of California Utility Employees, Friends of the Earth, Environment California, and the Alliance for Nuclear Responsibility.
There is an implied quid pro quo. The groups will support PG&E’s request for an extension from the California Lands Commission of its land use permit that allows access to ocean cooling water at the Commission’s June 28 meeting. In return, PG&E will agree to withdraw its 20-year license extension application at the Nuclear Regulatory Commission . Instead, it will aim to retire the two-unit site when its current licenses expire in 2024 and 2025.
The involvement of the NRDC is noteworthy as it is the same special interest group that the New York Times credited with writing the Clean Power Plan - which I do not credit with being a plan for particularly clean power.
Outsourced government seems to be reality, as the agreement is basically opponents of nuclear power waving their ability to bring the power of government to bear upon the nuclear operator if the nuclear operation promises to disappear by 2025.

The President of the NRDC, Rhea Suh, formerly of the Department of the Interior within the Obama administration, wrote some strange things on the agreement in California’s Last Nuclear Power Plant:
For years, some have claimed that we can’t fight climate change without nuclear power, because shutting down nuclear plants would mean burning more fossil fuels to generate replacement electricity.
That’s wrong, of course, and now we have the proof.
Today, California’s Pacific Gas and Electric became the first power company toannounce plans to replace an aging nuclear reactor with sound investments that make us more energy efficient and help us get more clean power from the wind and sun.
 That's batshit crazy right there.

Economists opine on tools to reduce greenhouse gas emissions

I've noted a flurry of opining on pricing emissions, perhaps because I'm Canadian and the small, homogenous eco-econo group heard a blast that disturbed the herd, but two recent works from south of the border also caught my attention.

Carbon pricing under binding political constraints, by Jesse Jenkins and Valerie Karplus, provides an explanation of why a straight carbon tax is rarely implemented - and when it is, generally at very low levels.
...persistent political economy constraints motivate a search for climate policies that are politically feasible, environmentally effective, and economically efficient. As in many other domains of economic regulation, second best (and third and fourth best) climate policy mechanisms abound. By paying close attention to the distributional impacts of different climate policy instruments and their interaction with potentially-binding political constraints, economists, political scientists, and policy makers can help design climate policy responses that are both palatable enough to be implemented today and economically superior to alternative second-best instruments.
... we implement constraints of varying severity on:
  1. the maximum feasible CO2 price itself; 
  2. the maximum tolerable increase in final energy prices; 
  3. a maximum tolerable decline in energy consumer surplus; and 
  4. a maximum decline in fossil energy producer surplus.
The full paper contains many, many equations. The stated "main objective of this exercise was to put an analytical framework around," and I think that's achieved more in noting the contraints than in the attempts to measure them. The authors' conclusion invokes scenarios where public opinion could be moved towards increasing the price of CO2, as the first best option, but...

Meredith Fowlie delivers a warning that policies taken outside of pricing carbon have been to the detriment of carbon prices, in Time to Unleash the Carbon Market?

Thursday, June 16, 2016

Huron water level threatened again - by Toronto's Premier and its Environment (and Climate Change) Minister

The government of Toronto politician Kathleen Wynne issue a press release yesterday. I'll attempt to list the issue that caught my attention dispassionately.

Great Lakes and St. Lawrence Governors and Premiers Release First-Ever Regional Maritime Strategy:
Michigan Governor Rick Snyder and Ontario Premier Kathleen Wynne met today to discuss their ongoing partnership to grow the economy and create jobs. On behalf of the Great Lakes and St. Lawrence Governors and Premiers, they released the first-ever regional strategy to jumpstart the Great Lakes-St. Lawrence maritime transportation system. The strategy's objectives are to double maritime trade, shrink the environmental footprint of the region's transportation network, and support the region's industrial core. Once fully implemented, the strategy will help grow the region's maritime sector, which already contributes more than US$30 billion to the U.S. and Canadian economies and accounts for more than 220,000 jobs.
The strategy includes a blend of policies, programs and projects to rejuvenate the regional maritime system. Ten-year implementation of the strategy is estimated at US$3.8 billion based on preliminary analysis. The states and provinces will work with other levels of government, industry and other stakeholders to advance implementation of the recommendations over the longer term. Specific recommendations include:
  • Constructing a second "Poe Class" Lock in Sault Ste. Marie, Michigan, to ensure the movement of vital raw materials like iron ore and coal. The feasibility of a second hydropower plant should be examined, including the potential of using revenue for future lock maintenance and construction.
  • Clearing the system's dredging backlog to ensure transit for fully loaded vessels. 
  • Dredging the system's critical chokepoint--the St. Marys River--to its authorized depth of 27 feet, while a longer-term, system-wide analysis of bottlenecks is completed to make sure dredging dollars are used most efficiently.
Sounds wonderful - especially the shipping more coal part - but for the real environmentalists of Lake Huron (and particularly Georgian Bay), it seems likely to undermine decades of work getting the negative impacts of dredging the St. Clair river - to 27 feet - recognized.

Tuesday, June 14, 2016

2 new nuclear studies: on remote SMRs, and options for fuel recycling

Yesterday Ontario switched it's Energy Minister, along with the rest of the cabinet. The new Energy Minister, Glenn Thibeault, comes from being the Parliamentary Assistant to Glen Murray - and therefore from the culture my previous post covered.

Minister Thibeault arrives without any apparent background in science, engineering or technology, but he has some hefty reports he could deal with - maybe even read - as indicated in this Canadian Nuclear Association press release:
The Canadian Nuclear Association is pleased with the release of two new independent studies commissioned by the Ontario government on the benefits of advanced nuclear technologies.
The first study, "Feasibility of the Potential Deployment of Small Modular Reactors (SMRs) inOntario", assesses SMR siting requirements, technological maturity, and economics. The second study, "A Feasibility Study on the Recycling of Used CANDU Fuel", explores the prospects to reuse and recycle used CANDU fuel - determining their feasibility, and potential implications for policies.
"The government of Ontario's initiation of these studies is a further sign that it sees the potential of nuclear to help meet environmental and economic goals," said CNA President John Barrett.
...Natural Resources Canada co-funded the two independent studies, initiated by the Ontario Ministry of Energy (MOE).
Here are links:

Saturday, June 11, 2016

in Ontario, a climate circle

My province has been very active with the introduction of a cap-and-trade plan, both in creating revenue tools and planning the dispensation of the revenues.

A chronology of some events that brought about the current status - according to heresay I've encountered on social media, and subsequent research:
  • 2008, October - Dave Sawyer (of Enviroeconomics) and Nic Rivers (for M.K. Jaccard and Associates) prepare pricing carbon: saving green written for the David Suzuki foundation. A main finding of the report is "A substantial portion of the government revenue from a carbon price should be invested in a large-scale increase in renewable energy, home energy efficiency improvements, and public transportation."
  • 2009 - The National Round Table on the Environment and the Economy (NRTEE) releases ACHIIEVING 2050: A CARBON PRICING POLICY FOR CANADA. The work's "three principal policy elements" are cap-and-trade, regulations in various sectors including buildings and transportation, and using international carbon abatement trading (partially to mitigate costs). Like the earlier report for the David Suzuki foundation, the recommendations for disbursing revenues from cap-and trade include, "to invest in the required technologies and innovation needed to meet the Canadian environmental goal of reduced GHG emissions."
  • 2015, March - The government  appoints a Climate Action Group. David McLaughlin, NRTEE President and CEO in 2009, tweets, "More evidence ON moving to cap-and-trade carbon pricing regime...Climate change advisors experts in field"
  • 2015, November The government's draft Cap and Trade Program Design Options included, "From 2008 to 2010, Ontario collaborated on and co-authored Western Climate Initiative (WCI) design recommendations..." Ontario decides to join that.
  • 2016, May 13The Wall Street Journal carried an article, When All Economics is Political (subscription), on Russ Roberts of  EconTalk, which is a favourite podcast I found since being gifted, pointedly, a treadmill. Roberts jokes in the article,“How do you know macroeconomists have a sense of humor? They use decimal points.”
  • 2016, May 17 - following a Globe and Mail story based on a leaked draft of the climate change plan, the government spreads the message"The average energy costs to households for building energy and transport could rise in the order (of) $13 per month in 2017." The message originates from Dave Sawyer of Enviroeconomics, in a presentation that begins, "Our analysis indicates that the provincial GDP impact in 2020 would be equivalent to a drop in growth of 0.03%". Decimal pointsEconomists chuckle.
  • 2016, May 18government passes Landmark Climate Change Legislation facilitating actions by the government
  • 2106, June 8 - government has media launch of the Climate Change Action Plan. The media includes a commercial with an audience of children listening to David Suzuki.
Suzuki's re-appearance closes that circle.

Wednesday, June 8, 2016

EV, or not EV? and how

Incentives to purchase electric vehicles were a focus of Ontario's Climate Action Plan, but they didn't come from the automotive expert on the Climate Action Group appointed last March.

What would it take to make you buy an EV?
Industry consultant Dennis DeRosiers is blunt: “An incentive means a product has failed. The fundamental issue is that internal combustion engine cars are better.” He shakes his head that programs that have failed in virtually every jurisdiction where they’ve been introduced have not delivered a fraction of the anticipated results, and yet Ontario believes it will change the course. “Scrapper programs fail unless you’re prepared to force cars off the road. Governments won’t do that.”
DeRosiers was part of the provincial Climate Action Committee, and says in 100 hours of meetings less than half an hour was devoted to the auto sector. And despite the transportation sector making up 35 percent of all greenhouse gases in Ontario, he claims that none of his suggestions or advice was taken during these meetings. I asked about the popular projections that by 2050 our roads will be dominated by electric vehicles; he points to Germany, where the goal was 1 million EVs by 2020, and it currently sits at 70,000. “The greenest country in the world, and they don’t want them,” he says.
“Despite rebates and incentives, 96 per cent of drivers choose gas cars. And this is not the manufacturer’s fault. They are consistently making cars that are 20 percent more fuel efficient year over year.
“This is about drivers not wanting the new technology. It is still overwhelmingly for people who can afford two cars, so we’re talking not about buying one car, but two, and all the costs associated with that. And don’t forget the brutal depreciation on the electrics.”

Saturday, May 28, 2016

Wind driving extreme pricing in Ontario's electricity market

"There were wind shortfalls in all but one of the 28 High HOEPs during the Current Reporting Period"

Industrial wind turbines are driving extreme prices in the Ontario market according to the latest report from The Ontario Energy Board (OEB) Market Surveillance Panel (MSP).

And the past week's market performance.

  • On Sunday May 22, during hour 8, the system operator's (IESO) 5 minute Market Control Price (MCP) bottomed out at it's minimum of -$2,000 per megawatt-hour (MWh)
  • On Tuesday May 24, during hour 20, the 5 minute MCP hit the maximum $2000/MWh

Both spikes appeared to be due to renewable and demand forecasts being poor predictors of actual market conditions. The OEB's new report is therefore very relevant today, despite being for the period from November 1, 2014 to April 30, 2015.
In the Current Reporting Period there were 28 hours in which the HOEP exceeded $200/MWh (High HOEPs). This Period also had the highest HOEP since market opening, reaching $1402/MWh in hour ending 8 on February 20, 2015. The High HOEPs were primarily caused by under-forecasts of demand and short-notice losses of supply (curtailing of imports and under-generation of wind facilities relative to their forecast production).
Identifying the factors that lead to deviations between the PD-1 MCP and the HOEP provides insight into the root causes of price risks that participants, particularly importers and exporters, face as they enter offers and bids into the market.
This is the complicated data explanation of the simple mechanism through which forecasts can cause price spikes (for the reported period almost the exclusive cause of high priced hours). "Demand" to the MSP is demand from  IESO grid-connected generators. If the forecast for wind, and solar, is light the demand for grid-connected supply would be greater as embedded wind, and/or solar, would be less productive than expected too.
2.1.2  Wind Shortfalls, Demand Under-forecasting and High HOEPs 
A ‘wind shortfall’ occurs when real-time wind output is less than the hour-ahead (PD-1) forecast. Conversely, under-forecasting of demand occurs when real-time demand is greater than the PD- 1 forecast. Both of these conditions result in a greater need for supply in real-time than was contemplated in PD-1. There were wind shortfalls in all but one of the 28 High HOEPs during the Current Reporting Period, and an under-forecasting of demand in 22 of the 28 High HOEPs. Figure 2-3 maps the HOEP against wind and demand forecasts, and shows a data point for each hour during the Current Reporting Period. The coordinates represent the degree of demand forecast error (on the y-axis) and wind forecast error (on the x-axis). If a data point lies above the x-axis, then real-time demand was higher than forecast (the forecast underestimated real-time demand). If a data point lies to the right of the y-axis, then real-time wind production was less than was expected in the PD-1 timeframe (real-time wind production fell short of expectations). 
Figure 2-3: HOEP Map Against Ontario Demand Under-Forecasting and Wind Shortfall November 2014 – April 2015 (MW)

Thursday, May 26, 2016

California cap-and-trade auction predictably fails.

An article in the Los Angeles Times notes the poor results of California's latest auction of greenhouse gas credits.
Buyers at the auction took just 785,000 of the 43 million allowances offered, each of which allow the emission of one metric ton of carbon dioxide. All the permits were bought at the floor price of $12.73.
But there is a secondary market, where the private parties who own the credits trade them daily. Those credits were recently priced at $12.34, well below the state floor in the auctions. It means that any company needing a credit could buy it more cheaply on the secondary market than in the auction.
There are a lot of very poor, and mainstream, economists who have a great zeal for pricing carbon and no interest in attending to detail.  Most are professors. They are represented in the article by:
...a serious possibility is that emitters of carbon dioxide are making better-than-expected progress at cutting their gas output. That would mean the program is more successful than expected...
Another serious possibility is there is a flood of credits on a secondary market - credits  attained without any real reduction in emissions, which I've learned from following Aldyen Donnelly are known as "hot air" credits.
These are the credits that depress the carbon price. My province of Ontario may have chosen to join California in cap-and-trade precisely because it will be cheaper to purchase "hot air" credits from California than to attain actual carbon reductions at home.

From Twitter: