Renewables, Micropower, and the Transforming Electricity Landscape By Bennett Cohen and Amory Lovins Originally published in Solutions Journal, Spring 2010 http://www.rmi.org/rmi/RenewablesMicropowerTransformingElectricityLandscape At RMI, we’ve been asking our- selves how the world will get its elec- tricity—now the source of over two- fifths of fossil carbon emissions and the recipient of most of the world’s investments in energy systems. Over the next 50 years, nearly all currently operating power plants will retire, so the future may be utterly different than the past or present—and our lat- est data strongly suggest it will. Every day, utilities and emerging competitors are planning and build- ing the assets they’ll be using in 2050. Tracking those choices reveals the rapidly shifting contours of the future power system—and what investors think it makes economic sense to build now. Since the 1970s, we’ve taken a special interest in the smaller, cheaper, faster, cleaner, and more secure electric generators that the Economist calls “micropower”: all renewable sources except big hydro dams, plus cogenerating electricity together with useful heat in factories or buildings. Cogeneration, also called “com- bined heat and power,” (see “Fossil- Fueled Cogeneration” sidebar) typi- cally saves upwards of half the cost, fuel, and emissions of making them separately. In 2002, we published “Small is Profitable,” an Economist book of the year that remains the definitive work on micropower’s hidden economic benefits. In 2005, we began posting and updating the only detailed public database of global progress in deploy- ing micropower. Now our latest update confirms micropower’s remarkable acceleration in taking over the global market long dominated by central thermal sta- tions—coal- or gas-fired, nuclear, and big hydro. This dramatic shift augurs well for the world’s clean and secure electricity future. Our May 2010 update includes data through 2008 or 2009 (depend- ing on availability), and transparently recalculates cogeneration capacity and output from the primary data sources. (See the very latest micropower data, updated in September 2010.) All data sources (see “Micropower Data” sidebar) and assumptions are documented. The data are subject to inevitable uncertainties, but are based in general on bottom-up equipment counts provided by industry, and cross-checked where possible against government output metrics. The totals are probably conservative, because the cogeneration capacity and output shown are known to be significantly undercounted. We will continue to update the database as new information arrives. The emerging micropower revolu- tion is making new electricity less carbon-intensive, faster to deploy, often cheaper. New power plants are increasingly being chosen by entre- preneurs and investors rather than by central planners, driving a shift to- ward smaller and cleaner plants with better economics. Faster construc- tion reduces financial risks. Shorter decision cycles better capture rapid technological evolution and falling costs. All these trends heighten com- petitive pressure on big, slow, lumpy projects whose greater financial risks are clearly deterring investors. The changing electricity landscape depends on plant construction, retire- ment, and operations. The latter is important for nuclear power, which during 1990–2006 increased its global capacity by 44 GW (13.5 percent) but its output by 757 TWh/y (40 percent), due to the combined effects of new construction (36 percent), uprating (7 percent), and improved capac- ity factors through better operation (57 percent). Meanwhile, though, micropower pulled ahead of nuclear power, outproducing it in 2008 by 25.8 percent and in 2009 by 34.1 percent. The Rise of Renewables A common argument against re- newable power is that it can’t possibly Fossil-Fueled Cogeneration Combined heat and power (CHP) is sometimes fueled by biomass, like black liquor and hog fuel in pulp- and-paper plants or sawdust and scraps in furniture factories, but it’s primarily fossil-fueled. So why would RMI, whose focus is to speed the U.S. transition away from fossil fuels to efficiency and renewables, be excited about the market adoption of smaller fossil-fuel-fired generators? The answer is cogeneration’s radical efficiency. Traditional power plants convert one-third of their fuel into electricity and two-thirds into waste heat. Cogeneration uses both. Often industrial heat made to run a manufacturing process can also make electricity, even from leftover high-temperature heat that is being expensively disposed of, but without using any more fossil fuel. Or small generators in buildings can heat or cool them with heat left over from making electricity. Such methods typically save at least half—often two-thirds or more— of the fuel, emissions, and cost of making electricity and heat separately, Moreover, most cogeneration is gas- fueled; gas is often more efficiently burnable than coal and emits only half of coal’s carbon per unit of contained energy. Thus the International Energy Agency reckons that accelerating CHP could save 10 percent of global CO2 by 2030. The most efficient CHP systems can exceed 90 percent efficiency from fuel to useful work. Replacing, say, America’s 920 oldest coal plants with modern combined-cycle gas plants, then using most of the other 40 percent for district heating, would cut their CO2 emissions by more than three-fourths, save money, and help nearby city- dwellers’ pollution-assaulted lungs. The gas-fired cogen system would still be fossil-fueled, but a great improvement, surpassed only by—and competing with—superinsulated, superefficient buildings and renewable electricity.
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Renewables, Micropower, and the Transforming Electricity LandscapeByBennettCohenandAmoryLovins
OriginallypublishedinSolutions Journal,Spring2010http://www.rmi.org/rmi/RenewablesMicropowerTransformingElectricityLandscape
AtRMI,we’vebeenaskingour-selveshowtheworldwillgetitselec-tricity—nowthesourceofovertwo-fifthsoffossilcarbonemissionsandtherecipientofmostoftheworld’sinvestmentsinenergysystems.Overthenext50years,nearlyallcurrentlyoperatingpowerplantswillretire,sothefuturemaybeutterlydifferentthanthepastorpresent—andourlat-estdatastronglysuggestitwill. Everyday,utilitiesandemergingcompetitorsareplanningandbuild-ingtheassetsthey’llbeusingin2050.Trackingthosechoicesrevealstherapidlyshiftingcontoursofthefuturepowersystem—andwhatinvestorsthinkitmakeseconomicsensetobuildnow. Sincethe1970s,we’vetakenaspecialinterestinthesmaller,cheaper,faster,cleaner,andmoresecureelectricgeneratorsthattheEconomistcalls“micropower”:allrenewablesourcesexceptbighydrodams,pluscogeneratingelectricitytogetherwithusefulheatinfactoriesorbuildings. Cogeneration,alsocalled“com-binedheatandpower,”(see“Fossil-FueledCogeneration”sidebar)typi-callysavesupwardsofhalfthecost,fuel,andemissionsofmakingthemseparately. In2002,wepublished“SmallisProfitable,”anEconomistbookoftheyearthatremainsthedefinitiveworkonmicropower’shiddeneconomicbenefits.In2005,webeganpostingandupdatingtheonlydetailedpublicdatabaseofglobalprogressindeploy-ingmicropower. Nowourlatestupdateconfirmsmicropower’sremarkableaccelerationintakingovertheglobalmarketlongdominatedbycentralthermalsta-tions—coal-orgas-fired,nuclear,andbighydro.Thisdramaticshiftaugurswellfortheworld’scleanandsecureelectricityfuture.OurMay2010updateincludes
datathrough2008or2009(depend-ingonavailability),andtransparentlyrecalculatescogenerationcapacityand
outputfromtheprimarydatasources.(Seetheverylatestmicropowerdata,updatedinSeptember2010.) Alldatasources(see“MicropowerData”sidebar)andassumptionsaredocumented.Thedataaresubjecttoinevitableuncertainties,butarebasedingeneralonbottom-upequipmentcountsprovidedbyindustry,andcross-checkedwherepossibleagainstgovernmentoutputmetrics.Thetotalsareprobablyconservative,becausethecogenerationcapacityandoutputshownareknowntobesignificantlyundercounted.Wewillcontinuetoupdatethedatabaseasnewinformationarrives. Theemergingmicropowerrevolu-tionismakingnewelectricitylesscarbon-intensive,fastertodeploy,oftencheaper.Newpowerplantsareincreasinglybeingchosenbyentre-preneursandinvestorsratherthanbycentralplanners,drivingashiftto-wardsmallerandcleanerplantswithbettereconomics.Fasterconstruc-tionreducesfinancialrisks.Shorterdecisioncyclesbettercapturerapidtechnologicalevolutionandfallingcosts.Allthesetrendsheightencom-petitivepressureonbig,slow,lumpyprojectswhosegreaterfinancialrisksareclearlydeterringinvestors. Thechangingelectricitylandscapedependsonplantconstruction,retire-ment,andoperations.Thelatterisimportantfornuclearpower,whichduring1990–2006increaseditsglobalcapacityby44GW(13.5percent)butitsoutputby757TWh/y(40percent),duetothecombinedeffectsofnewconstruction(36percent),uprating(7percent),andimprovedcapac-ityfactorsthroughbetteroperation(57percent).Meanwhile,though,micropowerpulledaheadofnuclearpower,outproducingitin2008by25.8percentandin2009by34.1percent.
The Rise of Renewables Acommonargumentagainstre-newablepoweristhatitcan’tpossibly
Fossil-Fueled Cogeneration Combined heat and power (CHP) is sometimes fueled by biomass, like black liquor and hog fuel in pulp-and-paper plants or sawdust and scraps in furniture factories, but it’s primarily fossil-fueled. So why would RMI, whose focus is to speed the U.S. transition away from fossil fuels to effi ciency and renewables, be excited about the market adoption of smaller fossil-fuel-fi red generators? The answer is cogeneration’s radical effi ciency. Traditional power plants convert one-third of their fuel into electricity and two-thirds into waste heat. Cogeneration uses both. Often industrial heat made to run a manufacturing process can also make electricity, even from leftover high-temperature heat that is being expensively disposed of, but without using any more fossil fuel. Or small generators in buildings can heat or cool them with heat left over from making electricity. Such methods typically save at least half—often two-thirds or more—of the fuel, emissions, and cost of making electricity and heat separately, Moreover, most cogeneration is gas-fueled; gas is often more effi ciently burnable than coal and emits only half of coal’s carbon per unit of contained energy. Thus the International Energy Agency reckons that accelerating CHP could save 10 percent of global CO2 by 2030. The most effi cient CHP systems can exceed 90 percent effi ciency from fuel to useful work. Replacing, say, America’s 920 oldest coal plants with modern combined-cycle gas plants, then using most of the other 40 percent for district heating, would cut their CO2 emissions by more than three-fourths, save money, and help nearby city-dwellers’ pollution-assaulted lungs. The gas-fi red cogen system would still be fossil-fueled, but a great improvement, surpassed only by—and competing with—superinsulated, supereffi cient buildings and renewable electricity.
beeconomicallycompetitivewithlargecentralthermalpowerplants,because,afterall,renewables(exceptbighydrodams)provideonly2percentofworldelectricity,versuscoal’s41percentandnuclearpower’s13percent.Ifrenewableswerecom-petitive,we’retold,they’dproduceagreatershareofworldelectricity.Butthesesharesreflectthetechnologies,costs,costdistortions(chieflylargesubsidiestofossilandnuclearplants),andinstitutionalpreferencesandbar-riersofdecadesago.
Toseethegreatwaveofchangestart-ingtosweeptheglobalelectricitymarket,weneedtolookatdifferenttechnologies’marketshareofnewelectricitygeneration,reflectinginvestors’andbuyers’choicesundertoday’sverydifferentconditions. CoalmakesnearlyhalfofU.S.electricity(45percentin2009whennatural-gaspriceswerelow),butthemedianU.S.coal-firedpowerplantis41yearsoldwhenweightedbyunit,or30whenweightedbycapacity. Sowhat’sbeingboughttoday,notdecadesago?Notcoal. In2009,windandotherrenewablesaccountedfor42.2percentofallnewU.S.generatingcapacity,whilegasaccountedfor43.3percentandcoalforonly12.6percent.TheU.S.installed10GWofwindpowerin2009alone—nearlytwicethe6GWofcoaladdedduringtheentiredecadeof2000–2009.
Coalstilldominatesinstalledcapacityduetodecades-olddecisions(becauseoflongleadtimes,eventhecoalplantsnowenteringservicereflectdecade-olddecisions),butcoal’sU.S.andE.U.marketshareisnowdwin-dlingbecauseinvestorsareinsteadchoosingtobuildrenewablesandnaturalgaspower.Europein2009closedmorenuclearandcoalcapacitythanitadded.EvenChinahalveditsnetadditionsofcoalcapacitydur-ing2006–2009,reducedthecoal-firedshareofitstotalelectricityproductionbyoneandahalfpercentagepointsin2009,andisplanningonlyaboutfive-eighthsofits2010netadditionsofelectricalcapacitytocomefromcoal(nearlyalltherestisrenewable). Early2010datasuggestthistrendwillaccelerate.AccordingtoNewEn-ergyFinance,aleadingenergyindus-tryinformationproviderthattrackstheworld’sindividualclean-energytransactions,theworldinvested$27.3billioninrenewableenergyduringthefirstquarterof2010,up31percentfromthesameperiodin2009.
Smaller Is Better Partofthereasoninvestorsarefavoringrenewablesoverbigcentralthermalpowerplantsisthatrenew-ablesentailmuchlessfinancialriskandarequicklybuiltandstartedup.Mostcoalplantsarebeingcancelledorpostponed,whilerenewablecapacityisburgeoning—andmuchofthe2013renewablecapacityadditionsaresoquicktobuildthattheywon’tevenbeannounceduntil2011–2012. Attheendof2009,270GWofproposedU.S.windcapacity(notallfirmlyplanned)wasstuckinthequeueawaitinginterconnectiontothegrid,oftenresistedbyrecalcitrantcoal-firedutilitiesthatdislikecompetition.That’senoughwindpowertodisplacenearlyhalfofU.S.coal-firedelectric-ity,athalfthecostofpowergeneratedbyanewcoalplant.AndinTexas,thetopwindpowerstate,17percentofpotential2009windgenerationfromalready-installedturbineswascurtailed,oftenbylackofavailabletransmissioncapacity. RenewablesaregainingmarketshareevenfasterinEurope(seebe-low),accountingfor71percentofnewelectriccapacityaddedin2009.Ofthe31percentfromnaturalgas,too,asignificantfractionwasdecentralizedcogeneration.
Micropower = Renewables + Cogeneration (Except Big Hydro) Butthe“fuelstory”—thetransitionfromfossilfuelstorenewables—isonlyoneoftheshiftstransformingtheelectricitylandscape.Equallyimpor-tantisthe“scalestory”—thetransitionfromlargetosmallscale,andawayfromgiantcentralthermalplantstomicropower. Micropoweristypicallymodular,quicklydeployable,andfinanciallylower-riskthanlargecentralthermalplants.Itmayhavealotofcapacityclusteredtogether,likeawindfarmwith100-plusturbinestotalinghun-dredsofmegawatts,butitseconomiescomechieflyfrommassproductionofmodularunits(suchasindividualwindturbinesorsolarpanels)ratherthanfromthegargantuansizeofsingleunits.
Micropower Data Tracking micropower’s progress requires a considerable effort to combine many disparate data sources. One other independent organization—an important global network of renewable energy experts—annually updates its database on renewables. Until 2006, the World Alliance for Distributed Energy published an annual assessment of cogeneration plus small-scale wind and solar generation. We are unaware of another organization that compiles and publishes both cogeneration and renewables as RMI does. We suspect that, following a 2008 G8 communiqué directing countries to “...adopt instruments and measures to signifi cantly increase the share of combined heat and power in the generation of electricity” and the establishment of a special CHP working group at the International Energy Agency (IEA), better international cogeneration data will become available. In the U.S., the Energy Information Administration already began tracking industrial and commercial cogeneration in 2008, although an IEA report shows nearly twice as much installed capacity. Some central-station-oriented organizations, chiefl y in the nuclear industry, reject our data out of hand because their databases don’t show much if any micropower. That’s because they’re consulting databases confi ned to utility-owned or large units or both, and often excluding the newer kinds of renewables. Looking at the wrong database can be a bet-your-company mistake.
In2008,micropowerproducedabout17percentoftheworld’stotalelectricity,3percentagepointsmorethanitssharein2002.Nuclearpower’ssharemeanwhilefellbyslightlymore,andaccordingtoInternationalAtomicEnergyAgencydata,probablyfelltoaround13percentin2008andevenlowerin2009(Fig.1).Wedonotyetknowexactlyhowmuchelectricitytheworldgeneratedin2009,sowecan’tyetconfirmmicropower’s2009shareofthattotal,butitprobablyexceeded2008’sshare. Evenmoreimpressively,micro-power’sshareoftheworld’snewelectricity,hoveringaroundone-fourthormoresince2002,appearstohavesoaredto91percentfrom2007to2008asadditionalgenerationfellby63percentintheglobalrecession(Fig.2).Thisfigureisfuzzybecausethedenominatoristhedifferencebetweentwobignumbers,anddifferentsourc-es’statisticalseriesdiffer.IfweusedtheIAEA’sinsteadofBritishPetro-leum’sdenominatorfor2007and2008,micropower’sshareofnewgenerationwouldbeonly64percent,butitsshareoftotalgenerationwouldn’tchange.(Thetwoorganizations’generationtotalsmatchexactlyfor2008butnotfor2007.)
The2009data,whichRMIwillpostwhenavailable,mayalsoshowahighmicropowershareofnewgenerationbecausemostrenewablesresistedtherecessionbetterthancentralplantsdid.However,resumptionofreces-sion-suppressedgrowthinelectric-itydemandcouldsomewhatreducemicropower’sshareofnewgenera-tionaddedinthenextfewyears.Forexample,its2008addedgenerationwas36.5percentofthetotalaverageannualincreasesduring2005–2007.Butthat’sstillimpressive,andcom-pareswithnuclearpower’sshareoflessthan1percent.
Micropower’s Recent Impressive Achievements• In2006,micropowerproduced
16percentto52percentofallelectricityinadozenindustrialcountries—notincludingtheU.S.(~9percent),whoserulesfavorincumbentsandtheirgiantplants.Nuclearpowerworldwideadded1.44GW(onebigreactor’sworth)ofnetcapacity—morethanallofitfromupratingoldunits,sincere-tirementsexceededadditions.Butphotovoltaicsaddedevenmorecapacity;windpower,tentimes
more;micropower,30to41timesmore.Micropowerplusefficiencyprobablyprovidedoverhalftheworld’snewelectricalservices.InChina,theworld’smostambitiousnuclearprogramachievedone-sevenththeinstalledcapacity(7GW)andone-sevenththegrowthrateofChina’sdistributedrenew-ables(49GW).
• In2007,theU.S.,Spain,andChinaeachaddedmorewindcapacitythantheworldaddednuclearcapacity,andtheU.S.addedmorewindcapacitythanitaddedcoal-firedcapacityduring2003–2007,inclusive.Chinabeatits2010windpowertarget.
• In2008,Chinadoubleditswind-powerforthethirdyearinarow.Windpowerpulledaheadofgas-firedcapacityadditionsforthefirstyearintheU.S.andthesecondyearintheEU;inboth,renewablesaddedmorecapacitythannonrenewables.Thatplus~$40billionforbighydrodamsbroughtrenewablepowerproduc-tion,forthefirsttimeinaboutacentury,moreinvestmentthanthe~$110billioninvestedinallfossil-fueledpowerstations.
• In2009,theU.S.addedanother10andChinaanother13GWofwindpower.
• Inspring2010,Chinashouldbeatits2020windpowertarget,andaroundtheendof2010,renew-ables(excludingbighydro)shouldsurpassnuclearpowerintotalcapacity,overtakingitinoutputsome4–5yearslater.
• Developingcountriesin2008had43percentofrenewables’globalcapacity(excludingbighydro),headingforthemajority.AmajorAsianshifttorenewablescouldshrinkglobalcoaluse,because97percentofincrementalcoalde-mandisinAsia:ChinaandIndiausenearlyhalfofworldcoalandhad75percentofworldcoal-firedcapacityunder2008construction.Thisshiftisstartingtoemerge:China’snetrateofaddingcoalplantsfellbyhalfduring2006-2009Chinaalsoshutdown62GWofinefficientoldcoalplantsduring2005–2009,planstoclose31GWmoreby2011,andap-
pearstobecoolingitsoverheatednuclearambitionswhileaccelerat-ingefficiencyandrenewables.Thenew2020wind-and-PVtargetisreportedly~120GW,andaTsing-hua/Harvardteamfoundin2009thatChinacancost-effectivelyandpracticallyprovidetwiceasmuchwindpowerasitstotalcurrentelectricityuse.
The Bottom Line Centralthermalpowerplants—nuclearorfossil-fueled—arerapidlylosingshareintheglobalmarketplace,andfiercecompetitionisincreasingtheiralreadydauntingfinancialrisks. Newpowergenerationismov-ingphysicallyclosertocustomers,avoidingnewtransmissionlinesandpotentiallymakingpowersupplymorereliable.IntheU.S.,forexample,approximately98to99percentof
powerfailuresoriginateinthegrid,andonsitegenerationbypassesthiscauseofoutages. Newwaystodiversify,forecastandintegratevariablerenewables(wind-powerandphotovoltaics)intothegridcanletthemachieveveryhighsupplyfractionswithoutneedingbulkelectricitystorage. Inall,theshiftofbothsourceandscaleisrevolutionizingtheelectricitybusiness—theworld’smostcapital-intensiveandcriticalinfrastructuresector—beforeoureyes.
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