ACES Act caps US greenhouse gas emissions

The passed bill would establish a cap-and-trade system to achieve lower US emissions levels by allowing institutions to trade their emissions permits so that the most efficient reduction projects are executed. This market-based incentive is estimated to be cheaper than mandating all institutions to lower emissions the chosen percentage without regard to each institution’s costs. The cap, beginning in 2012, is set for 2020 emissions to equal 17% below 2005 (or ~4% below 1990) and then 2050 emissions at 83% below 2005 (~80% below 1990). The original bill draft called for 20% below 2005 by 2020 but was relaxed as a compromise to shore up support among legislators from coal states.

The sharp drop in emissions during 2008-09 already has emissions at 6% below 2005 levels, so 17% below seems unaggressive to me. I hope advances in solar, wind, and efficiency help persuade legislators to lower the cap at least back to 20% below 2005 during the bill’s continued development or after it becomes law.

Electricity Emissions Continuing to Plunge

The EIA just published its preliminary estimate for March electricity generation, and the numbers are even more climate-friendly than last month. The most notable change is the large substitution from coal to natural gas due to the recent lower prices for natural gas. Coal use fell 14.5% from March 2008 while natural gas consumption increased 5%. More good news for the climate were a 1.2% increase in hydroelectric power generation, a .3% increase for nuclear, and a 4.8% decrease for petroleum liquids.

Year-to-date, 2009 coal consumption for electricity is down a whopping 10.2% (much more than the EIA projection of ~2.5%, as I wrote last week would probably occur). Natural gas use for electricity has fallen .8%. US emissions could fall as much as 5% in 2009 (to 7.5% below 2005 levels) if current trends continue. But for now, I’ll stick with the more conservative projection that they will fall more than 3%.

Here’s to swift passage of climate legislation to ensure emissions continue falling during our economic recovery in the 2010s.

Onwards in the Sustainable Energy Transition-

Prices Today Require Government Incentives

Solarbuzz.com estimates that May 2009 solar PV prices equal 36.88 cents, 26.68 cents, and 20.78 cents per kWh for residential, commercial, and industrial electricity, respectively. Thus, only the state of Hawaii (with its 25+ cents per kWh average has an electricity market where solar can compete with little supportive policy this year. But PI projects solar module prices to fall 25% in 2009, 19% in 2010, and more than 10% in both 2011 and 2012. This would translate into a locked-in price for solar electricity of around 20 cents, 15 cents, and 12 cents per kWh (assuming that installation costs would also fall, though around half the module price drop pace).

2012 Grid Parity in Almost Half the US

Huge electricity markets such as California, Texas, Florida, and New York will join Hawaii by 2012 as long as electricity prices keep rising (I use a price rise of 3.5% per year – much less than the 4.8% per year increase over the last eight years). Since there is state and federal policy supporting solar through the mid-2010s, private consumers already benefit from cost-effective solar in many of these states (Why else would Wal-Mart be deploying it?). And thanks to falling prices for solar, the amount of government support per kilowatt can be lowered as it becomes many times more effective at deploying solar.

Even if electricity prices only rise 1% per year (thanks to effective efficiency and low-cost wind power deployment), solar grid parity is poised to arrive during the mid-2010s.

A New Notion of Grid Parity

Since solar has a locked-in price due to a marginal cost close to zero as you harvest the free sun, grid parity is not when the price of solar is equal to the price of conventional fuels. I am saying that it is instead when the price of solar is equal to the expected price of conventional fuels halfway through the life of the panels. So grid parity in 2012 based on a price of 20 cents per kWh means that I expect the price of electricity in a given market will be at least 20 cents in 2024.

Why Should Fossil Fuel-Powered Electricity Prices Rise

A rising price for oil beyond $100 per barrel is likely due to the rising marginal cost of production. Such an increase would pressure natural gas prices to double back above $9 per MBtu and weigh bullishly on electricity prices. Along with the cost of carbon dioxide finally being internalized into the cost of burning fossil fuels, solar power’s relative price is set to collapse.

Bottom Line: This time of sustainable energy transition is an exciting period to be around for. Solar panels today are like cell phones in 1999. In just a few years, they will be ubiquitous. Passage of federal climate legislation is a crucial step we need to take soon, and then we can all reap the rewards from leading a low-carbon energy future — green jobs, energy security, lower electricity bills (while prices per kWh may rise, efficiency sends the per capita bill down), cleaner air, and a more stable climate.

I’ll keep you up-to-date as solar reaches grid parity in market after market like a set of slow-moving dominoes.

Onwards-

Composition Changes: Lower Carbon Intensity

On top of the lower overall consumption of electricity is a shift toward lower carbon intensity of the electricity generated. This shift was strongest in February when dirtier coal consumption for electricity fell 13.4% while demand for cleaner natural gas increased 2.4% and wind climbed significantly as well. The low price of natural gas is driving the shift from coal, as I wrote in February may happen. This could lead to coal’s share of electricity falling below 48% in 2009, a continuation of coal’s share decline of the last ten years described a couple weeks back.

Carbon Emissions Poised to Fall 3+%

When you add up fossil fuel consumption in early 2009, you get a picture of emissions in freefall. Rather than the 2.5% emissions drop I described a few days ago from the April EIA Short Term Energy Outlook, emissions from energy use are currently falling at a 5% rate. Coal use is falling ~8%, natural gas for electricity is down ~4%, and oil demand is more than 4% below 2008 levels.

Since it is possible that weather (a hot summer and cold early winter) and a late 2009 economic recovery may bring emissions levels closer to those in 2008, for now I will say that emissions are poised to fall more than 3% this year. But keep the higher 4-5% range in mind as possible – which would bring US emissions to just ~6.5% above 1990 levels.

Bottom Line: US carbon dioxide emissions are poised to fall dramatically in 2009. The more we deploy efficiency and renewables, the faster we can send emissions down and keep them down as our economic recovery revs up in late 2009/2010. I’ll keep you updated at SETenergy.org as this develops during the months ahead.

The rapid wind growth of 2008-09 is truly remarkable amidst the backdrop of a difficult recession. And it strengthens my argument that the EIA is underestimating wind power deployment over the next two decades. The report points to 300 GW of wind projects in the current pipeline. Some may not come to fruition. But if just half of them become reality by 2030, it will more than double the EIA’s forecast. And many new proposals will come about in the years ahead as our wind resource becomes better understood and wind turbine technology improves its efficiency and costs.

Wind power in the US will probably pass 1.5% of US electricity in 2009 and then 2% in 2010 as it marches toward our potential to at least equal Denmark’s 20%.

I’ll keep you updated as this clean energy market continues to develop!

Onwards in the Sustainable Energy Transition-

The Details

North Carolina currently has an electrical capacity of ~28 GW, as reported by the US Energy Information Administration State Energy Profile. The bulk of the state’s electricity comes from coal (~60%) and nuclear (~35%). The remaining ~5% is mostly hydropower, then some natural gas and a little renewable electricity (mostly biomass, since there is no  significant wind capacity installed to date and only a trace of solar (~5 MW)).

Recently, electricity consumption has been falling due to efficiency and the recession. For instance, last December demand was 2.5% below year-ago levels. With federal and state leaders focused on energy efficiency, there is a significant possibility that electricity consumption may not need to grow from now on. And that scenario is what the NC WARN report is based on.

Blackburn, the former chair of Duke University’s Economics Department, and Runkle, a NC attorney, put forth an electricity demand future based on 1% per year efficiency progress through 2023. Their scenario also has an acceleration of renewable energy deployment as called for in the state’s Renewable Energy Portfolio Standard (REPS) of 12.5% (7.5% renewables and 5% efficiency). They highlight the growing opportunities to take advantage of solar’s falling price and the state’s significant wind potential (located in the mountains, along the coast, and offshore). Coupled with a few co-generation retrofits and policies to shave peak electricity demand, these advances allow the retirement of 3.7 GW of older coal plants or as many as 7 to 9 existing plants.

The Costs

Since the plan is based on efficiency that is proven to cost less than 5-6 cents per kWh of demand reduction, this would save North Carolinians a great deal of money in the years ahead. Instead of spending tens of billions of dollars on proposed new coal and nuclear plants (potentially lifting electricity rates 50+% above today’s 7.5 cents per kWh), North Carolina can put those resources into becoming a leader in climate-friendly energy resources and thus reap the benefits of green jobs and a strengthened economy.

Energy Security: Putting NC’s Resources to Use

North Carolina has more powerful solar potential than Germany, the world leader that has over 5 GW installed to date (1,000X current NC capacity). And Interior Secretary Salazar recently bragged of the 1,000 GW wind potential offshore in the Atlantic, of which North Carolina has a sizable chunk. Harvesting these vast North Carolina resources would create many thousands of jobs and can help lead an economic recovery.

North Carolina is not a significant producer of oil, coal, or natural gas. So it’s time we begin to free ourselves of these volatile energy sources and rely more on our own resources. Within a few years, Plug-in Hybrid Electric Vehicles (PHEVs) can help to free us from a dependence on oil, which brought much transportation to a halt last Fall after the Gulf hurricanes.

The Climate Needs Us to Say No to New Coal

To keep our lovely coastline mostly intact, North Carolina will have to do its climate part — including avoiding new non-CCS (Carbon Capture and Storage) coal capacity. Construction at Cliffside is more than 10% underway, but the project should be re-examined with a carbon constraint lens.

Our climate can’t take any more coal plants. Thanks to efficiency, we don’t need more electricity. And thanks to renewable resources available to us, we can begin to phaseout greenhouse gas emitting fossil fuels (coal, oil and natural gas) in the years ahead.

This Sustainable Energy Transition won’t happen in a matter of months. But we all have a role to play to make it happen through smart energy policy and habits over the next few decades as the NC WARN report begins to lay out.

Kudos to NC WARN and everyone involved in sharing this important information with us.

The stability of solar prices remains impressive to me since fossil fuel prices have collapsed by more than 60%. This occurs thanks to many of today’s modules sales set up via long-term contracts. A number of solar manufacturers at the margins have reduced prices as much as 30%, so there are bargains to be had even if most prices are resilient.

Bottom line: The downward movement in prices is helping to increase the competitiveness of solar versus other energy sources. It is probably good for the industry that module prices are falling slowly, but price declines will need to accelerate in the years ahead if we are to achieve grid parity in sunny markets by the end of current subsidies in 2016.

The US became the global wind leader at 25.2 GW with Germany moving to #2 at 23.9 GW. The North American and European markets were roughly equal in 2008 growth, with Asia following closely behind.

China Rising

China doubled its wind capacity again this year, adding a big 6.3 GW to hit 12.2 GW installed (4th globally after Spain). And China is poised to grow faster than any other country in 2009, potentially doubling again to ~24 GW. At such a quick rate, China will probably pass Spain and Germany by 2010 (and accomplish its 30 GW by 2020 national goal 10 years in advance). Whether China will pass the US in 2010-12 depends on US energy policy. If the US puts significant resources behind its stated goal to foster a green economic recovery, we may grow quickly enough to outpace China for many years.

With similar wind potential of ~1 TW each, it will be interesting to see how these currently coal-dependent top world energy consumers take advantage of this cost-competitive renewable power source. I’ll be covering the deployment race closely in the months to come…

New York had 832 MW at the end of 2008, and our friends at Renewable Energy World reported today on the completion of an additional 330 MW upstate. The grand total is now ~1.162 GW, which can provide ~2.4% of our state’s electricity demand. With the latest installations, NY passed Wisconsin, Hawaii, Washington, and Illinois in % penetration to 16th place behind California. The state has onshore wind potential to grow to six times the current installation level, and could grow further toward wind at a 20% share of electricity with offshore wind farms in the years ahead.

We are still talking a small fraction of our national electric grid, which has a total capacity of ~1 TW (terawatt = 1 trillion watts). But hundreds of GWs are off-line most of the time when demand is not at its summer peak, so wind’s current ~25.5 GW can provide almost 2% of US electrical demand. If we stabilize our electrical demand by deploying efficiency, each additional percent of the pie taken by wind from coal, oil, and natural gas is a significant drop in greenhouse gas emissions nationwide.

Congratulations, New York! And here’s to continued quick wind power growth here and throughout the country in the months and years to come.

But maintaining growth in 2009 will be a challenge. Financing of projects has frozen in the credit crisis and halted (for now) the plans of many solar developers such as SET’s business partner, Carolina Solar Energy. The Stimulus package that passed the House carried significant support for solar, but we will have to see if it makes it through the Senate this week before that support is guaranteed.

Solar panel prices for February should be reported within a few days, and I will give that update as soon as they emerge. Hopefully, the price of solar can fall enough to get close to grid parity once oil and natural gas prices return to economic growth levels beyond $70 per barrel and $7 per MMBtu by 2010.

Bottom line: California’s doubling of solar capacity in 2008 ensures that the US solar industry is quickly growing toward a significant scale of GWs rather than hundreds of MWs. With the right government policy, the US can surpass Japan and Germany as the leader in solar by 2012 just like we passed Germany in wind power in 2008. Without such growth, our domestic industry could fall behind these competitors and others.

The rest of the top ten are Oregon (7.2%), Colorado (6.9%), Texas (6.7%), Kansas (6.6%), and Montana (6.3%). Interestingly, California – which was long the aggregate wind leader until Texas overtook that position a few years back – is 15th in percentage terms at 3.1% (behind South Dakota (6%), Washington (5.2%), Oklahoma (4.1%) and West Virginia (3.4%)).

Half of our 50 states have less than .5% of electricity coming from wind power, pulling the national average down to ~1.9%. So we have to more than triple current capacity to compete percentage-wise with Spain, Germany, and Denmark, nations that get at least 6% of their electricity from wind turbines. If we are aggressive, this could be done by 2016, potentially the end of Obama’s second term.

Growth in 2009 is slated to be as little as 4.4 GW (17.5%) and concentrated in Texas and a handful of states such as New York, Indiana, Oregon, Illinois, and Kansas. Innovative incentives can help the wind industry buck the recession and credit crisis to foster more green jobs and more clean, low-cost electricity.

I’ll keep you updated as the year progresses, and we’ll see if we can get more states climbing toward the 20% mark achieved by North Dakota and Iowa.