Least cost solutions to Climate Change:
Do we really need so many new power stations?

On August 26, 2008 David Porter from the UK Association of Elec. Producers was on Radio 4 bemoaning the prospect that, based on current limited energy efficiency improvements, electricity companies are having to find £100 billion by about 2016 so that they may build replacement power stations just so that we can the keep the lights on. Is this expenditure really necessary?

Furthermore with our aging, fossil fuel burning, carbon dioxide producing, power stations reaching the end of their lives (and our growing energy requirements) in resent months we have seen a growing number of new coal fired power stations are currently being planned for the UK, Blyth and Tilbury and Kingsnorth to name but a few¹.

Energy, it’s a Dirty Business

Professor Danny Harvey of Toronto University, a geographer and expert in modelling climate change, notes that traditional coal fired power stations result in 90 percent greater emissions factor than gas fire powered stations². To make matters worse current gas fired power stations are about 52 percent efficient whereas coal fired power is just 40 percent efficient.³ So it is not surprising to note that coal is a dirty fuel when burned; by comparison gas is surprisingly clean.

By way of offering a couple of examples of just how destructive coal fired power stations are the Architecture 2030 campaign has offered some startling statistics: the American company Home Depot has funded the planting of 300,000 trees in cities across the USA. Each tree will absorb and store about one-third of a ton of carbon dioxide over its lifetime. The carbon dioxide emissions from only one medium-sized (500 MegaWatt) coal-fired power plant, in just 10 days of operation, would negate the Home Depot's entire effort. It also note that if every household in the U.S. changed a 60-watt incandescent light bulb to a compact fluorescent, the carbon dioxide emissions from just two medium-sized coal-fired power plants each year would negate this entire effort.

Cleaning things up?

In these post-Kyoto, climate change aware, days the government is making much ado about low carbon technologies. To this end utilities companies are investigating “clean” gas and coal technologies are under development they remain at a developmental phase. Whilst clean technologies that capture carbon are beneficial we can be almost certain that such power stations will cost more to build and this will in turn increase the cost of the electricity that the consumer has to pay, surely for the benefit of the public, the economy and future generations the government should be considering ways to minimise the cost of climate change. To this end it should be ensuring that a strategic least cost strategy is developed. Curious about what this could mean Dewjo’c has had a brief look at the emerging experiences and strategies that have begun to develop in other countries.

Low Carbon = Low Cost Economy?

When it comes to developing a low carbon economy Germany is one of the countries that is making the most concerted effort at this time. With this in mind we first wondered what we could learn from Germany’s record of renewable energy generation. Between 1998 and 2003 wind generating capacity quadrupled; biomass energy doubled; the number of photovoltaic roofs increased six-fold. By 2005 18,000 wind turbines were operating on shore compared with 1,500 in the UK. Unlike the UK Germany has established grants and the compulsory purchase of mirco-renewable energy by utilities companies, at a favourable cost to boot, this has helped to ensure that renewable energy system have been broadly adopted. The key thing to notes is that Germany is subsidising renewables. Generally if a subsidy is required then the economic viability may be questioned, and probably for good reason. Not satisfied that we had found an appropriate answer we began to wonder whether there are other more economic solution exists.

A Least Cost Approach?

The next thread of research looking for a least cost approach lead to two rather surprising findings, the first was that in the USA utility companies have found that it is cheaper and, more importantly for them, more profitable not to build and run power stations but to mitigate them encouraging energy efficient technologies! Here we see utilities companies spending capital on incentives that actually encourage the use of low energy goods and appliances, we also see energy companies selling saved energy to bill payers. (Here the utility may pay for a retrofit and then incrementally charge for the benefit over the duration of the payback period. After payback the purchased goods simply become the property of the person paying the bill.) Further research into best practice energy efficiency in the USA reveals that is considered a low risk investment that can have a better return on investment, in many cases over 20%, than government stocks and bonds.

There are more examples of how these American companies and utilities are economically tapping into energy efficiency but you get the point. Should we be surprised that it is the USA that is, in some areas, leading the way in energy efficiency? I’d argue not, those Americans know a good deal when they see it!

And the second finding came from the Swedish electrical utility company called Vattenfall. Last year it completed a least cost strategy assessing the cost of climate change, once again energy efficiency, rather than renewable energy, was the first win when selecting a least cost approach. The Vattenfall report goes on to suggest that by using the least cost approach it is economic to limit atmospheric carbon dioxide to 450 parts per million (ppm) rather than the 550ppm noted in the Stern report. This finding is of great significance, as it would avoid many of the negative impacts of climate change upon the world’s poorest most vulnerable countries.

NegaWatts not MegaWatts!

All to often we hare politicians bang on about renewable energy sources, this may be well meaning, but in the first instance I would think that it is better to ask whether renewable energy sources are necessary. It is not that I object to renewable energy, not at all, I simply think that in order to address rising energy bills, peak oil and climate change we should take a more pragmatic approach. One that is less driven by the need for populist sound bites.

Studying the findings of Vattenfall, a Swedish energy utility, it emerges again and again that, over time, it is cheaper to reduce energy consumption than it is to generate new energy. If the UK were to adopt this strategy the cost of climate change can be minimized, fuel poverty could be reduced and everyone’s net wealth could increase. In essence it should be considering the cost per kilowatt of saving energy rather than the cost per kilowatt generating energy. To use the term developed by energy efficiency expert Amory Lovins, one should be thinking of “NegaWatts” rather than “MegaWatts.”

With the Vattenfall documentation in hand we now began to consider range of technologies are suited to a least cost approach. An excellent example of “low energy goods and appliances” is the humble compact fluorescent light bulb [see The Permissible Cost of Green Energy Systems]. This “finding” perhaps a little unsurprising and one that is more than likely underwhelming to those with a gadget fetish but the important thing here is the underlying concept; it is far cheaper to save energy than make it.

Some interesting facts and statistics

The cost of a normal incandescent light bulb is some 50 pence and has a life span of just 1000 hours compared to 12000 for a compact fluorescent, so over the course of the life of a compact fluorescent bulb you can expect to use some 12 bulbs (you spend £6.00 on light bulbs rather than just £3.70 on a compact fluorescent). So despite the apparent additional cost of the compact fluorescent bulbs they are cheaper in the long run. A study undertaken by the Energy Saving Trust⁴ notes that savings accrued over the service life, which includes the running costs, each energy-saver bulb is a staggering £78.14 and pay for themselves within the first year. So with this kind of energy saving incentive who needs subsidies? The EST also note that energy efficient lighting could reduce electricity consumption and deliver potential savings of approximately 900,000 tonnes of CO2 over 10 years across the UK.

In 2003 Joan Ruddock MP noted that Jonathan Smith of EON, Powergen’s parent company, had calculated that changing every light fitting in all 20 million households in the UK to energy-saver bulbs would result in a reduction on fuel bills for the bill paying public of around £4.8 billion – the cost of building 64 offshore wind farms, 53 biomass power stations, or 14 gas-fired power stations. She also observed that energy expert David Olivier of Energy Advisory Associates has calculated that giving away 30 compact fluorescent lamps to the average household would cost £100 million, but save the equivalent of the output of three 1000 Mw nuclear plants (that’s about equivalent to six medium sized coal fire power stations!).

I’ve found that if you take these sums one stage further you’ll find that when used back-to-back, and assuming 10 light fittings per household, the 30 compact fluorescents would provide the average household 30 years of use; this approaches the life span of a power station. From here its quite easy to conclude that by adopting simple and relatively cheap energy efficient technologies, such as compact fluorescents, you can mitigate a power stations for less cost than it costs to build one, and avoid much of the on going energy costs and all the emission with no loss to quality of life.

Market Failures

This is a massive subject. During the course of my research I so far recorded over 50 market failures which tend to fall into six categories; Capital misallocation, Organizational failures, Regulatory failures, Absent and Incomplete markets, Informational failures and Value-chain risks. Obviously too many to issues and topics to discuss here, as a consequence I want to discuss one example of Informational failure. I’m going to discuss compact fluorescents; otherwise know as CFLs.

The discussion starts with the seemingly innocuous question; with the available capital cost incentives (for both consumer and utility company), and environmental benefits, one has to ask why hasn’t everybody, and I mean absolutely everybody, gone out and bought CFLs?

As I see it there are three reasons given by the average Joe Bloggs. One is that that the quality of light is reportedly not as good, another is they don’t look as good and finally there is the accusation that you can’t use them with dimmers.

To take these issues in turn, the quality of light was quite poor but over the last couple of years manufactures have moved the technology on in leaps and bounds (tip: make sure you buy bulbs with a colour temperature between 2700-3000 K). Not surprisingly manufactures have picked up on this one as well there are a growing number of CFLs on the market that look similar to incandescent bulb and finally one manufacturer called Megaman now sells dimmable compact fluorescent bulbs (they aren’t quite as energy efficient as the normal CFLs but they are still a massive improvement on the traditional incandescent bulb).

As noted above studies and example have shown compact fluorescents are and energy negative solution that leaves you with spare change in your pocket rather than that of someone else i.e. the power company. Furthermore they need not compromise your quality of life.

Legislative change

It is fair to say that to continue living in the manner that we are currently enjoy we will always need to generate electricity by some means (albeit by renewable energy or carbon capture power stations etc.), but as our ageing power stations begin to need replacement the nation could take the opportunity to implement a very simple least cost solution that will avoid unnecessary costs and/or pumping millions of tonnes of carbon dioxide into the atmosphere.

When I first saw all the above facts laid out in front out me it struck me that the UK should do as the Australians have done. We should enshrine in law a minimum energy performance requirement for light bulbs. This approach appeared to be something of a “no brainer.” Who could question its logic? But then I began to think about what’s going on in the USA and the creation of markets in saved energy. Perhaps all we need are some laws that encourage these new markets to develop in the UK. What we need is to enable commerce to attach value to saving energy. This should not be hard; especially with the right tax incentives (a windfall tax on new power stations maybe). Surely, as it is not bound to a singular technology, as it allows the entire energy market to refocus itself, this is a far more powerful concept.

Another realisation has been that a solution that focuses on energy efficiency would save
• the time (its faster to implement than building a new, and no doubt controversial, power stations),
• money (your money and the power companies),
• resources (there is only so much fossil fuel, lets use it wisely),
• energy (that’s why we have power stations) and
• carbon emissions (the unfortunate by-product from building and running power stations, even renewable ones.)

Conclusion

The Stern Report stated the belief that climate change would cost anything between 1 percent and 20 percent of GDP per annum to stabilise the climate at 550ppm CO2e; both in terms of cost and climatic stabilisation target this is countered by the Vattenfall report; if we start with the most appropriate, least cost, energy efficient, technologies this need not be the case we could stabilise the climate at 450ppm CO2e use one saving to help pay for the next and still have some change in our pockets. Sounds good to me!

1. http://news.bbc.co.uk/1/hi/england/tyne/6646315.stm
http://news.bbc.co.uk/1/hi/uk_politics/6444373.stm
2. Heat by George Monbiot, pp82
3. Low Energy Buildings and District Energy Systems by L.D. Danny Harvey, p30
4. CE56 Cost benefit of lighting, Energy Saving Trust



Notes on the author:
Mark Siddall is an architect and a Certified PassivHaus Designer. He is also the sustainability champion for Devereux Architects and has conducted detailed research into low and net-zero carbon technologies. In addition to being one of the practice’s lead designers, Mark also provides consultancy, project enabling and education for clients, design teams and constructors. Currently he working on what is understood to be the UK’s first major PassivHaus scheme (25 homes) and is providing consultation for the Riverside One Net-Zero Carbon development in Middlesbrough (a significant scheme for Bio-Regional Quintain).