In Parts 1-3 of this series, we looked at electricity’s modern revolution and how it will set traditional concerns aside as out of date, and in so doing will bring five timely and relevant new priorities to the fore for governments and industry to address. We’ll look now at the first of these priorities, as I see them…
(Truly) Integrated Resource Planning
Electricity industry planners have traditionally looked to local resources, with emphasis on the cost and availability of local resources ahead of others (negative externalities aside in some cases). While some jurisdictions have moved towards the idea of integrated resource planning (IRP), the aspiration to do IRP is often at odds with reality, in which decisions are often driven by narrow constituencies and considerations.[i]
Not just electricity planning, but energy planning generally, is full of contradictions, gaps and omissions. Departmental silos are common: environmental and energy ministries can pull in opposite directions, as occurred recently in Brazil where oil development plans contradicted environmental goals (similar examples can be found elsewhere). Agriculture lobbyists and corn-based ethanol have captured transportation policy in many places, while urban infrastructure decisions are all too often made without properly taking account of their full energy and societal implications.
The global challenges we face call for ‘walking the talk’ on a more holistic planning basis: truly integrated resource planning. This raises a number of questions around how electricity planning can become more integrated so it is better equipped to rise to the challenges it faces:
· How can electricity planning better take account of issues related to energy efficiency, energy storage, and energy security?
· How will information technology, renewables integration and smart-grid mesh with customer education in support of all these things?
· With transportation looking more and more to electricity, it makes sense at a minimum to integrate planning across these two areas. Are we advocating for this integration?
· When should electricity planning be prepared to look farther afield for cleaner electricity sources? What are the opportunities and priorities for improving planning coordination across neighbouring jurisdictions?
· How should electricity planning take account of adaptation issues related to climate change?
Low Carbon Electricity Sources
The world in the post COP-15 era recognizes as a priority the need to shift to low carbon electricity sources. What is less obvious, however, is how successful this shift will be, and which low carbon sources will prove most economic at the scale required. There are four notable trends we can see as part of this shift.
1. Coal
The least expensive and most abundant fossil fuel, coal, is the electricity source that generates the most CO2 emissions, but continues to power 50% of US electricity, 70% of India’s electricity, 80% of China’s, and fully 90% of Australia’s electricity. There are identified opportunities to improve the efficiency of existing and new coal plants, through capital stock replacements and underground coal gasification, but carbon capture will be necessary to transform coal to a fuel that can be used in a low carbon world.
For decades governments discussed collaboration on clean coal projects with little to show for their efforts. In the last year, however, the private sector has begun to step into this collaborative space, notably in the partnership between Duke Energy and China Huaneng Group. Supporters of this latest initiative argue that it will achieve commercialization of CCS within years, not decades. But detractors caution that CCS may never be economic, given the additional energy (“parasitic load”) required to divert and capture CO2, and the declining cost curve for rival technologies. Without bold commercial efforts such as the Duke-Huaneng partnership, however, we will never know if CCS can play the role so many are hoping it will.
2. Natural gas
There is an expectation that gas – at least in some parts of the world – will serve as a bridging resource to replace coal until alternative technologies (including storage) become more economic and feasible for large scale deployment. The United States, for instance, recently discovered large shale gas deposits and has improved the technology to access shale gas, while liquefied natural gas (LNG) has also become a global commodity in the last few years. But gas still has a significant amount of carbon, and its pricing is volatile; there are also significant costs associated with LNG transport and security, as well as shale gas extraction and transport.
3. Renewables
We are likely to see continued growth in renewables, lower costs and technological innovation. While even optimistic targets in many jurisdictions foresee no more than 25 percent of electricity generated from renewables by 2025, so many jurisdictions are starting from such a low baseline that even this number would represent impressive and speedy growth. On the global level, hydroelectricity represents by far the largest share of renewables. But locally available hydro resources have mostly been tapped in many jurisdictions, leading planners to look farther afield for potential energy from water.
Planners are also looking at other sources of renewables, like wind, solar and tidal power. To encourage investment in these and other emerging renewable technologies, many jurisdictions worldwide have adopted, or are adopting, feed-in tariffs, which guarantee premium electricity prices for renewable energy sources. But there are concerns that such inflated prices may not always be the most economic means of reducing emissions in the energy system, and there are worries of public backlashes against much higher electricity prices. Spain, an early mover in providing renewable subsidies, announced in late 2008 that it would have to roll back some of its subsidies, while Germany is adjusting downward its tariff for renewables. It remains to be seen, therefore, whether jurisdictions worldwide will maintain feed-in tariffs in the medium- to long-term. Will they face a ratepayer backlash, or are higher prices for renewables here to stay?
4. Nuclear
While the pace of new nuclear has been slow in the West, several European countries are warming to the prospect in response to their concerns about energy security and carbon in the transportation sector, and in the United States President Obama is calling for a new generation of nuclear plants. In emerging economies like India and China, there are ambitious plans to build reactors in the coming decades, and a number of Middle Eastern countries are weighing the nuclear option for the first time.
Some economists would recommend that policy makers determine and guide overall policy but be technology neutral, leaving the decision on how best to achieve the policy goal to the market. In reality, however, many governments pick winners and losers – favouring some energy sources and putting up obstacles to others. And there is a view that governments should be making such choices: major projects like carbon capture and storage or nuclear new build will not go ahead without government support.
Does it make sense in the context of growing global energy challenges for governments to be technology neutral? Or should they in fact be working aggressively to promote certain sources ahead of others? Does society need to decide now how much share renewables, gas, nuclear and coal will have in our respective jurisdictions by 2030, so we can establish the pricing mechanisms, regulatory frameworks and infrastructure necessary to achieve these targets? When it comes to sources of electrons, do we want governments to be active and involved or distant and trusting?
More questions than answers, I grant you. Stay with us over the next couple of days as we look at the additional priorities of carbon pricing, clean energy capital and governance improvements.
Part five is available now, to read further please click here.
President and CEO
Canadian Electricity Association
[i] Integrated resource planning is meant to synthesize inputs related to efficiency, transmission, supply, the environment and economics all at once.
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