I made a guest appearance on The Energy Gang podcast today (a production of Greentech Media), to talk about peak oil and the challenges of energy and transportation transition. My segment runs for about the first half an hour. You can listen to it here or via your favorite podcast player, or just play it below.
My thanks to host Stephen Lacey for having me on the show!
Oil is back above the fold as prices continue to crash, but most of the coverage has been overly focused on geopolitical narratives and missing the point, which is written in the data as plain as day. So I wrote a short explainer about what’s going on. Read it here: Drilling Down on the Oil Price Slide
For my final article for SmartPlanet, which is closing down as an independent publication, I take an in-depth look at the research to date on stranded carbon assets, and offer my own thoughts on the subject. I believe that the risks of stranded assets are far larger than has been contemplated thus far.
Read it here: Why the potential for a trillion-dollar ‘carbon bubble’ grows bigger every day
(Note: The title at SmartPlanet wasn’t mine. As my article details, estimates of the size of the “carbon bubble” vary from $1.1 trillion to $28 trillion, and I think even the latter estimate is too low.)
Back in early April, I had the pleasure of attending the Bloomberg New Energy Finance “Future of Energy Summit 2014” conference in New York City, where I heard from a large number of decidedly upbeat executives in the sector, who were very optimistic indeed about the future of renewable energy and cleantech in general. The buzz in the finance and insurance space was particularly interesting.
Here’s my report for SmartPlanet: Cleantech investments are sexy again, here’s why
I have a short new article at GreenBiz.com on several financial innovations that are opening up new sources of capital for renewable energy and energy transition.
Read it here: 5 finance models bringing clean power to the people
If you’d rather listen to my thoughts than read them, I have made three recent guest appearances on some podcasts.
– On the Extraenvironmentalist podcast with Seth and Justin: Episode 76 (I last appeared on the Extraenvironmentalist podcast in August 2012.)
Update June 2, 2014: Thanks to Scott Bohachyk, an amazingly dedicated Extraenvironmentalist listener who transcribed my whole segment, you can read it as well:
Part 1 | Part 2 | Part 3 | Part 4
– On the KunstlerCast podcast with James Howard Kunstler: Episode 251
– On the Wall St. for Main St. podcast
As always, you can find all my media appearances on my media page.
For SmartPlanet this week, I reviewed the trends I have explored over the past several years and updated them with fresh data, and concluded that the world has reached a tipping point in energy transition from which there will be no going back.
Read it here: The energy transition tipping point is here
For SmartPlanet last week, I reported on my trip to the 2014 World Future Energy Summit in Abu Dhabi, and the slow progress United Arab Emirates appears to be making on its goals to diversify its economy away from fossil fuels and build Masdar City.
Read it here: The UAE’s slow march to sustainability
For my final SmartPlanet post of the year, I graded my 2013 oil and gas price forecast as “close enough” and issued my forecast for 2014.
Read it here: Oil and gas price forecast for 2014
For SmartPlanet this week, I featured a new report by geoscientist David Hughes, which is the first publicly available empirical analysis of actual oil production data from the Monterey shale formation in California. Widely touted as the next big play in fracking, the Monterey looks to be a dud.
Read it here: Monterey Shale isn’t all it’s fracked up to be
For SmartPlanet this week, I followed up on my previous story about securitization and other financial innovations in renewable energy with a look at the emerging “green bond” market, which is bringing billions of dollars of financing to bear on climate change solutions. I also talked to a creative New York-based financing company that is packaging off-balance-sheet bonds to help cities implement self-financing energy efficiency improvements.
Read it here: How green bonds could unleash the Kraken of energy transition
For SmartPlanet this week, I reviewed the “capital gap” problem in financing clean energy and efficiency, and how a slew of new players and approaches aim to solve it. Move over, mortgage-backed securities, solar-backed securities are the next big thing.
Read it here: Financial innovation is the next big thing in clean energy and efficiency
For SmartPlanet this week, I reviewed a slew of developments from the past two months in the grid power storage sector, including California’s new storage procurement mandate, commercial microgrids, innovative financial models, utility testing of storage systems, and the opening of the PJM capacity market to storage. It all adds up to a very exciting picture of storage finally growing into a serious grid player, which will enable more renewable energy on the U.S. grid.
Read it here: U.S. support of grid energy storage charges up
For Greentech Media last week, I explained how FuelCell Energy, the largest of the publicly traded fuel cell makers, is partnering with utility NRG Energy to market and deploy its fuel cells. This is good news, after so much contention between utilities and the makers of smart grid/microgrid/renewable energy equipment. Some utilities are finally figuring out the new business models they’ll need to survive the energy transition, and how to replace conventional baseload power with a cleaner, decentralized alternative.
For SmartPlanet this week, I observed that oil prices are still in triple digits but Big Oil is taking losses and the fracking boom is cooling down. That can only mean one thing: prices are going higher.
Read it here: Trouble in fracking paradise
For Greentech Media this week, I reviewed the new Medium-Term Renewable Energy Market Report 2013 from the International Energy Agency (IEA), and found a surprisingly bullish forecast for renewables, especially wind and solar. Most interesting are the phenomenal growth rates they project for the developing world.
Investor and StockTwits Executive Editor Phil Pearlman liked my article for Quartz comparing the costs of nuclear power to solar, and invited me to a Google Hangout to discuss it. You can see the video below; it’s about half an hour long. The video struggled a bit with my weak Internet connection in the UK, but the sound came through clearly. Worth a listen if you just can’t get enough of my views on solar vs. nuclear!
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For Quartz this week, I ran down the data on the cost of nuclear power vs. the cost of renewables, in response to The Breakthrough Institute’s recent claim that the cost of German solar is four times the cost of Finnish nuclear power. If you want to know what nuclear power really costs, here’s the data.
Read it here: The real reason to fight nuclear power has nothing to do with health risks
Note: I would not have said we should “fight” nuclear power; the title wasn’t my choosing, and it was more in reference to a previous Quartz article on the health aspects. I just don’t think the current generation of nuclear technology makes economic sense, and the next generation has yet to prove itself…despite the claims of a loud chorus of nuclear advocates and a well-promoted film.
June 17, 2013
Nuclear proponents are launching a full-court press for fresh investment in the technology. The release of the new film Pandora’s Promise, another editorial from ardent nuclear champions Michael Shellenberger and Ted Nordhaus of the Breakthrough Institute, and Paul Blustein’s recent piece in Quartz, “Everything you thought you knew about the risks of nuclear energy is wrong,” are part of an effort to put a new shine on a technology that once offered, but failed to deliver, electricity “too cheap to meter.”
All of these actors are purportedly motivated to support nuclear power on climate grounds, emphasizing the technology’s extraordinarily small physical footprint, its ability to generate massive amounts of electricity, and its lack of carbon emissions (after the plants are built). And they are probably right that the risks of radiation have been historically overblown as “junk science” wormed its way into popular culture. But the anti-nuclear crowd (and I, too, used to count myself among them) is probably right for the wrong reasons.
Missing from the entire debate about nuclear is the most important fact of all: Nuclear is dying due to poor economics, and the debate is already over as far as the market is concerned.
Shellenberger and Nordhaus have backed up their arguments with junk accounting on nuclear energy’s costs. This is where the discussion must depart from mere boosterism and descend into the deep, dark world of energy economics—a subject that Blustein did not even address.
The generally accepted way to compare the cost of various power generation technologies is a levelized cost of energy (LCOE) analysis. There are valid questions about this approach, which serious energy analysts continue to wrangle over. But for mere mortals and policy advocates, LCOE will have to do. There isn’t a better alternative.
As the Energy Information Administration (EIA) explained in the LCOE analysis section of the Annual Energy Outlook 2013:
[LCOE] represents the per-kilowatthour cost (in real dollars) of building and operating a generating plant over an assumed financial life and duty cycle. Key inputs to calculating levelized costs include overnight capital costs, fuel costs, fixed and variable operations and maintenance (O&M) costs, financing costs, and an assumed utilization rate for each plant type. The importance of the factors varies among the technologies. For technologies such as solar and wind generation that have no fuel costs and relatively small O&M costs, the levelized cost changes in rough proportion to the estimated overnight capital cost of generation capacity. For technologies with significant fuel cost, both fuel cost and overnight cost estimates significantly affect the levelized cost. The availability of various incentives, including state or federal tax credits, can also impact the calculation of levelized cost. …As with any projection, there is uncertainty about all of these factors and their values can vary regionally and across time as technologies evolve and fuel prices change.
Anyone who really wants to understand the costs of power generation should read that report, as it explains the many factors, assumptions and uncertainties that a good LCOE analysis entails.
In the EIA’s analysis, which leaves out all incentives, the average cost of “advanced nuclear” or “next-generation nuclear” plants entering service in 2018—long lead times associated with these technologies will make it difficult to open any early—would be $108.40 per megawatt-hour (MWh), equivalent to $0.1084 per kilowatt-hour (kWh), in 2011 dollars. This seems in the right ballpark, as the estimated cost of power from the new nuclear plant under construction in the Kaliningrad region of Russia is around $0.10/kWh, a German lawmaker said in April.
For reference, the 2012 average retail price of electricity in the US was $0.1153/kWh. So the cost of new advanced nuclear power would be just barely below the retail price of electricity—power sold to you and me at home. (Commercial, industrial, and transportation customers all buy power for less than the LCOE cost for advanced nuclear power.)
In other words, it would be very difficult for a utility to make money selling power generated by advanced nuclear plants, if they had to shoulder the entire cost themselves. But they don’t.
Not included in the LCOE analysis is the cost of decommissioning nuclear plants, which is often externalized and pushed onto ratepayers through surcharges on their utility bills, or the cost of managing nuclear waste for decades, which is generally pushed onto taxpayers through the Department of Energy budget. And these are not trivial costs: Edison International estimates that decommissioning its San Onofre Nuclear Generating Station near San Diego, which it permanently retired last week, will cost around $3 billion. So the LCOE analysis actually understates the true, all-in cost of nuclear power.
But the complexity doesn’t end there. As EIA explains, the true cost of power generation can vary substantially based on a number of other factors specific to where the plant is located, including the utilization rate (which depends on the demand character and the existing resource mix where the plant is located), the existing mix of resources in the area, the capacity value (how much of the time the plant will run) on the local grid, and the portfolio diversification needs (the specific mix of generation technologies) of the local utility.
Recognizing these factors, EIA suggests a minimum cost for advanced nuclear of $104.40, an average of $108.40, and a maximum of $115.30/MWh.
Solar photovoltaics (PV) in 2018 would range from a minimum of $112.50, to an average of $144.30, to a maximum of $224.40/MWh.
Wind energy would range from a minimum of $73.50, to an average of $86.60, to a maximum of $99.80/MWh.
The Breakthrough Institute points to this same EIA analysis as proof that “solar costs substantially more than new nuclear construction,” which is correct if one only looks at the average prices. But it’s more complicated than that.
The EIA has historically overestimated the cost of renewables, and underestimated the cost of conventional fuels. The new 50-MW Macho Springs solar plant under construction by First Solar in New Mexico is will deliver power for $50.79/MWh under its Power Purchase Agreement (PPA), and other US solar projects have come in this year in the range of $70 to $90/MWh.
By those recent numbers, the cost of US solar PV is already as little as half that of advanced nuclear generation in 2018. Further, we should bear in mind that the cost of solar and wind is still falling, while the cost of nuclear keeps rising.
Comparing the cost of one power generation source to another can get much more complex still, including the crucial matter of commodity and construction costs between now and 2018—a subject fraught with uncertainty all on its own—and future policy decisions.
The Breakthrough Institute elects to ignore all of this real-world complexity and offer its own extremely distorted way of comparing power generation costs.
In its most recent analysis, “Cost of German Solar Is Four Times Finnish Nuclear”, BTI compares the retail cost of German solar, which includes significant feed-in tariff incentives, to the capital cost of building a new nuclear plant in Finland, as estimated by its developer, plus the EIA’s estimate for the fixed and variable costs of nuclear power. There are numerous glaring problems with this approach, but I’ll name just the obvious ones.
Over the years I have spent many, many hours reviewing the cost estimates for new nuclear plants. Every time I’ve gone down that rabbit hole I have reached a point where I threw up my hands and quit because the data quality is so poor. Since no nuclear plants have been built on schedule in recent years, there are no reliable real-world cost data to establish a baseline. When you explore the various components of an estimate, you quickly find yourself in a regression of footnotes to previous papers which lead you back to estimates made a decade or more ago, before the cost of all commodities exploded in the second half of the 2000s.
In short: Cost estimates for new nuclear plants are not credible. I have yet to find a single one that stood up to close scrutiny. And as far as I am aware, no nuclear plant has ever been built for close to its original cost estimate.
With numerous, highly transparent LCOE analyses available from EIA, NREL, and other agencies, why does the BTI ignore them in favor of their own, partial analysis, based on a developer’s cost estimate?
They appear to have begun with the predetermination that nuclear power is the only solution to everything, and then rounded up a highly selective, distorted, and outright wrong pile of evidence to make their case.
The simple fact is that, at least in the US, the nuclear industry is dying a slow death. The announced closure of four major facilities in 2013 alone amount to 4,246 megawatts of nuclear capacity—enough to power 2.7 million homes for a year—that are being retired.
Even while the nuclear industry is able to externalize its costs for insurance (which are federally limited), loan guarantees (which are federally backstopped), decommissioning (which is pushed onto ratepayers) and waste handling (which is pushed onto taxpayers), it still lost. If it had to stand on its own and pay its full insurance costs like every other energy source, we could never build another nuclear plant in America, because no private investors would be willing to take that kind of risk. It’s hard to imagine how the economics could be more tilted in nuclear’s favor (although I’m sure its proponents have ideas on that).
The reason nuclear is dying is economics, not tribalism, as Shellenberger and Nordhaus claim. The UCS study found that if the EIA’s National Energy Modeling System were updated using 2009 utility cost estimates for building new nuclear plants, instead of EIA’s old over-optimistic projections, nuclear plants would not be the most economical way to add new capacity. The economics have shifted even farther away from nuclear since then.
Meanwhile, outside the fantasy world inhabited by the BTI, the real energy market has moved on. The US installed 13,200 megawatts of wind capacity in 2012, according to Bloomberg New Energy Finance.
In 2010, the combined generation of the four nuclear plants now headed for retirement, would have been just over 30 million MWh if all four were operating normally (one plant, the Crystal River plant in Florida, was not). Using a weighted average of the EIA’s onshore and offshore capacity factors for wind (36%), the wind capacity installed in the US last year will generate 41.6 million MWh per year.
In other words, the US installed enough wind last year to replace 138% of the nuclear generation shuttered this year.
The US nuclear fleet is shrinking, while wind and solar are posting double-digit, exponential growth rates. What part of this do Shellenberger and Nordhaus not understand?
To be sure, there are other important considerations from a policy standpoint. Insurance costs for nuclear power are probably inflated, due to exaggerated fears about radiation. But nuclear advocates aren’t arguing that underwriting rules should be updated. Yes, the utility industry will need to update the century-old hub-and-spoke architecture of the grid to accommodate high levels of variable and distributed renewable power, but that needed to be done anyway. Yes, there are important questions to be addressed about dispatchability—the degree to which the power generator can be fired up at will, as needed—voltage regulation, service level guarantees, and the evolution of utility business models and regulatory environment, which I have written a series of articles about (see here, here, here, and here).
But it is simply wrong to claim that solar PV is four times as expensive as nuclear power, in Germany, Finland, or anywhere else. BTI’s entire argument—including its repeated insistence that we should emphasize innovation over deployment of renewables—is bizarre, and detached from reality.
These are the facts: Renewables have taken the lead in new power generation in America, comprising nearly half of all new generating capacity installed in the United States in 2012. In the first quarter of this year, nearly half the new capacity installed was solar. With its poor economics, enormous complexity, overly-large capital requirements, too-long lead times, and overall risk, US nuclear power is headed for contraction, not resurgence. Ultimately, I think the same will be true globally.
I share BTI’s passion for creating a low-carbon future to address the threat of climate change. But false accounting isn’t the way to go about it. We should lean hard on solutions that work today, like renewables, demand response, microgrids, and advanced grid management technologies.
There may come a day when next-generation nuclear reactors can prove their economic viability in the real world and not just on paper. But until they do so—and especially while the old generation of nuclear power is dying—it makes no sense to promote nuclear power.
You can follow Chris on Twitter at @nelderini. We welcome your comments at ideas@qz.com.
For SmartPlanet last week, I reviewed the recent closure of four nuclear plants in the U.S., including the San Onofre Generation Station in California, and concluded that nuclear power is headed for a long goodbye. Read it here: Nuclear’s swan SONGS
For SmartPlanet this week, I updated my outlook for oil and gas prices this year. So far my model is working beautifully, and has proved to be far more accurate than the calls made by the big-name analysts at Goldman Sachs, Morgan Stanley, Bank of America Merrill Lynch and Citigroup.
Read it here: 2013 oil and gas price forecast update
