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Electricity at the lowest societal cost by optimizing techno-economic, environmental and health impacts of electricity infrastructure growth


Description

Summary


The EMERGE project aims to promote well-informed energy infrastructure decisions in Latin America and other developing regions by using a model that combines techno-economic, environmental and health impacts to determine which energy infrastructure scenarios will have the minimal combined economic, environmental and health cost to society.

Many developing countries need to upgrade their energy infrastructure have to choose between centralized, traditional, fossil fuel based infrastructure or clean, distributed and renewable based infrastructure.  Heightening concern with atmospheric greenhouse gas concentrations, water use, food security, biodiversity loss, soil and ocean acidification, air quality and many other emerging issues are in part caused by electricity production. There will be many local and global economic, environmental and social costs and benefits depending on the mix of energy sources selected.

EMERGE can be used to determine which mix of energy resources will minimize the societal cost of electricity for a region.  In 100% government owned electricity markets, we recommend that government utilities implement the mix of energy resources that minimizes societal cost of electricity.  For countries with partially or fully privatized electricity markets, we recommend that policy sets the mix of energy resources that minimize the societal cost of electricity as an industry standard.  

Benefits include:

*Minimizing climate change and air pollution costs 

*Immediately securing a long term stable market for renewables

*Reducing health and environmental burdens that unevenly affect people living in poverty

*Improving universal energy access, economic development, gender equality

*Global leadership on climate change

EMERGE is being designed with direct feedback from national energy organizations, universities and electricity regulators in South America.  The model and methodology will be distributed freely to any interested organizations in developing countries.  


Category of the action

Reducing emissions from electric power sector.


What actions do you propose?

The United States Energy Information Agency projects that 85% of energy demand increase in the next 30 years will happen in developing countries [1].  

Understanding what mix of renewable energy resources is optimal for a country is essential for maximizing holistic returns on investment and evolving energy infrastructures into sustainable systems.

EMERGE is designed to determine an optimal renewable energy portfolio for each electricity grid in Latin America based on resources, electricity grid interaction and constraints, and national/regional priorities to minimize societal cost.  In other words, determining an electricity infrastructure that minimizes the combined economic, environmental and health costs. 

Each country’s electricity grid(s) should be modeled to provide a technical simulation of it’s hourly operations and economic calculation of it’s capital and operational and maintenance requirements.  From there, lifecycle assessment (LCA) can be used to determine emissions and resource utilization of the infrastructure and fuel lifecycle, including: materials processing, manufacture, operation, maintenance and disposal or recycling.  There are multiple types of LCA analysis.  ReCiPe 2008 is the latest technique and assesses impact in the following areas [2]:

1. climate change (CC)

2. ozone depletion (OD)

3. terrestrial acidification (TA)

4. freshwater eutrophication (FE)

5. marine eutrophication (ME)

6. human toxicity (HT)

7. photochemical oxidant formation (POF)

8. particulate matter formation (PMF)

9. terrestrial ecotoxicity (TET)

10. freshwater ecotoxicity (FET)

11. marine ecotoxicity (MET)

12. ionising radiation (IR)

13. agricultural land occupation (ALO)

14. urban land occupation (ULO)

15. natural land transformation (NLT)

16. water depletion (WD)

17. mineral resource depletion (MRD)

18. fossil fuel depletion (FD)

Each of these impacts causes damage to human health, ecosystem diversity or resource availability.  Therefore, a cost can be and should be associated to the damage caused in each category. 

Monetary valuation methods exist for valuing the cost of each of these impacts.  For example, Pizzol, et al, published “Monetary valuation in Life Cycle Assessment: a review” in 2014, which describes the different methods and their appropriateness to LCA [3]. 

A limitation of using LCA metrics is that they are typically values for emissions over averaged over multiple spatial scales.  The actual damage of an emission depends on the spatial and temporal scale.  While aggregate electricity grid dispatch modeling accounts for the temporal scale, a spatially resolved air pollutant model is needed for accurate emission dispersion and air quality concentration calculations.  Spatial resolution is not built in to the EMERGE tool because of the highly sophisticated nature of three dimensional atmospheric transportation and transformation modeling of air pollutants.   Instead, EMERGE relies on reduced-form equations to calculate how emissions map to human and environmental exposure and damage.  These reduced-form tools also make it possible to estimate impacts in regions without readily available meteorological and emissions data and models.

In a 2015 study on energy planning uncertainty, Allison Bridges states “Many sophisticated models exist for determining air quality, but they are often impractical for use as tools to initially assess the health impact of numerous possible alternatives in the course of developing climate and energy policies that work to reduce air pollution. The development of tools such as reduced- form screening models is helpful in filling this void […] The extent to which energy planners should make use of reduce-form tools largely depends on the purpose of the analysis, the questions being asked, the resources available, and the tolerance for uncertainty [4]”.

Energy infrastructure scenarios can be simulated on a case-by-base basis, or an optimization algorithm can be used.  The economic, environmental and health impacts, in terms of dollars should be summed and compared, or used as the objective function in the optimization algorithm to determine which energy infrastructure will have the least impact, or most benefit, to society for each electricity grid.  Isolated scenarios can also be simulated for off-grid communities.

The model is intended to be run in optimization mode, that is, to determine the mix of energy resources that will meet demand and other constraints/goals at the lowest societal cost.  

Energy infrastructure decisions should be based on minimizing the combined economic, environmental and health costs to society.

The electricity market could conceivably evolve toward the mix of energy resources that minimize the societal cost of electricity if external environmental and health costs were internalized by electricity producers.  This is controversial, especially because these external costs are larger than retail costs. 

For example, the average cost per kWh in the U.S. in 2014 was $0.102. Machol et al. (2013) find that the average health impact cost per kWh of coal generated electricity is $0.32, which is over 3x the retail cost [5].

Additionally, it is difficult to allocate external health and environmental costs because they are not evenly distributed and happen over long time horizons.  Yet, because they will be incurred by society in one way or another, government should align policy in the private electricity sector to reduce these costs.  

In electricity markets that are fully government owned, government utilities should strive to provide electricity at the lowest societal cost.  This requires accounting for external health and environmental costs in investment analysis.  The EMERGE tool provides a way for utilities to quantify and monetize external health and environmental costs.  

The approach we recommend for fully government owned electricity markets is that utilities set a goal of providing electricity at the lowest societal cost and move towards the mix of energy sources that minimizes societal cost as demand increases and existing infrastructure depreciates.

Privately owned utilities companies operate within constraints of available technology and maximizing return to share holders.  However, the external costs of their generation are incurred by society in the future. For example, individuals living in areas with polluted air typically incur greater respiratory and cardiovascular disease and health costs.  The costs are either paid by the individual, or by society in the form government funded health plans.  Environmental costs are incurred in similar ways.

The approach we recommend for partially or fully privatized electricity markets, which is the majority of Latin America, is to develop policy that sets the optimal mix of energy sources as a regulation the industry must meet.  Benefits include:

*Minimizing climate change and air pollution impacts 

*Immediately securing a long term stable market for renewables

*Reducing health and environmental burdens that unevenly affect people living in poverty

*Improving universal energy access, economic development, gender equality

*Global leadership on climate change

Setting an optimal mix of energy sources as a standard or regulation is politically reasonable and responsible.  It's a way of optimizing current and upcoming goals such as Renewable Portfolio Standards (RPS) in the United States, or the Intended Nationally Determined Contributions (INDC) that countries will be announcing at the U.N. Framework Convention on Climate Change (UNFCCC) in Paris this December.

A policy of this nature, designed for maximum societal benefit, will create criticism from (most likely fossil fuel) organizations who stand to lose profit under this type of policy.  Fossil fuel businesses generate huge revenues, which will be used to fight a policy that threatens their profitability.  This will be hard to overcome, yet the climate change costs (Akerman, 2014, The Cost of Climate Change) and air pollution costs (Machol, 2013, Economic value of U.S. fossil fuel electricity health impacts) of fossil fuel use are projected to be much greater than fossil fuel revenues [5,6].

Another criticism that could arise is the uncertainty around what the optimal mix is.  To address this valid concern, the field’s leading experts should determine the optimal mix of energy sources for an electricity grid.  While tools using reduced-form equations can produce quick estimates, results should be confirmed with sophisticated and detailed electricity dispatch, atmospheric dispersion, and human exposure mapping tools to know with certainty that the energy mix will minimize the societal cost of electricity.

A final criticism of a policy to implement an optimal mix of electricity sources to provide electricity at the lowest societal cost is that it would be too expensive.  In a 2014 paper published in Energy, Stanford Professor Mark Jacobson and colleagues show that an all wind, water and sunlight (WWS) scenario for repowering California would produce 220,000 more 40-year jobs created than lost ($11.3 billion/yr benefit), eliminate $103 billion/yr in state air-pollution related costs, and avoid 45.1 billion/yr in climate change costs compared to a conventional business as usual scenario.  Additionally, Jacobson shows that 2030 California electricity costs under a WWS scenario will be $0.053 - $0.072/kWh, while conventional costs would be $0.157 - $0.163 without externalities, and $0.207 - $0.220 with externalities [7].

Without bold and effective action, the global energy imbalance caused by anthropogenic emissions will continue to increase, possibly to a state beyond human’s ability to return to equilibrium.  It’s clear that the social and economic benefit of a policy to provide electricity at the lowest societal cost is possible and in society’s best interest.  While certain businesses will suffer, we must consider and act based on what is best and just for current and future generations.


Who will take these actions?

Actions need to be taken at the policy level of every country.  National energy organizations need to incorporate the monetary valuation of social and environmental impacts of energy infrastructure choices and balance them with the nation’s priorities and constraints.  

In 100% government owned electricity markets, we recommend that government utilities implement the mix of energy resources that minimizes societal cost of electricity.  For countries with partially or fully privatized electricity markets, we recommend that policy sets the mix of energy resources that minimize the societal cost of electricity as an industry standard. 

Setting the optimal mix of energy sources as the standard will minimize environmental and health impacts, costs and shift a disproportionate burden from the lowest class. 

Latin American national organizations I am communicating with that can take action include:

Ecuador: Ministerio de Electricidad y Energia Renovable, Ministerio de las Sectores Estrategicos

Peru: Ministerio de Energia y Minas, Ministerio de Ambiente

Colombia: Unidad de Planeacio Minero Energetica, EPM, ISAGEN

Chile: Comision Nacional de Energia, Centro de Energias Renovables

Brazil: Conselho Nacional de Politica Energetica, Empresa de Pesquisa Energetica

Uruguay: Administracion del Mercado Electrico, 

Argentina: Secretaria de Energia

Social support is a very important important driving factor.  Unified social support is essential to drive political and industrial action.  Education is a key piece to informing and uniting society. Climate change will affect everyone, and it is not unreasonable that the vast majority of human beings can come together to demand sustainable policy that mitigates climate change and simultaneously .

Optimal mixes of energy sources will make it easier to achieve universal energy access, which will improve economic development and also has implications for improving gender equality.


Where will these actions be taken?

Each country and regional electricity grid must take action.  Additionally,  cooperation among all countries to form an inclusive, cost effective and resilient Latin American electricity grid will accelerate the process and further reduce costs.

Data, priorities and constraints in each country are necessary to run the EMERGE model.  The project promotes collaboration among countries to share lessons learned and strategies to promote more sustainable and secure energy supply in Latin America. 


How much will emissions be reduced or sequestered vs. business as usual levels?

EMERGE can simulate the impact of emissions and resource consumption in the 18 categories listed below for electricity infrastructure scenarios. 

While EMERGE is intended to be run in optimization mode, the optimization module is in development, and thus below is an example using scenario analysis.  

Data for the example below is from a case study on wind and solar integration in Brazil’s Northeast grid. The modeling was performed while I was working as a USAID Research and Innovation Fellow at the Federal University of Rio de Janiero (UFRJ), during July – September 2014. 

Using EMERGE in scenario analysis mode, rather than optimization mode, show that if 2000 MW of rooftop photovoltaic solar panels and 4000 MW of onshore wind turbines are installed in Brazil’s NE electricity grid, CO2 eq. emissions from Brazil’s NE grid will be reduced by 28%.  Emissions and resource consumption changes for additional lifecycle categories are listed under other key benefits.  


What are other key benefits?

Change from baseline annual emissions and resource utilization:

1. Climate change:  28% reduction in CO2 eq. 

2. Ozone depletion: 26% reduction in CFC11 eq. 

3. Terrestrial acidification: 28% reduction in SO2 eq. 

4. Freshwater eutrophication: 20% reduction in Phosphorus eq. 

5. Marine eutrophication: 27% reduction in Nitrogen eq. 

6. Human toxicity: 18% reduction in pDCB eq.

7. Photochemical oxidant formation: 27% reduction in NMVOC

8. Particulate matter formation: 27% reduction in PM10

9. Terrestrial ecotoxicity: 4% reduction in pDCB eq. 

10. Freshwater ecotoxicity: 64% increase in pDCB eq. 

11. Marine ecotoxicity: 60% increase in pDCB eq. 

12. Ionising radiation: 28% reduction in U235 eq. 

13. Agricultural land occupation: 27% reduction

14. Urban land occupation: 25% reduction 

15. Natural land transformation: 28% reduction

16. Water depletion: 26% reduction

17. Mineral resource depletion: 39% increase 

18. Fossil fuel depletion: 28% reduction 

*Universal electricity access

*Poverty and gender equality

 


What are the proposal’s costs?

EMERGE is being designed to minimize the societal cost of electricity, as well as mitigate the health and environmental costs disproportionately incurred by the world's lowest classes.

The investment required for each electricity grid will depend on many factors, including electricity demand projections, current state of the grid, mix of electricity generation technology, complimentary technologies like energy storage, transmission and distribution infrastructure and more.  The intention is that through valuing health and environmental impacts, energy infrastructure investment can be optimized to producing the most benefits at the least cost in the long term.

The EMERGE project, based on developing a model and methodology that developing countries can use to see a more full picture of energy infrastructure impacts to optimize decisions, has been funded until June, 2016 by the U.S. National Science Foundation with a small amount of additional funding from USAID and the Association of Energy Engineers.  Promotion via the Climate CoLab will help with distributing the model and highlighting the importance of evaluating and minimizing environmental and health externalities by selecting of mix of energy sources and technology that provide electricity at the lowest societal cost.


Time line

The EMERGE tool is targeted to be complete and ready to distribute by December 2015.  Distribution will begin as soon as EMERGE is ready, which is targeted for the first quarter of 2016. The model is built in a modular way where developing countries can customize it for specific constraints or priorities, allowing for quick initial results as well as customization and integration with sophisticated models for more detailed analysis.  

The implementation timeline of optimal energy infrastructure in a specific country depends on the size of the project, financial resource availability, technology availability, political and social support.


Related proposals

Energy Supply

Water-Energy Nexus

Rural Resilence

United States' Climate Action Plan

Europe's Climate Action Plan

India's Climate Action Plan

Other Developed Countries' Climate Action Plan

Global Climate Action Plan


References

[1] U.S. Energy Information Association. http://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_5_6_a2015.

[2]      M. Goedkoop, R. Heijungs, A. De Schryver, J. Struijs, and R. van Zelm, “ReCiPe 2008. A LCIA method which comprises harmonised category indicators at the midpoint and the endpoint level. Characterisation.,” A life cycle impact …, p. 133, 2013.

[3]      M. Pizzol, B. Weidema, M. Brandão, and P. Osset, “Monetary valuation in Life Cycle Assessment: a review,” J. Clean. Prod., vol. 86, pp. 170–179, 2015.

[4]      A. Bridges, F. a Felder, K. Mckelvey, and I. Niyogi, “Energy Research & Social Science Uncertainty in energy planning : Estimating the health impacts of air pollution from fossil fuel electricity generation,” Energy Res. Soc. Sci., vol. 6, pp. 74–77, 2015.

[5]      B. Machol and S. Rizk, “Economic value of U.S. fossil fuel electricity health impacts,” Environ. Int., vol. 52, pp. 75–80, 2013.

[6]      F. Ackerman and E. A. Stanton, “The Cost of Climate Change,” New York, no. May, p. 42, 2008.

[7]      M. Z. Jacobson, M. a. Delucchi, A. R. Ingraffea, R. W. Howarth, G. Bazouin, B. Bridgeland, K. Burkart, M. Chang, N. Chowdhury, R. Cook, G. Escher, M. Galka, L. Han, C. Heavey, A. Hernandez, D. F. Jacobson, D. S. Jacobson, B. Miranda, G. Novotny, M. Pellat, P. Quach, A. Romano, D. Stewart, L. Vogel, S. Wang, H. Wang, L. Willman, and T. Yeskoo, “A roadmap for repowering California for all purposes with wind, water, and sunlight,” Energy, vol. 73, pp. 875–889, 2014.