Energy Use and Options (Part 3A): Future Electrical Generation

[perry]

Energy Use and Options:

This is a rather long subject, and I have broken it into 4 parts, and then this part into 2 parts. This post is Part 3A. Please read Part 3B on Future Nuclear Generation if you want a detailed discussion of the issues. Part 4 will follow in the next week or so.

Part 1: US Energy usage and the effects on the environment and us.
Part 2: Current Electrical Generation.
Part 3A: Future Electrical Generation.
Part 3B: Future Nuclear Generation.
Part 4: Transportation Fuel Options for the future.

Oil/Natural Gas Issues (Perry’s view):

Oil & Natural gas generates various polluting emissions depending on the quality of the fuel product and is a noticeable contributor to global warming. Power production facilities tend to small, relatively easily sited (even in urban areas), and cheap to build.

The issues are: Fuel cost, emissions, and diminishing future supply (someday). They generate noticeable CO2 emissions and some NOx (smog), and may generate other emissions of concern if low quality fuel is used such as SO2 (acid rain). The first factor mentioned will eliminate these fuels from being much of a viable electrical generation method in the future. 2005 saw the point where worldwide petroleum & natural gas demand is now at current and projected production capacity; meaning the price of petroleum is now totally market driven.

Since 2000 the cost of natural gas for power production has doubled – before hurricane Katrina hit. Prices will continue to go up and the attractiveness of gas fired generation from the mid 90’s to recently is already gone.

This will eliminate most future supply concerns and the amount of emissions. Long term Oil & Natural gas will largely become peaking power plants once the existing gas supply power plant gas supply contracts expire (many of the combined cycle plants signed 10 to 20 year gas supply contracts at fixed gas rates when constructed; thus allowing the plant to guarantee its power cost for the duration of the fuel contract). Peaking power represent only a small percentage of power produced in the US.

Combined cycle and combustion turbines are financed and depreciated on a 20 year schedule. Also, the basic equipment seems to have not much more life than that (these plants will likely need to be replaced every 20 to 25 years).

Cost of new generation (first 20 years, at $8 per MMBtu gas):
Combined Cycle: Estimate: 8.50 cents per KW-Hr.
Combustion Turbine: Estimate: 12.50 cents per KW-Hr.

Coal Issues (Perry’s view):

Coal fired anything produces vast quantities of many polluting emissions. Huge amounts of CO2. NOx (smog), SO2 (acid rain), mercury emissions, small particulates (asthma concerns), radiation emissions (as much radioactive components are emitted per day at some coal plants as a typical nuclear plant emits a year), and others. Much of the remaining ash would be considered a RCRA hazardous waste requiring special disposal except that Congress defined coal ash as a “non hazardous” waste and exempts it from most pollution standards. Coal mining is a hazardous activity and is known to kill multiple people every year worldwide, not counting the various long term health and environmental effects of coal mining.

While there is better coal burning technologies that is being built into the most recently ordered plants; do not think that this “solves” the problems; it just reduces them compared to the older plants. Also note, coal plant cost has increased due to the modern pollution control required on pulverized coal boilers within the US.

You may also hear of coal gasification- that removes “all” of the bad stuff before burning. I recommend caution in thinking that this is really a clean option. You are still “burning” 3000-5000 tons or rock per day in the typical power plant. These rocks have a variety of trace chemicals and elements in it. Even if you remove “most of it” in some form of “waste” process stream before burning the synthetic gas – how is the waste being disposed of? What of the “small” percentage that gets through and burned. In addition; coal gasification plants cost more to build and are less efficient, and long term reliability in a large utility plant is unknown. So far several state utility commissions have recently rejected them due to this increased cost and unknown reliability (WEPCO wanted to build one in Wisconsin, also turned down in Illinois). Who is going to step up to the plate on a $1 Billion dollar gamble to prove the technology is long term reliable in a large power plant. The vendors offering to build coal gasification are not willing to sign performance contracts like they will sign for pulverized coal plants, gas turbine plants, even nuclear plants. Government subsidies got the technology to the 250 MW range, I suspect it will take government subsidies and guarantees to get it to the 600 MW or larger range.

The latest ideas are that it is possible to “capture” some (or much) of the CO2 with a chemical reaction. If this actually works on a commercial plant scale (many things work in the lab – but not in the field) you have the cost of the chemicals and the disposal of the waste product to deal with.

I personally have worked years in coal plants and have studied their effects. In general, even the best coal fueled plants are the worst polluting of any new power production technology in existence; coal mining is some of the most destructive mining operations just due to their size compared to other mining activities.

Coal fired plants are large, require large land areas for the coal (unless they are a mine-mouth plant), large land areas for disposal of ash, and are hard to site because people do not want them around. But, coal is cheap, has a many hundred year supply, and historically the public grew up with it – so they largely accept its pollution and hazards without question (and the general population largely ignores the environmental groups in part because the environmental groups are always on the extreme on too many issues – creating a trust problem).

The future of coal fueled generation depends on how serious the US and the world is in cleaning up the atmosphere. If serious, coal fueled generation will be reduced to a modest portion of the power grid.

I will note that so far the US is voting on coal. In my state alone there were 3 new coal baseload units approved for construction in 2005. Many others are in the construction approval process around the US. Worldwide, coal plant construction has not slowed down.

Note a significant long term power company strategy is involved with new coal plants. They have an expected life of 50 to 60 years. However, cost of power is figured based on paying for the plants in 20 years due to how plants are financed and depreciated. After 20 years, the price of power will drop from these plants to just Fuel, operations, and maintenance, which means that over the very long term – that coal plant generation prices go down.

Actual power cost is dependant on how far the coal must be transported. Mine-mouth plants are the cheapest power plants in existence. However, most coal needs to be transported ¼ to ½ across the US which adds significant cost to the price of the coal. The cost estimates below are for the average plant with coal being moved about ¼ of the way across the country.

Cost of new generation (first 20 years: coal transported to remote plant):
Pulverized Coal: Around 3.20 cents per KW-Hr.
Coal Gasification: Around 3.70 cents per KW-Hr.

Nuclear Issues (Perry’s view): THIS IS A BRIEF EXTRACT from Part 3B

The three sides of nuclear power: The Good, the Bad, and the Ugly.

The biggest problem with nuclear power is that should anyone list out a comprehensive list of items for discussion related to nuclear power – different people will group those items differently. What I may see as a “Good” you may see as an “Ugly.”

Thus, I proceed knowing full well that I stretch my neck out by raising my head to speak; and in do doing provide ample opportunity for others to swing their mighty sword of personal righteousness to whack my head off. I but have one last request (the condemned get a last request – don’t they). Please thoroughly research all sides of the issue before swinging your sword. I used to have grave concerns about nuclear power. In the end, I found out I was wrong on most of the issues.

Nuclear generation produces no air pollution emissions and has proven to be the most reliable and cheapest generation that the US currently has. Standardized designs have reduced construction cost (there are currently over 20 nuclear plants under construction worldwide).

Just like coal plants, nuclear plants have an expected life of 50 to 60 years. However, cost of power is figured based on paying for the plants in 20 years due to how plants are financed and depreciated. After 20 years, the price of power will drop from these plants to essentially just fuel, operations, and maintenance, which means that over the very long term – that nuclear plant generation prices go down, and most probably again be the low cost generator.

Overall, these plants are still more expensive to build than a coal plant; but the higher capacity factors (more KW-Hr;s to spread the cost over) and the lower fuel, operating & maintenance cost make the 20 year cost of these plants on par with new US coal fired generation.

The history of nuclear power is full of good things that happened and terrible things that happened. The potential for good cheap energy is great, getting there has had its price, and only in the last 10 years has the industry worldwide really started to figure out how to get it right.

One of the good things is that the nuclear power industry actually tries to learn from its mistakes – and tries to do things better.

Here is a list of some of the mistakes, and lessons learned, and issues that stand out in my mind: Note that I have “bolded” the titles on the different mistakes and issues so that you can brows the items and chose what to read if you are in a rush.

Please see part 3B Nuclear Energy for a full discussion of the following items:

Fear of Radiation & Normal Plant Radiation Releases:
Containment Buildings (& catastrophic radiation disasters):
SL-1: (The US Army’s version of a battle theater nuclear power plant).
Sodium Cooled Reactors:
Atomic Energy Commission “Atoms For Peace:”
Lack of Standardized Designs:
High Level Waste Disposal:
Terriorism against the plant:
The NRC and Regulatory Process is not good enough:
The Government is providing huge subsidies to the Nuclear industry:
Nuclear plant insurance:

To sum things up: The world is generally voting nuclear, and for a good reason. This is the only technology currently available that realistically can replace coal, oil, and natural gas fired power plants at this time, and its long term cost is also the lowest cost option at this time (including waste disposal).

5 years ago if you had asked me about nuclear power – I would have laughed at you. Now, I no longer laugh and feel that it must be considered.

Cost of new generation (first 20 years):
Nuclear Power plant: Around 3.20 cents per KW-Hr.

Wind Issues (Perry’s view):

Wind generates no polluting emissions (great for global warming and respiratory health). Common concerns are: noise problems, loss of property value for neighbors, scenic impairment. The noise and property value issues are common unless the wind turbine is built in a remote area. Bird kills are actually rather rare for the newer wind-farms (although they get a lot of press so it appears to be a big issue).

Wind power is the most expensive utility scale power generation capacity to build. Over 80% of its 20 year operating cost is spent up front constructing the wind turbine. The most costly components are the turbine blade, gearbox, and pivot system, which are also the components that wear out and need replacing. Once worn out an essentially new wind turbine can be mounted on an existing tower (the tower being very cheap to build and likely to have a 50 – 100 year life).

Long term, wind power will have to stand on its own without the significant government subsidies that now exist (my estimate is that the subsidies currently fund at least ½ of the cost of wind power). While it is great to pay extra for a little bit of wind power (0.3% of total generation in 2003), and to subsidize the startup of a technology; the people of the US will not pay such large scale subsidies for substantial grid percentage capacity.

Large scale capacity that will meaningfully affect the US generation mix will only be built if wind power can be competitive with other technologies. At this point it does not look like wind power will ever actually be competitive in most of the US power grid. The most complete estimates I have seen set current unsubsidized wind power at about 7 cents per KW-Hr to provide power to the local grid. I have not seen any data to indicate that wind powers cost will go down much more than that as the feeling is that the technology is reaching maturity.

I will note that I have reviewed a projection for a huge mega wind-farm of a future 5th generation machine in a great wind site at 6 cents per KW-Hr based on 20 year wind turbine life and standard 20 year financing and depreciation. North Dakota is often mentioned as a place to build such wind farms (there is enough wind energy in the North Dakota alone to power the US).

However, the problem with generating lots of electricity in North Dakota, or anywhere substantially remote, is the cost of transmission of that energy. Electricity rarely moves more than several hundred miles from its generation point. The grid is more about overall balance and stability than about moving power huge distances. In the few cases of long distance power movement the source is usually something really cheap – like Canadian Hydro power.

Let’s examine the concept of generating and moving a nominal 1000 MW of electricity from a North Dakota wind-farm to Minneapolis & Saint Paul – the nearest market that could really use it. First you have to construct about 3000 MW of wind turbines to be able to generally supply 1000 MW (remember the capacity factor of 32.1%), and you must construct a transmission line that can handle the 3000 MW to the twin cities for higher than average wind days (you have to be able to move this 3000 MW in order to have your average of 1000 MW – and Minneapolis/Saint Paul can easily soak up 3000 MW and back down other generation in the area). That transmission line is probably about 2 billion dollars to construct; and will need maintenance. This works out to about 1.4 cents per KW-Hr for this transmission line (20 year financing/depreciation). However, in reality you need two of these lines so that the wind-farm can keep producing when the first transmission line is shut down for repairs or routine maintenance. Now you are up to 2.8 cents per KW-Hr for transmission alone. Normal transmission cost for general power in the US is about 0.5 cents per KW-Hr. Overall, you have to add a 2.3 cents per KW-Hr premium to move power from North Dakota to Minneapolis/Saint Paul. This brings the total cost from 6.0 up to 8.3 cents per KW-Hr (After 20 years those transmission lines will be paid for and could then support the replacement of wind turbines at a reduced “maintenance” rate).

Note that years ago the utility industry studied building transmission lines from western mine-mouth coal plants to Minneapolis/Saint Paul and concluded that the cost of transmission of bulk power over long distances was not economical (it was cheaper to transport the coal). The reality is that even if North Dakota was filled with enough wind-farms to power the US – and the wind-farms were magically paid for such that the electricity was “free”, the transmission cost alone to the eastern and western US coast (the major power markets) would make it uneconomical.

Of course, for the days that the wind is not blowing well – the Minneapolis/Saint Paul area must have a good portion of that 1000 MW of replacement power available (you could make a good argument that their would always be something like 333 MW of power flow, thus only 666 MW needs to be ready to pick up the slack for a low wind day).

Are you really going to sign up for 8.3 cent power when you can build it locally for 3.2 cents; especially given that you must build most of the 3.2 cent power stations anyway for when the wind does not blow hard?

Wind generation even in a local situation is about 2 times the cost of other baseload options, and it is an intermediate supply situation that requires backup generation for most of its capacity to compensate for poor wind conditions (the cost of that backup generation is not included in the cost estimate for wind power). Adoption of a policy of developing major wind power grid capability would have a significant price affect on electrical cost.

The latest renewal of the subsidies and tax credits saw the start of the recognition in Congress about how much wind power is being subsidized on a per KW-Hr basis and the recognition that its cost of production was not going to go down much in the future.

At some point these subsidies will not be renewed as there are clearly cheaper electrical supply options – and wind power will never get much cheaper. Wind power growth will end at that point; and replacement of wind turbines when they wear out may not be subsidized either (which would almost eliminate wind power in the US long term).

I feel that long term wind power will only be a niche market within the US, principally focused in areas where it can be used to displace oil or natural gas generation because other forms of generation are politically unacceptable (California). It will actually be most useful in other countries that do not have relatively cheap electrical grid power typical of the US and in the developing third world countries where transmission networks have not yet been built.

Cost of new generation (first 20 years):
Wind Power: 6 - 7 cents per KW-Hr.

Solar Power:

This is so expensive that it is not considered to be a utility capable option within the US.

Solar power produces no air emissions and is largely free once installed. There have been concerns raised about the chemical waste generated from the manufacture of solar cells, which appears to be a valid issue. However, I will not further evaluate this issue as it is very unlikely that solar power will ever play a significant role in the US power grid over the next several decades (and after that manufacturing methods may have changed substantially).

Solar cells tend to degrade over time and estimated lives of solar cells range from 20 to 40 years depending on the quality of solar cells are purchased (satellite quality is best – but expensive). Thus, most normal systems may need to be replaced in 20 years.

It is most useful where the cost of running power lines or providing alternate power is very high. In these cases battery storage and conversion systems add to the cost of a solar energy system (substantially).

Current estimated cost for a large industrial system in a sunny location, connected to the grid so that it needs no storage capacity, is 21.3 cents per KW-Hr. That is based on the current $4.00 per Watt cost for most production solar cells.

The industry often states that solar panels will become “cost effective” when it the solar cell cost comes down to $2.00 per Watt.

I do not believe that is so. The cost of the installed system is much more than just the cost of the solar cells. It would not surprise me to find that the cost of an industrial sized solar power system would be about 15.0 cents in a sunny location, connected to the grid so that it needs no storage capacity, if the solar cell price fell to $2.00 per Watt. (See Part 2 for the solar power link).

However, more solar cells will be installed in remote locations and in other parts of the world that do not have centralized power stations and transmission grids. That is its market. People who have extra money may buy a solar power system just to “do their part,” but overall that will not have much impact on the US power supply.

Cost of new generation (first 20 years):
Solar power: > 20 cents per KW-Hr

Hydro Issues:

All good hydro generation sites are currently utilized. Their will be no significant change in the amount of hydro generation available.

However, note that hydro is also very expensive to build. The most expensive part is the dam and waterways which can last 50 to 100 years without much work. The water turbines and generators are only a small cost of the project and can be extensively rebuilt or even replaced without having much effect on the lifetime overall cost of electricity.

Cost of new generation (first 20 years):
Hydro power: N/A

Summary of future generation options:

Estimated cost of new generation (first 20 years):

Pulverized Coal: 3.20 cents per KW-Hr.
Nuclear Power plant: 3.20 cents per KW-Hr.
Coal Gasification: 3.70 cents per KW-Hr.
Wind Power: 6 - 7 cents per KW-Hr.
Combined Cycle (gas): 8.50 cents per KW-Hr.
Combustion Turbine (gas/oil) : 12.50 cents per KW-Hr.
Solar: > 20.00 cents per KW-Hr
Hydro power: N/A


Suggested actions:

One issue not discussed is the need to replace existing plants: For example, the US would need to build an average of 3 nuclear plants a year just to replace the retirement of the existing plants over the next 30+ years. Large coal plants are in a similar situation, which is why you are now seeing the start of new coal plant construction.

Construction of 6 nuclear plants a year in the US would in years substantially replace most coal fired generation, greatly reducing CO2 emissions and improving other forms of air pollution. Within 60 years nuclear generation would stabilize at about 75% of the US power production – which is where you want the low cost producer to be.

I know that 6 plants per year is shocking to some; but otherwise there will be 6 large coal plants per year built if the nuclear units are not built. New generation is on its way, the old units have to be replaced and growth in electrical demand must be met. It is up to us to choose what it will be.

Oh, one other note: Electrical prices will go up as a result as the new plants are built. Currently 70% of the US power production is less than 2.00 cents per KW-Hr. Transmission, distribution, taxes, profit, etc raise that to about 8.7 cents per KW-Hr for residential customers (see Part 2). Just figure that things will go up about 1.5 cents per KW-Hr or so (they have to tax and make profits on that extra 1.2 cents per KW-Hr).

Interesting footnote: As I was finishing this I found a similar “professional” cost analysis (without all the discussion of the issues). It presents the following:

Nuclear: 4.2
Pulverized coal 4.2
Gas Combined Cycle* 7.3
Wind 6.9
Solar 12.5

* Extrapolated to $8 per MMBtu gas, the paper presented two gas price options: $5 & $6 per MMBtu which would have been reasonable a couple of years ago.

I note that the basic conclusions are the same: Nuclear is the cheaper and cleaner long term option. What is also intriguing is that they based their coal cost off of the same project that I did. The Wisconsin Energies Oak Creak project. They assumed a different financing / payback schedule than I did.