Catherine Izard — 2010-11 Fellow
In June of 2009, the US House of Representatives passed America’s Clean Energy and Security Act (ACES; H.R. 2545, 2009), the first bill regulating greenhouse gas (GHG) emissions to pass either house of Congress. ACES required a reduction in US GHG emissions of ~70% below 2005 levels by 2050. ACES also introduced a Renewable Portfolio Standard (RPS), requiring electric utilities to provide 20% of their demand from a combination renewable energy sources and efficiency gains (H.R. 2545, 2009). Because electric power sector accounts 35% of the country’s total GHG emissions, it is an obvious target for emissions reductions (EPA, 2010). Even if Congress enacts no additional climate policy, EPA is likely to regulate carbon emissions from US industrial and power facilities under the Clean Air Act (CAA) (Richardson et al., 2010). It is thus highly likely that the US electricity sector will need to transition to low- or zero-carbon "clean" energy sources in the coming decades.
In a hypothetical scenario where emissions reductions starts immediately and decrease linearly to 50% below 2000 levels by 2050, the electricity sector would need a 40% reduction in carbon intensity per kWh by 2030 to be on track. Achieving this level of emissions reductions of the electricity grid will require a radical change in the technology mix of the U.S. electricity sector. This radical change in the technology mix implies massive amounts of new generating capacity construction and/or retrofitting. Depending on the rate of emissions reductions desired, the electricity sector may be forced to retire existing capacity before the end of its natural life.
Currently, proposed US climate policy has set emissions reduction goals without due consideration of the physical realities of the amount of construction required to meet those goals. Designing policy that includes incentives for efficient construction can increase the effectiveness and cost efficiency of decarbonization. In order to design this policy, it is important to understand the how the severity of emissions constraints affects the physical flows of electricity capacity construction required to comply. Four decision variables primarily drive the amount of construction required to meet emission reduction goals: the magnitude of reductions, the timing of reductions, demand growth, and technology choice.
Magnitude of Reductions: The magnitude of emissions reductions is a of obvious importance, since the more aggressive reductions are, the more turnover will be required in the electricity sector. A modest goal may simply require building only zero- or low-carbon capacity to meet new load. An aggressive goal may require retiring existing capacity before the end of its natural life, and then building even more zero- or low-carbon capacity to both make up for retirements and meet new load.
Timing of Reductions: The timing of emissions reductions is a crucial decision variable because it affects the rate at which emissions reductions must occur. An early start means that the transformation of the electricity sector can occur gradually, limiting the amount of construction in a given year. The penalty for a late start, however, is that construction must proceed more rapidly in order to meet cumulative emissions targets. Additionally, during pre-mitigation period, the electricity sector will have built new fossil fuel plants, committing the sector to higher business-as-usual emissions. While this effect has been discussed qualitatively, it is important to quantitatively assess the penalty for starting mitigation late in physical terms in order to fully appreciate the consequences of timing.
Demand Growth: There needs to be enough electricity capacity construction to meet demand, regardless of what other activity is motivated by climate constraints. Demand growth can be reduced, however, by policies that encourage energy efficiency improvements and load shedding. Demand-side management is thus an important policy tool to examine when attempting to reduce emissions from the electricity sector.
Technology Choice: There are many options for zero- and low-carbon electricity. The first option is to re-dispatch existing units by increasing the capacity factor of lower carbon units such as natural gas. The second option is to retrofit existing fossil fuel plants with carbon capture and storage (CCS). The third option is new construction of zero- and low-carbon capacity, such as wind, solar (photo-voltaic and/or thermal), nuclear, etc. The choice among these options will affect the amount of construction and retirement needed for two reasons. First, if re-dispatch or retrofit is selected, it will reduce the amount of retirement and displace construction. Second, different technologies have different capacity factors. Lower capacity factor technologies require more capacity the same amount of output as higher capacity factor technologies, and thus require more construction.
A fifth concern that has the potential to affect how successfully the US can decarbonize its electricity sector is resource scarcity and security. Many zero-carbon technologies rely on scarce metals (e.g. rare earth elements, gallium, indium, etc.), and a rapid increase in demand for specialty metals caused by the development of a clean electricity infrastructure may trigger short-term supply shortages. There is some evidence that the large- scale deployment of new technologies may strain resource availability given current technologies (e.g., without substitution). Many resource economists argue that resource scarcity is unlikely to be a concern in the long run because higher prices will encourage substitution or increased recycling rates. However, the time frame of rapid construction for the electricity sector may not allow this luxury—short-term scarcity may be enough to cause problems for some technologies that it could affect decarbonization trajectories. Many of these minerals are currently mined in relatively small quantities or as co-products of other minerals. While in the long run, it is possible to develop or expand mines, this process can take years to decades—longer than the time scale required for rapid construction of electricity infrastructure.
Resource security is another issue of potential concern for the scarcer metals. Some metals, like tin, gallium, and magnesium are mined in very few regions globally, rendering supply chains potentially vulnerable. We saw a telling example of this only recently. China produces 88% of the world’s rare earth elements (REEs), and in September 2010, China shut down exports of REEs to Japan in a political maneuver that caused significant problems for the Japanese manufacturing sector. Such a tactic used against the U.S. could, for example, prevent the manufacture of advanced wind turbines, which require large quantities of rare-earth magnets, and hinder decarbonization efforts.
This work will develop a new methodology for analyzing the effects of GHG abatement magnitude and timing, demand growth, technology choice, and resource security on infrastructure flows. The new method, termed “integrated infrastructure flow analysis” (IIFA), extends the core tool of material flow analysis to create a multi-criteria decision-making tool that can evaluate the implications of decision making on infrastructure flows. The research will identify scenarios that could threaten the achievement of climate goals through materials shortages, increased construction costs, etc. The IIFA methodology will develop a framework for characterizing these effects and provide information to decision makers. The end result will be a portfolio of infrastructure investment pathways that best avoid unintended roadblocks. While this project will apply IIFA to the electricity sector, many types of infrastructure also face challenges that require integrated, multi-criteria tools to assess (e.g., water distribution systems, transportation networks, etc). IIFA will also be relevant to these other infrastructure types.