System LCOE and minimizing GHG avoidance costs

Recent references on full life cycle costing of electricity generation options – including accounting for intermittency and integration costs.

Why the Best Path to a Low-Carbon Future is Not Wind or Solar Power Analysis of Brookings paper by Charles Frank

This paper examines five different low and no-carbon electricity technologies and presents the net benefits of each under a range of assumptions. It estimates the costs per megawatt per year for wind, solar, hydroelectric, nuclear, and gas combined cycle electricity plants. To calculate these estimates, the paper uses a methodology based on avoided emissions and avoided costs, rather than comparing the more prevalent “levelized” costs. Three key findings result:

First—assuming reductions in carbon emissions are valued at $50 per metric ton and the price of natural gas is $16 per million Btu or less—nuclear, hydro, and natural gas combined cycle have far more net benefits than either wind or solar. This is the case because solar and wind facilities suffer from a very high capacity cost per megawatt, very low capacity factors and low reliability, which result in low avoided emissions and low avoided energy cost per dollar invested.

Second, low and no-carbon energy projects are most effective in avoiding emissions if a price for carbon is levied on fossil fuel energy suppliers. In the absence of an appropriate price for carbon, new no-carbon plants will tend to displace low-carbon gas combined cycle plants rather than high-carbon coal plants and achieve only a fraction of the potential reduction in carbon emissions. The price of carbon should be high enough to make production from gas-fired plants preferable to production from coal-fired plants, both in the short term, based on relative short-term energy costs, and the longer term, based on relative energy and capacity costs combined.

Third, direct regulation of carbon dioxide emissions of new and existing coal-fired plants, as proposed by the U.S. Environmental Protection Agency, can have some of the same effects as a carbon price in reducing coal plant emissions both in the short term and in the longer term as old, inefficient coal plants are retired. However, a price levied on carbon dioxide emissions is likely to be a less costly way to achieve a reduction in carbon dioxide emissions.

The Optimal Share of Variable Renewables. How the Variability of Wind and Solar Power Affects Their Welfare-Optimal Deployment

This paper estimates the welfare-optimal market share of wind and solar power, explicitly taking into account their output variability. We present a theoretical valuation framework that consistently accounts for output variability over time, forecast errors, and the location of generators in the power grid, and evaluate the impact of these three factors on the marginal value of electricity from renewables. Then we estimate the optimal share of wind and solar power in Northwestern Europe from a calibrated numerical power market model. The optimal long-term share of wind power of total electricity consumption is estimated to be 20% at cost levels of 50 €/MWh, about three times the current market share of wind; but this estimate is subject to significant parameter uncertainty. Variability significantly impacts results: if winds were constant, the optimal share would be 60%. In addition, the effect of technological change, price shocks, and policies on the optimal share is assessed. We present and explain several surprising findings, including a negative impact of CO2 prices on optimal wind deployment.

 System LCOE/ What are the Costs of Variable Renewables? by Falko Ueckerdt, Lion Hirth, Gunnar Ludere

Levelized costs of electricity (LCOE) are a common metric for comparing power generating technologies. However, there is qualified criticism particularly towards evaluating variable renewables like wind and solar power based on LCOE because it ignores integration costs that occur at the system level. In this paper we propose a new measure System LCOE as the sum of generation and integration costs per unit of VRE. For this purpose we develop a conclusive definition of integration costs. Furthermore we decompose integration costs into different cost components and draw conclusions for integration options like transmission grids and energy storage. System LCOE are quantified from a power system model and a literature review. We find that at moderate wind shares (~20%) integration costs can be in the same range as generation costs of wind power and conventional plants. Integration costs further increase with growing wind shares. We conclude that integration costs can become an economic barrier to deploying VRE at high shares. This implies that an economic evaluation of VRE must not neglect integration costs. A pure LCOE comparison would significantly underestimate the costs of VRE at high shares. System LCOE give a framework of how to consistently account for integration costs and thus guide policy makers and system planers in designing a cost-efficient power system.

The Economist on past and future emissions cuts


Chart 1 – click to embiggen

The above graphic is from The deepest cuts, a contribution fromThe Economist to grappling with the “big picture” on effective carbon avoidance strategies.There are some obvious problems with the numbers in Chart 1 – particularly the Cumulative Emissions avoided by Hydropower and Nuclear. There are also some very big issues with the Chart 2 where authors attempt to project the carbon avoidance situation in 2020. I  addressed some of these issues in my comments to the article:

I hope this is just the beginning of an ongoing Economist project to refine and update an understanding of what is working, what is not working – all in the context of the essential measure of cost/benefit, specifically cost-per-ton-CO2-avoided.

I need to highlight a few errors in your data presentation. In your Chart 1 you report Cumulative Emissions Avoided for both Hydropower and Nuclear that understate the actual avoidance by roughly thirty times. Nuclear and hydropower avoidance should be about 64 and 90 GtCO2-eq respectively vs. your 2.2 and 2.8 GtCO2-eq. I derived these values from two sources. First, the IAEA report you referenced Climate Change And Nuclear Power 2013 states on page 14

Over the past 50 years, the use of nuclear power has resulted in the avoidance of significant amounts of GHG emissions around the world. Globally, the amount of avoided emissions is comparable to that from hydropower.

From inspection of IAEA FIG. 5 we can see that cumulative historical Hydropower avoidance is very roughly 25 GtCO2-eq greater than the nuclear avoidance, but otherwise similar. But what is the cumulative avoidance? in “Prevented mortality and greenhouse gas emissions from historical and projected nuclear power” Pushker and Hansen, 2013 calculated that the cumulative global CO2 emissions emissions avoided by nuclear power is 64 GtCO2-eq. Here’s their Figure 3, page 12 for both historical and projected emissions avoided:

Click to embiggen

The authors calculated the 64 GtCO2-eq avoidance based on a different IAEA source document: Energy, Electricity and Nuclear Power Estimates for the Period up to 2050: 2011 Edition; International Atomic Energy Agency, 2011.

Is 64 GtCO2-eq a big number? It is a Very Big Number, as Pushker and Hansen 2013 contrast to 35 years of USA coal emissions:

For instance, 64 GtCO2-eq amounts to the cumulative CO2 emissions from coal burning over approximately the past 35 yr in USA

Chart 2: Click to embiggen

Regarding your Chart 2, forecasting “the policies likely to have the biggest impact in 2020” is a courageous undertaking. To make useful projections requires a deep knowledge of the energy industry, the electric power industry, economic forecasting and the political trends of the significant emitting countries. That is a Very Big Ask, so I decided to have a look for related work by the firm retained by The Economist: namely Climate Action Tracker. The principles of this consulting firm are listed as Dr. Bill Hare, Dr. Niklas Höhne, Dr. Johannes Gütschow and Dr. Michiel Schaeffer. The first three gentlemen are affiliated with the Potsdam Institute for Climate Impacts Research (PIK). That affiliation immediately boosted my estimate of the Climate Action Tracker qualifications because I have been studying the work of other PIK researchers who have been publishing very important and original work on the difficult subject of integrating variable renewable generation sources, especially at potentially high future penetration levels. This work requires a deep understanding of electric power systems. In particular I will recommend these three PIK papers:

  1. Hirth, Lion, The Optimal Share of Variable Renewables. How the Variability of Wind and Solar Power Affects Their Welfare-Optimal Deployment (November 8, 2013). FEEM Working Paper No. 90.2013. Available at SSRN: or
  2. Ueckerdt, Falko and Hirth, Lion and Luderer, Gunnar and Edenhofer, Ottmar, System LCOE: What are the Costs of Variable Renewables? (January 14, 2013). Available at SSRN: or
  3. Hirth, Lion and Ueckerdt, Falko and Edenhofer, Ottmar, Why Wind is Not Coal: On the Economics of Electricity (April 24, 2014). FEEM Working Paper No. 39.2014. Available at SSRN: or

What I found in an afternoon of Internet research on Climate Action Tracker gives me concern about the Chart 2 conclusions. You have probably noticed in Chart 2 that in the six short years to 2020 nuclear power has become so insignificant it doesn’t even make the top-eleven list. That is puzzling, as nuclear power is currently the largest source of non-hydro emission-free electricity.

I confess that all of my searching for anything related to nuclear power trends in publications by Climate Action Tracker principles is a single update:  Climate Action Tracker Update, 30 November 2012 from which I have extracted the only two, widely separated paragraphs wherein nuclear is even mentioned:

…Society also would lose the ability to choose whether it wants technologies like carbon capture and storage and nuclear energy, because those, along with bio-energy, would likely have to be deployed on a larger scale.
…More pressure on future policy requirements. For example, full global participation would be required after 2020, and society may have little freedom to choose technologies, such as the freedom to reject large-scale nuclear energy, CCS, or bio-energy.

The only way I can read these comments is that the authors political view is that nuclear power should be rejected. This supports my conclusion that the members of Climate Action Tracker are possibly experts in climate science, but perhaps not so expert in the electric power industry and the economics of energy. The economics is fundamental to policies that can be implemented in the real world.

How Fast Are The Costs Of Solar Really Coming Down? Recent Gains Do Not Promise Sustained Growth

Despite the long-standing assertion by proponents that solar energy is nearing a breakthrough, the failure of solar energy to achieve significant market penetration despite heavy and sustained public subsidies over the last two decades is no mystery. The costs of scaling solar remain reliably higher than not only fossil energy but also other non-fossil alternatives, most notably nuclear. Continued growth of solar will require continued heavy subsidies for the foreseeable future.

(…snip…)Bottom line, even cherry-picking best case solar facilities, ignoring heavy subsidies, ignoring artificially low module prices, ignoring costs of backing up solar and balancing intermittency, and assuming the worst case for nuclear in terms of cost overruns, scaling solar still costs substantially more than scaling nuclear today. While nuclear has displayed negative learning rates in many countries, recent nuclear deployment efforts have achieved substantial reductions in upfront capital costs over time, including in South Korea and China. Moreover, due to the difficulty of exporting soft cost gains and to enduring austerity, solar cost declines experienced recently will likely prove difficult to sustain and replicate globally in the coming years.

The Breakthrough Institute published a new report on low-carbon energy options on July 3, 2013. The reports tackles the question “Can solar electrical generation realistically scale to displace coal and gas-fired plants?”. This is a complex issue which definitely does not lend itself to sound-bite media appetites. I found the report to be objective and well-supported by suitable citations.

The conclusions will offend solar fans – especially those who are also anti-nuclear. I hope that those readers will not reject the report without first studying the linked citations. I will be watching for reasoned criticism of the report. Meanwhile, here is an excerpt from the conclusions:


Recent relative gains in solar costs and deployment provide a highly questionable basis for sustained progress over the coming decade. Costs remain high and are declining significantly more slowly than proponents suggest. Module costs will continue to decline over the long term, as solar efficiency improves and manufacturing efficiencies are realized. However real module costs have not come down as quickly as proponents claim. Nor do module costs represent the primary barrier to low costs.

Balance-of-system and other soft costs now represent the lion’s share of installed solar costs, particularly for rooftop solar, which cannot benefit from economies of scale, as large industrial solar installations can. Lacking some major breakthrough in solar installation technologies, solar deployment is likely to remain costly and labor intensive. Reductions in cost will come incrementally, in response to the scale up of domestic solar industries and will continue to require heavy, sustained subsidies in order to realize.


Scaling solar without heavy subsidies will require bringing both module and installation costs down dramatically, significant breakthroughs in electricity transmission and storage, and perhaps greater pursuit of centralized solar plants that can benefit from economies of scale and superior citing. As a long-term strategy to develop better and cheaper technologies, continuing and even expanded solar subsidies may be justified. But heavily subsidized solar does not represent a serious short-term strategy to replace either fossil energy or nuclear.

Please read the whole report.

Is it really faster to deploy solar than nuclear power?

In brief, no. Ask an industrial engineer to study the wind, solar and nuclear deployment cycles. I am confident that she would quickly conclude that wind and solar are dramatically slower to deploy – limited by the massive physical scale required to achieve meaningful electrical generation from such dilute energy sources. E.g., non-dispatchable wind power requires roughly ten times the steel and concrete as required for dispatchable nuclear power. 

At Climate Spectator Geoff Russell uses actual historical data to demonstrate the relative deployment speeds of solar and nuclear power (only the UAE nuclear projection in Geoff’s chart is not actual data). I cannot improve on the wording Geoff chose for his conclusion:

(…snip…) the French have been producing electricity with nuclear reactors for less than 80g of CO2 per kwh for over 20 years. The Germans are stuck at 450g of CO2 and still building more coal power stations.

Being cool, profitable and popular is fine, but irrelevant. We need a reliable technology that delivers deep energy emission cuts and we need it fast.

It’s rapidly becoming crystal clear that the biggest enemy we face in preventing ongoing climate destabilistation is the anti-nuclear movement. They have cost the planet two decades which could otherwise have seen many more countries with clean electricity, and now they are running a distracting strategy promoting technologies which are intrinsically slow to roll out. They have, in effect, created an energy growth vacuum being filled by coal seam gas which is quick to build but which won’t prevent further climate destabilisation. 

I recommend that you read Geoff’s complete essay, which is well-resourced with citations for all the relevant data.

Chinese solar/wind subsidies: who benefits?

I enjoyed Joris van Dorp’s comments on “Energy idiocy”: Solar Panel Tariffs. Here’s a lightly-edited reprise of the dialogue:

The tariff’s are imposed because the Chinese state has been heavily supporting the Chinese solar manufacturers financially. Chinese panels makers have been earning only 2$ for every 3$ in costs, with the Chinese state making up the difference. That is called dumping, and the EU and USA are fully in their right to impose tariffs in order to protect their PV manufacturers, who cannot operate similar structural loss making enterprises as the Chinese have been able to do for years.

I invite criticism of my reply:

I agree with all your facts. I also agree with John Cochrane’s main thesis, but I will try to state John’s observations on “Silly Policy” from a “Who benefits?” perspective.

To promote internal growth China has been subsidizing their solar and wind manufacturers. Hence China is literally delivering a “free lunch” to global solar consumers (which basically means heavily taxpayer subsidized PV projects). By “free lunch” I mean a transfer from China’s savers/taxpayers to e.g., German taxpayers/consumers. I mention China’s savers because the financial repression imposed upon the savers is a central part of the Chinese government funding, direct taxes are relatively small.

The Chinese subsidized solar isn’t fun for a German PV manufacturer – but these companies are only in business because of a transfer from German taxpayers to the company. For a German PV installer the Chinese subsidy is a win – their costs go down a bit (not hugely, because the PV cells are a modest part of the life cycle cost of PV solar). Of course the German taxpayer and consumer win.

So there are mostly winners from the Chinese subsidy, unless you are a Chinese taxpayer/saver. Chinese citizens benefit from more jobs, more village farmers employed in the over-sized solar factories. 

My personal long run view – I don’t think these Chinese PV companies have a future. How long will OECD taxpayers be willing to continue funding a “feel good” energy policy that obviously doesn’t work? 

Today’s update on the “policy that obviously doesn’t work” Cost of German Solar Is Four Times Finnish Nuclear. This is a very instructive analysis of a truly silly energy policy. The true cost is much worse than 4X – see the graphic depicting life cycle costs at the end of the article:

Lastly, if anyone knows of a study demonstrating a solar project that is economically competitive with nuclear without subsidy please comment. By viable I mean all-costs-inclusive life cycle costs.  I’m not aware of any PV projects in the first world that would have been built on purely economic grounds). It’s not easy to obtain objective data on any of the wind/solar projects because they are all intrinsically political – and it is definitely not in the politicians’ interest to publish the facts.

German Solar Subsidies: “Costliest mistake in the history of German energy policy”

SPIEGEL ONLINE has a surprisingly accurate take on the true cost of the German solar subsidies. Snippet on the “Costly Mistake“:

(…) A new study by Georg Erdmann, professor of energy systems at Berlin’s Technical University, reveals just how far Germany’s current center-right governing coalition — made up of Chancellor Angela Merkel’s CDU and the business-friendly Free Democrats (FDP) — has strayed from its own self-imposed goals. Erdmann has calculated the effects that the latest changes to the EEG will have between now and 2030. He believes that subsidies for renewable energy, including an expansion of the power grid, will saddle energy consumers with costs well over €300 billion ($377 billion).

An environmental surcharge known as the EEG contribution, which is already added to German energy bills, will rise sharply. This renewable energy surcharge currently amounts to 3.59 cents per kilowatt hour. Chancellor Angela Merkel previously promised to cap it at 3.5 cents, but Erdmann’s calculations show the EEG contribution jumping to “over 10 cents per kilowatt hour,” or nearly three times what the chancellor pledged.

The study is all the more interesting because Erdmann himself is a member of a panel of experts the German government appointed a few months ago to monitor Germany’s transition to renewable energy. Though the panel is expected to deliver its conclusions at the end of this year, it already seems clear that Erdmann considers solar energy subsidies a hindrance rather than a help in Germany’s phase-out of nuclear energy.

Photovoltaics are threatening to become the costliest mistake in the history of German energy policy. Photovoltaic power plant operators and homeowners with solar panels on their rooftops are expected to pocket around €9 billion ($11.3 billion) this year, yet they contribute barely 4 percent of the country’s power supply, and only erratically at that.

When night falls, all solar modules go offline in one fell swoop; in the winter, they barely generate power during the daytime. During the summer, meanwhile, they sometimes generate too much power around midday, without enough storage capacity to capture it all. The distribution network is also not laid out in a way that would allow the country’s thousands of owners of photovoltaic arrays — a term used to denote an installation of several panels working together — to feed into the grid as well as draw power from it.

To keep the lights on, Germany ends up importing nuclear power from France and the Czech Republic. Grid operator Tennet even resorted to tapping an aging fossil fuel-fired power plant in Austria to compensate for shortages in solar power.

Nanosolar rising

Tom Cheyney has a two-part update on progress at valley-darling Nanosolar. We’ve been naively hopeful about Nanosolar since 2007 (see Energy sources with “Moore’s law” type exponential deflation?).

Cheyney had good access to the new crop of Nanosolar execs. I continue to be guardedly optimistic. The article gives a good outline of the challenges facing the scaling from prototype to industrial production of a new technology.


“We can go faster; the line speed we’re running right now is fairly slow,” a process engineer told me, snapping me out of my ink-stained trance stare. “This machine has the capability to go five times this speed, so we could go five times the capacity of what we’re running on the other tools.”

“We’re not a fully balanced line yet, as you’d expect, so this tool, if it were running 24 by 7, we’d need a lot more equipment to catch up with it,” piped in Brian Stone, VP of sales and product management.

“We’re in commercial production, and we’re ramping up our volumes and our factories,” added Eugenia Corrales, Nanosolar’s exec VP of ops and engineering. “What you’re going to see is the beginnings of that. You’re not going to see our full-fledged capability–you’re going to see where we are today.”

“Various tools are in various places,” explained Stone. “Some may be running production rolls, others may be running experiments.”

“We share the shop floor with development areas where some of our engineers are doing work,” said Corrales. “The pilot line is also on the floor right now, our waste management is on the floor right now: long-term, it’s going to be outside the building.”

“At some point, it will be more automated in this part of the evolution, but right now we don’t even have all the equipment lined up in a true end-to-end line, because that’s how this evolved.”

Corrales, a new kid on the Nanosolar block (six weeks on the job when I visited in mid-July), has her work cut out for her. But her c.v. suggests she should be up to the task of bringing order to the Nanosolar factory floor, with its mix of R&D/pilot activities as well as front- and back-end CIGS solar-cell production. She brings years of manufacturing, product development, and operations management experience from stints at SolFocus, Cisco Systems, and Hewlett Packard.

I asked her what struck her, both expected and unexpected, about her new employer.

For starters, she told me, “the foil is thinner than I expected it to be.” (The flexible aluminum-alloy substrate, in rolled lengths between one and two kilometers, is 150um thick.)

“There’s a tremendous amount of innovation that goes on in Nanosolar,” she then generalized. “That’s really the history of the company. I expected that to some degree, but there’s just a whole slew of scientists that are very impressive.

The solar ponzi scheme

The well-off can afford to buy “feel good” solar panels, these panels being heavily subsidized by taxes paid by everyone. The wealthy can then sell back excess power from their subsidized panels (which raises the cost of electricity to everyone due to the high cost of solar). So the lower classes taxes are used to subsidize the rich doing their feel-good. Does this make sense?

Cool Earth Solar — a cool innovation

Instead of expensive mirrors, why not use 8-ft diameter mylar balloons — clear on top, reflective bottoms? Solar electricity cheaper than natural gas? Let’s wish this team can succeed to take this approach to industrial scale!

If solar power is expensive in part because the materials come dearly, then use cheaper materials. That’s the design principle behind thin film solar cells, and now also behind a form of concentrated solar using plastic balloons, designed by a firm called Cool Earth Solar.

Concentrated solar uses mirrors to shine more light onto regular solar photovoltaic cells, in order to get more energy, and thus more profit, out of a single cell. However, the mirrors themselves and machinery needed to keep them precisely aimed usually drive the cost per watt back up.Cool Earth’s idea is to use a reflective inflatable made out of mylar, a cheap plastic often used for food packaging, to reflect light onto cells. The company claims that its scheme produces energy at a lower cost than natural gas plants.

How frequently are these balloons going to have to be — i.e., what is their average life expectancy? Note that the company is in the electric utility business — they will not sell solar components to you as consumer. They are working on contracts to sell their solar-generated power to the California utilities. Excerpts from their FAQ:

When will you be accepting customers? coolearth is currently negotiating with electrical utilities for the sale of energy from our solar power plants. The company’s goal is to provide clean, renewable, solar power electricity at a competitive cost with current fossil based sources of grid power.

How is the coolearth solution better than other solar technologies? coolearth’s solution has two main advantages. First, our CPV technology addresses the limited availability and cost fluctuations of solar cells. Second, our innovative use of reflective thin films as our reflector material reduces by an order of magnitude both the amount of material and the weight required for a CPV system. The result is a solution that generates electricity at a price competitive with that of traditionally fueled power plants.

Why are your solar concentrators inflatable? Serendipitously, inflation air allows us to make an effective concentrator from nothing but thin flat clear and reflective plastic films that are bonded to each other like a conventional foil balloon. The inflated structure is lightweight but strong enough to survive 125 mph winds. We can optimize the optical properties of the balloon by actively controlling its inflation. The balloon also forms a protective barrier around our receiver.

What is Concentrator Photovoltaic (CPV) technology?

Similar in principle to using a magnifying glass to concentrate light, concentrated solar systems use lenses or reflectors to concentrate sunlight onto highly efficient solar cells. By concentrating the light onto a single high efficiency cell, the technology vastly reduces the amount of traditional solar cell area needed to produce electricity. Multi-junction, high efficiency cells derived from satellite technology allow CPV systems to generate the same amount of electricity as traditional flat panel PV systems while using up to 500 times less solar cell material.