Climate change

February 24, 2011

The cost of ending global warming – a calculation

Filed under: Economic issues, Global Warming — buildeco @ 12:04 am

Guest Post by Chris Uhlik. Dr Uhlik did a BS, MS, and PhD in Electrical Engineering at Stanford 1979–1990. He worked at Toyota in Japan, built robot controllers, cellular telephone systems, internet routers, and now does engineering management at Google. Among his 8 years of projects as an engineering director at Google, he counts engineering recruiting, Toolbar, Software QA, Software Security, GMail, Video, BookSearch, StreetView, AerialImaging, and research activities in Artificial Intelligence and Education. He has directly managed about 500 engineers at Google and indirectly over 2000 employees. His interests include nuclear power, photosynthesis, technology evolution, artificial intelligence, ecosystems, and education.

(Ed Note: Chris is a member of the IFRG [a private integral fast reactor discussion forum] as well as being a strong support of the LFTR reactor design)

An average American directly and indirectly uses about 10.8 kW of primary energy of which about 1.3 kW is electricity. Here I consider the cost of providing this energy as coming from 3 main sources:

1. The fuel costs (coal, oil, uranium, sunlight, wind, etc)

2. The capital costs of the infrastructure required to capture and distribute the energy in usable form (power plants, tanker trucks, etc)

3. The operating costs of the infrastructure (powerline maintenance, plant security, watching the dials, etc)

The average wholesale electricity price across the US is about 5c/kWh, so the all-in costs of providing the electrical component is currently ~$570/person/year or 1.2% of GDP. The electric power industry including all distribution, billing, residential services, etc is $1,120/person/year or 2.4% of GDP. So you can see there is about a factor of two between marginal costs of electricity production (wholesale prices) and retail prices.

The rest of this energy comes from Natural gas, Coal, Petroleum, and Biomass, to the tune of 6.36 kW/person.

I’m going to make the following assumptions to calculate how much it would cost to convert to an all-nuclear powered, fossil-carbon-free future.

Assumptions (*see numbers summary at foot of this post)

  • I’ll neglect all renewable sources such as hydro. They amount to only about 20% of electricity and don’t do anything about the larger fuel energy demand, so they won’t affect the answer very much.
  • Some energy sources are fuel-price intensive (e.g. natural gas) and some have zero fuel prices, but are capital intensive (e.g. wind). I’ll assume that nuclear is almost all capital intensive with only 35% of the cost coming from O&M and all the rest going to purchase costs plus debt service.
  • I’ll use 8% for cost of capital. Many utilities operate with a higher guaranteed return than this (e.g. 10.4%) but the economy historically provides more like 2–5% overall, so 8% seems quite generous.
  • I’ll assume 50 year life for nuclear power plants. They seem to be lasting longer than this, but building for more than 50 years seems wasteful as technologies advance and you probably want to replace them with better stuff sooner than that.
  • Back in the 1970′s we built nuclear power plants for about $0.80–0.90/watt (2009 dollars). In the 1980′s and 90′s we saw that price inflate to $2.09–3.39/watt (Palo Verde and Catawba) with a worst-case disaster of $15/watt (Shoreham). Current project costs are estimated at about $2.95/watt (Areva EPR). Current projects in China are ~$1.70/watt. If regulatory risks were controlled and incentives were aligned, we could probably build plants today for lower than the 1970′s prices, but I’ll pessimistically assume the current estimates of $3/watt.
  • Electricity vs Combustion: In an all nuclear, electricity-intensive, fossil-carbon-free future, many things would be done differently. For example, you won’t heat your house by burning natural gas. Instead you’ll use electricity-powered heat pumps. This will transfer energy away from primary source fuels like natural gas to electricity. Plug-in-hybrid cars will do the same for petroleum. In some cases, the total energy will go down (cars and heat pumps). In some cases, the total energy will go up (synthesizing fuel to run jet transport aircraft). I’ll assume the total energy demand in this future scenario is our current electricity demand plus an unchanged amount of energy in the fuel sector, but provided instead by electricity. I.e. 1.3 kW (today’s electricity) + 6.4 kW (today’s fuels, but provided by electricity with a mix of efficiencies that remains equivalent). This is almost certainly pessimistic, as electricity is often a much more efficient way to deliver energy to a  process than combustion. (Ed Note: I discuss similar issues in these two SNE2060 posts).
  • Zero GDP growth rate

Result: In this future, we need 7.7 kW per person, provided by $3/watt capitalized sources with 8% cost of capital and 35% surcharge for O&M. The cost of this infrastructure: $2,550/person/year or 5% of GDP.

Alternate assumptions:

  • Chinese nuclear plant costs of $1.70/watt
  • Higher efficiency in an electric future were most processes take about 1/2 as much energy from electricity as they used to take from combustion. 1.3 kW from old electricity demands (unchanged) + 3.2 kW from new electricity demands (half of 6.4 kW). And fuels (where still needed) are produced using nuclear heat-driven synthesis approaches.

Alternative result: $844/person/year or 2% of GDP.

Conclusion: Saving the environment using nuclear power could be cheap and worth doing.

Numbers*:

Year: 2008
GDP: $14.59T
Population 306M
Electricity: 12.68 quads
Non-electricity fuels: 58.25 quads
Natural gas: 16.33 quads
Coal: 1.79 quads
Biomass: 3.46 quads
Petroleum: 36.67 quads
Average retail electricity price: 9.14 c/kwh
Electric power industry: $343B/yr
Electricity transmission industry: $7.8B/yr

Per person statistics:
GDP: $47,680
Electricity: 1.29 kW (average power)
Fuels: 6.36 kW

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