Subsidies Won’t Fix the Energy Industry

“If Congress isn’t willing to end energy subsidies entirely, it could still make energy technologies more competitive by simplifying all 44 energy tax provisions. For instance, it could offer tax credits to companies based on what their emissions are, without requiring that they use any specific technologies to hit those targets. Unlike targeted subsidies, such performance-based provisions have historically led to less greenhouse emissions.”

https://reason.com/2022/11/26/subsidies-wont-fix-the-energy-industry/

Europe’s Energy Wounds Are Self-Inflicted

“”In 2000, Germany launched a deliberately targeted program to decarbonize its primary energy supply, a plan more ambitious than anything seen anywhere else,” Vaclav Smil wrote in 2020 for the Institute of Electrical and Electronics Engineers’ IEEE Spectrum. “The policy, called the Energiewende, is rooted in Germany’s naturalistic and romantic tradition, reflected in the rise of the Green Party and, more recently, in public opposition to nuclear electricity generation.”
The problem, as Smil noted, is that government-favored and subsidized solar and wind are intermittent. Wind doesn’t generate electricity when the air is still, and solar is of little use at night and on cloudy days. That means old-school generating capacity has to be maintained in parallel to the new systems.

“It costs Germany a great deal to maintain such an excess of installed power,” Smil added. “The average cost of electricity for German households has doubled since 2000. By 2019, households had to pay 34 U.S. cents per kilowatt-hour, compared to 22 cents per kilowatt-hour in France and 13 cents in the United States.”

The German news magazine Der Spiegel came to a similar conclusion in 2019.

“The state has redistributed gigantic sums of money, with the [Renewable Energy Sources Act] directing more than 25 billion euros each year to the operators of renewable energy facilities,” the authors observed. “But without the subsidies, operating wind turbines and solar parks will hardly be worth it anymore. As is so often the case with such subsidies: They trigger an artificial boom that burns fast and leaves nothing but scorched earth in their wake.”

Making the matter worse is the extent to which Europe has sourced its fossil fuels from Russia. That’s a dependency partly based on easy accessibility by land to Russia’s resources. It’s also an artifact of economic diplomacy from the Cold War era intended to build trade ties to reduce the risk of conflict. But what was supposed to give the West leverage over the old Soviet Union has instead handed modern Russia enormous clout.

Comparatively clean nuclear energy might have made the difference, but the 2011 Fukushima disaster spooked Germans more, perhaps, than people anywhere else, and the country resolved to abandon nuclear power, leaving it dependent on unreliable solar and wind and, especially, imported fossil fuels. Only now, with Russia throttling the supply of natural gas to 20 percent of capacity, is the governing coalition considering extending the life of the last two nuclear power plants past the end of the year.”

The Sinema-Manchin split that shaped Dems’ deal

“After Manchin agreed with Senate Majority Leader Chuck Schumer on the party-line tax, health care and energy bill, the West Virginia Democrat found himself bargaining with fellow moderate Sen. Kyrsten Sinema. Both hard-nosed negotiators, the Arizona Democrat’s business-friendly tax-approach clashed sharply with Manchin’s more progressive positions on taxes.

Manchin sought to target the wealthy and ended up agreeing with Schumer to target the so-called carried interest loophole that allows some people to pay lower tax rates on investment income. He also signed off on a corporate minimum tax package that most Democrats believed Sinema supported.

Ultimately, Sinema took a scalpel to the corporate minimum tax and scuttled any changes to carried interest, which Manchin called particularly “painful.” Triangulating between them through all of it: Schumer, whose job was harmonizing the views of the very public Manchin with an often-silent Sinema.”

The Democratic infighting over Joe Manchin’s “side deal,” explained

“Permitting is the process for getting federal approval for energy projects, including oil and gas pipelines, which often undergo extensive review for their environmental impact. It can be a long and expensive process, and while Republicans and Democrats agree that the experience could be improved, they differ on what those reforms should entail.

Sen. Joe Manchin (D-WV), a chair of the Senate Energy and Natural Resources committee who has deep ties to the coal industry, has long taken issue with the current permitting process, arguing that it’s too convoluted. This summer, he struck a deal with Senate Majority Leader Chuck Schumer: In exchange for Manchin’s backing on the Inflation Reduction Act, Schumer guaranteed a vote on permitting reforms that would streamline approval of fossil fuel and renewable energy projects.”

“In a letter sent to both Schumer and House Speaker Nancy Pelosi last week, House lawmakers argue Manchin’s reforms would make it easier to greenlight harmful oil and gas projects, and reduce constituents’ abilities to oppose such endeavors. Additionally, they claim that attaching the policies to a must-pass bill would force lawmakers to choose between “protecting … communities from further pollution or funding the government.””

Biden’s offshore wind plan is also a jobs plan

“what’s really worth paying attention to are Biden’s goals for offshore wind power, which is an important energy source for regions like the northeastern US that lack the space and ample sunlight that solar energy depends on. It’s here that the new plan goes from mundane to ambitious, and it may be an indicator of how the administration intends to address issues related to climate change, energy, and jobs at the same time.”

“As of today, the US has only seven offshore wind turbines — five in a wind farm off Rhode Island’s Block Island, and two more set up as tests in Virginia. But on February 23, the federal government will auction offshore wind leases to utilities or offshore wind energy developers in an ocean region called the New York Bight, off the coasts of New York and New Jersey. The holders of those leases will then be able to set up wind farms in the area that generate up to 7 gigawatts of energy — enough to power about 2 million homes — which would require 600 to 700 turbines.”

“Those 600 or 700 wind turbines will require people to build turbine components, ship them out to sea, and maintain them once they’re set up. To make that happen, the White House and Transportation Department are aiming to create nearly 80,000 offshore wind-related jobs by 2030 by investing in ports across the Eastern Seaboard — some as far inland as Albany, New York, from where turbine parts will be shipped down the Hudson River to the New York Bight.”

“The turbines, fishers say, could negatively affect marine life. They’re also concerned that turbine towers may interfere with radar, while no-sail safety zones in the vicinity of turbines may affect their ability to reach fishing areas. The long-term impacts of wind turbines on marine life still aren’t clear, but a study in Europe’s North Sea showed turbine bases may act as artificial reefs for animals like mussels. Late last year, the Energy Department awarded Duke University a $7.5 million grant to study offshore wind’s impact on marine life, the results of which should provide a fuller picture of how turbines might affect fisheries. In the meantime, the federal Bureau of Ocean Energy Management is looking for workarounds, which is why the sale notice for the New York Bight includes provisions aimed at helping fishers, such as 2.8-mile-wide transit lanes for fishing vessels.”

“The challenges don’t end there: Even if the wind turbines do get built, and even if their potential impacts on marine life are minimized, there has to be somewhere for the energy they produce to go. Transmission lines — those high-voltage cables you see strung up on steel struts across vast stretches of the country — are usually built by regional transmission organizations, and Jacobs says there might not be enough of them to carry all the energy produced by those new turbines.

This is exactly the issue Germany faced in 2020, when a lack of transmission capacity in Northern Germany meant the region had to send some of its wind power to neighboring countries instead. “They had a whole lot of offshore wind arrive at the beach,” Jacobs said. “And then the German utility industry said, ‘Oh, we hadn’t really prepared for this.’”

The Biden administration seems to want to avoid having a similar situation happen in the United States. That’s why the Bipartisan Infrastructure Law includes funding for transmission lines, and the administration announced the Energy Department is launching an initiative called Building a Better Grid that will act as a sort of central planning authority for grid improvements. But it’s unclear if that transmission buildout will happen by the time offshore wind gets up and running in the New York Bight — and the administration makes no mention of distribution lines, or the lower-voltage wires that bring electricity to homes and businesses. Those are usually built in the US by local utilities, explained Kyri Baker, assistant professor of engineering at the University of Colorado Boulder, and they’re often only replaced once they become completely inoperable.”

The ‘Green Energy’ That Might Be Ruining the Planet

“Here’s a multibillion-dollar question that could help determine the fate of the global climate: If a tree falls in a forest—and then it’s driven to a mill, where it’s chopped and chipped and compressed into wood pellets, which are then driven to a port and shipped across the ocean to be burned for electricity in European power plants—does it warm the planet?

Most scientists and environmentalists say yes: By definition, clear-cutting trees and combusting their carbon emits greenhouse gases that heat up the earth. But policymakers in the U.S. Congress and governments around the world have declared that no, burning wood for power isn’t a climate threat—it’s actually a green climate solution. In Europe, “biomass power,” as it’s technically called, is now counted and subsidized as zero-emissions renewable energy. As a result, European utilities now import tons of wood from U.S. forests every year—and Europe’s supposedly eco-friendly economy now generates more energy from burning wood than from wind and solar combined.”

“Nevertheless, the global transition away from fossil fuels has sparked a boom in the U.S. wood-pellet industry, which has built 23 mills throughout the South over the past decade, and is relentlessly trying to brand itself as a 21st-century green energy business. Its basic argument is that the carbon released while trees are burning shouldn’t count because it’s eventually offset by the carbon absorbed while other trees are growing. That is also currently the official position of the U.S. government, along with many other governments around the world.”

“critics of the industry have suggested an alternative climate strategy: Let trees grow and absorb carbon, then don’t burn them. Deforestation is a major driver of climate change, and the United Nations climate panel has warned that the world needs to end it worldwide to meet the ambitious Paris emissions targets for 2050.”

“European experience shows that general policies to promote renewables can spark a massive shift to wood-burning if biomass isn’t specifically excluded.”

“Enviva’s product would not exist without loggers who clear-cut forests into barren fields with motorized “feller-bunchers,” but the company tries to emphasize that its business is about growing trees as well as killing trees. Enviva requires the landowners who supply its wood to promise to replant their forests, and it uses GPS technology to track and trace every harvest to see if they comply. The company has also committed to help protect 35,000 acres of threatened bottomland hardwood forests and restore 5,000 acres of natural longleaf pine.”

“Jenkins wants the public to see the big picture: Southern forests are growing overall, with more trees being planted than cut, and Enviva’s demand for wood helps encourage landowners to keep their forests as forests. The Southeastern U.S. produces one-sixth of the world’s timber, and less than 4 percent of that harvest ends up as pellets.

“one thing both sides agree on is that it matters what kind of wood ends up in the pellet mills, and what would have happened to that wood otherwise. Policymakers and academics have made all kinds of theoretical assumptions, but it’s not hard to find the reality on the ground.”

“In the decade since Enviva started manufacturing pellets, the Dogwood Alliance has repeatedly exposed gaps between the company’s sustainability rhetoric and its actions. In 2018, for example, a Dutch TV station working with Dogwood followed some logs from another cypress swamp near the Virginia border back to Enviva’s mill. Smith and I returned to the scene three years later, and while the deforested high ground around the swamp had been recolonized by a thick tangle of grasses, bushes and scrub oak, there wasn’t much growing back in the low-lying wetlands, just some sad-looking stumps poking out of the murky water. Smith warns that if governments keep subsidizing the conversion of trees into energy, enormous swaths of environmentally valuable forests around the world will end up looking like that.

Enviva officials say they no longer accept any cypress wood at their mills, or for that matter any other wood harvested from ecologically sensitive areas. They say they now source only 3 percent of their wood from the increasingly rare bottomland hardwood forests that are such culturally resonant symbols of the South—and only from “non-sensitive” ones. But Jenkins admits the company made some questionable sourcing decisions in the past.”

“what’s clear from talking to people in North Carolina, and from a few hours standing outside two Enviva mills watching logging trucks come and go, is that much of the wood that gets pelletized isn’t unmerchantable waste wood. It’s pulpwood—whole pine and hardwood trees as well as wood chips that could otherwise be sold to paper mills. It’s not thick or unblemished enough to turn into telephone poles, houses or high-quality furniture, but much of it is fine for Amazon boxes, toilet paper and the fluff inside diapers; one member of Enviva’s sustainability team described it as Walmart wood rather than Gucci wood. I later spent an hour outside a nearby paper mill watching what kind of wood arrived there, and the trucks were bringing in the same kind of logs they brought to Enviva.

That means Enviva isn’t just cleaning up around the edges of the logging industry—it’s increasing demand for wood in the South. And that means additional trees would need to be logged to feed the paper mills that are losing trees to Enviva; the increased demand for pulpwood will require an increased supply of pulpwood. Even if new trees are planted in their place, many studies suggest they will take decades, and in some cases centuries, to absorb enough carbon to “pay back” the carbon debt from burning the older trees. That’s a problem, because scientists don’t believe the world can wait decades, much less centuries, to cut emissions.”

This popular and proven climate policy should be at the top of Congress’s to-do list

“Over the past three decades, 30 states — red and blue alike — have passed laws requiring electric utilities to use more clean energy. Since 2015, 10 states have adopted 100 percent clean electricity standards, requiring the transition to fully 100 percent carbon-free power. And six more have committed to that goal. State laws are popping up so fast, it’s hard to keep track. Across the country, 170 cities have policies to get to 100 percent clean. As a result, more than one in three Americans already live in a place that’s committed to reaching 100 percent clean power.

We know this approach is technologically possible. Wind, solar, batteries, transmission lines, and other technologies can replace dirty fossil fuels. Google, one of the largest electricity consumers in the country, is aiming for 100 percent clean power, real-time at all its facilities by 2030.

With all this state and local leadership, it’s not surprising that this approach is popular with the public. In independent polls from both Data for Progress and the Yale Program on Climate Change Communication, run over the past few months, more than two-thirds of voters support the federal government moving the country to 100 percent clean power by 2035.

And once we implement this policy nationally, it should stay popular because clean energy saves customers money.”

“Many utilities continue to operate old, uneconomic coal plants. In just three years, these plants cost customers an additional $3.5 billion to keep open — and that’s before we add in all the extra hospital bills for folks breathing in their pollution day after day. Or the cost of destabilizing our climate. Replacing these dirty plants with clean power is not only good for our health; it’s also good for our wallets.”

“In our research for our report, we spent months talking with congressional offices, parliamentary experts, think tanks, climate advocates, and others, and have concluded that it is possible to pass a CES through the budget reconciliation process. In our report, we identify several ways a CES can fit with the Byrd Rule.”

Biden’s new climate orders to reshape U.S. energy policy

“In a sharp contrast to the Trump administration’s focus on increasing fossil fuel production, Biden’s orders will press pause on auctions of federal lands and waters to oil and gas companies, expand conservation protections for large swathes of federal land, create a new civilian conservation corps and promise to deliver economic help to coal-producing regions suffering from the industry’s decline.

Biden will still need Congress to accomplish his target of spending $2 trillion on climate change to help reach the goal of eliminating greenhouse gas emissions from the power sector by 2035 and across the economy by 2050. But the orders to be issued Wednesday show Biden taking aggressive steps to launch a government-wide effort toward tackling climate change.”

“Last week, on his first day in office, Biden signed an executive order calling for reconsidering methane emission rules from new oil and gas sources, reversing Trump rules that rolled back vehicles’ tailpipe carbon dioxide limits, and canceling a permit for the Keystone XL pipeline, the subject of pitched political battles for a decade.
Wednesday’s orders fill in many of the details left out of last week’s orders, including setting the date that Biden will convene a promised climate change summit with world leaders for April 22, Earth Day.

The new orders will also address “environmental justice” issues, such as by establishing new commissions to address the concerns of so-called fenceline communities that are disproportionately people of color or low-income families that live near pollution sources. Biden is also directing agencies to weigh the climate change effects of all their decisions, a move that could affect procurement strategies for government vehicle fleets or electricity production.”

“The order that has generated the sharpest opposition from oil companies is one that promises to re-write the relationship between the industry and public lands. The Biden administration will order an open-ended freeze on offering public land for oil and gas drilling and coal mining, pending reviews of whether such leases were in the public interest. Under that review, the administration is expected to consider whether to add language to new government lease agreements to tighten standards on greenhouse gas emissions and increase the royalties that companies must pay for minerals they produce on public land.”

“Wednesday’s move will not affect production currently underway or the oil and gas leases and permits that companies had stockpiled under Trump administration in expectation of new restrictions. That means oil and gas production on federal land, which contributes about one-fifth of overall U.S. production, will not stop immediately, with activity likely to continue for at least another year, energy analysts have said.”

“a pause on new activity could come back to take major bite out of some state budgets, especially those with an out-sized dependence on oil production for revenue, such as New Mexico, which gets more than 10 percent of it revenue from the activity.

New Mexico Chamber of Commerce President and Chief Executive Rob Black said the moratorium would simply lead companies to shift their operations to neighboring Texas, a state with little federal property and a state oil industry regulator who has called concerns about greenhouse gas emissions “misplaced.”

“It won’t further our shared goals on carbon emissions,” Black said during a call with reporters. “It would just cause production to move a few miles down the road to private oil and gas leases [in Texas] or will incentivize it to go overseas to Saudi Arabia and Russia.””

Getting to 100% renewables requires cheap energy storage. But how cheap?

“To a first approximation, the question of whether renewables will be able to get to 100 percent reduces to the question of whether storage will get cheap enough. With cheap-enough storage, we can add a ton of it to the grid and absorb just about any fluctuations.

But how cheap is cheap enough?

That question is the subject of a fascinating recent bit of research out of an MIT lab run by researcher Jessika Trancik (I’ve written about Trancik’s work before), just released in the journal Joule.

To spoil the ending: The answer is $20 per kilowatt hour in energy capacity costs. That’s how cheap storage would have to get for renewables to get to 100 percent. That’s around a 90 percent drop from today’s costs. While that is entirely within the realm of the possible, there is wide disagreement over when it might happen; few expect it by 2030.”

“It’s important to test renewable energy over longer time spans. In addition to daily and weekly fluctuations in solar and wind, there can be yearly or even multi-year fluctuations. And indeed, by looking back over 20 years, the team found several rare events in which wind and solar were both unusually low for an unusually long time. These rare events represent a spike in the amount of storage needed. Planning for them substantially increases the cost of a pure-renewables system.”

“these researchers set an extremely high bar: a system with all-renewable energy, with flexibility handled entirely by storage, adequate to meet demand at every hour of every day for 20 years.

Soften any of these restraints even a little and the cost target that storage must meet rises to something far more tractable.

First and most notably, loosen the amount of time that the system must meet demand and things get much easier for storage. And a 100 percent EAF is a little crazy anyway; the existing power system is not up and available 100 percent of the time. There are brownouts and blackouts, after all. No power system is 100 percent reliable.

Trancik’s team found that if the EAF target is lowered from 100 to 95 percent, the cost target that storage must hit rises to $150/kWh. (More specifically, lowering the EAF reduced the total cost of energy storage by 25 percent for the first tier of storage technologies and 48 percent for the second tier.) That’s a much more tractable number, within reach of existing technologies.

Why does lowering the EAF so little ease the pressure on storage so much? The explanation is in those rare meteorological events of extended low wind and sun. They don’t happen often over a 20-year span, but building enough storage to deal with them when they do happen makes the last few percent of EAF exponentially more expensive. To lower the EAF to 95 percent is to say, “something else can handle those rare events.””

“the team is modeling a system in which storage is doing almost all the flexibility work. In fact, there are other sources of grid flexibility. My favorite candidate for flexibility dark horse is “load flexibility,” demand-side programs that can shift energy consumption around in time. Another source of flexibility is enhanced long-distance transmission, to carry renewable energy from regions that produce it to regions that need it. Another is dispatchable renewables like run-of-the-river hydro and advanced geothermal.

All of those sources of flexibility will grow and help to smooth out renewables. Storage won’t have to do all the work on its own. That, too, should ease the price pressure.”

“a renewables+storage system also gets easier if renewables get cheaper. The numbers that Trancik’s team use for renewables are quite conservative. (For instance, $1/Watt solar costs are already being beat routinely in the US.) If renewable energy continues to defy expectations and plunge in cost, it would become cheaper and easier to oversize renewables and curtail the excess energy. That in turn would ease pressure on storage.”

“the headline $20/kWh cost target for energy storage is almost certainly more stringent than what will be required in the real world. Even the $150/kWh target required for an EAF of 95 percent is likely too stringent. In the real world, storage will be assisted by other forms of grid flexibility like long-distance transmission, load flexibility, and microgrids, along with regulatory and legislative reforms. And renewables will probably continue to get cheaper faster than anyone predicts.

So let’s call the target $150-$200, or thereabouts. Can storage hit that?”

“There are two key characteristics of a storage technology: power capacity and energy capacity. Roughly speaking, power capacity refers to how fast you can get energy out of it, measured in kW; energy capacity refers to how much energy you can store in it, measured in kWh. Each is priced separately, power capacity costs and energy capacity costs. The latter is the number we’ve been using for targets”

“It expects, by 2030, “a drop in the total installed cost for Li-ion batteries for stationary applications to between USD 145 per kilowatt-hour (kWh) and USD 480/kWh, depending on battery chemistry.” Hey, $145 is well within our target range!

Nonetheless, lithium-ion batteries are limited. Researchers generally treat the raw materials costs of a storage technology as the lower possible bound of its total costs. Manufacturing and transportation costs can be lowered with scale, but materials costs are stubborn, and the materials involved in Li-ion batteries alone are costly enough that they will likely never hit $20/kWh. In the $150 range, though — that’s doable.”

“How about flow batteries? “The two main flow battery technologies — vanadium redox flow and zinc bromine flow — had total installation costs in 2016 of between USD 315 and USD 1,680/kWh,” IRENA reports. “By 2030, the cost is expected to come down to between USD 108 and USD 576/kWh.” Yes, $108 is well within our target range. (Note that there are flow battery companies already claiming to beat that.)

High-temperature sodium sulphur (NaS) and sodium nickel chloride batteries have been around for a while, but they are also expected to get much cheaper. “Cost reductions of up to 75% could be achieved by 2030, with NaS battery installation cost decreasing to between USD 120 and USD 330/kWh,” says IRENA. “In parallel, the energy installation cost of the sodium nickel chloride high-temperature battery could fall from the current USD 315 to USD 490/kWh to between USD 130 and USD 200/kWh by 2030.” Again, at the lower end, well within our target range.

CAES costs are extremely site-specific, as they depend on a reservoir in which to pump the air. “The typical installation cost is estimated to be approximately USD 50/kWh,” says IRENA, “possibly dropping to USD 40/kWh if an existing reservoir is available.”

Then there are thermal-storage options, like the increasingly popular option of storing electricity as heat in molten salt, with claims of energy capacity costs as low as $50/kWh.”

“Storage is rapidly evolving, diversifying, and falling in cost, to the point that wind and solar power plants coupled with storage are beginning to compete directly with fossil fuel power plants on cost. That’s only going to accelerate as both renewables and storage get cheaper. Providing all of US power, all day every day, will require oversizing renewables and installing an enormous amount of storage, but if they get cheap enough, that’s what we’ll do.

To put that more plainly: A US energy grid run entirely on renewable energy (at least 95 percent of the time), leaning primarily on energy storage to provide grid flexibility, may be more realistic, and closer to hand, than conventional wisdom has it.”