Wednesday, July 11, 2007

Externalities: Coal and Wind Energy

In a recent post, I highlighted mining and extraction costs ("externalities") associated with coal mining. In most countries coal is the dominant source of electricity. To effectively compete with the de facto source of electricity, supporters of renewable energy need to understand some of the externalities that are usually omitted when calculating the average cost of electricity from coal.

"Clean coal" initiatives do address emissions, but as I argued in my earlier post, mining and extraction have not been accounted for in a systematic manner.

On the emissions side, the most famous study on particulates was the decade-long EU study, ExternE ("the external costs of energy"):
Human activities like electricity generation or transport cause substantial environmental and human health damages, which vary widely depending on how and where electricity was generated. The damages caused are for the most part not integrated into the pricing system. Borrowing a concept adopted from welfare economics, environmental policy calls these damage costs externalities or external costs. By societal welfare principles, policy should aim to ensure that prices reflect total costs of an activity, incorporating the cost of damages caused by employing taxes, subsidies, or other economic instruments. This internalisation of external costs is intended as a strategy to rebalance the social and environmental dimension with the purely economic one, accordingly leading to greater environmental sustainability.
Thanks to the EU! Given the current level of influence of energy industry lobbyists in Washington, it is hard to imagine an equivalent Federal study being funded in the US. Nevertheless, US scientists have used the results of ExternE to estimate additional costs in the US.

Coal and Air Pollution
In what follows, we examine the costs due to particulates and air pollution ONLY: we do not include Mining (Environmental) and CO2 (Global Warming) costs. First an overview of the public health problems associated with particulates and air pollution (Williams, 2004):
... In recent years health damages, especially from chronic exposure to small particle air pollutants has been a focal concern about air pollution. Recent epidemiological research indicates major mortality impacts from long-term, low-level exposure to particulates — both particles emitted directly in combustion and sulfate and nitrate particles formed in the atmosphere from gaseous precursor emissions of SO2 and NOx. Lippman and Schlesinger (2000) survey the recent literature, concluding that the correlation of ambient particulate exposure levels commonly found in U.S. cities with increased human mortality and morbidity remains robust to all attempts to identify possible confounding variables.

... It is estimated that those in the US who have died from exposure to PM2.5 air pollution particles had their lives shortened, on average, by 14 years. ... the EPA projects that the Clean Air Act Amendments of 1990 will reduce the US death rate in 2010 by 23,000/y (EPA, 1999). But even with these laws in place, the premature death rate associated with residual small particle air pollution is significant. For example, Abt (2002) projects 6,000 premature deaths from emissions from 80 U.S. coal-fired power plants in the year 2007 (even accounting for new control technologies mandated by that year). These recent findings translate into much higher costs for air pollution damages than was the case for studies before chronic mortality impacts were taken into account.
Williams takes the ExternE results, and adapts them to regions in the US. In the graph below, he compares different typed of coal generation plants to Natural Gas Combined Cycle (NGCC) plants:

What the graphs says is that a clean coal plant is 50% more expensive than a comparable NGCC plant: for an NGCC plant the approximate cost for these externalities are about 40 cents/MWH. For the average coal plant, the externalities were 84 times more than an NGCC plant. Assuming coal is here to stay, at least for a long while, the public health implications of not switching to cleaner plants are immense! If the market were to price in the cost of these externalities, these older coal plants would be so much more expensive than renewables, they would have to be shut down.

In the US, the reality is sadly as follows: The older coal plants were built years ago so their construction costs are fully paid for. Utilities who own these plants know that newer, cleaner plants would be much more expensive to build. Similarly, retrofitting older plants would cost serious money. A few million dollars spent on lobbying against clean air standards is peanuts, so the industry seems intent on devoting more resources to lobbying.

ExternE and Wind Energy
How does wind energy score on the ExternE study?

Wind was the cheapest on both greenhouse gas and air pollution costs. Deployed clean coal technologies are still costly when it comes to greenhouse gas impacts. How does this translate into the cost (per KWH) of electricity?

Graphing the results for the UK and for Denmark:

reveals a different economic picture from what I portrayed in a previous post. In a future post, I will readjust those earlier cost graphs.

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Apoptotic said...

Hi! Interesting article. I have some information and explication along these lines, and link to this page from here:

Don Blankenship said...

Coal fired power stations pollute the air and atmosphere.But the externalities from wind power are treated differently from fossil fuel .If we include the coal externalities, it increases the levalized costs to then wind and solar power are already cheaper than coal power.
Don Blankenship