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Shifting to the mix of energy sources that minimizes total economic, environmental and health costs


Description

Summary

Global energy demand is expected to increase 60% from 2010 to 2040, with 85% of that demand happening in non-OECD countries [1].  At the same time, policy and regulations are being set to drastically reduce greenhouse gas (GHG) and air pollutant emissions from energy production.  In some cases, such as California, goals have been set to reduce GHG emissions by 80% below 2005 levels.

At a high level, the question arises of how do we meet increasing energy demand, and at the same time mitigate climate change and air pollution, without huge cost increases? 

I raised funding from the U.S. National Science Foundation and USAID and interviewed national energy organizations, ministries of environment, electricity market administrators, utilities and universities in 8 countries to find out how they were answering this question.

The problem became very clear: energy planning decisions are typically based on minimizing economic costs, and ignore huge environmental and health impacts which my research is showing are 10 - 100+ times greater than retail electricity prices. 

This has lead to the development of the Energy Model for Emerging Renewable Generation with Eco-environmental analysis (EMERGE) tool to determine which mix of energy sources minimizes the total sum of economic, environmental and health costs caused by the electricity production lifecycle of any electricity grid.   

The EMERGE tool can be run in any country.   Benefits of this approach include:

-       Minimizing climate change and air quality impacts as co-benefits of energy infrastructure development

-       Creating a long-term stable market for renewables

-       Shifting disproportionate burden of externalities from the poor

-       Improving universal energy access, economic development and gender equality

-       Global leadership with climate change and sustainability


Category of the action

Reducing emissions from electric power sector.


What actions do you propose?

The mix of energy sources that minimizes total economic, environment and health costs can be determined for each country’s electricity grid(s) using the EMERGE model.

Each country could then set the mix of energy sources that minimizes total economic, environmental and health costs as a standard that the industry must meet.  This can be done incrementally as capacity increases and infrastructure depreciates.

It’s conceivable that the electricity market could naturally evolve toward the mix of energy sources that minimize total economic, environmental and health costs if the external environmental and health costs were internalized by electricity producers. However this is controversial and unrealistic, especially because these external costs can be much larger than retail costs and happen over a long time horizon.

Recent studies [2,3] show that electricity grids must be decarbonized AND transportation and industry must be electrified to meet 2050 climate goals.  This will substantially increase electricity demand, making it even more critical to generate electricity using the mix of energy sources that minimizes economic as well as environmental and health costs.

If national electricity market regulators can set this lowest cost mix of energy sources as an industry standard, it would work in private, public and hybridized electricity markets.

 

EMERGE runs four modules to determine which mix of energy sources will minimize the total sum of economic, environmental and health costs:

1)  A technical module simulates electricity grid interaction with hourly temporal resolution to ensure supply and demand are met. 

2)  An economic module calculates economic costs. 

3)  A lifecycle impact assessment module quantifies and monetarily values 18 environmental and health impacts. 

4)  A optimization module uses a differential evolution Markov chain Monte Carlo method with Metropolis selection to determine which mix of energy sources minimizes the total economic, environmental and health costs.

 

The Life Cycle Impact Assessment module uses the latest lifecycle impact assessment (LCIA) methodology used by the IPCC to quanitfy18 environmental and health impacts [4].  Monetary valuation techniques, based on the EPA recommended Value of a Statistical Life as well as recommended elasticity measure of income to willingness to pay (WTP) for avoiding health impacts, along with the latest monetary valuation techniques of environmental damages, are implemented to express the impacts in terms of dollars.

The 18 environmental and health impacts include:

1. climate change (CC)

2. ozone depletion (OD)

3. terrestrial acidification (TA)

4. freshwater eutrophication (FE)

5. marine eutrophication (ME)

6. human toxicity (HT)

7. photochemical oxidant formation (POF)

8. particulate matter formation (PMF)

9. terrestrial ecotoxicity (TET)

10. freshwater ecotoxicity (FET)

11. marine ecotoxicity (MET)

12. ionising radiation (IR)

13. agricultural land occupation (ALO)

14. urban land occupation (ULO)

15. natural land transformation (NLT)

16. water depletion (WD)

17. mineral resource depletion (MRD)

18. fossil fuel depletion (FD)

A limitation of using LCA metrics is that they are typically values for emissions over averaged over multiple spatial scales.  The actual damage of an emission depends on the spatial and temporal scale.  While aggregate electricity grid dispatch modeling accounts for the temporal scale, a spatially resolved air pollutant model is needed for accurate emission dispersion and air quality concentration calculations.  Spatial resolution is not built in to the EMERGE tool because of the highly sophisticated nature of three dimensional atmospheric transportation and transformation modeling of air pollutants.   Instead, EMERGE relies on reduced-form equations to calculate how emissions map to human and environmental exposure and damage.  These reduced-form tools also make it possible to estimate impacts in regions without readily available meteorological and emissions data and models.

The EMERGE tool was developed using a completely novel and disruptive methodology.   The methodology allows for simulation of electricity grid interaction on an hourly basis, calculation of annualized economic costs, quantification and annualized monetary valuation of 18 environmental and health impacts using the latest life cycle impact assessment (LCIA) methodologies, and advanced optimization to span 10,000+ energy infrastructure scenarios. 

Optimization at this scale is made possible by several factors, including: utilizing country-specific reduced-form equations to calculate 18 environmental and health impacts, performing a monetary valuation of all 18 environmental and health impacts and summing all economic, environmental and health costs into a single dollar amount, and using an advanced Markov chain Monte Carlo method with Metropolis selection to very efficiently span the global parameter space that minimizes the single dollar amount.  That single dollar amount is the sum of total economic, environmental and health costs.

There are no known renewable energy integration models similar to EMERGE, based on reviewing the 37 renewable energy integration models in “A review of computer tools for analyzing the integration of renewable energy into various energy systems” [5] as well as “A review of energy models” [6].

To quantify the uncertainty of EMERGE, an integrated methodology consisting of three industry standard models is being used.  The Plexos electricity dispatch model dispatches power plants according to constraints and marginal cost, the CALPUFF dispersion model is being utilized to simulate the atmospheric dispersion of power plant emissions, and the EPA BenMAP model is being utilized to determine to map air quality changes to human health impact costs. 

The integrated modeling methodology only considers operational emissions, while EMERGE can be run for lifecycle or operational emissions.  The health impact costs of multiple scenarios using the integrated modeling methodology will be compared to the health impact costs from the same scenarios as calculated by EMERGE to get an idea of uncertainty and the sensitivity of select modeling assumptions.

EMERGE can also be run in scenario mode.  This is very helpful, for example, if a country is analyzing 10 different future energy infrastructure scenarios.  While the economic costs might vary by 10 – 30%, EMERGE can calculate how the environmental and health impact costs vary between scenarios, which vary greatly and can cost 10 – 100 times retail electricity prices (based on EMERGE preliminary results).

The model outputs can be prioritized based on the magnitude of their cost.  For example, in NE Brazil, the three impact categories of human toxicity, respiratory impacts and climate change are responsible for more than 95% of the impact costs.  This implies that particulate matter impact costs, human toxicity impact costs and climate change costs should be included in energy planning analysis and decision making.

Collaboration and cooperation across ministries will be very helpful to determine and implement the mix of energy sources that minimizes total economic, environmental and health costs.   Policy should be set that guides the energy sector towards this lowest total cost mix of energy sources as demand increases and infrastructure depreciates. 

South America has been the developing region case study for this project, and the following ministries have expressed interest in EMERGE:

Ecuador: Ministerio de Electricidad y Energia Renovable, Ministerio de las Sectores Estrategicos

Peru: Ministerio de Energia y Minas, Ministerio de Ambiente

Colombia: Unidad de Planeacio Minero Energetica, ISAGEN

Chile: Comision Nacional de Energia, Centro de Energias Renovables

Brazil: Conselho Nacional de Politica Energetica, Empresa de Pesquisa Energetica

Uruguay: Administracion del Mercado Electrico

Argentina: Secretaria de Energia

Agreement among ministries in a given country will accelerate policy implementation, however it is not necessary.  Ultimately, the national organization that is in charge of deciding energy infrastructure policy should be responsible for setting the mix of energy sources that minimizes total economic, environmental and health costs as a standard that the industry must meet, which can be done incrementally as capacity increases and infrastructure depreciates. 

Setting the mix of energy sources that minimizes total economic, environmental and health costs of electricity production will be increasingly important.   Recent studies show that decarbonizing electricity grids is not enough to meet long-term GHG goals, and that transportation and industry must also be electrified, which will substantially increase electricity demand.  

A policy of this nature, designed for maximum societal benefit, will create criticism from (most likely fossil fuel) organizations who stand to lose profit under this type of policy.   This will be hard to overcome, yet the climate change costs [7] and air pollution costs [8] of fossil fuel use are projected to be orders of magnitude greater than shifting to a carbon neutral electricity grid.

Another criticism that could arise is the uncertainty around what the optimal mix is when using reduced-form equations.  To address this valid concern, results can be confirmed with sophisticated and detailed electricity dispatch, atmospheric dispersion, and human exposure mapping tools to understand the environmental and health costs with a high degree certainty.

A final criticism of a policy to implement an optimal mix of electricity sources to provide electricity at the lowest societal cost is that it would be too expensive.  In a 2014 paper published in Energy, Stanford Professor Mark Jacobson and colleagues show that an all wind, water and sunlight (WWS) scenario for repowering California would produce 220,000 more 40-year jobs created than lost ($11.3 billion/yr benefit), eliminate $103 billion/yr in state air-pollution related costs, and avoid 45.1 billion/yr in climate change costs compared to a conventional business as usual scenario.  Additionally, Jacobson shows that 2030 California electricity costs under a WWS scenario will be $0.053 - $0.072/kWh, while conventional costs would be $0.157 - $0.163 without externalities, and $0.207 - $0.220 with externalities [9].


Who will take these actions?

Each country’s government can commit to determining which mix of energy sources minimizes total economic, environmental and health costs using the EMERGE model or another model that quantifies economic, environmental and health costs and then uses optimization to determine the lowest total cost mix.

Then, national electric market regulation authorities can set the mix of energy sources that minimizes total economic, environmental and health as a standard that the industry must meet.  This can be done incrementally as capacity increases and existing infrastructure depreciates.

Setting the mix of energy sources that minimizes the total economic, environmental and health costs as a standard that the industry must meet is a way of optimizing current and upcoming goals such as Renewable Portfolio Standards (RPS) in the United States, or the Intended Nationally Determined Contributions (INDC) that countries will be announcing at the U.N. Framework Convention on Climate Change (UNFCCC) in Paris this December.

Social support is also essential.  Unified social support drives political and industrial action. Education is a key piece to informing and uniting society. Climate change will affect everyone, and it is not unreasonable for society to come together and demand sustainable policy that mitigates climate change and simultaneously. 

Additionally, optimal mixes of energy sources will make it easier to achieve universal energy access, which will improve economic development and also has implications for improving gender equality.

Without bold and effective action, the global energy imbalance caused by anthropogenic emissions will continue to increase, possibly to a state beyond human’s ability to return to equilibrium.  While certain businesses will suffer, we must consider and act based on what is best and just for current and future generations.


Where will these actions be taken?

The mix of energy sources that minimizes economic, environmental and health costs are determined at the grid level.  Each national energy organization and electricity grid regulator is responsible for setting the lowest societal cost mix of energy sources as a standard that the industry must meet.

Cooperation among countries to form interconnected grids will improve transmission and storage constraints, resiliency and accelerate the process by further reducing costs.

Data, priorities and constraints in each country are necessary to run the EMERGE model.  The project promotes collaboration among countries to share lessons learned and strategies to promote a secure energy supply that minimizes climate change and air pollution benefits. 


How much will emissions be reduced or sequestered vs. business as usual levels?

In the Northeast Brazilian electricity grid case study below, 10,900,000 kg of CO2 equivalent per year would be sequestered if Northeast Brazil shifted from it's 2015 baseline scenario to the mix of energy sources that minimize total economic, environmental and health costs.

Additional sequestered emissions in 12 impact categories are listed below.

Climate Change

1.09E+07 kg CO2 eq.

Human toxicity

1.32E+07 kg pDCB eq.

Respiratory impacts

8.52E+04 kg PM10 eq.

Photochemical oxidants

2.96E+04 kg NMVOC eq.

Ionizing radiation

5.05E+05 kg U235 eq.

Marine toxicity

6.05E+05 kg pDCB eq.

Freshwater eutrophication

1.94E+04 kg P eq.

Terrestrial acidification

6.90E+04 kg SO2 eq.

Freshwater toxicity

6.72E+05 kg pDCB eq.

Marine eutrophication

1.96E+04 kg N eq.

Terrestrial ecotoxicity

-2.18E+03 kg pDCB eq.

Ozone depletion

-1.13E-01 kg CFC11 eq.


What are other key benefits?

A $2.3B increase in annualized infrastructure costs will produce a decrease of $113B in the total sum of economic, environmental and health costs.

Annualized change in costs are listed below for each category.  A negative dollar amount is a cost decrease and a positive dollar amount is a cost increase.

Human toxicity

-$45,453,672,162.06

Respiratory impacts

-$36,540,078,902.98

Climate change human impact

-$25,400,000,000.00

Photochemical oxidants

-$771,338,111.96

Ionizing radiation

-$13,152,893.71

Climate change ecosystem impact

-$388,000.00

Fossil depletion

-$277,137.32

Land transformation

-$23,075.44

Marine toxicity

-$17,248.44

Agricultural land occupation

-$13,800.00

Urban land occupation

-$4,136.48

Freshwater eutrophication

-$3,840.93

Metal depletion

-$2,164.24

Terrestrial acidification

-$1,828.75

Freshwater toxicity

-$1,105.67

Annualized Infrastructure costs

$2,730,000,000.00

Ozone deplection

$815,755.80

Terrestrial ecotoxicity

$594.98

Annualized total change

-$113,855,886,947.32

 


What are the proposal’s costs?

Shifting to the mix of energy sources that minimizes total economic, environmental and health costs incurred by the Northeast Brazil electric system will increase annualized infrastructure costs by $2.3B and decrease the total sum of economic, environmental and health costs by $113B.


Time line

Shifting to the mix of energy sources that minimizes total economic, environmental and health costs incurred by the Northeast Brazil electric system will increase annualized infrastructure costs by $2.3B and decrease the total sum of economic, environmental and health costs by $113B.


Related proposals

Transportation

Industry

Buildings


References

[1]   Leahy, Michael, Justine L. Barden, Brian T. Murphy, Nancy Slater-thompson, and David Peterson. 2013. “International Energy Outlook 2013.” United States Energy Information Administration.

[2]   Yang, Christopher, Sonia Yeh, Saleh Zakerinia, Kalai Ramea, and David McCollum. 2014. “Achieving California’s 80% Greenhouse Gas Reduction Target in 2050: Technology, Policy and Scenario Analysis Using CA-TIMES Energy Economic Systems Model.” Energy Policy 77:118–30.

[3]   Wei, Max et al. 2013. “Deep Carbon Reductions in California Require Electrification and Integration across Economic Sectors.” Environmental Research Letters 8(1):014038..37ef0d9dff3c11bf4c176aa87e4f5831).

[4]  Goedkoop, Mark, Reinout Heijungs, An De Schryver, Jaap Struijs, and Rosalie van Zelm. 2013. “ReCiPe 2008. A LCIA Method Which Comprises Harmonised Category Indicators at the Midpoint and the Endpoint Level. Characterisation.” A life cycle impact … 133).

[5]     D. Connolly, H. Lund, B. V. Mathiesen, and M. Leahy, “A review of computer tools for analysing the integration of renewable energy into various energy systems,” Appl. Energy, vol. 87, no. 4, pp. 1059–1082, Apr. 2010.

[6]     S. Jebaraj and S. Iniyan, “A review of energy models,” Renew. Sustain. Energy Rev., vol. 10, no. 4, pp. 281–311, Aug. 2006.

[7]      F. Ackerman and E. A. Stanton, “The Cost of Climate Change,” New York, no. May, p. 42, 2008.

[8]   Machol, Ben, and Sarah Rizk. 2013. “Economic Value of U.S. Fossil Fuel Electricity Health Impacts.” Environment International 52:75–80.

[9]   Jacobson, Mark Z. et al. 2014. “A Roadmap for Repowering California for All Purposes with Wind, Water, and Sunlight.” Energy 73:875–89.