Energy Externalities: Approaches, Insights, Limitations and Security of Supply Issues

1. Energy Externalities:Approaches, Insights, Limitations and Security of Supply Issues Stefan HirschbergPaul Scherrer Institut NEEDS FORUM 2 Energy Supply Security – Present and Future Issues5 - 6 July 2007, Krakow, Poland

2. Content • Introduction • Some recent results • Coupling with LCA-inventories • Some difficult issues and limitations • Multi-criteria Decision Analysis (MCDA) and integration of security of supply aspects • Security of supply and climate protections – synergies or conflict of objectives? • Conclusions

3. What are the components of security of supply? • Availability of energetic and non-energetic resources(short-term and long-term) • Risks caused by cost volatility • Severe accidents and terrorist threat • Overall stability and reliability of the supply system

4. Current Monetary Damages due to Air Pollution in China Source:Hirschberg et al., 2003

5. Focus of external costs assessment • Health impacts of emissions • Global warming • Impacts on crops and building materials • (Impacts on biodiversity)

6. Results for Electricity Systems in EU-15: Base Case Fossil Renewables ExternE-Pol: Dones et al., 2004

7. External costs, new power plants, 2000 (air pollution) PV, c-Si PV, a-Si CHP, SNG Geothermal CHP, Biogas NPP, Gen II FR Hydro: reservoir Hard coal SC, D NPP, Gen II, CH Wind onshore, D CHP, Natural Gas Wind offshore, DK Wind onshore, CH Hydro: Run-of-river SOFC, Natural Gas CC, Nat. Gas, baseload, IT CC, Nat. Gas, mid-load, CH CC, Nat. Gas, baseload, CH Source: PSI/GaBE, to be published

8. External costs, 2030 (air pollution) PV, c-Si PV, a-Si CHP, SNG Geothermal CHP, Biogas NPP, Gen III, CH Hydro: reservoir NPP, Gen III FR Wind onshore, D CHP, Natural Gas Hard coal IGCC, D Wind onshore, CH Wind offshore, DK Hydro: Run-of-river SOFC, Natural Gas CC, Nat. Gas, baseload, IT CC, Nat. Gas, mid-load, CH CC, Nat. Gas, baseload, CH Source: PSI/GaBE, to be published

9. CETP: Internal and External Costs for Power Plant Options in Shandong Province 25 Global Warming Mortality 20 Morbidity 18.4 Crops Internal Costs 15.2 14.5 15 US Cents per kWh 10.7 10.3 10 7.7 7.7 6.9 6.5 6.4 6.1 5.8 5.4 4.3 5 3.3 0 Jinan Gas CC Heze Coal Ref. Nuclear ALWR Jinan Coal Ref. Weihai Coal Ref. Jinan Coal IGCC Jinan Coal AFBC Qingdao Dry FGD Qingdao Wet FGD Qingdao Coal Ref. Shandong average Jinan Coal Dry FGD Jinan Coal Wet FGD Jinan New Coal, low S Qingdao Sea Water FGD Source:Hirschberg et al., 2003

10. 25 25 177 78 External External 39 Internal Internal 20 20 /kWh /kWh 15 15 2000 2000 Rp Rp 10 10 5 5 0 0 NPP, Gen II Geothermal Geothermal Photovoltaic Photovoltaic CHP, Biogas CHP, Biogas NPP, EPR 1500 Hydro: reservoir Hydro: reservoir CC, Natural gas CC, Natural gas Wind onshore, D Wind onshore, D CHP, Natural gas CHP, Natural gas Wind offshore, DK Wind offshore, DK Wind onshore, CH Wind onshore, CH SOFC, Natural gas SOFC, Natural gas Hydro: Run-of-river Hydro: Run-of-river IGCC, Hard Coal, D Steam-PP, Hard Coal, D CHP, CH4 from wood (SNG) CHP, CH4 from wood (SNG) Options for electricity supply in CH, 2006 & 2030 Full Costs (internal + external), • Sustainability assessment ofa wide technology portfolio 2030 2006 • Full costs as ONE aggregatedsustainability indicator • Basis: Life Cycle + Impact Ass-essment of current & future systems • Nuclear power as cheapest option: today & 2030 • Renewables till 2030 much cheaper than today • Including external costs increases competitiveness of renewables • CO2 dominates ext. costs of fossil systems: high uncertainty Source: PSI/GaBE, to be published

11. Results: Environmental Indicators, 2000 1.0 0.8 0.6 Relative to specific Maximum (=100%) 0.4 0.2 0.0 PV, c-Si PV, a-Si CHP, SNG Geothermal CHP, biogas Hydro: reservoir NPP, Gen II, FR NPP, Gen II, CH Hard Coal, SC, D Wind, onshore, D CHP, Natural Gas Hydro: run-of-river Wind, onshore, CH Wind, offshore, DK SOFC, Natural Gas Natural Gas, CC, midload, CH Natural Gas, CC, baseload, IT Natural Gas, CC, baseload, CH Fossil energy Uranium Metals GHG emissions Source: PSI/GaBE, to be published Land use Ecotoxicity Acidification & Eutrophication Land contamination Non radioactive waste Radioactive waste

12. Results: Environmental Indicators, 2000 1.0 0.8 0.6 Relative to specific Maximum (=100%) 0.4 0.2 0.0 PV, c-Si PV, a-Si CHP, SNG Geothermal CHP, biogas Hydro: reservoir NPP, Gen II, FR NPP, Gen II, CH Hard Coal, SC, D Wind, onshore, D CHP, Natural Gas Hydro: run-of-river Wind, onshore, CH Wind, offshore, DK SOFC, Natural Gas Natural Gas, CC, midload, CH Natural Gas, CC, baseload, IT Natural Gas, CC, baseload, CH Metals Source: PSI/GaBE, to be published Ecotoxicity Non radioactive waste

13. Results: Environmental Indicators, 2000 1.0 0.8 0.6 Relative to specific Maximum (=100%) 0.4 0.2 0.0 PV, c-Si PV, a-Si CHP, SNG Geothermal CHP, biogas Hydro: reservoir NPP, Gen II, FR NPP, Gen II, CH Hard Coal, SC, D Wind, onshore, D CHP, Natural Gas Hydro: run-of-river Wind, onshore, CH Wind, offshore, DK SOFC, Natural Gas Natural Gas, CC, midload, CH Natural Gas, CC, baseload, IT Natural Gas, CC, baseload, CH Uranium Source: PSI/GaBE, to be published Land contamination Radioactive waste

14. Results: Environmental Indicators, 2000 1.0 0.8 0.6 Relative to specific Maximum (=100%) 0.4 0.2 0.0 PV, c-Si PV, a-Si CHP, SNG Geothermal CHP, biogas Hydro: reservoir NPP, Gen II, FR NPP, Gen II, CH Hard Coal, SC, D Wind, onshore, D CHP, Natural Gas Hydro: run-of-river Wind, onshore, CH Wind, offshore, DK SOFC, Natural Gas Natural Gas, CC, midload, CH Natural Gas, CC, baseload, IT Natural Gas, CC, baseload, CH Source: PSI/GaBE, to be published Land use Acidification & Eutrophication

15. 0.2 0.0 Results: Environmental Indicators, 2030 1.0 0.8 0.6 Relative to specific Maximum (=100%) 0.4 PV, c-Si PV, a-Si CHP, SNG Geothermal CHP, biogas Hydro: reservoir NPP, Gen III, FR NPP, Gen III, CH Wind, onshore, D CHP, Natural Gas Hydro: run-of-river Wind, onshore, CH Wind, offshore, DK SOFC, Natural Gas Hard Coal, IGCC, D Natural Gas, CC, midload, CH Natural Gas, CC, baseload, IT Natural Gas, CC, baseload, CH Fossil energy Uranium Metals GHG emissions Source: PSI/GaBE, to be published Land use Ecotoxicity Acidification & Eutrophication Land contamination Non radioactive waste Radioactive waste

16. Examples of controversial/difficult to estimate external effects • Severe accidents, terrorism, risk aversion • Visual intrusion • Resource depletion • Nuclear proliferation • Security of supply • Serious attempts to estimate the corresponding costs lead to low estimates but this does nor resolve the controversy!

17. Survey I: Result examples Source: Faberi et al., to be published

18. Survey I: Result examples Source: Faberi et al., to be published

19. Electricity: contribution to external costs by species ExternE-Pol: Dones et al., 2004

20. Variation in estimated costs of CO2 damages

21. Gas pipeline explosion Coal mine highwall collapse Oilwell blowout Dam break (Teton, USA) Examples of Severe Accidents

22. Frequency of accidents • Fossil chains perform similar for OECD and non-OECD countries; exception is coal chain in China with clearly higher accident rates • Hydro dam failures in non-OECD countries can result in thousends of fatalities; no such accident happened in OECD since 1963 (1963: Vaiont, Italy; 1917 fatalities) • Additionally to immediate fatalities, also latent fatalities are important for nuclear power Source: Burgherr & Hirschberg, 2004

23. Justified and Unjustified Stakeholder Criticisms of External Costs • Monetization as such is not accepted by all. • Alternative approaches to Willingness to Pay (WTP) are preferred. • The way WTP estimates are generated is put in question. • The overall uncertainties are very large leading to non-robust rankings. • The historical development of cost estimates is troublesome. • Some estimates of specific external costs have a weak basis; for some potentially important externalities relevant cost estimates are not available. • Social factors are scarcely represented. • It is impossible and/or meaningless to monetize some of the social factors.

24. Examples of difficult but potentially important social aspects: • Social justice • Risk aversion and perception • Resilience of the energy system • Conflict potential • Theoretically, any externality can be monetized, but in practice methodologies and valuation are often controversial.

25. Criteria related to security of supply

26. Sensitivity analysis of production costs for new NPP Change in costs Sensitivity investment costs (Reference 3000 CHF/kWel) Sensitivity amortization period (Reference 60 years) Sensitivity interest rate (Reference 2.5%) Sensitivity fuel costs (Reference 12 CHF/kWel) Sensitivity full load hours (Reference 7600 h/a) Sensitivity decommissioning costs (Reference 500 CHF/kWel) Sensitivity backfitting costs (Reference 750 CHF/kWel) Change in parameters Source: Prognos 2006

27. Sensitivity analysis of production costs for CCGT Change in costs Sensitivity investment costs (Reference 600 CHF/kWel) Sensitivity amortization period (Reference 30 years) Sensitivity interest rate (Reference 2.5%) Sensitivity fuel costs (Reference 35 CHF/MW input) Sensitivity full load hours (Reference 6000 h/a) Change in parameters Source: Prognos 2006

28. Comparison production costs new NPP and CCGT Capital costs Operating costs Fuel costs CCGT 2035 Prices trend CCGT 2035 Prices high NPP 2035 Prices trend and high Source: Prognos 2006

29. US President Gerald Ford in 1975: • „We, the United States, are not blameless. Our growing dependence upon foreign resources has been adding to our vulnerability for years and years, and we did nothing to prepare ourselves for such an event as the embargo of 1973.“ • „Within the next 10 years my program envisions 200 major nuclear power plants, 250 major new coal mines, 150 major coal –fired power plants, 30 major new refineries, 20 major new synthetic fuel plants, the drilling of many thousands of new wells, the insulation of 18 million homes and the manufacturing and sale of millions of new automobiles, trucks and buses that use much less fuel.“

30. MCDA Demo

31. Conclusions: external costs • Health effects due to air pollution and global warming impacts dominate current estimates of external costs. • External environmental costs may be substantial but large variety between technologies and sites. Good technologies including advanced fossil have rather low pollution costs. • Uncertainties are large but ranking of technologies is relatively robust. • External costs of nuclear and renewables are low; external costs of natural gas are moderate; external costs of coal and oil are highest. • Social aspects of energy systems are represented to limited extent by current estimates of external (and total) costs. • External costs are no panacea and have limitations. Serious attempts to estimate some of the controversial costs usually lead to low estimates but this is not accepted by some stakeholder groups. • Internalisation of external costs is economically and socially justified. It leads to more efficient overall economy.

32. Conclusions: security of supply • Security of supply is fundamental for a sustainable energy policy • Needs to be pursued along with protection of health, environment and climate, resource saving and affordability • In NEEDS a variety of indicators represents security of supply issues • There are synergies but also some conflicts between security of supply and climate protection & other overriding sustainability policy goals. • Trade-offs are inevitable and will be highlighted through MCDA implementation within NEEDS.