The Road Less Taken: Energy Choices for the Future
(Fairewinds.org, Sept 5, 2013) – Watch Arnie Gundersen’s interview with Amory Lovins, preeminent environmental thinker and co-founder of the Rocky Mountain Institute . With forty years of energy policy experience, Amory Lovins has dedicated himself to the idea that our energy future does not have to look like our energy past. Listen in as Arnie and Amory discuss transitioning towards a clean energy economy in the US and around the world.
AG: Amory Lovins has been at the forefront of how we produce energy and how we can produce energy and how we can save energy for the better part of four decades now. He’s the cofounder of the Rocky Mountain Institute, which has been the largest think tank here in the United States on proposing alternatives to the present energy paradigm. So I’m really pleased to have Amory here today to talk to us at Fairewinds.
AL: If you were to say that we had to have large central mainframe computers, I think 10 years ago, people would have said you’re nuts, most of the market is in distributed computers. We don’t need to send everything to a few big computers if we have highly distributed networks in exactly the same way we can run an advanced industrial economy on distributed sources of electricity. In fact, it’s cheaper and more resilient to do it that way. There is a widespread misunderstanding even among some people who should know better, about how the grid works and it supposes that you need to have a constant source of power to meet constant needs for power. But of course, there isn’t a direct connection between the two. The different sources serve the grid; the grid serves the loads. And when we’re told you need the coal and nuclear plants to keep the lights on because they’re 24/7 while solar and wind power are variable and thus supposedly unreliable, this is completely fallacious. First of all, there is no such thing as a 24/7 power plant. They all break. The big central plants are down about 10 or 12 percent of the time. Nearly half of that are so-called force outages that are not predictable – you just lose 1,000 megawatts without warning in milliseconds and then it’s often down for weeks or months. And that is why the grid has been designed for well over a century to back up failed plants with working plants. But in exactly the same way, the grid can manage the forecastable variations of wind and photovoltaic power. In fact, there is a whole list of tactics you use to cope with this variability. First of all, you diversify your solar and wind power by location so they don’t all see the same weather at the same time; you diversify them by type because weather that’s bad for one kind is good for another. You forecast them, and we can actually forecast their output more accurately now than we can forecast demand. You then integrate them with all the other kinds of renewables which are dispatchable; that is, you can have them whenever you want. You integrate them with demand response – some flexibility of demand which can be completely unobtrusive to the customer, and you integrate them with two kinds of distributed storage, smart charging and discharging of electric vehicles and high-storage air conditioning. Now it turns out that that list is enough to give you completely reliable power in the Texas grid – the so-called ERCOT power pool, every hour of the year in 2050, with no bulk storage of electricity and with only 5 percent renewable power left over to be spilled. And the economics of doing that would be quite reasonable. If you wanted to go further, you could use flexible, that is fast ramping gas-fired capacity, to back up, but there is increasing evidence that a largely or wholly renewable power supply, well designed and well run, may well need less storage and backup than utilities have already installed and paid for to manage the intermittence, the unforecastable failures of their large thermal power plants. Any kind of generator you put on the grid has integration costs. You have to look at both sides. And when you do, you find that the grid integration costs for wind and solar are actually very small. They’re typically a few tenths of a cent per kilowatt-hour, and they may well be less than the grid integration cost of the big lumpy capacity that fails unpredictably and all at once. The portfolio of diversified renewables doesn’t have that sort of ungraceful failure mode.
AG: But most people don’t realize that there’s power plants out there that are hot and running, spinning, but aren’t producing any electricity yet, in case another power plant collapses. And when something breaks, they almost immediately pick up the load.
AL: If you keep elephants to haul stuff around, elephants get sick, elephants die. You need standby elephants to haul the carcass away and do the job for the first ones. And elephants eat a lot and they’re expensive. It’s a lot better to have, again, a diversified portfolio with small costs- small costs of failure, and not all likely to fail at the same time.
AG: You know Amory, when I’m out on the stump talking about power, a lot of people will say yes, solar’s great, wind’s great, but what are we going to do for base-load power, that 24/7 power that we need all the time?
AL: There is a widespread misunderstanding about the term base-load, which many nuclear advocates use as some magical attribute of power plants that supposedly run all the time. There is no such thing as a power plant that runs all the time. All of them fail sooner or later. But actually the term base-load has 5 meanings. That’s one of them used only by journalists and propagandists. It’s not used in the industry. One other meaning of base-load is loads that seem to be steady; that seem to go on all the time, although when you look closer, maybe some are on sometimes and others are off sometimes, but they seem to add up to a constant portion of a load as opposed to the parts that only happen sometimes. And if you’re analyzing utility loads, you might think of base-load as meaning that. But if you’re buying generating resources for a utility, then to you, base-load is the resource that’ll generate the cheapest electricity over time. And if you’re operating the grid, it doesn’t matter what you already spent on a plant. All that matters going forward is how much it costs to run. So for the utility operator, base-load means the plant that costs the least to operate regardless of what you paid for it for building it. Well, traditionally, that cheapest-to-run role, aside from big hydro dams, was held by coal or nuclear stations – typically, nuclear cheaper to run than coal. However, they are now both undercut by renewables because they have essentially zero operating costs just like the hydro; and therefore, when you put in a lot of renewables, the coal and nuclear plants are shoved up the what’s called low-duration curve which means they run fewer hours. And if you’re in a competitive power market, they also take lower prices, so they earn less money because the market clearing price where everything competes and there’s enough supply and demand and balance, is set by the renewables, like by wind power in much of the Midwestern U.S. right now. And that costs approximately zero to run. So the result is that many coal plants that cannot compete with renewables or gas are shutting down. Coal lost 19 percent of its U.S. market share the last two years alone.
AG: Just in the last 8 months, we’ve had an enormous change in the nuclear industry. We started the year with 104 nuclear power plants and now we’re down to 99. We lost the Kewanee plant, Crystal River 3, San Onofre 2 and 3 and just last week the Vermont Yankee plant announced that it was shutting down.
AL: Quite a few nuclear plants are starting to shut down because they, too, are uneconomic to operate. They can’t compete with the wholesale power price and that’s regardless of what they may have cost to build originally. Because that cost is already sunk and you cant un-spend it. And anyway, it’s probably paid off by now because the plants are old. And I just wrote a piece in the April, 2013, The Atomic Scientist about the economics of U.S. nuclear phase-out, and we’re in one. It’s kind of in slow motion but any nuclear plant that has big repair bills like Crystal River or San Onofre stands a good chance of shutting down, and it’s kind of like having the engine blow up in your car and it’s an old car and you’ve got to figure out, is it worth putting in a whole new engine and betting that something else important isn’t going to break during the time you wanted to get the benefit out of the new engine. And it’s a pretty hard bet to make because as these plants get old, stuff starts to wear out, you get fatigue and corrosion and all kinds of age-dependent effects, there has been a very rapid escalation in the real cost of big maintenance jobs on these plants, what are called net capital additions, because they’re actually added to the capital cost rather than expensed. And the industry has been pretty careful not to find out whether that escalation is mostly for upgrading to produce more power – whether it’s a productive investment – or whether it’s more and more big repairs caused by aging effects. That would be very bad news for those who have just gotten their licenses extended or are about to, to go into 20 years of overtime, because it would mean that your license lets you run the plant, but it’s not worth continuing to fix it. And I think there is some evidence emerging that for many plants, that will be the case.
AG: The New York Times, Matt Wald ran a story saying that the economics of these plants is marginal right now. And it’s especially true with the single-unit plants because they don’t have a second unit to average out the labor costs and it’s especially true because all these plants are now pushing 40 years. The net effect is that as soon as there’s a problem, management’s going to pull the plug and shut the plant down. The cost to keep your staff fed for the half-year or year to make a major repair can never be amortized in addition to the cost of the repair over 20 more years to the plant site.
AL: Yeah. This is very different, of course, from the situation with modular renewables. If you had a gearbox break on a wind machine or an inverter break on a photovoltaic plant, it’s a matter of typically days to weeks to get the new one in and you just plug it in and keep going. You don’t have to worry about radioactivity. It really isn’t a difficult repair – a standard industrial repair. And it only affects one unit at a time. It’s at most a few megawatts, it’s not 1,000 megawatts.
AG: The big issue here is how do we want our power to be generated 50 years from now. Do we want it to be large central stations controlled by larger corporations? Or do we want people-powered renewable energy? That battle was fought 100 years ago and the big corporations won. Well, with the invention of computers and distributed generation, solar power and windmills, we’ve been able to turn the tide and it’s time now for people to get back involved in energy production.
AL: In fact, the biggest game changer is that instead of having to build a cathedral like project for a decade for billions of dollars, in that time and for roughly that money, you can now build each year during your big plant construction period a solar manufacturing plant, which then each year thereafter will produce enough solar cells that each year thereafter they can produce as much electricity as your big plant would have produced. So the scaling can be incredibly rapid. Take, for example, Portugal, which had 17 percent renewable electricity in 2005; 45 percent in 2010, 70 percent in the first quarter of 2013 because it was rainy and windy. Germany is now 23 percent renewably powered, doubled in about 6 years. Germany, right after the Fukushima accident, shut down 8 of its reactors, about 41 percent of its capacity. And yet they had completely replaced that by the end of the same year. Three-fifths of the replacement was by very rapid growth in renewables. They remained a net exporter of electricity. They remained the only consistent exporter of electricity to France because the German electricity is now cheaper. They kept the French lights from going off in a February, 2012, cold snap by sending them 3-odd gigawatts. Their carbon emissions went down. Their economy grew robustly with 380,000 new jobs in the renewable business. And their wholesale electricity prices dropped dramatically; in fact, over the last 2 years, they’ve dropped about 30 percent. So German heavy industry is now paying the same in real terms per kilowatt hours it did in 1978 and attracting new energy intensive industry to Germany. That drop in price is led by the renewable capacity and some of the German states are around half wind powered now. It’s really a remarkable story and over half their renewable capacity is actually locally owned. Only 2 percent in the U.S. is owned by ordinary citizens and communities and co-ops. But over half in Germany. 86 percent of Danish wind power is locally owned, generally by farmers and their communities. Denmark is 41 percent renewably powered in 2012; 30 of that’s wind. Denmark and slightly ahead of it, Germany, have the most reliable power in Europe and some of the lowest wholesale prices before tax, although electricity is heavily taxed in both countries for households.
AG: The three countries I didn’t hear mentioned in the most-improved category was France, America and Japan. Could you explain a little bit why France, America and Japan might be different than the other models?
AL: France is very rich in renewables but chose administratively, without even asking the parliament back in the mid-70’s to go all nuclear. They got to 78 percent. Now it’s back to 75. And this has got them in a lot of trouble. It means that their nuclear builder and their state-owned – and their utility, both of which are largely state owned, are practically broke. I was just in France last week contributing to their energy policy discussion, which is now opened up to the public for the first time, and they’re starting to realize that they cannot continue to support the existing system. They have to do something different. And they will be reducing their nuclear output from three-quarters to half through normal attrition and a bit more. But they are increasingly interested in the German model, because basically electricity – France chose a costly option whose costs are relentlessly rising and there was just a big report a couple of weeks ago about the big upward rate pressure that they’re under for their electricity. Germany chose a portfolio of cheaper options with declining costs. So if you think cheap electricity is important for economic competitiveness, I think you’d have to conclude German’s on the right track and France is not. In the United States, it’s a mixed picture, but most of our energy policy is made at a state level and there are leading states like California, New Jersey, Texas in different aspects of the renewable revolution. Notice that’s a politically diverse bunch. Texas, for example, is a deeply conservative state, and yet it is by far the national leader and one of the world leaders in wind power because they’re very good at making money in Texas, and that’s fine, too. But nationally, the modern renewables have passed 5 percent of U.S. electric output, but that’s not really very impressive if you count big hydro as well from 2005 to 10, the U.S. crawled from 9 to 10 percent renewable electricity while Portugal went from 17 to 45 percent. And we have a lot of catching up to do, especially with China, which is the world leader in renewables and in many aspects of efficiency.
AG: The other country I mentioned was Japan. You know, I wrote that book called Fukushima Daiichi: The Truth in the Future. The back of that book is about a future for Japan that’s not dependent on nuclear. Could you talk to us a little bit about that?
AL: Japan’s a very interesting case. They are actually the richest of any major industrial country in renewable potential, even ahead of France. So per acre, Japan has 9 times the high-grade renewable potential for making electricity of Germany and twice that of North America; three times that of Europe. And yet they have only 1/9th the electric fraction of renewable production that Germany has. Why is that? Well, because Germany decided to go away from nuclear toward renewables and efficiency. There’s a very strong national consensus on that. They are not going to reverse it. No party voted against it. No party will oppose it in this September’s election. It makes sense, it makes money; and basically, the Chancellor bet that it was smarter to spend energy money on German engineers, manufacturers and installers than to keep sending the money to Russia for gas and she’s won her bet. Now in Japan, on the contrary, you don’t have laws giving renewables automatic priority to dispatch to the grid. You do have very recently a feed-in tariff system like in Germany where society decides what kinds of energy it wants – in this case, renewables – and pays for them on a predictable basis. And actually, Japan set the tariff much higher than Germany had because they thought renewables were much more expensive than they are. But they’re starting already to cut that back as the prices drop. And I would say Japan is awakening to its renewable potential. Part of what’s going on is they split in the Japanese business community, which in the past was really dominated by the major utilities, some of which I used to work for – Tokyo Electric, Kansai Electric and so on. Nothing that happened in the Fukushima accident was a surprise, either technically or institutionally; in fact, we discussed such scenarios back in the 70’s and they just said it couldn’t happen to them. But I’m afraid they were wrong. Now in Japan, the richest guy is Masyoshi Son, who founded Softbank and broke the telecom’s monopoly. So he’s good at breaking monopolies. And after Fukushima, he knew nothing about energy, but he studied it pretty hard and after a few months, he ran a press conference saying excuse me, Son here, my business colleagues and I see that TEPCO is in a bit of – spot of bother, and we think we can solve this problem in a few years by building solar power and other renewables, and sitting behind me are 34 provincial governors who will provide the land from their land banks, mostly Brownfield sites, and I’ll invest the first billion dollars and I’ve identified the people to invest the next 10 billion dollars. And all we ask is that the utilities accept our power and pay us a fair price for it, which will be less than they’re paying now – what do you say? Well, the utilities of course didn’t at all like the notion of this competition. It did everything that it could to block it. And meanwhile, the government changed to one that favors that point of view. But meanwhile, the feed-in-tariff started to make renewables, especially solar, take off like a rocket. And many of the business leaders are now starting to split from the monolithic business organizations and say actually, Son san is right. I can get cheaper power from those guys than from those guys and there’s money to be made here and I intend to make some – I’m in. So in the very politically complex, behind-the-scenes slow motion way, the new consensus forms in Japan. I think that’s going well. And of course, driving that is the example of China in front of everybody. China’s the world leader in making wind, photovoltaics, biogas, solar thermal collectors like for water heating, small hydro – they tend to be in all renewables. Wind power alone, they’ve doubled their capacity each of the last 5 years. It now out produces nuclear power in which they have the world’s most aggressive program. 2006 they had distributed renewables producing 7 times more capacity than nuclear and growing 7 times faster. By 2010, that gap had widened further and in solar, they own most of the world’s productive capacity for making solar modules and that’s twice as much as is installed each year. And they just upped their domestic target to 40 gigawatts installed by 2015 – that’s right around the corner. That’s going to soak up the surplus capacity real fast. So they are driving the world price relentlessly down for both solar and wind. More power to them. It’s good for everybody that they’re doing this and they are exiting coal slowly because it’s a huge, cumbersome system. But their emphasis in what they’re planning is very much away from coal, and the same thing is happening in the other big coal user – India – where the business case for coal plants collapsed in 2012 and just in the lat ¾ of that year, they canceled 42 billion lots of coal plants.
AG: Amory, your knowledge of nuclear and coal and oil and solar just continues to astound me. I realize that the Rocky Mountain Institute has a lot of material on its website, most of it very highly technical for geeks around the world to read. If the average person wants to know more, is there any resource they can use?
AL: Thanks, Arnie. You can go to blog.rmi.org and in March and April, 2013, look for the Asian and German blogs. And we’ll put out more news as it happens. I would also recommend you go to reinventingfire.com and rmi.org to find out about reinventing fire. That’s a major business book that we put out in 2011, the work of 61 of us over a year and a half with much help from industry. And it’s actually introduced by the president at Shell Oil and the Chairman of Exelon, which is the biggest nuclear and third biggest coal-fired utility in the country. That might surprise people when they learn what the book says; namely, that you can run a 2.6 fold bigger U.S. economy in 2050 with no oil, no coal, no nuclear energy, 1/3 less natural gas, 80-odd percent lower carbon emissions, 5 trillion dollars lower cost counting all hidden or external costs at zero, no new inventions and no act of congress, the transition led by Business for Profit. The electric side of that story is that we showed how to make electricity supply 80 percent renewable and half distributed and much more resilient at essentially the same cost as business as usual, but best managing all the risks around the different ways our electricity system could evolve. And that distributed renewable future is coming right at us. Utilities and the electricity industry as a whole are undergoing the most dramatic change in any sector I can remember anytime and we’re right in the heart of that working with industry leaders to figure out what the next industry looks like and how to keep the lights on meanwhile.
AG: Thank you for coming and thank you for making the future a better one for all of us. You know, Fairewinds is a people-powered site and we’d sure appreciate it if you do three things for us. The first is take a look at the site. There’s all sorts of great resources. Second, pass the word to others through Twitter or Facebook or word of mouth. And the last piece is we’d like you to consider a contribution as well. Thank you very much. I’m Arnie Gundersen with Fairewinds.
Reinventing Fire: Bold Business Solutions for the New Energy Era by Amory Lovins, 2011.