DOE technologist handicaps impact of carbon price

BOSTON--If you attached a cost to putting greenhouse gases into the atmosphere, how would the energy business change?

Steven Koonin, the undersecretary for science at the Department of Energy and former chief scientist of BP, has thought this question over. Koonin was the keynote speaker Thursday at the Fifth Annual Conference on Clean Energy here, where he offered a big-picture analysis of how the U.S. should convert to low-carbon energies.

Steven Koonin, undersecretary for science in the U.S. Department of Energy (DOE).

(Credit: DOE)

The main drivers toward cleaner energy are efforts to improve the country's energy security and to cut greenhouse gas emissions. But there are many paths to that destination and we won't get there by only putting a price on carbon, Koonin said.

"Now the economists will tell you that all you need to do (is put a price on carbon emissions) and the market will take care of itself after that," Koonin said. "And that may be true, but as a technologist I have the ability and in fact the responsibility to look ahead and ask what the likely responses will be if there is a carbon price."

Establishing a significant, long-lasting, and universal carbon price would act as a "supply side" signal to the energy industry and favor certain technologies, he said.

One clear implication for the U.S. would be a greater shift toward natural gas, which is significantly less-polluting than coal for making electricity. Recent drilling improvements allow for capturing large amounts of natural gas from shale in the U.S., Koonin said.

Onshore wind is economically competitive in many areas in the U.S. and has the potential to supply 20 percent of the country's electricity by 2030. Another clean source of power is small and medium-size hydro power, which can supply tens of gigawatts from small dams.

Nuclear fission, which now supplies about 20 percent of the electricity in the U.S., is also poised to expand in an economy with a carbon price because there are no emissions during power generation. Carbon capture and storage facilities attached to coal-power plants, too, are needed because existing coal plants will continue to operate, he said.

Finally, increased conservation and efficiency are required in both the transportation field and for heating and power, he said.

Not just about technology
Koonin favors a cap-and-trade system to regulate carbon emissions, a system proposed in the energy and climate legislation now being debated in the Senate. Under cap and trade, heavy polluters such as utilities are given pollution permits and can buy additional permits to stay under a government-set limit on carbon.

But other policies are required, in part because the energy industry by its nature changes very slowly. Koonin specifically mentioned portfolio standards, where utilities need to get a portion of their electricity supply from renewable sources or a "low carbon" portfolio standard.

"One of the most important things we need to do beyond technology is to accelerate energy change," he said. "It takes decades to affect significant changes in the energy system."

It's a mistake to look at the IT industry as a model for how quickly energy can change, Koonin said. Whereas digital technologies evolve very quickly, energy changes slowly because power plants and buildings last decades and even cars last 15 years.

The first hybrid passenger car came to the U.S. in 2001, and even now, eight years later, there are fewer than 1 million sold, out of a total 150 million cars, he noted.

The scale and investments required to adopt different energy technologies is much bigger in than IT, and the energy industry is dominated by incumbents with well-optimized processes, he added.

To accelerate changes in energy, the DOE has established different types of research centers. This year, there will be $25 million a year to fund three "innovation hubs" at universities focused on specific problems, such as advances in nuclear. The DOE also recently awarded grants for ARPA-E, research aimed at breakthrough technologies.

[tikiwade]

This article does not mention the obvious, that cap-and-tax = higher energy costs for everyone because the utilities will just pass the costs on to the consumers, us, in the form of rate increases. Everything that we as consumers buy and use requires energy, so the costs of goods will also go up as a result of this. I think that regulation and portfolio requirements are a great solution.

[SilentDaeth]

Bingo, you hit is right on the head. There is not an industry as a whole anywhere that just absorbs these kinds of taxes. Any tax imposed on an industry just gets passed right along to the consumer and they eat it. You tax all the oil industry and gas prices go up because of it. In fact, companies have to pass the taxes onto the consumer or the company would fold under the immense weight of taxes alone. Oh, if people think that this will only hit the coal plants, their wrong their too, the "clean" electricity choices will raise the costs right along with them, because it just means more profits for free.

[carlhage]

Cap/tax increases prices only for fossil-CO2 emitting energy, the other technologies would decrease in cost as they become mainstream. Yes, cap/tax favors certain technologies-- ones that don't change the atmosphere. That is the point. Subsidizing legacy energy just to keep prices low is bad for the economy. Some oil producing countries sell gasoline at $.05/gal, and people protest when they might have to pay what everyone else does. The solution to rising prices, of course, is to give the new revenue back to people-- not to give it to polluters. We use income tax to subsidize fossil energy, so why not tax fossil fuel and cut income tax instead. The productivity of the economy would jump with better efficiency.

The other solution is to change the rates to encourage efficiency/conservation. As rates increase, that motivates people to invest in efficiency, and they end up paying less overall. About half of the things to cut GHG emissions have negative cost, but we aren't doing them because of short term thinking and lack of effort. In California where the electric utility was allowed to profit from conservation in the 1970s, electric use has been flat ever since. Even though rates are higher in CA, people pay less because they use less (half the national average). We have a huge opportunity to free up huge amounts of energy at very low cost with demand reduction.

At $30/ton CO2, energy costs don't rise that much, but it makes the difference in making clean energy cost effective. (It's awfully hard to compete with one guy running a massive scraper that feeds coal onto a conveyor.) Independent of climate change costs, recent estimates claim a comparable amount is already paid in health care from coal plant pollution, and it's a small fraction in comparison to trade-balance and military costs for oil. As Boone Pickens, says, "We're going to go broke." We people are paying a high price now, and we shouldn't.

[iptofar]

So inventing a false market is economically sound???? Come on. Only the ivy lead head in the clouds folks believe that. A market creates a motivation, you can't motivate the laws of physics or for that matter economics. So now, not only create a false market but now fix the price. Holy cow.

Just think, if we had spend the spendulous on proven nuclear power, we would have actually created real jobs, produced less co2, and the investment would have had a pay back.

[murph0613]

What a great observation he makes - that any changes that are to be made need to be made slowly and methodically. He's right, our energy infrastructure cannot change on a moment's notice; it takes decades. The bureaucrats that think we can start taxing energy companies into submission have missed that vital point. We need alternatives AND a plan to implement them. And people need to agree on how that will happen. This is why it's so hard to change - and we need to acknowledge that and work within that structure, rather than trying to throw it out.

[basraw]

Volcanoes put out more CO2.. CAP THE VOLCANOES FIRST!

http://www.telegraph.co.uk/earth/earthnews/6553592/Climate-change-sceptic-Ian-Plimer-argues-CO2-is-not-causing-global-warming.html

[cp256]

Cap and Trade will go down as the biggest money-grabbing scam in the history of mankind. Of course it will have virtually zero (ie: completely imperceptible) effect on global warming, climate chaos, climate change or whatever the charlatans and misinformed are calling it this week.

We could go back to pre-fire monkey-man technology and we still wouldn't cool off the planet to any significant degree.

No matter how convincing junk science is, it's still junk science. GIGO.

[MacAaron]

What we really need is for government to get out of the way. Currently, government is why my state (Wyoming) produces more power from wind than any other state in the nation, but uses none of it. Why? We ship it to the morons in California who think they're being "green" by buying it from us instead of doing it their damn selves. One look at the state budgets between the two states and you see something telling: WY shortfall for next year: $26 million (common, about 1% of total budget) / CA shortfall for next year $14.6 BILLION (bankruptcy).

Hmm...

[carlhage]

Several times recently I see the claim that adding a price for CO2 will cause energy costs to skyrocket. Those favoring carbon taxes or cap-and-trade price regulation think about $30/ton is a good value. I looked up the numbers from PG&E for a typical household. Electricity would go up $4/mo, natural gas $9/mo. But compare that to the change in natural gas prices during 2008 - $35/mo ($51-$86/mo). For gasoline, the price for CO2 would be $.29/gal, but during 2008 CA prices varied by $2.77/gal ($1.81-$4.58 according to the EIA).

The proposed CO2 prices, important to make renewable energy cost competitive, pale in comparison to the fluctuations in price because of supply and demand imbalance. No, CO2 taxes won't cause a skyrocketing of prices, but supply and financial disruptions do cause skyrocketing prices. Electricity made from solar/wind remains stable over the 20 year or whatever life, but fossil fuel electricity is likely to go up. So a CO2 tax could be worth the cost just in price stability.

The cost of CO2 on gasoline is almost nothing. But the cost of the Iraq war is more than all imported oil.