October 9, 2006
Canada, Opinions

Tough choices needed for renewable plan

Greenhouse gas reduction is not a one-size-fits-all concept. Canada’s approach may differ from others.

Many Canadians would spend $30 per person per year for a significant reduction in the risk of global warming. Move that to $300 per year per person – $1,200 per year for a family of four – and support would waver, and it would virtually disappear at $3,000.

This is important, because renewable energy that doesn’t add fossil carbon to the atmosphere costs more than fossil fuels, and there is virtually no prospect of a technology miracle that will change that.

Given this, it is important to set the right goal: Canadians are best served by getting the most reduction in greenhouse gases at the lowest cost. To do this, we need to remember three things.

– Doing a little bit of everything is bad policy

The list of ways to produce energy from renewable sources is long. We can make electricity from sunlight or wind, burn or gasify straw or wood waste to make diesel or electricity or ferment them to make ethanol, make biogas and then electricity from manure, and make diesel from oilseeds.

But not all of those make economic sense. In the absence of good cost estimates, all look tempting, but once a realistic cost analysis is done, some are frightfully expensive and a waste of money.

Compare paths to electricity. The wholesale cost of power from current sources averages about five to seven cents a kilowatt hour (kWh) in Ontario and Alberta, and it’s even less in B.C. and Quebec because of the large base of hydro power.

If built at an economic size, power from straw would cost eight cents per kWh, and seven cents from the huge surplus of trees killed by the mountain pine beetle in B.C.

If we build a large centralized biogas digester to process manure, as the Danes do, power costs 25 cents per kWh, and over 70 cents per kWh from a digester in a large dairy. Clearly, burning straw or concentrated wood waste is much more economical than making power from manure.

Wind power is also relatively cheap, but we have to plan for what happens in winter if the wind isn’t blowing. Wind is a wonderful source of a small slice of our total power. Above that, we need more costly backup generation on standby.

So rule one for renewables: pick winners, and don’t waste money on hopelessly expensive technologies.

– Scale matters

No misconception plagues biomass more than the mistaken belief that large plants are uneconomic because it costs too much to transport the biomass.

The opposite is true. Large plants have a lower capital cost per unit of output, for example per megawatt (MW) of capacity: if you double the size of a power plant the plant cost increases by only 60 per cent. Numerous studies have shown that the capital savings as plants get larger is far higher than the cost of transporting biomass. Power from a 300-MW plant burning trees killed by the mountain pine beetle will cost seven cents per kWh, and 12 cents per kWh if the plant size is 100 MW, because of higher capital cost per MW and higher proportional heat loss for small plants.

The Finns have learned the lesson of economy of scale well: they operate a 240-MW power plant that can operate 100 per cent on biomass and that draws in wood waste from more than 100 kilometres. Hence rule two for renewables: do it at an economic scale.

As an example of questionable policy, Ontario recently invited bids for renewable energy, to be paid for by all power consumers in the province, but stipulated that the maximum power output was 10 MW. This has guaranteed a long obligation to plants suffering from a diseconomy of scale.

Canadians don’t build small oil refineries, car plants or power plants because they are not economical, and we shouldn’t build small uneconomical renewable energy plants.

– Canada is different from the U.S.

In renewable energy, Canada differs from the U.S. in two critical ways.

First, the U.S. downplays carbon reduction (although they have a better record than Canada for limiting growth in carbon emissions). Instead, they focus on reducing oil imports, and hence emphasize ethanol and biodiesel as alternate fuels.

Because there isn’t enough grain to make a significant drop in oil imports, U.S. ethanol research has focused on cellulose as a feedstock.

Canada is different: we are an oil exporter and are focused on reducing fossil carbon in the atmosphere. Hence, we should only make ethanol or biodiesel a priority over renewable electricity if it is more economic.

The jury is out on this: we need more study of whether corn stover and straw are better used as a power-plant fuel or feed to an ethanol fermentation plant. Blindly insisting on an arbitrary target for ethanol in transportation fuel – as Canada recently announced – isn’t good policy unless we know that it gets the most carbon out of the atmosphere at the least cost.

The second way we differ is that the U.S. pays farmers to leave good farmland sit idle. The same payment could subsidize a dedicated energy crop on that land at no increased cost to society. Canada doesn’t pay farmers not to grow crops, and we don’t have a surplus of good idle land. Thus, oil seed for diesel will have different economics in Canada.

We need an analysis based on our cost structure, and free from the influence of powerful U.S. farm lobbies, to decide if this is right for us. Rule three for renewables is to do what makes sense given our goals and our economics.

It’s worth returning to Canada’s key objective: getting the most carbon out of the atmosphere for every dollar we spend. There are projects available today that are clearly good uses of money, for example generating power with straw, corn stover or trees killed by mountain pine beetles, if they are developed on a scale big enough to make them economic.

Misguided projects done in the spirit of “let’s do everything” waste social dollars, have small impact on carbon in the atmosphere, and raise the cost of power to all consumers. We need to aim carefully, based on an understanding of costs, to get renewables right.

By Peter Flynn, The Edmonton Journal

Peter Flynn holds the Poole Chair in Management for Engineers in the department of mechanical engineering at the University of Alberta, where he does research in the economics of renewable energy. He gave this speech this month.


URL to article:  https://www.wind-watch.org/news/2006/10/09/tough-choices-needed-for-renewable-plan/