by James A. Bacon
Elona Verdolini, Francesca Vona and David Popp are deeply concerned about climate change and the need to deploy more renewable energy sources. “Decoupling economic activities from fossil-fuel use (and hence, from anthropogenic carbon emissions) is the only way to avoid severe and pervasive impacts from climate change while sustaining economic growth,” they write in a paper just published by the National Bureau of Economic Research.
But they also acknowledge a reality typically missing from economic studies of renewable energy. Wind and solar are not “dispatchable,” that is, they do not generate electricity upon demand; they generate electricity when the wind is blowing and the sun is shining. “This translates into high system costs of renewable generation, as it requires holding significant back-up capacity to ensure a balanced energy supply throughout the day. In fact, these challenges will only further increase as the share of energy generation increases to levels never witnessed before.”
Unless cheap electricity storage options become widely available in the immediate future, “the penetration of renewable energy will increase system costs, as a significant amount of capital-intensive and under-utilized back-up capacity will have to be maintained,” write the authors, who hail from Italy, France and the United States respectively.
Delving into data for 26 Organization of Economic Cooperation and Development (OECD) countries between 1990 and 2013, the authors found that an 0.88% increase in renewable energy capacity is associated with a 1% increase in the share of fast-reacting fossil generation capacity.
“To date [fast-reacting fossil] technologies have enabled [Renewable Energy] diffusion by providing renewable and dispatchable back-up capacity to hedge against variability of supply. Our paper calls attention to the fact that renewables and fast-reacting fossil technologies appear as highly complementary and that they should be jointly installed to meet the goals of cutting emissions and ensuring a stable supply.”
Bacon’s bottom line: This is essentially the argument that the utility industry has been making, although the implications for Virginia of this high-level conclusion drawn from 26 OECD countries, many of which are far farther along in the deployment of renewables than the United States, are not immediately apparent.
PJM Interconnection, the regional transmission organization that supports wholesale electricity markets for Virginia, has estimated that the electric grid can accommodate up to 30% renewables without threatening the integrity of the electric grid. The current level of wind and solar in Virginia is a tiny percentage of that level, and even Virginia’s voluntary Renewable Portfolio Standard for 2025 is only 15%. So, it’s not as if wind and solar are likely to create the reliability issues seen in countries that heavily committed to renewables.
But this is not an issue we can ignore in the Old Dominion. If solar penetration is merely 1% or 2% of Virginia’s electricity, the need for back-up capacity is de minimus; any needed power can be purchased from wholesale markets. But what happens if solar and wind reach 15%? There is a finite amount of electricity that can be purchased from outside Virginia because there is a finite amount of transmission capacity. At what level of solar/wind penetration would Dominion Virginia Power, Appalachian Power and the smaller electric utilities be required to maintain expensive backup capacity? I don’t know of anyone who has even asked that question.
The question goes to the heart of the debate over energy policy in Virginia in the era of the Clean Power Plan, which will accelerate the phase-out of coal-powered electricity production. Environmental groups have pushed not only for more wind and solar, but they oppose the construction of new gas-fired plants, new pipelines to supply them, and new nuclear units. Some even oppose extending the life of existing nuclear units. Again, that’s fine when solar/wind is a negligible component of electricity output, but it creates problems if renewables come to dominate the system. The NBER paper reminds us that we need to understand the tradeoffs better as we make decisions that we’ll live with for decades. Right now, I fear that we lack the information needed to make intelligent choices.
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