THE TRUTH ABOUT COAL (SCIENCE, NOT A SALES PITCH)

The Hidden Costs of Electricity; Externalities of Power Generation in Australia
Dr. Tom Biegler, FTSE, March 2009 (Australian Academy of Technological Sciences and Engineering)

SUMMARY
The Australian Academy of Technological Sciences and Engineering (ATSE), Australia’s premier scientific body, reported its findings on what the cost of coal is when externalities are considered.

ATSE defines externalities as “…environmental and social costs that are not accounted for in the market price of electricity.”

Examples of externalities: Impacts on climate, human health, crops, structures and biodiversity.

The report considers the externalities for all forms of electricity generation in pursuit of an accurate measure of the real comparative costs. The information is intended to provide a basis, in metrics (dollars per megawatt-hour ($/MW-h), on which objective choices between power generation sources can be made.

click to enlarge

The report identifies the best comparable previous studies on the subject as (1)ExternE, from the European Union (EU), and (2) NEEDS (New Energy Externalities Development for Sustainability), the EU’s successor study to ExternE.

ExternE used a huge body of research and analysis to derive monetary estimates of the costs of greenhouse, health and other environmental impacts of power plant lifecyle emissions.

From ATSE's reading of ExternE, for the EU:
- Total external costs (2005 terms) = €41/MW-h for electricity generation from black coal, €58/MW-h for electricity generation from brown coal.
- New Energy and nuclear energy had significantly lower external costs than all fossil fuels. External costs for onshore wind: €0.9/MW-h. External costs for nuclear power (light water reactor): €4/MW-h.
- Uncertainties and gaps in estimates of external costs remain and are significant but the information that is available is invaluable.

click to enlarge

The ATSE report points out that EU conclusions need to be reconsidered in an Austaralian context (or wherever else they may be applied).

It also points out, before reporting its conclusions on the costs of externalities, how wide the range of estimated environmental costs from greenhouse gas (GhG) emissions is. For currently deployed fossil fuel technologies in Australia, for example, harm from greenhouse gases is estimated to range from $A18/MW-h for natural gas to $A39/MW-h for brown coal. Nevertheless, the ATSE report concludes, using $A40/MW-h as the average cost of Australian electricity, even the lowest of those estimates for external costs is significant.

click to enlarge

Non-GhG emissions from fossil fuels also affect public health. (Examples: fine particles, PM10, sulphur dioxide, SO2, and nitrogen oxides, NOX) In Australia, these pollutants cause only 7-to-20% of the costs they do in Europe because of Australia's lower population density. Nevertheless, the total health damage cost for non-GhG emissions in Australia is ~$13/MW-h, an aggregated national health impact of ~$A2.6 billion per year.

GhG external costs + non-GhG external costs: ~$A19/MW-h for natural gas, $A42/MW-h for black coal and $A52/MW-h for brown coal.

Solar photovoltaic (PV) external costs come in at $A5/MW-h. Wind is even less, at $A1.50/MW-h. Geothermal is in the same range. Large-scale deployments and new transmission for New Energy could drive external costs up due to environmental impacts.

Nuclear power is GhG-free but mining, plant construction and decommissioning entails significant external costs reaching ~$A7/MW-h. The risks of reactor accidents, terrorist incidents and weapons proliferation are difficult to quantify and, therefore, not part of the report but, as ATSE points out, they are very real and could represent catastrophic costs.

click to enlarge

COMMENTARY
Australia is on the verge of taking action against global climate change. Its Carbon Pollution Reduction Scheme (CPRS) will institute a national cap&trade system designed to use the marketplace to cut greenhouse gas emissions.

The CPRS will be part of a $250 billion expenditure by Australia through 2050 on climate change and New Energy. The ATSE’s recent Energy Technology for Climate Change: Accelerating the Technology Response considered the technical, commercial and marketplace aspects of the various power generation choices. This new report’s calculations are intended to provide a more comprehensive understanding with which to decide which New Energies to fund.

click to enlarge

Because the Australian government line on carbon capture and storage (CCS, “clean” coal) is that it is coming and will deliver the nation into a future of abundant, clean, cheap power generation, the report considered it. After acknowledging the coal industry line about CCS cutting emissions and emissions costs 90%, the report pointed out that getting such a result from such an infrastructure-intensive technology - if it eventually proves to be possible - would be very expensive.

ATSE’s study makes 4 concrete recommendations. They are recommendations any country serious about fighting global climate change should take very seriously:
(1) Increase the focus of policy decisions on external costs. Without such a focus, decisions will be made that will not necessarily get the intended results because costs based on a strict market orientation will be different than the real costs. Any calculation of costs must also be based on Australian factors, not those reached by the EU. An Australian Federal Government Department should, therefore, be given the responsibility to collect, analyze and disseminate data that incorporates external costs.
(2) Develop a broader data base on external factors applicable to power generation. It is crucial to the success of efforts to build a new, low-emissions energy infrastructure to have accurate, Australia-specific, investment-grade data. Recommended priorities (a) certainty of the cost of damage from GhGs generated by existing power plants; (b) define and quantify the externalities associated with CCS because if it were possible it would be crucial; (c) quantify the externalities of large-scale New Energy (solar, wind and geothermal); (d) quantify the externalities of nuclear power; (e) R&D on the externalities for lesser-known power sources and factors not in the report (biomass, energy storage, energy security, synergistic multi-technology installations like combined heat and power, combined solar and wind or combined offshore wind and wave energy).
(3) Improve Australia’s ability to assess external costs. Cooperation with “centers of expertise” around the world is vital.
(4) Bring the public into the discussion on a broad scale. An understanding of the implications of external costs is crucial to public acceptance of generation sources that may seem more expensive until a deeper understanding of costs is clear. To get this understanding across, a comprehensive mass-communication strategy must be developed and implemented.

click to enlarge

The last recommendation is really worth highlighting. “Drill, baby, drill” could not possibly have caught on in the U.S. if there was a broad-based enough understanding of how inadequate oil reserves really are in comparison to consumption. In this context, it is interesting how public opinion has turned against the use of coal as grassroots movements have finally begun to get the word across to the public through powerful and effective P.R. campaigns that there is no such thing as “clean” coal and that the public health and environemtnal costs of burning coal are enormous.

click to enlarge

QUOTES
- From the ATSE report: “Existing methods for valuing externalities do give an idea of their relative costs for different technologies in Australia but some major gaps and uncertainties need to be resolved through further work…Until identified, and then if possible quantified in monetary terms, they remain hidden, playing a limited role in technology selection…”
- From the ATSE report: “Even with the considerable uncertainties associated with credible valuation of externalities, the external costs derived in this Academy study… provide a useful indicator of their relative magnitudes for some electricity generation technologies relevant to 2050…The present wholesale price of electricity in Australia, averaging around $40/MW-h, gives a context for these monetary valuations of external costs…[U]ncertainties, approximations and possible omissions…still need to be addressed in reaching reliable investment-grade data. Attaching monetary values to externalities is problematical and subjective but of increasing importance to an ever-more-watchful and well-informed society. With billion-dollar investments at stake, more work is needed to reduce the uncertainties and to explore the externalities…Their evaluation, including open communication, discussion and understanding within the community, should not be left until too late.”