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m-61934

PHOTOVOLTAIC ENERGY 1 MPACTS ON U.S. CO;! EMISSIONS1

S.C. Moms, J. Lee, P.D. MosKowitz, and G. Goldstein

Brookhaven National Laboratory Department of Applied Science

Analytical Sciences Division Upton, NY 11 973

ABSTRACT

The p o t e n t i a l r o l e of pho tovo l t a i c (PV) technology i n r educ ing C02 emissions was evaluated i n an energy-environmental economic systems model. The model examines the r o l e of photovol ta ic energy systems i n a compe t i t i ve market environment, PV technology is already competitive fOK cer tain niche m a r k e t s . Further growth i n those m a r k e t s i s expected a s w e l l a s exbansion i n t o o t h e r m a r k e t s . Decreasing c o s t p e n a l t i e s should provide g r e a t e r i n c e n t i v e for expansion of niche markets. This anaiysis i nd ica t ed t h a t , wh i l e PV w a s not projected to be competit ive a s a generai source of e l e c t r i c i t y supply t o t h e g r i d by 2030, it d i d become an a t t r a c t i v e technology f o r t h i s purpose a f t e r 2010 under carbon emission c o n s t r a i n t , even i f t h e carbon c o n s t r a i n t was l imi t ed t o s t a b i l i t y of emissions a t t he 1990 level.

INTRODUCTION

Reducing t h e use o f f o s s i l f u e l s i s a key element f o r t h e m i t i g a t i o n of greenhouse gas emissions. This ana lys i s focuses on t h e p o t e n t i a l c o n t r i b u t i o n t h a t pho tovo l t a i c (PV) technologies can con t r ibu te t o t h e r educ t ion o f carbon dioxide emissions from t h e U . S . energy system. S tud ie s examining issues o f global climate change m u s t cons ide r t i m e s c a l e s of a cen tu ry o r more. S tud ie s of s p e c i f i c technological opt ions; however, a r e limited t o a r e a s o n a b l e range of technological f o r e s i g h t . This analysis considers t h e per iod 1990-2030. It draws on p r o j e c t i o n s from t h e National Renewable Energy Labora to ry t3 c h a r a c t e r i z e expected advances i n PV technology. It u s e s MARKAL-MACRO, a wel l -es tabl ished energy-environment-economic syste-ns a n a l y s i s model, t o ex&nine the competition between PV and o t h e r technologies a v a i l a b l e f o r reducing greenhouse gas emissions i n t h e energy system.

OUTLOOK FOR PHOTOVOLTAICS I N THE U . S .

The c o s t of pho tovo l t a i c power has decreased ove r seven-fold i n t h e p a s t t w o decades and i s p ro jec t ed t o decrease a f u r t h e r four-fold i n t h e n e x t two decades [I]. PV systems are c u r r e n t l y c o s t - e f f e c t i v e f o r o f f - g r i d niche

’ For presentation a t the EPA Symposium on Greenhouse G a s Emissions and Mitigation Research, June 22-23, 1995, Washington, D.C. The work described in t h i s paper w a s not funded by the_U.S. Environmental Protection Agency. This work was prepared as

. an account of work sponsored by the U.S. Department of Energy. Neither t he U n i t e d States Govement nor any agency thereof, nor any of t h e i r employees, nor any of their contxactors, subcontractors, o r their emgloyees, makes any warranty, express or implied, or assumes any l ega l l i a b i l i t y o r responsibi l i ty f o r the accuracy, completeness, OK usefulness of any information, apparatus, product, o r process disclosed o r represents tha t its use would not infringe pr ivately owned r i g h t s . The dews and opinions of authors expressed herein do not necessarily s t a t e or r e f l e c t those of the United States Government o r any agency, contractor, o r subcontractor

STE thereof - OISTRlBU77ON OF THIS BOCUMEM IS UNLl

This rrseyd, was performed under the 3uspicn of the United Sum Department of Energy under Conma NO. DE-AC02-76CH00016

markets f o r e l e c t r i c i t y . These inc lude accent l i g h t i n g , s e c u r i t y l i g h t i n g , sens ing devices , water p w s , communications and a growing number of o t h e r uses . Many o f t hese uses compete d i r e c t l y wi th grid-connected service; t h a t i s , non-grid-connected PV i s chosen because of convenience o r t o avoid t h e cos t of e lectr ic connec t ions . Current i n s t a l l e d capac i ty i n these app l i ca t ions (< 60 MW) i s s e v e r a l t i m e s l a r g e r than e x i s t i n g u t i l i t y app l i ca t ions and i s expected t o grow a t roughly lO%/year through 2000 [2] . PV i s a l s o cos t - e f f ec t ive i n remote app l i ca t ions where g r i d connect ion is i n f e a s i b l e and t h e competit ion i s d i e s e l generators. T h i s market i s smaller i n t h e U.S. t han i n o t h e r p a r t s of t h e world.

Near-term u t i l i t y a p p l i c a t i o n s are l i k e l y t o focus on peaking power and power condi t ion ing a p p l i c a t i o n s . Many u t i l i t i e s , e s p e c i a l l y i n t h e south- w e s t , experience t h e i r peak l o a d co inc ident wi th peak s o l a r i n s o l a t i o n . This maximizes t h e value of PV f o r peaking power. The modular c a p a b i l i t y of PV al lows u t i l i t i e s t o i n s t a l l app ropr i a t e capac i ty levels i n needed l o c a t i o n s . Thir ty-nine u t i l i t i e s are t e s t i n g grid-connected PV systems i n t h e U. S . [ 31 . A number of experimental or demonstrat ion i n s t a l l a t i o n s a r e expected over t h e next f i v e years , adding 20 MW, al though t h e r e i s a l s o a proposal f o r a 100 MW f a c i l i t y [ 4 1 .

Over t h e longer term (2000 t o 2030), i f expected improvements i n e f f i c i e n c y and cos t m a t e r i a l i z e , PV may become competi t ive wi th f o s s i l f u e l p l a n t s . I f c o n s t r a i n t s on environmental emissions become more s t r i n g e n t , PV w i l l have an a d d i t i o n a l advantage.

A far- term p o t e n t i a l a p p l i c a t i o n of PV i s t h e production of hydrogen t o provide a carbon-free f u e l f o r hea t ing and motive power. Th i s has been explored and found c o s t e f f e c t i v e under severe carbon emission c o n s t r a i n t s i n Europe [ S I . I t is not cons idered f u r t h e r here .

ANALYSIS OF GREENHOUSE GAS MITIGATION WITH MARKAL-MACRO

Model

MARKAL-MACRO i s an integrated planning t o o l f o r energy-environment- economic systems a n a l y s i s [ 6 ] . I t i s being used by many coun t r i e s as a t o o l t o examine mi t iga t ion s t r a t e g i e s f o r greenhouse gas reduct ion [7 ,8 ,9 ,10] . It i s c u r r e n t l y being used by t h e U . S . Department of Energy a s t h e a n a l y t i c a l t o o l i n developing a l e a s t - c o s t energy s t r a t e g y f o r t h e United S t a t e s . As p a r t of t h i s app l i ca t ion , t h e technology d a t a i n t h e model was s u b s t a n t i a l l y updated and reviewed 1111 . The model provides an e x p l i c i t r e p r e s e n t a t i o n of t h e i n t e r a c t i o n s among t h e energy system, t h e economy, and t h e environment. I t al lows i n c l u s i o n of cons iderable t echno log ica l d e t a i l on energy technologies .

The model can choose among a w i d e range of mi t iga t ion op t ions . These inc lude reducing demands f o r energy services, i n v e s t i n g i n energy conservat ion measures, i n v e s t i n g i n h ighe r e f f i c i e n c y supply and end-use devices , switching from c o a l o r o i l t o n a t u r a l gas , switching from f o s s i l f u e l s t o renewable technologies . I n a d d i t i o n t o PV, renewable technologies included i n t h e model are wind, s o l a r thermal , biomass f u e l s , wave, and ocean thermal g rad ien t s . The model i s thus a b l e t o e v a l u a t e t h e p o t e n t i a l of PV i n a competi t ive environment . Charac ter iz ing PV

For t h i s ana lys i s , w e expanded t h e c h a r a c t e r i z a t i o n of PV i n t h e model based on da ta provided by NREL (Table 1) . This consisted of characterizing t h e c a p i t a l and opera t ing c o s t of PV by v in t age year . Between 1995 and 2030, Y

2

DISCLAIMER

Portions of this document may be illegible in electronic image products. Images are produced from the best available original document.

module e f f i c i e n c y was assumed t o i n c r e a s e from 7% t o 16% and system c o s t assumed t o decrease from $7,00O/kW t o $640/kW.

Scenarios

Four cases were developed f o r t h e a n a l y s i s . The Reference case i s a "business a s usual" s cena r io t h a t i nc ludes no c o n s t r a i n t on carbon emissions. Two a d d i t i o n a l cases based on t h i s s cena r io c o n s t r a i n carbon emissions. One (S tab le ) r e q u i r e s t h a t carbon emissions i n 2005 and t h e r e a f t e r b e no higher than 1990 levels. The o t h e r (PV acc. -20%) c o n s t r a i n s carbon emissions i n 2010 through 2030 t o be 20% less than i n 1990. Both t h e s e scena r ios i n c l u d e t h e NREL expec ta t ions , o f improvements i n PV. The f o u r t h case assumes a less o p t i m i s t i c view of PV technology i n t h e f u t u r e . This case was designed by delaying t h e in t roduc t ion of new v in t ages of PV technologies . It i s l a b e l e d a s "slow" i n t h e f igu res . For p r a c t i c a l purposes t h e "accelerated" and "slow" cases might be considered t o r e p r e s e n t "with" and "without" PV as a s i g n i f i c a n t opt ion. I n a l l b u t t h e Reference C a s e , a small c a p a c i t y of each PV technology v in t age w a s f o r c e d i n t o t h e s o l u t i o n by p u t t i n g a lower bound on i t s capaci ty . This r ep resen t s t h e e x i s t i n g n i che m a r k e t s .

Analysis Approach

The a n a l y s i s examines t h r e e s t a g e s of r e s u l t s : t h e s p e c i f i c r o l e of PV under t h e d i f f e r e n t carbon c o n s t r a i n t cases, t h e imp l i ca t ions of t h e a v a i l a b i l i t y of PV on t h e energy system as a whole, and t h e broader imp l i ca t ions on t h e economy. The obvious ques t ion is , does t h e model choose t o i n v e s t i n PV technologies beyond t h e lower bound? Even when it does not i n v e s t , information i s s t i l l gained i n t h e form of marginal c o s t s . These i n d i c a t e t h e r e l a t i v e impact t h a t an a d d i t i o n u n i t of PV would have on consumer u t i l i t y . By comparing cases, one can determine t h e d i f f e r e n c e i n t h e t o t a l cost of t h e energy system among cases? This gives the absolu te amount of money saved i n t h e energy s y s t e m . These a b s o l u t e amounts can be misleading unless d i f f e r e n c e s i n energy demand are a l s o considered. I f t h e m o d e l i s forced t o u s e more expensive technology (as i n t h e case where w e de l ay a v a i l a b i l i t y of more e f f i c i e n t PV), t h e c o s t of providing energy services increases and p r i c e e l a s t i c i t y leads t o a dec rease i n energy demand. This can r e s u l t i n lower t o t a l c o s t s even though t h e system i s more expensive p e r u n i t energy delivered. The nex t level of r e s u l t s i s t h e impact on g r o s s domestic product (GDP) and on t h e energy i n t e n s i t y of t h e economy (primary energy use p e r u n i t G D P ) .

RESULTS

Carbon Emissions

Figure 1 shows t h e p r o j e c t e d growth i n carbon emissions through 2030 without carbon c o n s t r a i n t s . It a l s o shows t h e emission l e v e l s a s s o c i a t e d with t h e s t a b i l i t y and 20% reduc t ion cases. Although t h e l a t t e r are a l s o outputs of t h e model, it has been c o n s t r a i n e d t o produce t h e s e r e s u l t s . The following r e s u l t s i n d i c a t e t h e changes i n t h e energy system and t h e r e s u l t i n g changes i n t h e c o s t of energy. - Photovol ta ics: Projected Investment and Marginal Costs

The model does not invest beyond t h e lower bound i n t h e pre-2010 PV vintages. The m o d e l invests i n a l l l a te r vintages i n t he CO2 cons t r a ined cases. With C02 c o n s t r a i n t s , PV begins t o compete a c t i v e l y . w i t h t r a d i t i o n a l electrical gene ra t ion technologies a f t e r 2010. The 2010 PV v in t age comes i n t o t h e s o l u t i o n e a r l i e r i n t h e 20% reduc t ion case than i n t h e s t a b i l i t y case, bu t l a t e r v in t ages come i n as soon as they are a v a i l a b l e i n a l l C02 cons t r a ined

3

cases. P r o j e c t e d t o t a l annual output of PV technologies i s shown i n Figure 2. Marginal c o s t s a r e given i n Table 2 . Negative marginal c o s t s indicate t h e added v a l u e necessa ry i n a niche market competing a g a i n s t t h e g r i d t h a t would be necessa ry t o make t h e technology economically competit ive. Given t h a t PV a l r e a d y has a foo tho ld i n t h e s e markets without t h e a id of C02 c o n s t r a i n t s , a c o s t p e n a l t y on t h e o rde r of $lOO/kW may be i n t e r p r e t e d as an i n c e n t i v e f o r g r e a t e r m a r k e t p e n e t r a t i o n . P o s i t i v e marginal c o s t s i n d i c a t e t h e i n c r e a s i n g va lue of t h e technology t o t h e system a s t h e technology becomes cheaper and t h e carbon emission c o n s t r a i n t more r e s t r i c t i n g a s energy demands cont inue t o increase over t i m e .

Impact on Energy Costs and Demand f o r Energy Services

There are two important measures of energy c o s t s i n t h e r e s u l t s . F i r s t i s t h e annua l i zed t o t a l c o s t o f t h e energy system. This i n c l u d e s energy r e source and f u e l c o s t s , investment i n supply- and demand-side technology, o p e r a t i n g and maintenance c o s t s and o the r c o s t s a s s o c i a t e d wi th t h e energy system. Second i s t h e marginal c o s t of supplying u s e f u l energy services. This varies among t h e energy service ca t egor i e s . As marginal c o s t s r ise , demands f o r energy services tend t o decrease. Figure 3 shows an example of t h e change i n t h e marginal c o s t of supplying energy services as carbon emission c o n s t r a i n t s a r e imposed. Figure 4 shows t h e o v e r a l l r e s u l t i n g effect on energy demand o f r i s i n g marginal c o s t s over t i m e and with i n c r e a s i n g l y s t r i n g e n t carbon emission c o n s t r a i n t s . Energy c o s t s p e r u n i t demand inc reased over t i m e and, i n general , were higher with more s t r i n g e n t carbon emission c o n s t r a i n t s (Figure 5 ) . This i s because long-term p r i c e e l a s t i c i t y d r i v e s down t h e demand. Equ i l ib ra t ion o f t h e economic sys tem l e d t o some of t h e r e q u i r e d r educ t ions i n carbon emissions being achieved by reducing demand r a t h e r t han investment i n high c o s t technology. Because of t h e reduced demand, less energy was produced and t h e t o t a l c o s t of t h e energy system decreased compared t o t h e r e fe rence case, a l though t h e marginal c o s t of meeting energy service demands w a s higher.

Comparison of t h e slow PV growth case with t h e more accelerated NREL e s t i m a t e s of improvements i n PV provides an i n d i c a t i o n of t h e r o l e of PV i n meeting carbon c o n s t r a i n t s . The slow PV case w a s $15 b i l l i o n (1.4%) lower i n energy c o s t s i n 2030 than t h e acce le ra t ed p r o j e c t i o n s , bu t marginal c o s t s t o supply energy services w e r e h igher and t o t a l demand f o r energy services was lower by 2.4%. The economic implicat ions of t h i s are discussed i n t h e next paragraph. A key i n d i c a t i o n of t h e r o l e of PV, however, i s t h a t t h e marginal c o s t of C02 r educ t ion dropped by about $40/ton of carbon i n 2030 as a direct r e s u l t of t h e a v a i l a b i l i t y of a s i g n i f i c a n t PV o p t i o n i n t h e accelerated PV technology case.

Impact on GDP

Energy i s a r equ i r ed element of production. The impact of decreased demand f o r energy services under carbon emission c o n s t r a i n t s i s r e f l e c t e d i n t h e economy by a reduct ion i n t h e growth r a t e of GDP (Figure 6 ) . GDP grows a t 1 .82%/year i n t h e r e fe rence case. This slows t o 1.77%/year i n t h e 20% C02 reduc t ion cases. This decreased growth r e s u l t s i n an est imated GDP i n 2030 t h a t i s about 2% lower than i n t h e reference case. The p r o j e c t e d GDP i n 2030 using t h e "acce le ra t ed" PV p r o j e c t i o n i s about $20 b i l l i o n p e r year (0 .2%) higher t h a n t h a t p r o j e c t e d with t h e "slow" PV growth assumption.

CONCLUSIONS

PV technology i s a l r eady competit ive f o r c e r t a i n niche markets. Fu r the r growth i n t h o s e markets i s expected a s wel l as expansion i n t o o t h e r niches such as peaking power. Decreasing c o s t p e n a l t i e s should provide g r e a t e r

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incentive for expansion of niche markets. This analysis indicated that, while PV was not projected to be competitive as a general source of electricity supply to the grid by 2030, it did become an attractive technology for this purpose after 2010 under carbon emission constraints, even if the carbon constraint was limited to stability of emissions at the 1990 level.

NOMENCLATURE

Carbon dioxide Gross Domestic Product

co2 GDP Mw Megawatt (one million watts) NREL , National Renewable Energy Laboratory PV Photovoltaics

ACKNOWLEDGMENTS

This work was supported by the Photovoltaics Division, Office of Energy Efficiency and Renewable Energy, U. S . Department of Energy. We acknowledge the contribution of Tom Bath, Walter Short, Jeff Williams, and Tom Ferguson of NREL in providing current projections of PV cost and efficiency and of discussion of existing and potential niche markets.

REFERENCES

1.

2.

3.

4 .

5.

6.

7.

8 .

9.

10.

11.

T. Ferguson, 1995. personal communication of data from NREL.

Energy Information Administration, 1995. Annual Energy Outlook 1995 with Projections to 2010, U. S. Energy Information Administration, Washington, D.C.

T. Ferguson, 1995 ob cit.

Energy Information Administration, ob sit.

T. Kram, 1993. National energy options for reducing C02 emissions, Vol. 1: the international connection, Netherlands Energy Research Foundation, Petten.

L. D. Hamilton, G. A. Goldstein, J. Lee, A. S. Manne, W. Marcuse, S. C. Morris, and C-0. Wene. 1992. MARKAL-MACRO: an overview (BNL 48377). Brookhaven National Laboratory, Upton, NY.

T. Kram, 1993 ob cit.

T. Kram (ed.). 1994. National energy options for reducing C02 emissions, Volume 2: country studies, Netherlands Energy Research Foundation, Petten.

M. N. Denisis, G.A. Goldstein, E.J. Linky, S.C. Morris, and K.J. Simeonova. 1995. Demand side management & green lights in Bulgaria. The Bulgaria Energy Forum, Varna, June 21-23.

M. Tichy, K. J. Simeonova, S. C. Morris, and G. A. Goldstein. 1995. Eastern Europe: a new frontier for MARKAL-MACRO, International Energy Workshop, Laxenburg, Austria, June 20-22.

A

S. C . Morris, J. Lee, and G. A. Goldstein. 1995 (forthcoming). U. S. MARKAL-MACRO Database Documentation. Brookhaven National Laboratory, Upton, NY.

5 Y

TABLES

Vintage 2000 2005 2010 2020 2030

TABLE 2. MARGINAL COST OF PV TECHNOLOGIES BY VINTAGE IN 20% COz REDUCTION SCENARIO (S/kW)

2000 2005 2010 2030 -523.

-100. +14. +35.

+73. +95.

DISCLAIMER

This report was prepared as an account of work sponsored by an agency of the United States Government. Neither the United States Government nor any agency thereof, nor any of the$ employees, makes any warranty, express or implied, or assumes any legal liability or responsl- bility for the accuracy, completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its use would not infringe privately owned rights. Refer- ence herein to any specific commercial product, procw, or serviw by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply its endorsement, recom- mendation, or favoring by the United States Government or any agency thereof. The views and opinions of authors expressed herein do not necessarily state or reflect those of the United States Government or any agency thereof.

21 88

1688 -

1888

U

U -4 L -tl 111 E

-- E

1668

1448

1228.

FIGURE 1:

FIGURES

C02 EMISISONS BY SCENARIO

I

I I I I t 1

2838 1888 4 2825 2815 2828 1996 1995 2888 2885 . 2818

YEARS

X PY slou -28% PY Reference PY acc. stable 4 PY acc. -28%

X

FIGURE 2. TOTAL PROJECTED OUTPUT O F PV TECXNOLOGIES

h rl \ t9

F I G U R E 3 . MARGINAL COSTS O? AN EXAMPLE ENERGY SERVICE DEMAND

38

24

18

12

6

8 1 I 1 1

281 8 2815 2828 2825 2838 1998 19% 2888 2885 . YEARS

x PY low - 28% C 6. Reference a S r A B S C o PV acc - 28% C

FIGURE 4 . TOTAL DEMAND FOR ENERGY SERVICES

ul -0 c ro E OJ n

n E 3

Ln

+

X

88888

72888

64888

5mee

48888

I

48888 ! 1 1 1

1998 19% zme 2885 281 8 2815. 2828 2825 2838 1 I 1 1

- YEARS

PV slow -28% A PY Reference a PY acc. stable 0 PY am. -28%

a

19.0

18.0

17.0

16.0

15.0

14.0

13.0

FIGURE 5. TOTAL ENERGY SYSTEM COST PER UNIT DEMAND

PV slow -20%

PV Reference

PV acc. Stable

PV acc. -20%

-------

-.--.--.--_.

12.0 .I

FIGUFE 6. IMPLICATIONS FOR GROSS DOMESTIC PRODUCT .

X

12

11

9

*

8

6

a 1

5 1 1 I I I 1 I

1998 1995 2888 2885 281 6 281s : 2828 zaz5 2838

YEARS

PY slow -Za% A PV Reference CI PV acc. stable 0 PY am. -28%

..

9