teaching microeconomics of renewable energy isee conference reykjavík, iceland august 13, 2014...
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Teaching Microeconomics ofRenewable Energy
ISEE ConferenceReykjavík, IcelandAugust 13, 2014
David TimmonsUniversity of Massachusetts Boston
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kW = 9.8ηQH
Dam functions: 1. create head 2. store water (store energy)
Renewable Energy: Physical Basis
photo: Orkustofnun, Iceland National Energy Authority
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W = 0.5 ρAV3
Renewable Energy: Physical Basis
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Adapted from Murphy and Hall (2010)
Renewable Energy Cost Factors: Net Energy Ratios
Energy Source Net Energy
Ratio Reference Oil (global) 35 (Yandle, Bhattarai and Vijayaraghavan 2004) Natural gas 10 (Hall 2008) Coal 80 (Cleveland 2005) Shale oil 5 (Hall 2008) Nuclear 5-15 (Lenzen 2008; Murphy and Hall 2010) Hydropower >100 (Hall 2008) Wind 18 (Kubiszewski, Cleveland and Endres 2010) Photovoltaic cells 6.8 (Battisti and Corrado 2005) Biomass: ethanol (sugarcane) 0.8 – 10 (Hall, Cleveland and Kaufmann 1986),(Goldemberg 2007) Biomass: ethanol (corn-based) 0.8 – 1.6 (Farrell, Pelvin and Turner 2006) Biomass: biodiesel 1.3 (Hall, Cleveland and Kaufmann 1986) Biomass: farmed willow chips 55 (Keoleian and Volk 2005)
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Nominal Capacity
(MW)
Capital Cost
($/kW)
Assumed Capacity Factor
Capital $/Expected1
kW Natural gas: combined cycle 620 $917 90% $1,019 Coal: advanced pulverized fuel 650 $3,246 90% $3,607 Hydroelectric 500 $2,936 75% $3,915 Nuclear: dual unit 2,234 $5,530 90% $6,144 Wind: onshore 100 $2,213 25% $8,852 Biomass combined cycle 20 $8,180 90% $9,089 Wind: offshore 400 $6,230 35% $17,800 Solar: photovoltaic 150 $3,873 20% $19,365 Solar: thermal electric 100 $5,067 20% $25,335
1 For comparing sources with different capacity factors, we define $/expected kW as ($/kW)/(capacity factor), or the capital cost to produce the same amount of electricity as one kW of capacity running continuously.
Adapted from EIA (2013)
Renewable Energy Cost Factors: Capital Intensity
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Renewable Energy Cost Factors: Intermittency
pumped storage: Northfield, Massachusetts
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source: EIA (2014)
Renewable Energy Supply
source: Jacobson and Delucchi (2011)
tera
watt
s (T
W)
2012
$/k
Wh
2030 est. demand = 17 TW
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P
Q
MCH
A. Hydropower: low initial cost, but limited quantity
Microeconomic Concepts: marginal cost
Renewable Energy Supply
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P
Q
MCH P
Q
MCW
A. Hydropower: low initial cost, but limited quantity
B. Wind: higher cost, higher quantity
Microeconomic Concepts: marginal cost
Renewable Energy Supply
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P
Q
MCH P
Q
MCW P
QA. Hydropower: low initial cost, but limited quantity
B. Wind: higher cost, higher quantity
C. Solar PV: highest cost, unlimited quantity
Microeconomic Concepts: marginal cost supply elasticity
Renewable Energy Supply
MCPV
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P
Q
MCH P
Q
MCW P
Q
P
Q
MCagg
A. Hydropower: low initial cost, but limited quantity
B. Wind: higher cost, higher quantity
C. Solar PV: highest cost, unlimited quantity
D. Aggregaterenewable supply, and demand
MCPV
Microeconomic Concepts: marginal cost supply elasticity aggregate supply
Renewable Energy Supply
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P
Q
MCH P
Q
MCW P
Q
P
Q
D
MCagg
A. Hydropower: low initial cost, but limited quantity
B. Wind: higher cost, higher quantity
C. Solar PV: highest cost, unlimited quantity
D. Aggregaterenewable supply, and demand
Microeconomic Concepts: marginal cost supply elasticity aggregate supply market equilibrium
Renewable Energy Supply
MCPV
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P
Q
MCH P
Q
MCW P
Q
P
Q
D
MCagg
A. Hydropower: low initial cost, but limited quantity
B. Wind: higher cost, higher quantity
C. Solar PV: highest cost, unlimited quantity
D. Aggregaterenewable supply, and demand
Renewable Energy Supply
Microeconomic Concepts: marginal cost supply elasticity aggregate supply market equilibrium equimarginal principle
MCPV
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P
Q
MCH P
Q
MCW P
Q
P
Q
P
Q
MCC
D
MCagg
A. Hydropower: low initial cost, but limited quantity
B. Wind: higher cost, higher quantity
C. Solar PV: highest cost, unlimited quantity
E. Conservation:high quantity available at MC of solar PV
D. Aggregaterenewable supply, and demand
Renewable Energy Supply
Microeconomic Concepts: marginal cost supply elasticity aggregate supply market equilibrium equimarginal principle
MCPV
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CoalHydro Power Geothermal Peat
0
20
40
60
80
100
120
140
160
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990
PJ (petajoule)
1 petajoule = 1015 joule = 0,278
TWh
Source: Orkustofnun 2004
Geothermal Heating in Iceland
Oil
2000
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CoalHydro Power Geothermal Peat
0
20
40
60
80
100
120
140
160
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990
PJ (petajoule)
1 petajoule = 1015 joule = 0,278
TWh
Source: Orkustofnun 2004
Geothermal Heating in Iceland
0%
20%
40%
60%
80%
100%
1900 1920 1940 1960 1980 2000
Proportional contribution of sources
Oil
2000
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Geothermal Heating in Iceland
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Geothermal Heating in Iceland
Ísafjörður
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District Heat Energy Sources 2008
electricity, 86%
oil, 4%District Heating SystemÍsafjörður, IcelandPopulation: 2,600
Midtown District (Skutulsfjardareyri)
Southern District (Holtahverfi)
incinerator plant
incinerator, 10%
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P
MCrenewable1
Time
MCfossil
t1
Renewable Energy Transition Dynamics
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t2
Renewable Energy Transition Dynamics
P
Time
MCfossil
MCrenewable1
t1
MCrenewable2
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MCrenewable2
SMCfossil
t2
Renewable Energy Transition Dynamics
P
Time
MCfossil
t3