Energy Externalities: Approaches, Insights, Limitations and Security of Supply Issues

IP NEEDS – Supply Securitys

NEEDS FORUM 2, 5 - 6 July 2007, Krakow

Laboratory for Energy Systems Analysis

The Energy Departments

Energy Externalities:Energy Externalities:Approaches, Insights, Limitations and Security of Supply IssuesApproaches, Insights, Limitations and Security of Supply Issues

Stefan HirschbergStefan HirschbergPaul Scherrer InstitutPaul Scherrer Institut

NEEDS FORUM 2NEEDS FORUM 2

Energy Supply Security – Present and Future IssuesEnergy Supply Security – Present and Future Issues5 - 6 July 2007, Krakow, Poland5 - 6 July 2007, Krakow, Poland

IP NEEDS – Supply Security, 2NEEDS FORUM 2, 5 - 6 July 2007, Krakow

Laboratory for Energy Systems Analysis The Energy Departments

• Introduction

• Some recent results

• Coupling with LCA-inventories

• Some difficult issues and limitations

• Multi-criteria Decision Analysis (MCDA) and integration of security of supply aspects

• Security of supply and climate protections – synergies or conflict of objectives?

• Conclusions

Content



What are the components of security of supply?

• Availability of energetic and non-energetic resources(short-term and long-term)

• Risks caused by cost volatility

• Severe accidents and terrorist threat

• Overall stability and reliability of the supply system



Current Monetary Damages due to Air Pollution in China

0 50 100 150 200

Billion US $ PPP per Year

China

Power SectorChina

Shandong

Power SectorShandong Crops Morbidity Mortality

196

45

25

8

Source:Hirschberg et al., 2003



• Health impacts of emissions

• Global warming

• Impacts on crops and building materials

• (Impacts on biodiversity)

Focus of external costs assessment



Results for Electricity Systems in EU-15: Base Case

0

1

2

3

4

5

6

7

8

Ext

ern

al C

ost

s (E

uro

ce

nt / kW

h)

RestPower Plant

Coal Oil Gas Nuclear

Hyd

ro

Gas

Photovoltaic WindCogeneration(all.exergy)

Die

sel

RenewablesFossil

ExternE-Pol: Dones et al., 2004



External costs, new power plants, 2000 (air pollution)

NPP, Gen

II, C

H

NPP, Gen

II F

R

Hydro

: Run

-of-r

iver

Hydro

: res

ervo

ir

Hard

coal

SC, D

CC, Nat

. Gas

, bas

eload

, CH

CC, Nat

. Gas

, mid-

load,

CH

CC, Nat

. Gas

, bas

eload

, IT

CHP, Biog

as

CHP, Nat

ural

Gas

CHP, SNG

SOFC, Nat

ural

Gas

PV, c-S

i

PV, a-S

i

Wind

ons

hore

, CH

Wind

ons

hore

, D

Wind

offs

hore

, DK

Geoth

erm

al0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Tota

l ext

ern

al c

ost

s in

cl.

WT

P (

Rp

./kW

h)

Ionising RadiationSulfates, primaryNitrates, primaryNMVOC (via O3)FormaldehydeNickelLeadChromium-VICadmiumArsenicPM2.5-10PM2.5NOxSO2GHG (IPCC 100a)

Source: PSI/GaBE, to be published



External costs, 2030 (air pollution)

NPP, Gen

III,

CH

NPP, Gen

III F

R

Hydro

: Run

-of-r

iver

Hydro

: res

ervo

ir

Hard

coal

IGCC, D

CC, Nat

. Gas

, bas

eload

, CH

CC, Nat

. Gas

, mid-

load,

CH

CC, Nat

. Gas

, bas

eload

, IT

CHP, Biog

as

CHP, Nat

ural

Gas

CHP, SNG

SOFC, Nat

ural

Gas

PV, c-S

i

PV, a-S

i

Wind

ons

hore

, CH

Wind

ons

hore

, D

Wind

offs

hore

, DK

Geoth

erm

al0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

To

tal e

xte

rna

l co

sts

incl

. W

TP

[R

p.

20

00/k

Wh

]

Ionising RadiationSulfates, primaryNitrates, primaryNMVOC (via O3)FormaldehydeNickelLeadChromium-VICadmiumArsenicPM2.5-10PM2.5NOxSO2GHG (IPCC 100a)




7.7

18.4

10.7

6.5 5.8 6.1

3.3

15.2

10.3

7.7 6.9 6.45.4

4.3

14.5

0

5

10

15

20

25Global WarmingMortalityMorbidityCropsInternal Costs

Shan

dong

ave

rage

Wei

hai C

oal R

ef.

Hez

e C

oal R

ef.

Qin

gdao

Coa

l Ref

.

Qin

gdao

Dry

FG

D

Qin

gdao

Sea

Wat

er F

GD

Qin

gdao

Wet

FG

DN

ucle

ar A

LWR

Jina

n C

oal R

ef.

Jina

n N

ew C

oal,

low

S

Jina

n C

oal D

ry F

GD

Jina

n C

oal W

et F

GD

Jina

n C

oal A

FBC

Jina

n C

oal I

GC

CJi

nan

Gas

CC

US

Cen

ts p

er k

Wh

CETP: Internal and External Costs for Power Plant Options in Shandong Province

Source:Hirschberg et al., 2003



0

5

10

15

20

25

NPP, Gen

II

Steam

-PP, H

ard

Coal, D

CC, Nat

ural

gas

CHP, Nat

ural

gas

SOFC, Nat

ural

gas

CHP, Biog

as

CHP, CH 4

from

woo

d (S

NG)

Hydro

: Run

-of-r

iver

Hydro

: res

ervo

ir

Wind

ons

hore

, CH

Wind

ons

hore

, D

Wind

offs

hore

, DK

Photo

volta

ic

Geoth

erm

al

Rp

2000

/kW

h

177 78 External Internal

0

5

10

15

20

25

Rp

2000

/kW

h

39 External Internal

NPP, EPR 1

500

IGCC, H

ard

Coal, D

CC, Nat

ural

gas

CHP, Nat

ural

gas

SOFC, Nat

ural

gas

CHP, Biog

as

CHP, CH 4

from

woo

d (S

NG)

Hydro

: Run

-of-r

iver

Hydro

: res

ervo

ir

Wind

ons

hore

, CH

Wind

ons

hore

, D

Wind

offs

hore

, DK

Photo

volta

ic

Geoth

erm

al

Full Costs (internal + external), 2006 2030

Options for electricity supply in CH, 2006 & 2030

• Including external costs increases competitiveness of renewables

• Renewables till 2030 much cheaper than today

• Basis: Life Cycle + Impact Ass-essment of current & future systems

• Nuclear power as cheapest option: today & 2030

• Full costs as ONE aggregatedsustainability indicator

• CO2 dominates ext. costs of fossil systems: high uncertaintySource: PSI/GaBE, to be published

• Sustainability assessment ofa wide technology portfolio



Results: Environmental Indicators, 2000

0.0

0.2

0.4

0.6

0.8

1.0

NPP, Gen

II, C

H

NPP, Gen

II, F

R

Hydro

: res

ervo

ir

Hydro

: run

-of-r

iver

Hard

Coal, S

C, D

Natur

al Gas

, CC, b

aselo

ad, C

H

Natur

al Gas

, CC, m

idloa

d, C

H

Natur

al Gas

, CC, b

aselo

ad, I

T

CHP, biog

as

CHP, Nat

ural

Gas

CHP, SNG

SOFC, Nat

ural

Gas

PV, c-S

i

PV, a-S

i

Wind

, ons

hore

, CH

Wind

, ons

hore

, D

Wind

, offs

hore

, DK

Geoth

erm

al

Rel

ativ

e to

sp

ecif

ic M

axim

um

(=

100%

)

Fossil energy UraniumMetals GHG emissionsLand use EcotoxicityAcidification & Eutrophication Land contaminationNon radioactive waste Radioactive wasteSource: PSI/GaBE, to be published




0.0

0.2

0.4

0.6

0.8

1.0

NPP, Gen

II, C

H

NPP, Gen

II, F

R

Hydro

: res

ervo

ir

Hydro

: run

-of-r

iver

Hard

Coal, S

C, D

Natur

al Gas

, CC, b

aselo

ad, C

H

Natur

al Gas

, CC, m

idloa

d, C

H

Natur

al Gas

, CC, b

aselo

ad, I

T

CHP, biog

as

CHP, Nat

ural

Gas

CHP, SNG

SOFC, Nat

ural

Gas

PV, c-S

i

PV, a-S

i

Wind

, ons

hore

, CH

Wind

, ons

hore

, D

Wind

, offs

hore

, DK

Geoth

erm

al

Rel

ativ

e to

sp

ecif

ic M

axim

um

(=

100%

)

MetalsEcotoxicity

Non radioactive wasteSource: PSI/GaBE, to be published




0.0

0.2

0.4

0.6

0.8

1.0

NPP, Gen

II, C

H

NPP, Gen

II, F

R

Hydro

: res

ervo

ir

Hydro

: run

-of-r

iver

Hard

Coal, S

C, D

Natur

al Gas

, CC, b

aselo

ad, C

H

Natur

al Gas

, CC, m

idloa

d, C

H

Natur

al Gas

, CC, b

aselo

ad, I

T

CHP, biog

as

CHP, Nat

ural

Gas

CHP, SNG

SOFC, Nat

ural

Gas

PV, c-S

i

PV, a-S

i

Wind

, ons

hore

, CH

Wind

, ons

hore

, D

Wind

, offs

hore

, DK

Geoth

erm

al

Rel

ativ

e to

sp

ecif

ic M

axim

um

(=

100%

)

Uranium

Land contaminationRadioactive wasteSource: PSI/GaBE, to be published




0.0

0.2

0.4

0.6

0.8

1.0

NPP, Gen

II, C

H

NPP, Gen

II, F

R

Hydro

: res

ervo

ir

Hydro

: run

-of-r

iver

Hard

Coal, S

C, D

Natur

al Gas

, CC, b

aselo

ad, C

H

Natur

al Gas

, CC, m

idloa

d, C

H

Natur

al Gas

, CC, b

aselo

ad, I

T

CHP, biog

as

CHP, Nat

ural

Gas

CHP, SNG

SOFC, Nat

ural

Gas

PV, c-S

i

PV, a-S

i

Wind

, ons

hore

, CH

Wind

, ons

hore

, D

Wind

, offs

hore

, DK

Geoth

erm

al

Rel

ativ

e to

sp

ecif

ic M

axim

um

(=

100%

)

Land useAcidification & EutrophicationSource: PSI/GaBE, to be published




0.0

0.2

0.4

0.6

0.8

1.0

NPP, Gen

III,

CH

NPP, Gen

III,

FR

Hydro

: res

ervo

ir

Hydro

: run

-of-r

iver

Hard

Coal, I

GCC, D

Natur

al Gas

, CC, b

aselo

ad, C

H

Natur

al Gas

, CC, m

idloa

d, C

H

Natur

al Gas

, CC, b

aselo

ad, I

T

CHP, biog

as

CHP, Nat

ural

Gas

CHP, SNG

SOFC, Nat

ural

Gas

PV, c-S

i

PV, a-S

i

Wind

, ons

hore

, CH

Wind

, ons

hore

, D

Wind

, offs

hore

, DK

Geoth

erm

al

Rel

ativ

e to

sp

ecif

ic M

axim

um

(=

100%

)

Fossil energy UraniumMetals GHG emissionsLand use EcotoxicityAcidification & Eutrophication Land contaminationNon radioactive waste Radioactive waste




• Severe accidents, terrorism, risk aversion• Visual intrusion• Resource depletion• Nuclear proliferation• Security of supply

Serious attempts to estimate the corresponding costs lead to low estimates but this does nor resolve the controversy!

Examples of controversial/difficult to estimate external effects



Survey I: Result examples

Source: Faberi et al., to be published



Electricity: contribution to external costs by species

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Rad. Em.

NMVOC

Heavy Metals

PM2.5

NOx

SO2

GHG

ExternE-Pol: Dones et al., 2004



Variation in estimated costs of CO2 damages

-100

0

100

200

300

400

With 3%discounting and

regional values (Tol2006)

With 0%discounting andequitiy weighting

(Tol 2006)

Abatement costsEuropean Union(ExternE 2004)

Willingnes-to-PaySwiss Referenda

(Heck 2004)

Very low estimate(Downing et al.

2005)

Assumption BMUGermany (Krewitt

et al. 2006)

Very high estimate(Downing et al.

2005)

Based on impact assessment anddamage costs (ExternE/NEEDS)

Based onabatement costs

Based on referenda Range of uncertainty (uncertainties in climate change,impacts, extremes, valuation) (Downing et al. 2005)

Euro

20

00/

ton C

O2



Examples of Severe Accidents

Oilwell blowout

Coal mine highwall collapse

Gas pipeline explosion

Dam break (Teton, USA)



Frequency of accidents

• Fossil chains perform similar for OECD and non-OECD countries; exception is coal chain in China with clearly higher accident rates

• Hydro dam failures in non-OECD countries can result in thousends of fatalities; no such accident happened in OECD since 1963 (1963: Vaiont, Italy; 1917 fatalities)

• Additionally to immediate fatalities, also latent fatalities are important for nuclear power

Source: Burgherr & Hirschberg, 2004



Justified and Unjustified Stakeholder Criticisms of External Costs

• Monetization as such is not accepted by all.

• Alternative approaches to Willingness to Pay (WTP) are preferred.

• The way WTP estimates are generated is put in question. • The overall uncertainties are very large leading to non-robust rankings.

• The historical development of cost estimates is troublesome. • Some estimates of specific external costs have a weak basis; for some

potentially important externalities relevant cost estimates are not available.

• Social factors are scarcely represented.• It is impossible and/or meaningless to monetize some of the social factors.



Examples of difficult but potentially important social aspects:

• Social justice

• Risk aversion and perception

• Resilience of the energy system

• Conflict potential

Theoretically, any externality can be monetized, but in practice methodologies and valuation are often controversial.



Criteria related to security of supplyCRITERION INDICATOR Direction of

scaleUNIT

1 ENVIRONMENT1.1.1.1 Fossil primary energy Total consumption of fossil resources (LCIA) min MJ/kWh1.1.1.2 Other non-renewable energy Total consumption of uranium (LCIA) min MJ/kWh1.1.2 Mineral Resources (Ores) Weighted total consumption of metallic ores min kg(Sb-eq.)/kWh1.3.2.1 Release of hydrocarbons Large release of hydrocarbons (RA) min t/kWh1.3.2.2 Land contamination Catastrophic land contamination (RA) min km2/kWh2 ECONOMY2.2.2 Autonomy of electricity generation Medium to long term independence from foreign

imports, based on domestic energy storage and/or resources

max Ordinal

2.3.1.2 Impact of fuel price changes Sensitivity to fuel price changes min Factor3 SOCIAL ASPECTS3.1.1.1 Diversity of primary energy suppliers Market concentration in the supply of primary

sources of energymin Ordinal scale

3.2.1 Potential of Conflicts induced by Energy Systems.

Potential of energy system induced conflicts that may endanger the cohesion of societies

min Ordinal scale

3.3.2.1 Expected Health effects from accidentsExpected Mortality due to severe accidents (RA) min Fatalities/kWh3.3.2.2 Maximum consequences of accidents Maximum credible number of fatalities per

accidentmin Fatalities/accident

3.3.4.1 Potential of attack Potential for a successful attack (RA) min Ordinal scale3.3.4.2 Effect of a successful attack Likely potential effects of a successful attack (RA) min Expected number

of fatalities3.3.4.3 Proliferation Potential for misuse of technologies and

substances within the energy chainmin Ordinal scale

3.4.1.1 Equitable life conditions Share of the effective electricity costs in a social welfare receiver budget

min %



Sensitivity analysis of production costs for new NPP

Source: Prognos 2006

Cha

nge

in c

osts

Change in parameters

Sensitivity investment costs (Reference 3000 CHF/kWel)

Sensitivity amortization period (Reference 60 years)

Sensitivity interest rate (Reference 2.5%)

Sensitivity fuel costs (Reference 12 CHF/kWel)

Sensitivity full load hours (Reference 7600 h/a)

Sensitivity decommissioning costs (Reference 500 CHF/kWel)

Sensitivity backfitting costs (Reference 750 CHF/kWel)



Sensitivity analysis of production costs for CCGT


Cha

nge

in c

osts

Change in parameters

Sensitivity investment costs (Reference 600 CHF/kWel)

Sensitivity amortization period (Reference 30 years)

Sensitivity interest rate (Reference 2.5%)

Sensitivity fuel costs (Reference 35 CHF/MW input)

Sensitivity full load hours (Reference 6000 h/a)



Comparison production costs new NPP and CCGT


Capital costs Fuel costsOperating costs

CCGT 2035Prices trend

CCGT 2035Prices high

NPP 2035Prices trend and high



US President Gerald Ford in 1975:

• „We, the United States, are not blameless. Our growing dependence upon foreign resources has been adding to our vulnerability for years and years, and we did nothing to prepare ourselves for such an event as the embargo of 1973.“

• „Within the next 10 years my program envisions 200 major nuclear power plants, 250 major new coal mines, 150 major coal –fired power plants, 30 major new refineries, 20 major new synthetic fuel plants, the drilling of many thousands of new wells, the insulation of 18 million homes and the manufacturing and sale of millions of new automobiles, trucks and buses that use much less fuel.“



MCDA Demo



Conclusions: external costs

• Health effects due to air pollution and global warming impacts dominate current estimates of external costs.

• External environmental costs may be substantial but large variety between technologies and sites. Good technologies including advanced fossil have rather low pollution costs.

• Uncertainties are large but ranking of technologies is relatively robust. • External costs of nuclear and renewables are low; external costs of natural gas are

moderate; external costs of coal and oil are highest.• Social aspects of energy systems are represented to limited extent by current estimates of

external (and total) costs.• External costs are no panacea and have limitations. Serious attempts to estimate some of

the controversial costs usually lead to low estimates but this is not accepted by some stakeholder groups.

• Internalisation of external costs is economically and socially justified. It leads to more efficient overall economy.



• Security of supply is fundamental for a sustainable energy policy

• Needs to be pursued along with protection of health, environment and climate, resource saving and affordability

• In NEEDS a variety of indicators represents security of supply issues

• There are synergies but also some conflicts between security of supply and climate protection & other overriding sustainability policy goals.

• Trade-offs are inevitable and will be highlighted through MCDA implementation within NEEDS.

Conclusions: security of supply

Energy Externalities: Approaches, Insights, Limitations and Security of Supply Issues

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