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The Critical Path Energy System Decarbonization Stephen Stretton Research Associate, Cambridge Centre for Climate The Critical Path Energy System Decarbonization Stephen Stretton Research Associate, Cambridge Centre for Climate Change Mitigation Research (4 CMR) http: //www. 4 cmr. org Founder, Cambridge Zero Carbon Society http: //www. zerocarbonnow. org 2 nd June 2009

Contents Energy System Decarbonization • Why? • Terminology • Carbon • Rough Numbers for Contents Energy System Decarbonization • Why? • Terminology • Carbon • Rough Numbers for UK (Physics) • Land • Cost • Rough Numbers for UK (Economics) • The Critical Path 2

Why? 3 Why? 3

Why? Energy demand is rising rapidly Notes • All energy (not just electricity) is Why? Energy demand is rising rapidly Notes • All energy (not just electricity) is expressed in terms of Giga. Watts (GW)*. • 1 Gigawatt = 0. 75 Million Tonnes of Oil Equivalent per year = 8. 8 Terawatt-Hours per Year • 1 Gigawatt is the usual size of a nuclear power station or large coal power plant * In agreement with the recommendations from the Royal Commission for Environmental Pollution Sources: Reference Scenario, IEA (2004) World Energy Outlook; A 1 T Scenario IEA (2003) Energy to 2050

Why? 5 Why? 5

Carbon: Terminology Carbon Emissions Person Per Year (tonnes CO 2 eq) High Carbon ~10 Carbon: Terminology Carbon Emissions Person Per Year (tonnes CO 2 eq) High Carbon ~10 Lower Carbon 4 Low Carbon 2 Ultra-low Carbon 1 Zero Carbon 0 Negative Carbon <0 *Imports of embodied energy not included 6

Technology: Terminology Technology LCA g. CO 2 eq/kwh High Carbon Coal ~1000 Lower Carbon Technology: Terminology Technology LCA g. CO 2 eq/kwh High Carbon Coal ~1000 Lower Carbon Gas ~400 Low Carbon CCS ~150 Ultra-low Carbon Renewables & Nuclear? ~5 to ~50 Zero Carbon (Decarbonize Lifecycle Costs) ~0 Negative Carbon Reforestation Biomass with CCS Air capture <0 7

Carbon: All Electricity Technologies Source: Parliamentary Office of Science and Technology 8 Carbon: All Electricity Technologies Source: Parliamentary Office of Science and Technology 8

‘Low. Carbon’ Tech. CSD 9 ‘Low. Carbon’ Tech. CSD 9

Physics Rough Numbers Total Person Carbon Emissions 600 million t. CO 2/yr + Imports Physics Rough Numbers Total Person Carbon Emissions 600 million t. CO 2/yr + Imports 10 t. CO 2/yr Energy Consumption 300 GW 5 k. W Electricity Consumption ~45 GW 1 k. W 10

Land See www. withouthotair. com Energy Source Density MWavg/km 2 Biomass ~0. 5 Wind Land See www. withouthotair. com Energy Source Density MWavg/km 2 Biomass ~0. 5 Wind ~2 -3 CSP ~15 11

Do Everything… to Save the Planet! 12 Do Everything… to Save the Planet! 12

Construction Costs Not adjusted for load factor – Study Data (2000 -6) 13 Construction Costs Not adjusted for load factor – Study Data (2000 -6) 13

Unit Cost 14 Unit Cost 14

Unit Costs p per k. Wh 15 Unit Costs p per k. Wh 15

Economics Numbers Total Person GDP £ 1. 2 trillion/yr £ 20, 000/yr Public Spending Economics Numbers Total Person GDP £ 1. 2 trillion/yr £ 20, 000/yr Public Spending £ 500 billion/yr £ 8, 000/yr Market Value of Houses etc £ 7 trillion £ 100, 000 National Debt £ 700 billion £ 12, 000 Other Liabilities Old nukes / PFI / Pensions / Banks ~£ 500 billion? £ 70 bn / £ 100 bn / £ 200 bn / £ 150 bn £ 9, 000 16

Fiscal Reform 1. Tax ‘bads’ 2. Remove tax on ‘goods’ 3. Tax ‘rent’ • Fiscal Reform 1. Tax ‘bads’ 2. Remove tax on ‘goods’ 3. Tax ‘rent’ • • Fossil fuels are both a ‘bad’ and a ‘rent’ So “change VAT to CAT” 17

Investment Cost & Tax Revenue • • UK needs 300 GW to sustain current Investment Cost & Tax Revenue • • UK needs 300 GW to sustain current energy use. 1 GW costs ~£ 2 bn. £ 600 bn cost = 50% of one year’s GDP • £ 100/t. CO 2 (10 p/kg. CO 2) would – UK energy spend ~£ 100 bn on energy each year – Cost of Trident £ 40 bn total – Add £ 50 to a barrel of oil – 4 p/k. Wh on gas – 10 p/k. Wh on coal – 23 p/litre on petrol – Raise £ 60 bn/yr initially – £ 1000 citizens income or replace VAT 18

Discussion Points • • How do we scale up renewable R&D by a large Discussion Points • • How do we scale up renewable R&D by a large factor & coordinate internationally? How fast can we build a super-grid with CSP? Does doing one technology prevent us from doing another? Are possible supply chain shortages ‘across’ technologies or ‘within’ technologies If the cost of high and low carbon are the same, is there any financial limit on what we can do? Does tackling climate change then cost anything at all? If new technology costs more, is there a limited ‘pot’ of subsidy to be allocated to most promising technology? Can ‘inflexible’ technologies promote a path to electric-car charging, leading to further intermittent renewable power being easily integrated? Market Incentives (19 th Century Railways) or State Intervention (20 th Century Wars) or Both? 19

Conclusions: The Critical Path 1. Public Understanding and Proposed Policy 2. Skills and Capacity Conclusions: The Critical Path 1. Public Understanding and Proposed Policy 2. Skills and Capacity Building 3. Govt Guarantee Carbon & Electricity Prices 4. Secure Finance e. g. with ‘Climate Bonds’ 5. Start Energy Efficiency Rollout 6. Build Energy Infrastructure 7. Fiscal Reform: ‘VAT to CAT’ 8. Strategy transfer around the world 9. Switch Transportation 10. Complete Decarbonization of Britain and other countries 11. Reforest the world 12. Permanently avoid fossil fuel extraction 20

Thanks for your attention! Contact me: Stephen Stretton sjs 53@cam. ac. uk Links: http: Thanks for your attention! Contact me: Stephen Stretton sjs [email protected] ac. uk Links: http: //www. 4 cmr. org http: //www. withouthotair. com http: //www. zerocarbonnow. org 21

Resources • Renewables: not finite, but diffuse • Gas & Easy Oil: running out Resources • Renewables: not finite, but diffuse • Gas & Easy Oil: running out • Coal: plenty to hang ourselves • Uranium: – ~25 000 GWyr known (500 GW x 50 yrs) – ~75 000 GWyr estimated (1500 GW x 50 yrs) • Multiplication Factors – Price-driven discoveries? – Thorium (x 2) – Seawater Uranium (x 50) – Depleted Uranium (x 40) Proliferation Risk? • E. g. Fast Breeder 22

Carbonomics meets Freakonomics… Total Person Carbon Emissions 600 million t. CO 2/yr + Imports Carbonomics meets Freakonomics… Total Person Carbon Emissions 600 million t. CO 2/yr + Imports 10 t. CO 2/yr Energy Consumption 300 GW 5 k. W Electricity Consumption ~50 GW 1 k. W Land Area ? ? GDP £ 1. 2 trillion/yr £ 20, 000/yr Public Spending £ 500 billion/yr Market Value of Houses etc £ 7 trillion £ 100, 000 National Debt £ 700 billion £ 12, 000 Other Liabilities Old nukes / PFI / Pensions / Banks ~£ 500 billion? £ 70 bn / £ 100 bn / £ 200 bn / £ 150 bn £ 9, 000 23

Electricity Generation Policy Additional Slides Electricity Generation Policy Additional Slides

Contents • Introduction & Recap • Low-Emissions Electricity Sources • Heating, Transportation and Industry Contents • Introduction & Recap • Low-Emissions Electricity Sources • Heating, Transportation and Industry • Economics of Energy • Solutions: World / UK • References

Introduction: Climate Change & Energy • Gases such as Carbon Dioxide (CO 2) and Introduction: Climate Change & Energy • Gases such as Carbon Dioxide (CO 2) and Methane absorb re-radiated heat in the ‘Greenhouse Effect’. • The combustion of fossil fuels such as coal, oil and natural gas, releases CO 2 into the atmosphere, increasing this effect. Sources: CO 2 graph shows trend shown without seasonal fluctuation. Data from Mauna Loa Observatory, Hawaii; Cover Photo © Nasa; Temperature graph from http: //www. globalwarmingart. com/ 26

Effects of Climate Change (1) (Present Day) – Some effects already seen Oceans damaged Effects of Climate Change (1) (Present Day) – Some effects already seen Oceans damaged Greenland ice melts (raising sea levels eventually by 7 m) Increases in extreme Amazon rainforest collapses, releasing weather (e. g. CO 2 Agricultural yields fall hurricanes) CO 2 released Tropical diseases spread from Methane World ecosystems cannot adapt forests and released Soils from peat Hundreds of millions at risk from Global heat bogs & hunger & drought circulation oceans? system Desertification of large parts of Earth’s surface collapses? Positive Feedback: Warming causes further release of greenhouse gases Source: Adapted from Warren, R (2006)

Effects of Climate Change (2) • Wholesale desertification of Earth possible within 100 years. Effects of Climate Change (2) • Wholesale desertification of Earth possible within 100 years. • Large population centres (China and India) at risk Source: Lovelock, J (2006)

Should We be worried? • • GW is major threat. Rational ranking of risks: Should We be worried? • • GW is major threat. Rational ranking of risks: GW ranks above nuclear power risks. Still uncertainty over final emissions, final warmth, final outcomes ‘Russian roulette with our children? ’ Collective action problem Mancur Olson (1982): “. . . If we finally get the information that the ecosystem can’t take any more, then it is important that we have the open-mindedness needed to change our views and policies the moment decisive information arrives. Those who shout wolf too often, and those who are sure there are no wolves around, could be our undoing” (Olson, M. Environmental Indivisibilities and Information Costs: Fanaticism, Agnosticism and Intellectual Progress The American Economic Review Vol 72, No 2. Papers and Proceedings of the Ninety Fourth Annual Meeting of the American Economuc Association (May 1982) 262 -266) 29

The Sovereignty of Nation-State • A Basic precept of Domestic politics and International Affairs The Sovereignty of Nation-State • A Basic precept of Domestic politics and International Affairs Consequences: • Nation States can impose taxes & laws, democratically agreed • Nation states act ‘selfishly’ in international arena • No strong Global institutions 30

“The Tragedy of the Commons” • • Each country acts in its own self “The Tragedy of the Commons” • • Each country acts in its own self interest. No-one takes responsibility for the common good. • • VERY TRAGIC Policies to convert away from fossil fuels may cost nothing or a negative amount on a global scale However, there are solutions that are attractive on a national scale. • 31

Welfare Economics Perspective • • Have a Environmental Externality Need a Binding International Agreement Welfare Economics Perspective • • Have a Environmental Externality Need a Binding International Agreement so that private costs = social costs e. g. : – – Global Carbon Tax or Global Emissions Trading BUT • No global government – no taxation • International agreement difficult • Agreements are in any case not enough • Incentives for countries to defect 32

A Simple Management Perspective • • Have a Problem Need to find Solution Keep A Simple Management Perspective • • Have a Problem Need to find Solution Keep it simple! Importance of leadership. 33

“Business as usual” would lead to disaster within a few decades (2100 CO 2 “Business as usual” would lead to disaster within a few decades (2100 CO 2 concentration 920 ppm) Dangerous Threshold Passed (550 ppm) (CO 2 Now: 380 ppm) • Model committed temperature (the temperature rise expected as a result of emissions up to that point). • Note that temperature rises do not include the effect of other greenhouse gases such as methane. • For spreadsheet model and discussion of assumptions see website: www. zerocarbon 2030. org. Sources: Sceffer, M et Al. (2006), Defra (2006).

Conversion to a zero carbon economy + less total energy used… Danger Avoided! (Stabilisation Conversion to a zero carbon economy + less total energy used… Danger Avoided! (Stabilisation @ 400 ppm) Source: IEA (2003) Sustainable Development (SD) scenario with additional reductions.

A Zero Carbon Plan Saving Planet Earth: What will it take? • Immediate Reductions A Zero Carbon Plan Saving Planet Earth: What will it take? • Immediate Reductions in Energy Consumption • Large Increase in Sustainable Energy Supply • Eventual conversion of economy to use low emissions electricity or hydrogen A 90% Reduction in CO 2 emissions by 2030 36

World Energy Consumption by Major Sectors (excludes biomass) Coal Gas Hydro Nuclea r Oil World Energy Consumption by Major Sectors (excludes biomass) Coal Gas Hydro Nuclea r Oil 37

Electricity is the Solution Energy Source Main Energy Vector • Biomass/Energy crops Liquid Fuels Electricity is the Solution Energy Source Main Energy Vector • Biomass/Energy crops Liquid Fuels • Biomass/Energy Crops (with sequestration) • Fossil fuels with CO 2 Sequestration • Nuclear • Renewables Wind ●Solar ●Hydro ●Tidal ●Wave ●Waste ● Electricity

All Energy By Sector 39 All Energy By Sector 39

Electricity Only 40 Electricity Only 40

Source: POST note 41 Source: POST note 41

Source: POST note 42 Source: POST note 42

Fossil Fuels - Use less! Gas • • Imported CO 2 emissions Oil • Fossil Fuels - Use less! Gas • • Imported CO 2 emissions Oil • • Imported Required for sectors which cannot be converted to electricity (Aviation, Heavy Road Freight, parts of Industry) Coal • • High availability But high emissions of CO 2 sequestration with gas or coal? • Reduce CO 2 emissions by 80%-90%? • Gas (or Coal-gas) turbines for load following • Cost higher than burning fossil fuels directly Need a Large Scale Alternative to Fossil Fuels

CO 2 Sequestration (With a Carbon Tax) • Fossil fuels burnt and CO 2 CO 2 Sequestration (With a Carbon Tax) • Fossil fuels burnt and CO 2 then buried in underground rock formation. • Potential solution for areas with large amounts of oil & natural gas (Middle East; North Sea? ). • It requires extra energy to compress CO 2. • Does not eliminate emissions (~10% escape? ). • Overall, perhaps an ~85% reduction in CO 2 compared to natural gas. Sequestration is always more expensive than directly burning fossil fuels: However, capital requirements are less than other options Image: CO 2 Sequestration From Wikimedia Commons

Renewables ~ about 11% of total UK energy demand? Energy Source Max Capacity (GW)* Renewables ~ about 11% of total UK energy demand? Energy Source Max Capacity (GW)* Hydro 0. 6 Waste (Residues; Municipal; Landfill gas) 3. 8 Wind (Onshore) 6. 5 Wind (Offshore)*** 11. 4 Solar (Photovoltaic Cells) 0. 1 Tidal 0. 2 Wave 3. 8 Total UK Renewable Capacity** 26. 5 UK Final Energy Demand 230 Maximum Renewable Contribution 11% *Interdepartmental Analysts Group estimation of maximum capacity available at less than 7 p/k. Wh (current price 2 -3 p/k. Wh). Apart from hydro figures from RCEP study (all large opportunities already used; small scale hydro adds <0. 1 GW). **Energy Crops Excluded for Environmental Reasons (Land Area, Indirect emissions). ***Offshore wind included but note that large rotating objects interfere with UK coastal radar.

Nuclear? Modern Nuclear Reactors (e. g. Westinghouse AP 1000 European PWR, Canadian ACR) • Nuclear? Modern Nuclear Reactors (e. g. Westinghouse AP 1000 European PWR, Canadian ACR) • Construction time? 5 -7 years • Compact • Constructors take price risk? • Inexpensive decommissioning? • Reduced fuel consumption? • Much less waste? • Price competitive with gas • Little capacity constraint • Cheap, modular, mass produced reactors for UK, China and US? Image: AP 1000 © Westinghouse 2005

Problem: Electricity is not always suitable for transport, heating & industry Energy Source • Problem: Electricity is not always suitable for transport, heating & industry Energy Source • Energy Crops (0%) • Renewables (12%) • Fossil fuels with CO 2 Sequestration • Nuclear Can Only Generate Electricity What about transport, heating and industry?

Heating, Transport and Industry Domestic heating (currently mostly gas) Transport (currently oil) Industry (coal, Heating, Transport and Industry Domestic heating (currently mostly gas) Transport (currently oil) Industry (coal, oil & gas) How do we convert to low emissions electricity?

Converting Domestic Heating Heat pumps • Move heat from a low temperature heat source Converting Domestic Heating Heat pumps • Move heat from a low temperature heat source (such as the ground outside) and transfer it to a high temperature heat sink. • Powered by electricity (from nuclear or renewables). • Uses up to 80% less energy. • Using pump to heat a domestic water tank can smooth demand & store energy. A heat pump uses electricity to move heat from outside to inside a home. It works on the same principle as a refrigerator reversed. Heat pumps use 50 -80% less energy than gas boilers. Heat pumps can be installed in both new and existing houses Image: Heat Pump theory From Wikimedia

Converting Domestic Heating (2) The Zero-Emissions House Ground source heat pumps + Better house Converting Domestic Heating (2) The Zero-Emissions House Ground source heat pumps + Better house insulation + Underground air circulation + In/Out heat exchanger = 90% reduction in energy consumption Combining a heat pump with a well -insulated hot water tank allows energy to be consumed overnight when prices are low. If we use non-emitting electricity (e. g. nuclear or microgeneration), CO 2 emissions from domestic heating could be reduced by 99%. Building regulations must ensure that all new houses have low emissions.

Converting Transport: Short distance Electric Cars • Technologies developing quickly, following success of Toyota Converting Transport: Short distance Electric Cars • Technologies developing quickly, following success of Toyota Prius • Full conversion possible by 2030 Reductions in car use • Charge for road congestion • Health benefits of walking and cycling, especially for children • Better urban planning & public transport Electric cars store energy in batteries when recharged overnight (when electricity prices are low). Hydrogen fuel cell technology developing and may be in use by 2030. Hydrogen can be produced using nextgeneration nuclear power stations. Image: Toyota Prius From Wikimedia Commons

Converting Transport: Long Distance Rail • Improve network • Build new freight lines • Converting Transport: Long Distance Rail • Improve network • Build new freight lines • Upgrade urban transit systems (Crossrail) • Reduce ticket prices Aviation • Tax aviation more heavily (noise, CO 2, congestion) • Ban night flights Travelling by rail uses much less energy than travelling by car or by plane. Image: Eurostar

Converting Industry • Imposing a carbon tax without a low-emissions alternative would encourage industry Converting Industry • Imposing a carbon tax without a low-emissions alternative would encourage industry to leave. • Industry requires a secure, reliable and cheap alternative energy source. • Nuclear electricity is low cost (especially at night) and provides a secure and independent source of energy. • Some (heavy) industry cannot be converted. • There is currently no other solution than nuclear energy.

CO 2 Reduction Target • • UK Target: CO 2 emissions 80% reduction on CO 2 Reduction Target • • UK Target: CO 2 emissions 80% reduction on 1990 levels by 2050 Sweden recently adopted same target Significant progress (30% reduction) by 2030 Aim is that such cuts, if adopted worldwide, would avoid ‘Dangerous’ Climate Change More recent evidence suggests even deeper cuts may be required Some countries may not cooperate, so perhaps UK cuts need to be even deeper to compensate/lead? Is a near-zero carbon economy economically feasible? 54

Security of Supply • • North Sea oil and gas are running down. Natural Security of Supply • • North Sea oil and gas are running down. Natural Gas provides a large and increasing proportion of our supplies Britain now net importer of gas Possible Fuels: – – Natural Gas from Algeria, Russia. . . Oil from Middle East… Coal: reserves are local (but most mines have closed; environmentally very damaging). Uranium from Australia and Canada. 55

Where is the Oil? 56 Where is the Oil? 56

Energy Security Source: IEA (2005) 57 Energy Security Source: IEA (2005) 57

Economic Efficiency A solution that maintains material prosperity: a) People wish to maintain a Economic Efficiency A solution that maintains material prosperity: a) People wish to maintain a comfortable standard of living b) British policy will be more influential if we are seen to be prosperous c) Balance of payments d) Sustainability and demographic transition requires ‘genuine saving’ (capital investment). 58

Risk(1) YOLL = Years of Lost Life Expectancy Total Global Energy Consumption ~100 000 Risk(1) YOLL = Years of Lost Life Expectancy Total Global Energy Consumption ~100 000 Twh globally/year – Nuclear 2500 Twh globally/year 59

Risk (2) 60 Risk (2) 60

Nuclear Proliferation? Have Existing Nuclear Industry 61 Nuclear Proliferation? Have Existing Nuclear Industry 61

Major polluters already have a nuclear industry 62 Major polluters already have a nuclear industry 62

The French Experience • Major building program 1970 s – 1990 s. • Now The French Experience • Major building program 1970 s – 1990 s. • Now 80% of electricity is generated by nuclear. • Realised economies of scale by using one design. • Often with duplicate units on same site. • France now has the lowest electricity prices in Europe. • Electricity is a major export good.

What makes a difference? 64 What makes a difference? 64

Nuclear: What are the Constraints? (1) Uranium Reserves? • Concentrated in stable countries such Nuclear: What are the Constraints? (1) Uranium Reserves? • Concentrated in stable countries such as Australia and Canada. • Sufficient for a large expansion in the nuclear industry. • Fuel costs are only a small part of cost of nuclear – rises in Uranium price will lead to more reserves becoming economic. • Fast breeder reactors or Thorium can take over if Uranium becomes scarce. • New technologies (chemical nets) are being developed for efficiently extracting nuclear from seawater with low energy expenditure: Uranium in sea water is replenished constantly, so it is practically unlimited. • UK has large existing supplies of Plutonium (100 tonnes: 2/3 of global civil separated uranium) which can be burnt in ‘Mox’ fuel. • Globally, decommissioned nuclear weapons are also a potential source of fuel.

Nuclear: What are the Constraints? (2) Available Sites • Some nuclear reactors (first few) Nuclear: What are the Constraints? (2) Available Sites • Some nuclear reactors (first few) can be based at existing sites. • New reactors much more compact: more than one reactor can be built in each place. • For a 100 GW expansion, perhaps 50 new sites (not threatened by flooding or coastal erosion) should be found across Britain. Need public information campaign about new reactors. • Public acceptability of nuclear will increase if it is seen as a solution to the problem of climate change. Skills • Main constraint for the UK. • We need a massive program to train of the order of 100, 000 new nuclear engineers over the next few years. • Better science/maths at school (teacher pay? ). • Sponsorship programs for young engineers.

Nuclear Costs and Risks • • • 100 GW of new nuclear capacity in Nuclear Costs and Risks • • • 100 GW of new nuclear capacity in UK Cost: £ 20 bn pa over 10 years Approximate Cost ~ £ 2 bn per GW. Could be built in private sector (or partnership of public and private) Government must reduce financial risk for private investors: – – – – Some government help with initial planning and regulatory issues. Need to ensure standard designs (EPR, AP 1000, ACR) to achieve global economies of scale. Guaranteed minimum prices. ‘Non-carbon’ obligation? Strong statement of intent. Some direct public investment? Electricity market design to encourage private investors in nuclear. Price guarantees can massively reduce financing cost but need not put the government at financial risk (since government has control over carbon taxes). 67

Benefits of this Plan a) b) c) d) e) f) g) Britain would have Benefits of this Plan a) b) c) d) e) f) g) Britain would have sufficient, secure, low emissions, lowcost energy for 50 years. Strategic independence. Massive reduction in CO 2 emissions. If internationally standard designs were used, there would be beneficial effect on economics of nuclear power worldwide: a) b) Reduced uncertainty for investors: Learning by doing and economies of scale. British industry would have a low cost low carbon energy source. Governments could put up taxes on carbon without industry moving abroad. Britain would give a moral example on CO 2 emissions to the rest of Europe and world. Market Design innovations would aid US policy makers

Summary • To prevent ‘dangerous’ climate change we need to act rapidly. • We Summary • To prevent ‘dangerous’ climate change we need to act rapidly. • We must invest in all low-emissions technologies. • Nuclear can generate a large part of our total energy (not just the part that is currently electricity). • If UK built 100 or so low-cost mass-produced passively safe modular nuclear reactors, the world would have a safe, clean unlimited supply of power that would be cheaper than all fossil fuels. • Cars and domestic heating can be converted to run off electricity. More freight can be transported by rail. • Cuts in consumption (e. g. aviation, long distance car use) are also necessary.

Economic Policy • • Shift entirely from Taxing Jobs and Investment to Carbon Tax Economic Policy • • Shift entirely from Taxing Jobs and Investment to Carbon Tax (see Stern report; Adrian Wrigley’s presentation on Wiki) Specific Electricity Price Guarantees in the Power Sector 70

Existing Economic Instruments • • • Climate Change Levy: A tax on industrial users Existing Economic Instruments • • • Climate Change Levy: A tax on industrial users of energy. Levied in terms of energy content not carbon content. Renewables Obligation: substantial incentive for renewable forms of energy EU Emissions Trading Scheme: ‘cap and trade scheme’ 71

What is the Renewables Obligation? • • The Renewables Obligation requires licensed electricity suppliers What is the Renewables Obligation? • • The Renewables Obligation requires licensed electricity suppliers to source a specific and annually increasing percentage of the electricity they supply from renewable sources. The current target is 6. 7% for 2006/07 rising to 15. 4% by 2015/16. It is expected that the Obligation, together with exemption from the Climate Change Levy for electricity from renewables, will provide support to industry of up to £ 1 billion per year by 2010. At the end of 2005, generation from renewable sources eligible under the Obligation stood at 4%. 72

What is the Climate Change Levy? • Commodity Climate change levy (CCL) is a What is the Climate Change Levy? • Commodity Climate change levy (CCL) is a tax on electricity, gas, coal and liquefied petroleum gas (LPG) used for energy, and is levied on the non-domestic sector. The levy is intended to encourage business to use energy more efficiently and is designed to help the UK meet its targets for cutting greenhouse gas emissions – in particular, to reduce carbon emissions. More broadly, improving energy efficiency also helps businesses to reduce their energy costs and makes them less vulnerable to energy market volatility. Legal Rate Pence/k. Wh Electricity 0. 43 p/k. Wh 0. 43 Natural Gas 0. 15 p/k. Wh 0. 15 LPG 0. 96 p/kg 0. 07 Coal 1. 17 p/kg 0. 15 Charged on all electricity (including nuclear) 73

Cost of Fossil Fuels Rising Cost of Fuel Oil Gas Coal (100 years) (200 Cost of Fossil Fuels Rising Cost of Fuel Oil Gas Coal (100 years) (200 years) Amount Extracted 74

Other Fuels? Cost of Fuel Uranium Solar Amount Extracted 75 Other Fuels? Cost of Fuel Uranium Solar Amount Extracted 75

Diminishing Returns Energy Efficiency: easy to make small changes: hard to make large improvements Diminishing Returns Energy Efficiency: easy to make small changes: hard to make large improvements Technology: greater investment, the lower the price: ‘learning by doing’ 76

“Learning by Doing” 77 “Learning by Doing” 77

Energy Supply in USA 78 Energy Supply in USA 78

Carbon Tax Effects of Different Rates 79 Carbon Tax Effects of Different Rates 79

Cost of Generating Electricity 80 Cost of Generating Electricity 80

Cost with and without Carbon tax 81 Cost with and without Carbon tax 81

Cost Breakdown Gas (CCGT) Coal (IGCC) Wind (offshore) Nuclear Fission 82 Cost Breakdown Gas (CCGT) Coal (IGCC) Wind (offshore) Nuclear Fission 82

Cost: Assumptions 83 Cost: Assumptions 83

84 84

Note the methodology used for standby generation in this study has been disputed, but Note the methodology used for standby generation in this study has been disputed, but that wind has systematic impacts on the electricity grid (associated with intemittency) with an associated cost. 85

Current 2020 CO 2 target implies electricity decarbonisation by 2020 Source: John Bower, Oxford Current 2020 CO 2 target implies electricity decarbonisation by 2020 Source: John Bower, Oxford Institute for Energy Studies (OEIS) 86

Why is there under-investment in electricity generation capacity? • • • Too much financial Why is there under-investment in electricity generation capacity? • • • Too much financial risk. Uncertainty over: Future price of Carbon Future electricity prices Future fuel prices 87

Volatile Energy Prices (Gas, Oil and Electricity) 88 Volatile Energy Prices (Gas, Oil and Electricity) 88

A Solution for the World? Source: IEA (2005) 89 A Solution for the World? Source: IEA (2005) 89

A solution for the UK? Energy Emissions Intensity* Total Emissions (GW) (t C/ GW) A solution for the UK? Energy Emissions Intensity* Total Emissions (GW) (t C/ GW) (Mt CO 2 / year) 2005 230 162 2030: Reductions in Use 70 Nuclear** 100 0. 04 3. 85 Renewables*** 25 0. 04 0. 99 Coal-Gas with (partial) Sequestration# 20 0. 13 2. 63 Oil ## 15 0. 55 8. 21 Total 160 0. 26 15. 7 Reduction in CO 2 Emissions: 90% *Emissions intensities include whole lifecycle (so emissions in construction are allocated across lifetime of reactor. **Does not include excess heat used in industry and homes or desalination **Also excludes any contribution from next-generation nuclear plants (hydrogen production? ) *** Entire capacity used, except energy crops (excluded for environmental reasons: land area/indirect emissions) ***Renewables (mostly wind) assumed to have approximately same emissions intensity as Nuclear. # Using gas turbines with CO 2 Sequestration (85% reduction in CO 2 eliminated relative to gas alone). ## For Aviation, Heavy Industry, Road Freight etc Also includes other unavoidable CO 2 emissions

Now Zero Carbon 2030 Trains Electric Cars Heat Pumps Total energy = ‘Final Energy’ Now Zero Carbon 2030 Trains Electric Cars Heat Pumps Total energy = ‘Final Energy’ net of refinery and generation losses 2030: Total energy does not include other uses for nuclear heat.

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