The technology choices utilities make today could cost them billions of dollars and be with them for at least 40 years—which is why power planners should hedge their bets and boost their investments in clean electricity, MIT Research Scientist Jennifer Morris argues in a post on Renewable Energy World.
“One of the biggest dilemmas that regulators and electricity industry planners face is predicting how strict future limits on greenhouse gas emissions will be,” Morris writes. “If the United States adopts a carbon tax 10 years from now, it could make power plants that burn fossil fuels less profitable, or even insolvent.” And the wrong choices will be costly for ratepayers—as South Carolina found out with the decision to abandon two nuclear plants late last month.
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“Looking forward, if utilities are reliant on coal plants instead of solar and wind, it will be much harder and more expensive for them to meet future emissions targets,” Morris warns. “They will pass the costs of complying with these targets on to customers in the form of higher electricity prices.”
After looking at utility investment strategies at a time of policy uncertainty, Morris and her colleagues recommended that “20 to 30% of new generation in the coming decade should be from non-carbon sources,” she writes. “For most U.S. electricity providers, this strategy would mean increasing their investments in non-carbon power sources, regardless of the current administration’s position on climate change.”
The MIT analysis started from the position that renewables are still more expensive than conventional fossil generation, after factoring in the cost of back-up generation and energy storage. Even so, after modelling and assessing the likelihood of a range of future emission limits, “our findings indicate that power companies should put a larger share of their money into non-carbon investments in the coming decade.”
The research team’s 20 to 30% threshold may not seem like much of an increase over the 19% investment share that non-carbon electricity sources commanded between 2005 and 2015, but “it requires a considerable increase in non-carbon investment dollars,” Morris states. “This is especially true since power companies will need to replace dozens of aging coal-fired power plants that are expected to be retired.”
But “society will bear greater costs if power companies under-invest in non-carbon technologies than if they over-invest,” she writes. “Sunshine and wind are free, so generators can produce electricity from these sources with low operating costs.” But “if the United States adopts strict emissions limits within a decade or two, they could prevent carbon-intensive generation built today from being used. Those plants would become ‘stranded assets’—investments that are obsolete far earlier than expected, and are a drain on the economy.”