This article never even mentions the real problem, which is doing good risk assessment. Suppose I'm a bank, and you come to me and ask for $3 billion to build a solar farm. If you work very hard for the next five years, you might (might) turn that $3 billion into, say, $6 billion. Or you could just grab the $3 billion and run, and have more money than you could ever spend anyway. The second option is so attractive that I know lots of people might take it. I could sue to get it back, but that's years of expensive hassle, and a lot of it will probably be gone by then anyway. So I don't make the loan, unless you're an enormous corporation like GE that can put up collateral, and has enough to lose that grabbing and running isn't worth it.
Policy is the issue, not risk assessment. I'm not dismissing the need for "good" risk assessment, but that should be a part of any investment analysis. A given.
What's interesting is the objective view that this is something we need to do, as stewards of the environment, as countries, as a civilization, while acknowledging it will be expensive.
This is the beginning of a post-denial era.
It's impressive to discuss opportunities in terms of billions and trillions. I think this presents a tremendous opportunity for the most universal, collaborative solutions.
A little oversight can make it very hard to steal the full $3 billion. Sure you can walk away with say 200 million, but at that point going for big money is much more attractive. Or better yet skim 100 million and go for 5.5 billion.
PS: There is also no need for green specific finance solar and wind are already cheaper than coal without subsides in much of the world. And they are only getting cheaper so that 90 trillion is going to be 80 trillion before you know it.
Those are nuclear-sized dollar numbers. I don't know of any solar PV farm that has been built in a single $3 billion phase. Flexible scaling is one of the big advantages of PV projects over other types of electricity generation projects. There are economies of scale as solar projects go up to (IIRC) 20 megawatts, but above 20 MW costs per unit are pretty flat. So investors can take a much smaller risk with e.g. a $50 million project of 25 megawatts, see how it performs over a few years, and invest in larger projects (or a larger number of tens-of-megawatts projects) if they like the results.
5 years is also an unusually long timeline for constructing a solar PV project. The largest PV project in the US, the 579 megawatt Solar Star in California, was completed in 3.5 years. It also began supplying (partial) power to the grid about a year after construction started. Since a big PV project is practically a bunch of little projects tiled together on the same site, energy payback and financial payback on a big PV project can begin well before construction officially completes. That's in contrast to big "chunky" generating investments like a traditional storage-backed hydroelectric dam, or a nuclear reactor, where you have to build in large increments and can't turn on parts of the plant as you finish them. If small nuclear reactors ever get commercialized -- and I hope they do -- they too should offer more tolerable financial/schedule risk than today's gigawatt-plus reactor designs.
I have an idea. How about we actually focus on viable alternative energy, like nuclear and hydro, as opposed to feel-good pipe-dreams, like pervasive wind and solar.
I agree - I'd love to see more nuclear power, particularly if we could iterate on the reactor design and build ones that are actually safe and efficient, rather than the 60s and 70s models that we're mostly stuck with. The anti-nuclear power movement is one of the great tragedies of the modern age - instead we doubled down on dirty, toxic coal-burners.
We live in a deeply irrational age. From gluten-free, to anti-vax, to organic, to anti-nuclear, the impassioned ignorance that controls us is mind-boggling.
The 70's models are political compromises. The technology to make nuclear reactors far, far safer has been around for as long as the others have.
And while the up-front cost of a nuclear reactor is going to be more than a solar farm, the amount of energy you'll be creating is orders of magnitude greater.
the amount of energy you'll be creating is orders of magnitude greater
Try running the numbers vs. 2.5 cents per kWh solar power. Further, nuclear costs more to construct, vastly more to operate, and even more to shut down.
I'll just point out the nuclear power plant Olkiluoto 3 which is well behind schedule and estimated to cost €8.5 billion [1]. Sure, the original price tag was €5 billion lower, but it's just the materialized cost that matters in the end.
A good TED Talk with the speaker going over the data of global green energy supply/demand. China/India's initiatives to build the next generation of nuclear has halted, mainly out of lack of demand and lack of released data.
The result has been a net loss of green energy globally, and an even greater loss going forward. Nuclear reactors simply provide more carbon-free energy than other renewables by several orders of magnitude, you simply cannot solve the green energy crisis without a heavy investment in nuclear technology.
Unfortunately that investment is hampered by an irrational terror of nuclear energy, even though all the usual candidates for why "nuclear is bad" have been thoroughly and consistently debunked.
Hydro? Only works in very few venues, especially in the developed world. Not to mention the wide-spread ecological damage when you do manage to build one.
I'll tell you what's not cheap: implementing the emissions cuts that governments want us to swallow without nuclear power. We'd have to substantially reduce energy consumption because the politically-acceptable forms of alternative energy simply cannot meet our demand. And we're actually so stupid that these deals allow our geopolitical enemies to continue to grow their emissions while we are forced to cut ours, allowing them to more quickly overtake us in economic and political power.
Just another way the greatest civilization in the history of the world is suddenly intent on throwing it all away.
Even if you can wish away all the problems with the technology (good luck), molten salt reactors are too easy to modify to produce weapons-grade uranium/plutonium. Not something I'd want to see most nations to get their hands on.
I think that's just the opposite of the case. They can be built with only traces of plutonium, and its dissolved in tons of sodium salts. Not easy at all.
Coal could have invested heavily in new tech and beat wind and solar twenty years ago. Nuclear was killed by politics and fear. Hydro is not as clean from an environmental damage perspective as we thought, and there will be a push to undo dams that were built out west.
The biggest challenge to wind and solar is energy storage, but there are low tech (gravity storage) ways to tackle those problems.
It's not just fear. The cost of cleaning up Fukushima is itself uncontained and enormous - on the scale of fighting a major war. It's not viable to risk having one power station cause such an expensive problem.
Modern reactors take 10 years and billions of dollars in capital costs that'll take half a century to recover. New nuclear is DOA and existing plants will turn down over the next decade.
It appears that Elon Musk is implementing an impactful, practical energy alternative driven by solar. I think the long-term view, going beyond the Tesla Master Plan part 2, and combined with Solar City, is a next-generation, green, alternative, renewable energy company.
Energy portfolio diversity is important, but as battery and solar capture technology improves it will be one path towards a foundation of renewable energy.
Nuclear and hydro, are relevant and important, but why dismiss one of the areas that has far-reaching, clear, practical benefits?
And which produces power 24/7? And actually gets you consistent output? A 300MW wind farm can go from 300MW to 10MW to 200MW to 50MW over the course of an hour or two. It can swing from 300MW to 10MW in 20-30 minutes.
I'll pay a little extra for a reliable and predictable energy source.
Not to mention Hinkley is going to be outputting way more power than a wind farm. Hinkley is what, 3000MW/H all the time, to a wind farms 300 some of the time?
Actually - this 9.25 index-linked (!!) for 35 years (!!)
Wind and solar is typically not linked, for 20 years only.
It is also planned for 10yrs from now, when most other costs will be lower still.
It will end up 50%-100% over onshore wind cost.
On the plus side - yet another breathless chapter in the "When will an EPR reactor ever produce actual power" series.
Nuclear is way to expensive even with massive subsides.
Grid solar is down to ~2.42 cents a kilowatt-hour. Look at that number and think why pay 5 times as much (12+ cents per kwh) for nuclear even after subsidies. Pumped storage is not free, but even with that it's still half as much for 24/7 solar power vs. nuclear power.
UK already get's some electricity from France, getting it from north Africa does not ramp up costs all that much. However, wind is another option, hell double that that to 5 cents per kWh and it's still cheaper.
PS: Land costs are less of an issue than you might think as solar does not take that much more land and you can generally use the space under it. Unlike the exclusion zone around nuclear power plants.
Currently wind seems to generate anywhere between 0 and about 5GW. Not reliable enough without vast amounts of storage.
http://www.gridwatch.templar.co.uk/
Hydro storage is cheap at scale if used daily. Modern wind farms are 40-50% capacity factor in good areas and even better in terms of minimum vs median output. Yes, you will end up wasting some 'extra' power, but without fuel costs that not a significant issue.
PS: UK lists 24% capacity factor (av 3.4GW or 9.3% of UK electrical production), which is very usually low and may relate to fudged numbers for installed capacity. Your link also ignores 30% of UK wind production.
There isn't much "How to" in the article. There is a bit of hand-waving about a G20 agreement but the link doesn't really provide any information. What a waste.
The "How to," is explicit and it's in the 3rd paragraph, "governments must create conditions that encourage private investment in clean technologies and sustainable development." That's how you raise trillions for green investment.
To reference my own previous comment, you "create the conditions" through policy.
Its not really new TRILLIONS. Its mostly replacing planned trillions that would have gone to older/carbon-intensive technologies.
So much of this is probably "earmarked" somewhere for a coal station, an ICE truck or whatever. And now has to be switched to a nuclear, solar or other innovative perpetual-motion investments.
So it is an easier task than it looks.
(This is still a massive challenge of course, free riders, unproven technologies, scaling, agency problems, etc, etc)
You have it right when you focus on the fact that this is a massive challenge.
The point isn't to create new monetary supply. This money is going somewhere, but how do we channel it to something as fundamental and positive as green investments?
This may look easy on the surface, but of course the devil is in the details. If the money is going somewhere then it will be taken away from somewhere. So, environmental policy must be balanced against economic policy, i.e. higher gas prices because of less in oil subsidies.
What I find promising is that the conversation has evolved beyond, "if we should do this," to "how we must do this."
The federal government provides a tax credit for 30% of project cost for solar and wind.
Unfortunately, this tax credit is non-refundable, meaning it can only be used to reduce your tax liability.
This effectively means that in order to do large-scale renewable energy projects, you must have backing from a large, profitable company to take advantage of the tax credit.
This is called tax equity investing, and it's a big money-maker for giants like Goldman Sachs, Berkshire Hathaway, Bank of America, Google, etc.
ROI for tax equity investing is amazing, like 20% annual rates of return.
But the entire structure shuts out small players, non-profits, and government entities.
The tax credit is phasing out over the next 7 years, and the hope is that solar will then be profitable enough to be developed without tax incentives.
But until then, investment is limited by companies with large tax liabilities.
The investment tax credit for solar works as you describe. Wind instead has a production tax credit where the owners get a tax credit for each megawatt-hour produced over the first 10 years of the project's life. The tax credit has been adjusted upward with inflation over time and is currently at $24 per MWh. If you make the reasonably conservative assumption of 20 years' life for a wind project, that's more like $12 per MWh over the project lifetime. Both tax credits are, as you say, only good for reducing tax liability.
New nuclear power in the US, built between 2005 and 2021, gets a production tax credit similar to wind. But it's capped at a lower level -- only 8 years of tax credits at $18 per MWh instead of 10 years at $24, and there's a cap on the maximum amount of eligible capacity. (Though the US is not building enough new nuclear to hit the cap anyway.) These tax credit levels were set up in the Energy Policy Act of 2005; back then nuclear looked a lot more mature and less in need of incentives than solar or wind generation technologies.
I think that investment tax credits are a better system than production tax credits. After a decade we can tell that there's really no danger of investors building an underperforming solar facility just to scoop up tax credits up front. The problem with a production tax credit is that it can generate perverse pricing signals at times of high output and low demand. Both wind and PV generators have negligible marginal costs and will "naturally" bid close to zero prices in competitive markets when demand is low and their output is high. But production tax credits also enable wind generators to bid less than zero -- "hey buyer, we'll pay you $5 per MWh to take this surplus electricity off our hands, and we'll still make money via the production tax credit." That negative-priced new wind may well be undermining other clean sources, like older wind projects, nuclear plants, or hydroelectricity. Nuclear would still be in financial trouble in deregulated electricity markets in the US even without bouts of negative-priced electricity, because it has relatively high O&M costs even after the capital costs are paid for, but it'd be doing a bit better if not for the bizarre negative pricing that wind produces sometimes.
Thanks for correcting me. And agreed about production vs investment tax credits.
It's unfortunate that the first "victim" of renewable energy is going to be nuclear (another carbon-free energy source).
The intermittent nature of solar and wind require other energy sources that can be ramped up late in the evening and early in the morning, and turned off at night.
Nuclear plants take days to ramp up, so they can't meet this need.
I too am unhappy about clean energy fratricide between renewables and nuclear power. (Though I think that most of the financial pressure on nuclear in the US is actually from shale gas; renewable generation hasn't been able to grow as quickly in absolute terms even though its relative YoY growth has been impressive.) If electricity storage gets cheaper and more abundant, that should help nuclear power too. It means that nuclear generators, like renewables, would be able to charge storage at low-price, low-demand times and discharge/sell at times of high demand. That would tend to displace relatively inefficient marginal supply sources based on fossils, like open cycle gas turbines used as peakers, instead of driving infighting between nuclear power and newer low-emissions sources.
As solar energy costs drop below those of fossil fuels [1], its seems possible that for a few trillion, some kind of sequestration would be possible. One could imagine entire PV farms devoted solely to restoration of the atmosphere to pre-industrial levels, for example. In my opinion, climate change is a problem with an engineering solution.
As a side note, the linked reference is a well argued version of the near future of transportation and energy. Highly recommended
46 comments
[ 3.5 ms ] story [ 107 ms ] threadWhat's interesting is the objective view that this is something we need to do, as stewards of the environment, as countries, as a civilization, while acknowledging it will be expensive.
This is the beginning of a post-denial era.
It's impressive to discuss opportunities in terms of billions and trillions. I think this presents a tremendous opportunity for the most universal, collaborative solutions.
PS: There is also no need for green specific finance solar and wind are already cheaper than coal without subsides in much of the world. And they are only getting cheaper so that 90 trillion is going to be 80 trillion before you know it.
5 years is also an unusually long timeline for constructing a solar PV project. The largest PV project in the US, the 579 megawatt Solar Star in California, was completed in 3.5 years. It also began supplying (partial) power to the grid about a year after construction started. Since a big PV project is practically a bunch of little projects tiled together on the same site, energy payback and financial payback on a big PV project can begin well before construction officially completes. That's in contrast to big "chunky" generating investments like a traditional storage-backed hydroelectric dam, or a nuclear reactor, where you have to build in large increments and can't turn on parts of the plant as you finish them. If small nuclear reactors ever get commercialized -- and I hope they do -- they too should offer more tolerable financial/schedule risk than today's gigawatt-plus reactor designs.
It's a shame that coal plants aren't held to the same standards, yes; but I'd rather see both replaced.
And while the up-front cost of a nuclear reactor is going to be more than a solar farm, the amount of energy you'll be creating is orders of magnitude greater.
Try running the numbers vs. 2.5 cents per kWh solar power. Further, nuclear costs more to construct, vastly more to operate, and even more to shut down.
[1] https://en.wikipedia.org/wiki/Olkiluoto_Nuclear_Power_Plant#...
A good TED Talk with the speaker going over the data of global green energy supply/demand. China/India's initiatives to build the next generation of nuclear has halted, mainly out of lack of demand and lack of released data.
The result has been a net loss of green energy globally, and an even greater loss going forward. Nuclear reactors simply provide more carbon-free energy than other renewables by several orders of magnitude, you simply cannot solve the green energy crisis without a heavy investment in nuclear technology.
Unfortunately that investment is hampered by an irrational terror of nuclear energy, even though all the usual candidates for why "nuclear is bad" have been thoroughly and consistently debunked.
Hydro? Only works in very few venues, especially in the developed world. Not to mention the wide-spread ecological damage when you do manage to build one.
Just another way the greatest civilization in the history of the world is suddenly intent on throwing it all away.
The biggest challenge to wind and solar is energy storage, but there are low tech (gravity storage) ways to tackle those problems.
It appears that Elon Musk is implementing an impactful, practical energy alternative driven by solar. I think the long-term view, going beyond the Tesla Master Plan part 2, and combined with Solar City, is a next-generation, green, alternative, renewable energy company.
Energy portfolio diversity is important, but as battery and solar capture technology improves it will be one path towards a foundation of renewable energy.
Nuclear and hydro, are relevant and important, but why dismiss one of the areas that has far-reaching, clear, practical benefits?
Wind power generates at ~8 pence per kwh.
It literally required greater subsidies than wind farms to be built.
I'll pay a little extra for a reliable and predictable energy source.
It will end up 50%-100% over onshore wind cost.
On the plus side - yet another breathless chapter in the "When will an EPR reactor ever produce actual power" series.
Grid solar is down to ~2.42 cents a kilowatt-hour. Look at that number and think why pay 5 times as much (12+ cents per kwh) for nuclear even after subsidies. Pumped storage is not free, but even with that it's still half as much for 24/7 solar power vs. nuclear power.
Solar price from: http://www.bloomberg.com/news/articles/2016-09-19/cheapest-s...
PS: Land costs are less of an issue than you might think as solar does not take that much more land and you can generally use the space under it. Unlike the exclusion zone around nuclear power plants.
PS: UK lists 24% capacity factor (av 3.4GW or 9.3% of UK electrical production), which is very usually low and may relate to fudged numbers for installed capacity. Your link also ignores 30% of UK wind production.
To reference my own previous comment, you "create the conditions" through policy.
This is not meant to be comprehensive, but it provides some context to the conversation: https://en.wikipedia.org/wiki/Energy_subsidies#Allocation_of...
So much of this is probably "earmarked" somewhere for a coal station, an ICE truck or whatever. And now has to be switched to a nuclear, solar or other innovative perpetual-motion investments.
So it is an easier task than it looks.
(This is still a massive challenge of course, free riders, unproven technologies, scaling, agency problems, etc, etc)
The point isn't to create new monetary supply. This money is going somewhere, but how do we channel it to something as fundamental and positive as green investments?
This may look easy on the surface, but of course the devil is in the details. If the money is going somewhere then it will be taken away from somewhere. So, environmental policy must be balanced against economic policy, i.e. higher gas prices because of less in oil subsidies.
What I find promising is that the conversation has evolved beyond, "if we should do this," to "how we must do this."
This effectively means that in order to do large-scale renewable energy projects, you must have backing from a large, profitable company to take advantage of the tax credit. This is called tax equity investing, and it's a big money-maker for giants like Goldman Sachs, Berkshire Hathaway, Bank of America, Google, etc. ROI for tax equity investing is amazing, like 20% annual rates of return. But the entire structure shuts out small players, non-profits, and government entities.
The tax credit is phasing out over the next 7 years, and the hope is that solar will then be profitable enough to be developed without tax incentives. But until then, investment is limited by companies with large tax liabilities.
New nuclear power in the US, built between 2005 and 2021, gets a production tax credit similar to wind. But it's capped at a lower level -- only 8 years of tax credits at $18 per MWh instead of 10 years at $24, and there's a cap on the maximum amount of eligible capacity. (Though the US is not building enough new nuclear to hit the cap anyway.) These tax credit levels were set up in the Energy Policy Act of 2005; back then nuclear looked a lot more mature and less in need of incentives than solar or wind generation technologies.
I think that investment tax credits are a better system than production tax credits. After a decade we can tell that there's really no danger of investors building an underperforming solar facility just to scoop up tax credits up front. The problem with a production tax credit is that it can generate perverse pricing signals at times of high output and low demand. Both wind and PV generators have negligible marginal costs and will "naturally" bid close to zero prices in competitive markets when demand is low and their output is high. But production tax credits also enable wind generators to bid less than zero -- "hey buyer, we'll pay you $5 per MWh to take this surplus electricity off our hands, and we'll still make money via the production tax credit." That negative-priced new wind may well be undermining other clean sources, like older wind projects, nuclear plants, or hydroelectricity. Nuclear would still be in financial trouble in deregulated electricity markets in the US even without bouts of negative-priced electricity, because it has relatively high O&M costs even after the capital costs are paid for, but it'd be doing a bit better if not for the bizarre negative pricing that wind produces sometimes.
It's unfortunate that the first "victim" of renewable energy is going to be nuclear (another carbon-free energy source). The intermittent nature of solar and wind require other energy sources that can be ramped up late in the evening and early in the morning, and turned off at night. Nuclear plants take days to ramp up, so they can't meet this need.
As a side note, the linked reference is a well argued version of the near future of transportation and energy. Highly recommended
[1] Clean Disruption - Why Energy & Transportation will be Obsolete by 2030 - https://www.youtube.com/watch?v=Kxryv2XrnqM