Power Plant Efficiency Hasn’t Improved Since 1957
Editor’s Note: Today we are happy to bring to you a guest post from Sean Casten, CEO and President of Recycled Energy Development.
Americans have a habit of framing our scientific history as a series of Great Inventors, from Eli Whitney to Thomas Edison to Afrika Bambaataa. The history books say each was prodded by Adam Smith’s invisible hand to come up with the great technological advances that have made our country a home of innovation.
There’s a problem with this mythology: sometimes there’s no invisible hand. Sometimes short-sighted government regulations give preference to bad technologies over good ones — stifling innovation and blinding us to our own ability to make progress.
Nowhere is this mythology more evident than in our energy system, the most heavily regulated and subsidized industry in the country. A host of bad regulations have made this system grossly inefficient, contributing both to global warming and to high power costs.
- » See also: Group Buying = Lowest Price for Solar. Ever.
- » Get CleanTechnica by RSS or sign up by email.
The US today converts fossil fuel into electricity at 33% efficiency, throwing away two-thirds of every unit of fuel we burn in cooling towers and smoke stacks. That’s the same conversion efficiency we had last year. That’s the same efficiency we had in 1980. In fact, you have to go all the way back to 1957 to find a year when the electric sector wasted more energy than they do today.
During the same period, we’ve seen automobile fuel economy skyrocket (especially on a horsepower-adjusted basis). We’ve seen massive increases in the efficiency of our electric appliances. We’ve even seen boring old steam boiler efficiency increases with modern controls, recuperators and preheaters. And yet the efficiency of electricity generation is stagnant.
It’s not stagnant because we’ve hit any fundamental limit. Indeed, studies by the US Department of Energy and Environmental Protection Agency have identified a whopping 200,000 MW of potential (that’s 20% of the peak power demand of the US) for proven technologies that either recover waste energy from industrials and/or cogenerate heat and electricity from a single fuel source.
The worst of these technologies is twice as fuel efficient as the current electric grid. Fully deploying that potential would not only cut CO2 emissions by 20% — about the same as if we took every passenger car off the road — but would also cut our energy costs, simply by burning less fuel. And those are just the technologies we’ve taken the time to quantify.
So what’s holding these technologies back? Nothing more than our regulatory paradigm.
A couple of examples:
- Our century-old electric regulatory model pays utilities a return on their capital investment, but compels them to pass along all operating costs to consumers at zero mark-up. This creates a great incentive to build capital-intensive boondoggles. It completely isolates electric utilities from the economic principles that drive “normal” businesses, wherein capital and operating cost reductions are a route to greater profits. This has conspired to make our electric sector openly hostile to efficient power generation. It explains why their efficiency hasn’t moved since 1957, and why that sector now accounts for 42% of US CO2 emissions.
- The Clean Air Act mandates end-of-pipe pollution control technologies that universally impose
additional parasitic loads on industrials and power plants to run baghouses, catalyst beds, electro-static precipitators and any number of other technologies. All these parasitic mandates have the perverse consequence that our environmental policy mandates reduction in criteria pollution and mandates increases in CO2 emissions. Worse, a facility that has the temerity to improve the energy efficiency of their process will almost certainly trigger New Source Review, under which they will have to come into compliance with new, more stringent permits than the one they currently operate under. These two features of the Clean Air Act conspire to make many industrials openly fearful many otherwise sensible steps to lower their greenhouse-gas signature (and lower their operating expense.)
None of this is to suggest that we should not continue to pursue technological revolutions, of course. But if those technologies bring about cheaper, cleaner, more efficient energy, they will find themselves blocked by precisely the same regulations that are keeping existing technologies out of the market. Technology is important — but regulatory reform to remove our barriers to energy efficiency is the critical path.
Related Posts on Energy Efficiency
- 7 Ways to Save Energy by Saving Water
- Toyota’s New Hybrid Travels Twice as Far
- Trucks Reduce Emissions by 83%
Andy:
Feel free to live the way that you want. I happen to like being free to travel, to take hot showers, to leave my computer sleeping, ready for instant access. I like eating fresh vegetables year round, sleeping in a temperature controlled environment, and being able to have bright light at the flick of a switch.
I have tried the low energy lifestyle and seen what it does to people when they have no other alternatives.
My mission is to try to make access to energy widely available for all people, especially those in areas who have had to struggle for their entire lives to collect wood scraps or dung so they could heat their meager meals.
Part of the problem is that energy projects tend to be large-scale, probably because these projects attract better publicity. But in fact, smaller, more diversified modes of production greatly increase the efficiency of power plants. An article about small-scale efficiency in power plants: http://www.brightfuture.us/new.
Here we go again…let’s blame the big, bad government for everything. Does it occur to anyone out there that regulation is necessary in order to provide uniform standards for customer service and inter-operability? What happened when the chains were taken off of the airline industry? Price wars, dismal customer service, bankruptcies, etc. When companies are under pressure to turn a profit, they don’t do it by improving efficiency. That would be nice, but in the corporate world it just ain’t so. They do it by cutting…cutting staff, cutting capital expenditures, cutting corners on maintenance.
I, for one, am relieved that something as vital as the electric grid isn’t left entirely to cut-throat free-market capitalism. I’m glad that there are crews on stand-by to restore power when it goes out in a storm. I’m glad that utilities can maintain and upgrade their equipment as needed without worrying that the capital expense will drive them into bankruptcy. I’m not always happy when the cost of those services shows up on my electric bill, but I believe that you get what you pay for.
Sure, the technology is out there to improve the efficiency of existing power plants. But let’s be honest…it’s not the government that’s holding utilities back. It’s all of us consumers who will cry bloody murder when we have to foot the bill for retro-fitting these facilities. In much the same way that we are all in favor wind power until the turbine shows up in our back yard, we want clean power plants but we don’t want to pay for them. Oh, the hypocrisy.
Mr. Sinister,
You misunderstand. There isn’t really much potential to increase the efficiency of existing power plants - they are too remote from thermal loads or opportunity fuel supplies. This isn’t an issue that society won’t tolerate that investment, but rather that the utilities were never motivated to make a better one. A more rational regulatory model would not have built those big remote plants in the first place, but rather allocated capital elsewhere.
We’re seeing the same problem recurring now, as the grid exhausts the current capacity and we’re trying to figure out where to build the new stuff. We can either build really expensive, really inefficient coal- and gas-fired power, or we can build much cheaper local power, to the benefit of all of society. Unfortunately, absent regulatory reform, we will bulid the former.
Rod,
We’re in agreement on subs, but not on capital amortization. Let’s assume utility-scale capital amortization, @ 10% over 20 years. Nothing remotely like what the private sector wants, but consistent with what you’d get if those nuke plants were built in the old way, by traditional regulated utilities. $6400/kW requires an annuity of $751/kW/year at that amortization schedule. Given a current average nuclear fleet capacity factor of 90%, that amortization would go against 8760 x 90% = 7884 kWh/kW /year, yielding a cost of %751/7884 = 9.5 cents/kWh just to amortize the capital. Add in fuel costs, O&M, etc. and that hardly looks like a competitive investment given current average retail rates in the US of about 8.5 cents.
(Note also that if this generation is built remotely, you need to add another $1300/kW - on average - for transmission and distribution, tacking another 3 cents or so onto the rate to get to the delivered cost.)
And of course, that’s just at crummy utility-scale returns - high as those numbers are, they’re not high enough to attract capital that isn’t backstopped by ratepayer guarantees. If you apply a more traditional 15% private equity cost of capital, the 9.5 cents becomes 13.
Bottom line: there’s a good reason why no one’s building nuclear without first securing massive government subsidies and/or capital recovery guarantees. Because they don’t pencil out any other way.
Not to contradict you, but a 1930’s Ford Model T gets 25mpg, which is nearly identical to todays average US car/suv. Overseas it is another story…
Re the wasted heat from powerplants, in Europe (darn them crafty Europeans) powerplant’s waste heat is often used to heat the homes near the facility.
In Germany and Denmark it is quite common for a community to own their own windfarm or powerplant cooperatively, so the motivation to have a clean efficient power source is high.
Sean:
It is a pleasure to enter into a discussion with someone who can actually run numbers. I have no quibbles with your figures, but I neglected to provide a few more details about the specific context of my discussion with the financial types. We were not talking about 1000 MWe or larger machines. As you have accurately pointed out, those machines are not appropriate for heat recovery systems.
The power plants that are the right size to locate near heat customers are on the order of 5-50 MWe. They would not be remote, but close to customers in order to successfully transmit the waste heat.
In that size range, we are not trying to compete against utility scale plants that have access to cheap fuel like mine mouth coal. Instead, we are aiming to supply power in place where it is useful but either supplied by a 5-50 MWe diesel engine or not available at all.
At current prices for diesel fuel, assuming a very efficient machine with a heat rate of 8,000 BTU per kilowatt hour, the fuel cost alone is running at about 28 cents per kilowatt hour.
Large diesel engines will cost at least $1000 and probably more like $3000 per KW new and they need regular maintenance by well trained people. Besides, they are notoriously dirty and CO2 emitting.
I hope you can now see why we believe that the ROI might be high enough to attract private capital.
BTW - I just read an interesting article in Fortune about Bill Gates and his plans after leaving Microsoft. Apparently he has already made an investment with a VC that is working on a nuclear energy project.
Rod,
Yes, I’d agree with you that those economics work, but it’s a niche application. The efficiency & economics I’m doing really relate to grid-connected power supplies, whether centrally- or locally-sited that must compete against the relevant buss bar rate.
To some degree, that is admittedly a matter of marketing strategy (e.g., entry markets vs. long term markets), but I would caution you that many an emerging technology - from fuel cells to solar - have looked at the off-grid space as an entry spot, with only mixed results. I am by no means an expert in those markets, but my understanding is that the challenge has been more one of inertia & infrastructure than fundamental economics. The odds are good that within 20 miles of an off-grid application, there’s someone who knows how to fix an engine, keeps a supply of spare spark plugs on hand and can spare some fuel oil if you’re in a pinch. Not so for other techs, for better or for worse. This has made those hard to crack, notwithstanding the competing economics.
Anyway, that’s off topic here - just a word of caution.
Sean:
Entire islands like Bermuda, Jamaica, Hawaii, Guam, etc. are completely dependent on oil burning power plants. Others have only natural gas.
With niches like that, we think we have a good place to start. Of course, there is some competition in the space now. Hyperion Power Generation and NuScale have also recognized that there is a need for reliable power in somewhat remote places. I have been studying energy technology for nearly three decades and I only know one alternative to fossil fuel that will work.
I am excited by the fact that it actually works a lot better. As a guy who has lived the high energy, off grid life that fission can provide, I just need to figure out how to get over the first unit hurdle.
An excellent and thought-provoking article. Cooling towers dispose of heat as though it is a nuisance, though it is really a valuable source of energy. Greenhouses, drying plants and fish farms are all good ways to use excess heat even in remote powerplant locations. There must be a way to change the laws to encourage this kind of development.