As Middle Eastern producers were…
Crude oil prices turned around…
One hundred seventy one nations signed the UN’s Paris agreement on climate change on April 22. But before that, the European Commission on Climate Action recommended that by 2050 countries reduce carbon emissions by 80 percent.
In the UK, the Committee on Climate Change will require that the carbon intensity of electricity production be limited to 50 grams of carbon emitted for every kilowatt-hour of energy produced (50gCO2/kwh) starting in 2030. The European and UK targets and limits, attainable or not, are aimed at electric utilities as they emit close to 40 percent of global carbon output. And the only technologies capable of complying with these carbon limits are the unlikely “twins” renewables and nuclear.
Few countries have attained these emissions targets. Paraguay and Norway, with large hydroelectric resources, have, but even France’s electric grid, with its large nuclear fleet, emits about 80g CO2/kwh. Germany despite all its focus on renewables, emits more. The U.S. electric grid, with its reliance on coal for about 40 percent of its generating needs, emits almost 200g CO2/kwh. China and India, both of whose electrical systems still rely even more extensively on coal, emit over 400 grams of CO2 per kWh.
Related: China Stockpiling Oil At Highest Rate In Over A Decade
Looking at transitions underway in the U.S. and the UK, we see natural gas displacing coal and to an extent smaller, aging nuclear facilities. The CO2 intensity of gas in the production of electricity is half that of coal. The faster the transition away from coal, the deeper the reduction in carbon emissions. Even without governmental prodding, electric grids are moving in this fashion to emit significantly less carbon. Why? Because a dramatic cheapening of natural gas has made it economically attractive to do so. We are not free market purists. We simply point out that right now utility economics already favors a lower carbon alternative for electricity production and at an attractive price.
We can divide electric production into three groups based on carbon intensity. At the high end are lignite and coal fired power stations emitting 1,000 grams of CO2/kwh or more. Natural gas plants, in the middle, emit about 500gCO2/kwh. At the low end, nuclear power and renewables emit from 10gCO2/kwh for large hydroelectric dams to perhaps 50gCO2/kwh for new nuclear plants, and more for offshore wind taking into account incremental transmission to bring that far away power to markets.
These numbers come from a body of academic literature devoted to life cycle analysis (LCA) of energy systems. The LCA method of analysis measures the energy usage and carbon intensity of each of the five phases of a power plant’s life: construction, mining and fuel preparation (for coal or uranium for example), operation, spent fuel storage, long term disposal/dismantlement. These criteria result in a carbon emissions report card for every electric generating system.
Related: Oil Up As Quarterly Earnings Season Kicks Off
A large hydroelectric dam, for example, incurs its worst carbon emissions score during construction, which involves years of use of energy intensive materials like cement and steel and energy intensive, often diesel powered, machines. As a result, the construction phase is highly energy/carbon intensive. But after that the other four life cycle phases of hydro, notably the electricity production or operations phase, is virtually carbon free. (Purists might argue for some additional carbon emissions potential in the event of a dam dismantlement or retirement.)
Wind power has a similar life cycle profile. It’s fairly carbon intensive during construction with the fabrication of steel towers and turbines blades and moving towers, blades and turbines into place. However, after that it’s also a carbon free operation with some back end emissions at dismantlement and disposal. Solar power has a fairly similar carbon life cycle profile with considerable energy/carbon intensity related to fabrication and installation and then a carbon free operating phase with very modest back end CO2 emissions potential.
Nuclear power has a slightly different carbon life cycle. Apart from the considerable energy/carbon expenditure involved in large construction projects, some of carbon emissions can occur during fuel procurement. Uranium is mined like coal. Then, also like coal, it is crushed but then undergoes a chemical extraction and refinement process. These are energy/carbon intensive processes.
Related: The Real Reason Saudi Arabia Killed Doha
Nuclear power resembles renewables, and excels in its carbon LCA, during plant operation and electricity production, virtually carbon free except for fuel procurement. Nuclear’s carbon emissions are front end and somewhat back end loaded. After its useful operating life there are energy/carbon inputs for fuel storage (typically on site), dismantlement and geological disposal.
In the U.S. and UK, carbon emissions from electricity production are in decline as coal plants retire. Near term, the industry will choose between nuclear and natural gas for base load generating additions. Electricity from the former may cost almost ten times as much but emit 90 percent less carbon. That’s the tradeoff policy makers claim they face. As a result nuclear technology enjoys a modest resurgence as a source of ample electricity and low carbon.
The way we see it, the pace of carbon emission reductions in the U.S. and Europe depends on the pace at which the industry retires coal-fired electric generation. As nuclear remains at best a high priced option, it is more likely that the industry will opt for more gas fired power stations. These may be viewed by their owners as more explicitly “transitional”, just a placeholder for the next mode of power generation whatever form that takes. An industry lacking in growth with large capital needs is likely to move cautiously.
By William Tilles and Leonard Hyman for Oilprice.com
More Top Reads From Oilprice.com:
Leonard S. Hyman is an economist and financial analyst specializing in the energy sector. He headed utility equity research at a major brokerage house and…