Centre on Asia and Globalisation


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Centre on Asia and Globalisation

  1. 1. Response: “Singapore” Benjamin K. Sovacool Research Fellow, Centre on Asia and Globalisation Lee Kuan Yew School of Public Policy, National University of Singapore Generating Dialogue: Clean Energy, Good Governance and Regulation March 17, 2008 bsovacool@nus.edu.sg
  2. 2. Preview of presentation • Perfect electricity markets • Negative externalities • Positive externalities • Putting it all together for Singapore • Implications for Policy
  3. 3. Perfect electricity markets? Perfect information: all participants in the market must be fully informed as to the quantitative and qualitative characteristics of goods and services (and substitutes to them) and the terms of exchange among them; Transaction costs: exchange must be instantaneous and costless; Rationality: consumers must maximize utility and producers maximize profits; economic actors must be able to collect and process all relevant information, hold rational expectations about prices and products, and make decisions that always promote their self interest; Perfect competition and openness: no specific firm or individual can influence any market price by decreasing or increasing supply of goods and services; there must be many buyers and sellers; they must act without collusion; firms cannot use their market power to influence the market themselves; predatory practices by incumbent firms against insurgent firms must be restricted; there must be no barriers to entry and exit; Internalization: all costs and benefits (or negative/positive externalities) associated with exchanges must be born solely by the participants of the transaction, or internalized in prices so that all assets in the economic system are adequately priced; Excludability: those involved in the exchange mist be able to prevent those not involved from benefitting from it.
  4. 4. Examples of externalities • Catastrophic risks such as nuclear meltdowns, oil spills, coal mine collapses, natural gas wellhead explosions, and dam breaches; • An increased probability of wars due to natural resource extraction or the securing of energy supply; • Public health issues and chronic disease, morbidity, and mortality; • Worker exposure to toxic substances and occupational accidents and hazards; • Public deaths and injuries due to coal trucks, barges, and trains; • Direct land use by power plants, pipelines, and upstream infrastructure; • The destruction of land by mining operations including acid drainage and resettlement; • Acid precipitation and its damage to fisheries, crops, and forests, and livestock, especially the effects of sulfur dioxide on wheat, barley, oats, rye, peas, and beans and the impacts of acid deposition on other high value crops such as vegetables, fruit, and flowers; • The effects of water pollution on fisheries and freshwater ecosystems, sensitive to water chemistry, as well as the release of radionuclides, drill cuttings, drilling muds and oils; •Consumptive water use, with consequent impacts on agriculture and ecosystems where water is scarce; • Degradation of cultural icons such as national parks, recreational opportunities, or activities such as fishing or swimming; • Atmospheric damage to buildings, automobiles, and materials by corrosion and the increased maintenance costs for natural stone, mortar, rendering, zinc, galvanized steel, and paint; • Continual maintenance of caches of spent nuclear fuel; • Cumulative environmental damage to ecosystems and biodiversity through species loss and habitat destruction, as well as the ecosystem services provided by wetlands, waterways, different types of forests, grasslands, deserts, tundra, coastal and ocean habitat; • Changes to the local and regional economic structure through the loss of labor and jobs and transfer of wealth and reductions in GDP; • Incidence of noise and reduced amenity, aesthetics, and visibility
  5. 5. Water consumption for conventional and renewable power plants (Gallons/kWh)
  6. 6. Direct and Indirect Carbon Emissions by Electricity Technology (equivalent grams of CO2/kWh
  7. 7. Singapore’s own emissions are substantial = 0.2 % of global emissions , yet Singapore has 15.2 mt/capita, Republic of Korea10.0, Japan at 9.6, China at 2.7; Out of 28 possible countries in Asia and Central Asia, including China, Japan, Korea, and the oil producing states of Turkmenistan, Azerbaijan, and Kazakhstan, Singapore ranks first in per capita GHG emissions
  8. 8. Henry Hub Natural Gas Futures Prices, 1990 to 2008 Source: Mark Bolinger and Ryan Wiser, Comparison of AEO 2008 Natural Gas Price Forecast to NYMEX Futures Prices (Lawrence Berkeley National Laboratory, January 7, 2008).
  9. 9. Energy accidents (frequency by decade and source) Techn Accid % of ology ents Total Natural 91 33 Gas Oil 71 25 Nuclear 63 23 Coal 51 18 Hydroele 3 1 ctric Other 0 0 Renewa bles
  10. 10. Unpriced positive externalities from clean energy Risk Management Environmental Investment Reduced Resource Improved Public Economic Performance Use Image Spillover Benefits Hedge against fuel Emissions credits Production tax Reduced water use Improved relations Rural revitalization price volatility credit with stakeholders Hedge against Reduced emissions Accelerated Lower production Corporate social Jobs and future fees depreciation costs responsibility employment environmental regulations Hedge against Avoided Local tax base Reduced energy use Economic future carbon tax remediation and improvements and wear and tear development pollution abatement on T&D grid costs Minimization of Avoided reliance on futures environmental costs markets of fuel extraction and transport Reduced insurance premiums Source: J. E. Pater, A Framework for Evaluating the Total Value Proposition of Clean Energy Technologies (Golden, CO: National Renewable Energy Laboratory, Technical Report NREL/TP-620-38597, February, 2006)
  11. 11. Peaking potential and ELCC: “normal” solar PV potential (flat plate facing south)
  12. 12. Peaking potential and ELCC:
  13. 13. But what about Singapore? 50 years payback!! Stephen Wittkopf, Nyuk Hien Wong, Willi Hess, Potential of Building Integrated Photovoltaics In Existing Urban High-Rise Housing in Singapore (Singapore: Centre for Advanced Studies in Architecture, National University of Singapore, 2004).
  14. 14. Putting it all together Descriptive Statistics of Electricity Externality Studies, $1998 (US Cents/kWh) Coal Oil Gas Nuclear Hydro Wind Solar Biomass Min 0.03 0.003 0.0003 0.02 0 0 0 0.06 Max 39.93 13.22 64.45 26.26 0.80 1.69 22.09 72.42 Mean 13.57 5.02 8.63 3.84 0.29 0.69 5.20 14.87 SD 12.51 4.73 18.62 8.40 0.20 0.57 6.11 16.89 N 15 24 16 11 14 7 16 29 Source: Sundqvist, Thomas and Patrik Soderholm. 2002. “Valuing the Environmental Impacts of Electricity Generation: A Critical Survey,” Journal of Energy Literature 8(2) (2002), pp. 1-18; Sundqvist, Thomas. 2004. “What Causes the Disparity of Electricity Externality Estimates?” Energy Policy 32 (2004), pp. 1753-1766.
  15. 15. Technology Nominal LCOE, $2007 Nominal External Cost, Full Social Cost, $2007 (¢/kWh) $2007 (¢/kWh) (¢/kWh) Energy Efficiency and DSM 2.5 0.0 2.5 Offshore Wind 2.6 0.4 3.0 Hydroelectric 2.8 4.94 7.8 Biomass (Landfill Gas) 4.1 6.7 10.8 Advanced Nuclear 4.9 11.10 16.0 Onshore Wind 5.6 0.4 6.0 Geothermal 6.4 0.7 7.1 Integrated Gasification 19.14 25.9 6.7 Combined Cycle Biomass (Combustion) 6.9 6.7 13.6 Scrubbed Coal 7.2 19.14 26.3 Advanced Gas and Oil 11.97 20.2 8.2 Combined Cycle Gas Oil Combined Cycle 8.5 11.97 20.5 IGCC with Carbon Capture 8.8 19.14 27.9 Parabolic Troughs (Solar 0.9 11.4 10.5 Thermal) Advanced Gas and Oil 12.8 11.97 24.8 Combined Cycle with Carbon Capture Solar Ponds (Solar Thermal) 18.8 0.9 19.7 Advanced Combustion 6.46 39.0 32.5 Turbine Combustion Turbine 35.6 6.46 42.1 Solar Photovoltaic (panel) 39.0 0.9 39.9
  16. 16. Re-rank them: Technology Full Social Cost, $2007 (¢/kWh) Energy Efficiency and DSM 2.5 Offshore Wind 3.0 Onshore Wind 6.0 Geothermal 7.1 Hydroelectric 7.8 Biomass (Landfill Gas) 10.8 Parabolic Troughs (Solar Thermal) 11.4 Biomass (Combustion) 13.6 Advanced Nuclear 16.0 Solar Ponds (Solar Thermal) 19.7 Advanced Gas and Oil Combined Cycle 20.2 Gas Oil Combined Cycle 20.5 Advanced Gas and Oil CC w/ CCS 24.8 Integrated Gasification Combined Cycle 25.9 Scrubbed Coal 26.3 IGCC with Carbon Capture 27.9 Advanced Combustion Turbine 39.0 Solar Photovoltaic (panel) 39.9 Combustion Turbine 42.1
  17. 17. Re-rank them: • Does not include greenhouse gases or climate change (from 1.4 ¢/kWh to 700 ¢/kWh) • Most studies utilized “willingness to pay” metrics • Did not assume cumulative damage • Assumed reference rather than representative technologies • Did not assume T&D damages • Presumed low capacity factors for wind (35 percent) and solar (17 percent) • Confirmed by Kammen et al. and others
  18. 18. Confirmed by preliminary study in Singapore: •LCA for five power generation technologies in Singapore (1, 250 MW oil-fired steam turbine plant; 367.5 MW natural gas combined cycle plant; 250 MW steam turbine plant; 2.7 kW solar PV; 5 kW PEM fuel cell) • Under current economics and rate structures, power generation from renewables is costlier than fossil fuels • However, inclusion of externalities more than compensate for this if they were included in the cost of electricity Source: R. Kannan, K. C. Leong, R. Osman, H.K. Ho, “Life Cycle Energy, Emissions and Cost Inventory of Power Generation Technologies in Singapore,” Renewable and Sustainable Energy Reviews 11 (2007), pp. 702-715.
  19. 19. Implications for policy Widespread convention of excluding externalities in prices must end; an SBC can be implemented to offset regressive nature of price increases in low-income families (in a sense they are already paying) Removal of subsidies insufficient to create functioning electricity markets; public goods attributes demand government intervention When all costs and benefits are included using the best available methods available, the seven technologies with the lowest full social costs are energy efficiency, offshore wind, onshore wind, geothermal, hydroelectric, biomass, and solar thermal. Scrubbed coal and natural gas are up to 10 times more expensive than these options