The External Health & Environmental
Costs of Electricity Generation in
Minnesota
February 19, 2014

Dr. Stephen Polasky | ...
Energy Efficiency Quality Assurance:
Past, Present, and Future
Thursday, March 6th
11:00 – 12:00 CST
Dave Bohac | Director...
Meeting Utility Resource Needs with Solar:
The Merits of the Aurora Solar Project
Wednesday, March 19th
11:00 – 12:00 CST
...
The External Health and Environmental Costs
of Electricity Generation in Minnesota
Dr. Stephen Polasky
Applied Economics P...
Question & Answer
Webinar Link:
http://www.mncee.org/Innovation-Exchange/Resource-Center/
HEALTH & ENVIRONMENTAL COSTS OF
ELECTRICITY GENERATION IN MINNESOTA

Andrew L. Goodkind and Stephen Polasky
Introduction
• Electricity generation contributes to air pollution
with serious health and environmental impacts
• Emissio...
Introduction
• Why estimate the monetary value of health
and environmental impacts?
• Information for policy and planning
...
Introduction
• Why estimate these values now?
• Minnesota Public Utility Commission uses
estimates from the 1990s
– Out-of...
Bottom-line
• Total cost: $2.454 billion annually
– Central estimate of dollar value of damages to
human health and the en...
Bottom-line
• Minnesota Public Utility Commission
estimates of costs (“old estimate”)
– Total cost between $58 and $257 mi...
Results in context
• Cost estimates have large margin of error
– Central estimate of $2.454 billion annually
– Range of es...
Results in context
• Partial coverage of impacts
• Included
– Health and some environmental impacts from criteria
air poll...
METHODS TO GENERATE COST ESTIMATES
Cost estimates
• Two important categories of cost
– Health and environmental costs of SO2, NOx,
PM2.5, PM10
– Climate chan...
Costs of criteria air pollutants
• What are the costs from emissions of SO2,
NOx, PM2.5, PM10 from Minnesota electricity
g...
Costs of criteria air pollutants
• Main steps in the analysis:
1. Link changes in emissions to changes in
ambient concentr...
Step 1:
From emissions to ambient air quality
• Start with data on emissions from electric
generating plant sources
Total emissions of pollutants from
power plants in Minnesota (2008)
Pollutant
SO2

Coal
77,143

Natural
Gas
80

NOX

61,18...
Step 1:
From emissions to ambient air quality
• Air dispersion and air chemistry model (sourcereceptor model)
• Air Pollut...
Step 2:
From ambient air quality to impacts
• Dose-response relationships
• Major cost comes from premature mortality
– 10...
Step 2:
From ambient air quality to impacts
• Other impacts
– Infant mortality from PM2.5 exposure
– Chronic bronchitis an...
Step 3:
From impacts to dollar value of costs
• Focus on cost of premature mortality
• Value of statistical life (VSL): $6...
Costs of SO2, NOx, PM2.5, PM10
• Combining steps 1 – 3: increased costs from
an additional unit of emissions of each
pollu...
Costs of SO2, NOx, PM2.5, PM10
• Range of marginal damage based on location
Pollutant

Mean

5th

25th

50th

75th

95th

...
Costs of SO2, NOx, PM2.5, PM10
• NRC (2010): damage from the 406 coal plants
in the U.S.
– $62 billion (2007 USD)
– 3.2 ce...
Costs from greenhouse gas emissions
• Cost per unit of greenhouse gas emissions: social
cost of carbon (SCC)
– Increase in...
Total emissions of greenhouse gases from power
plants in Minnesota 2006
(Thousand tons CO2e per year)

Coal
38,173

Natura...
Costs from greenhouse gas emissions
• Interagency Working Group on Social Cost of
Carbon 2013
– SCC of $33 per metric ton ...
COST ESTIMATE RESULTS
Costs per ton of pollutant for urban
and rural counties
Urban County Emissions
Median (5th – 95th
percentile)

Rural Count...
Total annual costs of emissions in SO2,
NOx, PM2.5, PM10 in Minnesota
Source

Median
$856

5th Percentile
$498

95th Perce...
Total annual costs of greenhouse gas
emissions from Minnesota
• Multiply social cost of carbon by total number
of CO2 equi...
Summary of cost estimates
• Total health and environmental costs:
– $2.454 billion
– Range: $1.041 billion to $3.562 billi...
THANK YOU FOR YOUR ATTENTION
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The External Health & Environmental Costs of Electricity Generation in Minnesota

  1. 1. The External Health & Environmental Costs of Electricity Generation in Minnesota February 19, 2014 Dr. Stephen Polasky | Prof. of Applied Economics University of Minnesota
  2. 2. Energy Efficiency Quality Assurance: Past, Present, and Future Thursday, March 6th 11:00 – 12:00 CST Dave Bohac | Director of Research Carl Nelson | Manager of Residential Programs Isaac Smith | Program Assistant • Past experience that have inform quality assurance best practices • Innovations are currently being used in the field • Future needs and opportunities for implementation Pg. 2
  3. 3. Meeting Utility Resource Needs with Solar: The Merits of the Aurora Solar Project Wednesday, March 19th 11:00 – 12:00 CST Betsy Engelking | Geranimo Energy Vice President Nathan Franzen | Geranimo Director of Solar • Introduction to the Aurora Solar Project that has been selected in MN • The design and technical merits of the proposed project Pg. 3
  4. 4. The External Health and Environmental Costs of Electricity Generation in Minnesota Dr. Stephen Polasky Applied Economics Professor University of Minnesota Pg. 4
  5. 5. Question & Answer Webinar Link: http://www.mncee.org/Innovation-Exchange/Resource-Center/
  6. 6. HEALTH & ENVIRONMENTAL COSTS OF ELECTRICITY GENERATION IN MINNESOTA Andrew L. Goodkind and Stephen Polasky
  7. 7. Introduction • Electricity generation contributes to air pollution with serious health and environmental impacts • Emissions include – Criteria air pollutants (SO2, NOx, VOCs…) – Greenhouse gases (CO2) • Impacts – Human health – Local/regional environmental effects – Climate change
  8. 8. Introduction • Why estimate the monetary value of health and environmental impacts? • Information for policy and planning – Resource planning: comparison of alternative energy sources – Resource use efficiency
  9. 9. Introduction • Why estimate these values now? • Minnesota Public Utility Commission uses estimates from the 1990s – Out-of-date – Not reflective of full costs
  10. 10. Bottom-line • Total cost: $2.454 billion annually – Central estimate of dollar value of damages to human health and the environment from electricity generation in Minnesota – $877 million from criteria air pollutants – $1.577 billion from GHG emissions • 94% of costs come from coal-fired power plants (58% of electricity from coal)
  11. 11. Bottom-line • Minnesota Public Utility Commission estimates of costs (“old estimate”) – Total cost between $58 and $257 million annually • Main differences – Old estimates: no damages from criteria air pollutants (“these are regulated”) – Old estimates: very low value for damages from greenhouse gas emissions
  12. 12. Results in context • Cost estimates have large margin of error – Central estimate of $2.454 billion annually – Range of estimates: $1.041 to $3.562 billion • Initial study not the final word
  13. 13. Results in context • Partial coverage of impacts • Included – Health and some environmental impacts from criteria air pollutants: SO2, NOx, PM2.5, PM10 – Climate change impacts from CO2 and other greenhouse gases • Not included – Damages from mercury emissions – Damage from VOCs, ammonia, metals – Damage to ecosystem services
  14. 14. METHODS TO GENERATE COST ESTIMATES
  15. 15. Cost estimates • Two important categories of cost – Health and environmental costs of SO2, NOx, PM2.5, PM10 – Climate change costs from CO2 and other greenhouse gases
  16. 16. Costs of criteria air pollutants • What are the costs from emissions of SO2, NOx, PM2.5, PM10 from Minnesota electricity generating plants? • National Academy of Sciences report: – National Research Council. 2010. Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use
  17. 17. Costs of criteria air pollutants • Main steps in the analysis: 1. Link changes in emissions to changes in ambient concentrations of air quality 2. Link changes in air quality to various health and environmental impacts (dose-response relationships) 3. Estimates the dollar value of these impacts
  18. 18. Step 1: From emissions to ambient air quality • Start with data on emissions from electric generating plant sources
  19. 19. Total emissions of pollutants from power plants in Minnesota (2008) Pollutant SO2 Coal 77,143 Natural Gas 80 NOX 61,184 684 1,458 293 180 422,061 15.1% PM2.5 3,201 29 478 32 15 214,189 1.8% PM10 8,201 109 553 40 16 794,405 1.1% NH3 5 213 367 10 0 203,768 0.3% VOC 583 31 109 4 22 1,210,933 0.1% Lead 0.91 0.001 0.038 0.006 0.006 22.0 4.3% Mercury 0.65 0.0001 0.008 0.0004 0.002 1.47 45.1% Biomass 402 Oil 602 Source: US EPA, National Emissions Inventory . Other 25 MN All Elect. % of Emissions Total 114,177 68.5%
  20. 20. Step 1: From emissions to ambient air quality • Air dispersion and air chemistry model (sourcereceptor model) • Air Pollution Emissions Experiments and Policy analysis (APEEP) model (Muller and Mendelsohn 2006) • Calculate change in ambient air quality by location: – With power plant emissions with versus without to get change in ambient air quality by location
  21. 21. Step 2: From ambient air quality to impacts • Dose-response relationships • Major cost comes from premature mortality – 10 μg m-3 increase in PM2.5 exposure related to 6% increase in premature mortality (Pope et al. 2002) – Some other studies have found larger impacts: Lepeule et al. 2012 find a 14% increase • Areas with higher populations exposed have higher impacts (location matters)
  22. 22. Step 2: From ambient air quality to impacts • Other impacts – Infant mortality from PM2.5 exposure – Chronic bronchitis and loss of visibility from PM10 – Chronic asthma, acute-exposure mortality, respiratory admissions, emergency room visits for asthma, and crop and timber loss from ozone – Chronic obstructive pulmonary disease and ischemic heart disease hospital admissions from NO2 – Asthma and cardiac admissions, and material depreciation from SO2
  23. 23. Step 3: From impacts to dollar value of costs • Focus on cost of premature mortality • Value of statistical life (VSL): $6 million (2000 USD) – Viscusi and Aldy (2003) estimate a mean VSL of $6.2 million (2000 USD), with a 95 percent confidence interval of $2.5 – $15.7 million • Values for other impacts are small in comparison with mortality costs
  24. 24. Costs of SO2, NOx, PM2.5, PM10 • Combining steps 1 – 3: increased costs from an additional unit of emissions of each pollutant at each location – Marginal damage: increased cost per unit of additional emissions • Total damage estimates: – For each pollutant: multiply marginal damage by the total amount of emissions – Sum over all pollutant types
  25. 25. Costs of SO2, NOx, PM2.5, PM10 • Range of marginal damage based on location Pollutant Mean 5th 25th 50th 75th 95th 𝐒𝐎 𝟐 5,800 1,800 3,700 5,800 6,900 11,000 𝐍𝐎 𝐗 1,600 680 980 1,300 1,800 2,800 𝐏𝐌 𝟐.𝟓 9,500 2,600 4,700 7,100 10,000 26,000 𝐏𝐌 𝟏𝟎 460 140 240 340 490 1,300
  26. 26. Costs of SO2, NOx, PM2.5, PM10 • NRC (2010): damage from the 406 coal plants in the U.S. – $62 billion (2007 USD) – 3.2 cents per kWh
  27. 27. Costs from greenhouse gas emissions • Cost per unit of greenhouse gas emissions: social cost of carbon (SCC) – Increase in future damages from greater climate change from an additional ton of CO2 in the atmosphere – Calculate CO2 equivalents for other greenhouse gases • Total cost equals social cost of carbon multiplied by total CO2 emissions • Simpler approach because location does not matter and no complex air chemistry
  28. 28. Total emissions of greenhouse gases from power plants in Minnesota 2006 (Thousand tons CO2e per year) Coal 38,173 Natural Gas 1,938 Oil 609 Other 578 N2O 91 18 21 58 7,606 2.5% CH4 7 3 0.3 6 12,897 0.1% 38,270 1,958 630 642 124,120 33.4% Pollutant CO2 Total GHG MN total % of total 103,617 39.9%
  29. 29. Costs from greenhouse gas emissions • Interagency Working Group on Social Cost of Carbon 2013 – SCC of $33 per metric ton CO2 eq. (2007 USD) – Sensitivity analysis: $11, $52 and $90 per metric ton • Major sources of uncertainty in SCC – – – – – Discount rate Future emissions of GHG Climate sensitivity Environmental impacts Monetary damages of impacts
  30. 30. COST ESTIMATE RESULTS
  31. 31. Costs per ton of pollutant for urban and rural counties Urban County Emissions Median (5th – 95th percentile) Rural County Emissions Median (5th – 95th percentile) $11,400 ($6,600 – $13,600) $5,100 ($1,900 – $6,500) $3,300 ($3,000 – $3,400) $2,300 ($1,300 – $2,900) PM2.5 $18,500 ($7,100 – $30,800) $3,400 ($2,700 – $6,600) PM10 $1,100 ($400 – $1,600) $200 ($150 – $350) NH3* $2,400 ($1,400 – $15,800) $900 ($600 – $1,700) VOC* $1,200 ($400 – $2,200) $230 ($140 – $370) Pollutant SO2 NOX
  32. 32. Total annual costs of emissions in SO2, NOx, PM2.5, PM10 in Minnesota Source Median $856 5th Percentile $498 95th Percentile $1,042 Natural Gas $3 $2 $6 Oil $7 $4.2 $9 Biomass $9 $5 $14 Other $1 $1 $2 $877 $502 $1,072 Coal Total
  33. 33. Total annual costs of greenhouse gas emissions from Minnesota • Multiply social cost of carbon by total number of CO2 equivalent tons of emissions Central $38/ton $1,454 Low $13/ton $498 High $60/ton $2,296 Catastrophic $104/ton $3,980 Natural Gas $74 $25 $118 $204 Oil $24 $8 $38 $66 Other $24 $8 $39 $67 $1,577 $540 $2,490 $4,316 Source Coal Total
  34. 34. Summary of cost estimates • Total health and environmental costs: – $2.454 billion – Range: $1.041 billion to $3.562 billion • Costs per kWh of electricity: – 4.6 cents/kWh for all sources of electricity – 6.8 cents/kWh for electricity generated from coal • External costs are significant – Average cost for households in Minnesota 12 cents/kWh (retail price)
  35. 35. THANK YOU FOR YOUR ATTENTION

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