Current Direction of Energy Policy and the Energy Market in Colorado

While Colorado seems to have relatively high success in energy production and efficiency, this is not represented to ratepayers in Colorado. According to Michael Sandoval, an energy policy analysist in Denver, “Across all sectors of Colorado the cost of electricity has skyrocketed more than 67 percent between 2001 and 2014, easily exceeding median income growth and the expected rate of inflation for the same period”. The cost of electricity is going up in Colorado, which is not only being pushed onto residential ratepayers, but also industry ratepayers. Increasing electricity and energy costs means that the price of living goes up in that particular region without any particular rise in standard of living. According to Citizens Advice, a network of policy workers and charities in the United Kingdom, increasing prices in energy has grave impacts on “people’s ability to maintain a decent standard of living”.

Furthermore, according to the Colorado Energy Office (CEO), “Colorado is a leader in renewable energy, with investments in wind, solar, biomass, geothermal, small hydroelectric, and other renewable energy resources increasing over the last decade”. The Colorado Energy Office, which is the direct advisor to the governor and state policy makers on energy policy, has the vision to “help Coloradans live more prosperous and healthy lives by promoting innovative energy production and efficient energy consumption practices that are beneficial to the economic and environmental health of the state”.

However, the Colorado Energy Office lists nuclear energy as traditional energy, and not a renewable or clean energy, thus disqualifying it from various state and federal programs and subsidies. The Governor of Colorado, John Hickenlooper, makes many comments and actions in promoting different energy sources and energy policy within Colorado. In August of 2016, when introducing new orders for carbon emission reduction he said “the one thing that we have to accept as a state and a country is that we are going to continue to move toward cleaner energy”. In a Denver Post opinion piece, he says that Colorado, in the spirit of the Obama Administration’s energy agenda, needs to have a diverse and various energy production market, which would include oil, gas, wind, and solar, but makes absolutely no mention of nuclear energy.

Colorado’s current energy focus as of March 2017 has been largely to increase wind and solar farms. One of the largest projects focused on has been Xcel Energy’s Rush Creek Wind Farm. The project consists of a wind farm that has a top capacity of 600 megawatts and a 90 mile transmission line to move the generated electricity. The project will take up about 95,000 acres and cost around $1.1 billion. Xcel plans on being heavily subsidized through production tax credits from the federal government under the Obama Administration’s Omnibus Appropriations Act.

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Environmental Externalities of Nuclear

Environmental externalities are an important cost associated with energy, but are a much more dispersed cost. Most of the other economic factors discussed in this report have related directly to the costs of energy companies, unless paid for by subsidy. For example, energy companies will have to buy the fuel, account for the reliability of an energy source, and build the necessary capital development. However, the environmental costs of an energy source are something not only paid for by energy companies, but by everyone to some degree. We all have a vested interest in the environment in varying degrees of capacity, which means we all foot the bill in some kind of way for environmental externalities.

Each energy source has some kind of environmental externality which is either obviously seen or more hidden. However, comparing environmental effects can be difficult as the effects are generally in completely different metrics. For example, how many birds and bats would have to be killed by wind farms in order to equal the amount of pollutions given off by a coal electricity generator? How much radioactivity exposure is equivalent to the environmental damages caused by liquid natural gas spills? It is like comparing apples to oranges.

Being emission-free is a popular concept and buzzword among many people. Out of the primary sources of energy which have been examined in this paper, wind, solar, and nuclear are all emissions free during the production of electricity. Hydro and geothermal are both emission free as well.

However, while this may be the case, emissions are not the only form of environmental effects related to energy production. A lot of the environmental externalities faced by energy production are faced during the mining of fuels, instead of the generating of electricity. For natural gas, reserves must be drilled to at depth. For renewables, rare earth elements must be mined. For coal and nuclear, mining also needs to take place.

When it comes to the environmental effects of nuclear energy, almost all of it has to do with the release of radioactivity, which is a unique from other forms of energy, which most concerns deal with emissions, animal deaths, etc. According to the U.S. Energy Information Administration, there are two forms of radioactive waste associated with nuclear power: low level waste and high level waste. Low level waste is radioactivity associated with the mining of uranium which would include mill tailings and tools that came into contact with the uranium during mining. The current and common practice with dealing with low level waste is to seal it with barrier so that radon is unable to escape into the environment.

High level waste is more difficult, as this is the spent reactor fuel after electricity has been produced. High level waste is generally dealt with on a case by case basis. For Fort St. Vrain, the former nuclear power plant in Colorado, fuel is kept on site and is under the discretion of the Department of Energy. Thought there is currently no permanent repository for nuclear waste disposal in the United States.

The environmental effect, and in turn the health effects, of high levels of radiation should not be understated. After large amounts of radiation were introduced from Chernobyl, 42,000 people had to be evacuated within a 30 kilometer distance. Out of the 129 firefighters responding to the accident, 17 died of radiation sickness, and 13 others became seriously ill. Furthermore, residents experienced increased higher rates of thyroid cancer.

According to the EPA:

Ionizing radiation has sufficient energy to cause chemical changes in cells and damage them. Some cells may die or become abnormal, either temporarily or permanently. By damaging the genetic material (DNA) contained in the body’s cells, radiation can cause cancer. Fortunately, our bodies are extremely efficient at repairing cell damage. The extent of the damage to the cells depends upon the amount and duration of the exposure, as well as the organs exposed.

Reliability of Energy Sources

The reliability of an energy source is an important economic factor. Since large sums of electricity cannot be stored at a time, energy supply must meet energy demand in real time. This means that when the most electricity is being used, the most electricity must be simultaneously created, and vice-versa.

This creates an interesting and constantly changing problem facing energy companies. They not only need to predict electrical output throughout the year, but also throughout the day. After predicting the energy needed, they will need to actually produce it. If their prediction is wrong or they are unable to create the energy needed, ratepayers could experience a shortage or the energy company could waste a lot of money via wasted electricity.

Since this is the case, extensive research has gone into electricity usage over time. Looking at a figure provided by the U.S. Energy Information Administration, we can see that electricity usage on October 22, 2010 in New England peaked at 8 in the morning, called the morning ramp, and 6 to 7 PM, which is the peak demand time. This data follows a regular pattern of electrical use. High use when people get up in the morning, and high use right when they get home from work. These are times when the most electrical supply is needed.

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This kind of data is also collected on a month to month basis. As seen in the figure below provided by the U.S. Energy Information Administration, electrical use goes in cycles with low use in the springs and falls and high use in the winters and summers. This is generally due to the use of heaters and air conditioners during these months.

CoalNatGasElecGenMatches

 

With this, the reliability of energy sources must be considered. Nuclear, natural gas, and coal are all time independent. You can always burn coal or natural gas, and you can always run nuclear reactors no matter the time of day or time of year. For renewables like wind and solar, this is not the case. The wind doesn’t always blow and the sun doesn’t always shine.

For solar, there are many parts in the country, including Colorado, in which the sun doesn’t shine during peak energy usage.  At 7 and 8 AM in Colorado in the winter time, the sun has hardly risen. By 5 PM, the sun has completely set in the winter thus completely missing the peak hour of usage. Furthermore, what if we experience large cloud cover or storms during times of high energy demands? Surely, there will be a shortage.

For wind, the story is similar. Luckily, the wind isn’t as variable upon seasons as the sun is, thus giving wind more chances of possible electrical generation time, but definitely not guaranteed time. There is no way to guarantee a satisfactory amount of wind will be blowing to ensure it will meet energy demands, thus making it unreliable.

Due to how unreliable renewable energy is, many countries, like Germany, are paying to keep coal generators in reserve in case the wind isn’t blowing or the sun isn’t shining. In the case of Germany, the government is paying billions of dollars to keep inactive coal generators in reserve. However, not only is it expensive to keep up the maintenance of these inactive coal generators, it is also expensive to flip these generators on and off (Porter).

A similar story occurred in South Australia. South Australia became heavily dependent on wind energy, though due to its unreliability, prices were unstable and surged frequently. The surges placed prices as high as $14,000 per megawatt-hour, frequently surged above $1,000 per megawatt-hour, and averaged at about $360 per megawatt-hour. The electrical prices seen in Victoria, Queensland, and New South Whales are around $50-$60 per megawatt-hour. Due to the surging prices, the South Australian government is begging and incentivizing gas-powered stations to begin operation again as reserve.

Cost of Energy Delivery

The cost of delivery is how effectively each energy can be transported to people, particularly high population areas. Since line loss, energy dissipating from electricity lines, occurs, it is important to put electricity generators close to the market it is intended to serve. The closer it is to the market, the less electricity is lost. Furthermore, putting up electric lines and the infrastructure associated with electric lines comes at a cost which is preferably avoided. This means the cost of delivery is highly dependent on where an electricity generator may be put.

Nuclear power plants are very flexible in where they can be placed. According to Lydia DePillis, an energy writer for Slate, the three factors considered in building a nuclear power plant is “state laws, geography, and the disposition of the local community.” Since the dispositions of the local community and state laws are variable and can be changed over a short period of time, they will not be considered in economic analysis, but will be examined further in the political implications section. When it comes to the geography factor, nuclear reactors need to be placed near large bodies of water, whether it is the ocean, a large river, or a large lake. The water source is used as a coolant for the reaction.

Since coal and natural gas are also thermoelectric power, meaning they create steam to spin electric turbines, they have similar requirements as nuclear energy. They require large amounts of water as a coolant, meaning they need to be placed near water sources. In Colorado, this limits us to the natural lakes, reservoirs, and rivers that can be seen in the provided figure. While reservoirs can be created specifically for nuclear, coal, or gas plants, this is an expensive and preferable option. However, there are water features spread out across Colorado, making it possible to construct these plants essentially anywhere.

colorado-river-map

 

For renewables like solar and wind, farms must be placed where they will be most effective. The wind doesn’t blow at the same rate everywhere and the sun doesn’t shine equally across the United States. Solar farms must be placed where they will get the most sun and wind farms must be placed where they will get the most wind. Looking at the map provided by the National Renewable Energy Laboratory, we can see where the sun shines most intensely in the United States and least intensely.   This map shows that the south western area of the United States has the most ideal sun exposure for solar energy, and the north eastern area of the United States is one of the least ideal areas for sun exposure. A majority of Colorado rests in 5.5-6.0  kWh/m2/day. While a lot of Colorado rests in a higher area of sun exposure, some of the most populated areas in Colorado, specifically Denver, Boulder, and Fort Collins, do no fall into, or barely fall into, the higher sun exposure areas, thus creating a higher cost of delivery for solar energy in Colorado.

national_photovoltaic_2009-01

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For wind, The National Renewable Energy Laboratory provides a map giving the average annual wind speed at 80 meters above ground level. This map shows that the central United States has the highest average wind speeds, making it more favorable to wind farms as compared to coastal areas. Most of Colorado ranges on the lower end of wind speeds from less than 4 meters per seconds to 5.5 meters per second, though the eastern side of the state ha pieces that can range 8.5 to 9 meters per second. These eastern areas would be the most ideal for wind farms in Colorado, but they are also far away from Colorado’s population centers like Denver, Boulder, and Colorado Springs thus creating a higher cost of delivery for wind energy.

USwind300dpe4-11

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Looking at these geographic implications, we can assess the relative cost differences of the energy sources for delivery. Natural gas, coal, and nuclear all are very versatile, as their only requirement is that they need to be near a water source. Wind and solar energy are less versatile and require higher levels of wind and sun exposure. However, sun and wind exposure do not always line up with areas of population, thus increasing its relative cost of delivery.

Do We Know Enough About Energy Policy?

Energy policy can be really boring to most people. Energy policy combines a lot of technology and science issues with socio-economic and political issues, which creates a complex relationship. Within this complex relationship, there is a lot of published data, ongoing research, and political work-arounds.

Furthermore, its topics don’t grab young minds like drug policy or foreign policy. I suppose oil and gas is not as sexy to think about as the implications of joints and bombs. I get it. Well, I understand you, but I don’t agree with you.

However, something that became clear to me when I became more interested in energy policy is that almost no one seems to understand it even a little bit. It is like there is a complete black out of knowledge among Americans when it comes to our energy policy and interests. This surprised me because energy policy is so important. It effects everyone in the United States no matter what. If you are reading this blog, you are using energy to read this blog and to keep the servers up for this blog. We all have lights to turn on. We all have vehicles to ride in, whether it is our own car, a bus, or an Uber. Our lives, our planet, and our standards of living are all in wedlock with the energy policies of the nation.

Many friends of mine were fascinated with the Standing Rock protests, which how could you not be with the terrible brutality those protesters had to go through. Yet, very few of these friends had much of a coherent clue of what it was they wanted. They didn’t know how much pipeline had already been built in the United States (around 2.5 million miles), and why this was decided as an effective method to transport oil and gas. They didn’t know what alternatives there were to a pipeline, and they didn’t really know where this pipeline was being placed and who had ownership of this land. However, these to me were minor lapses of understanding. I mean besides industry leaders and top policy wonks, who could really give you the amount of pipeline built in the US right off the top of their head? (Me. THAT’S WHO!)

The most egregious misunderstanding is that many of them truly believed we could live in a world without fossil fuels right now. That we could simply pack up our oil, gas, and coal operations, and there would only be minor complications. This is laughably ignorant, and it is such a widespread idea among college students! Even students at South Dakota School of Mines and Technology, which is an engineering and science school! I don’t want to get too bogged down on this specific point and will devote a post on its own to this topic, but looking at the primary energy consumption data posted by the U.S. Energy Information Administration should help clear up this fable. Looking at the amount of energy produced in total from 2015 (97.22 quadrillion BTUs) compared to the amount of energy produced by renewables, which includes hydroelectric, geothermal, wind, solar, and biomass, in 2015 (9.450 quadrillion BTUs), it is clear that renewables have a lot of work to do before we can completely throw away fossil fuels. Getting rid of oil and gas outright would clearly cause widespread shortages, which means immense suffering among people that need electricity right now (think hospitals, 911 responders, etc).

And my anecdotal evidence of my friends is not the only evidence I have for people being grossly ignorant on energy policy issues. Americans have been historically really bad with energy policy.

In 1978, two thirds of Americans polled thought that a nuclear power plant accident could result in an explosion like Hiroshima. Furthermore, this was around the same time that James Bridges’ movie, The China Syndrome, came out, which claimed that during a nuclear power plant melt down, the fuel rods would be so hot that they could burrow all the way to China. People watched and, presumably, believed this movie.

In 1977, 52% of Americans polled by Roper answered that they thought solar power would overtake foreign oil imports in the next 5 years, and 16% thought that wind power could do it. Yet here we are, still importing foreign oil 40 years later.

In the 1970s, a majority of Americans thought that the gas lines and energy shortages were due to oil companies greedily hiding their oil somewhere out of the United States so that they could sell oil for higher prices! As if the instability in the Middle East (particularly Israel and Egypt), environmental regulations, and inflation played absolutely no roles in rising oil prices!

But perhaps, people are smarter now. All these examples are from the 1970s, and after 40 years, perhaps the public became wiser. I will delve into this question on future blog posts. I have to get you to come back to my blog somehow!

 

(The historical polls referenced in this post all came from Eric R.A.N. Smith’s book Energy, the Environment, and Public Policy, which can be bought on Amazon here)