Tuesday, May 15, 2012

Green watts before green horsepower?

When I recently logged into the Los Angeles Department of Water and Power (LADWP) website, one thing that drew my attention in addition to the vastly improved and user friendly webpage (this is one metric on which it seemed LADWP was stone age) was a link to an option to buy green electricity.  As an environmental economist, one of many things I call myself, I believe in taking the cost-effective actions first. In other words I like to pick the low hanging cherries first (I am still reeling from the effects of having picked all the cherries I could for $6 last weekend at a farm near Bakersfield) . Moreover, I have been disappointed at not being able to convince myself to buy a hybrid car leave alone an electric car. While I believe there is still opportunity for me to improve my energy use efficiency (I still have a few incandescent bulbs that I turn on briefly) I am interested in contributing more directly towards the growth of alternative energy technologies. My complaint is only with the public policies that are being pursued to achieve this, which is a topic for another post. While I don't believe charity will save the day, I definitely support voluntary private action. I was therefore excited when LADWP said I could opt to buy green electricity at an additional cost of only 3 cents per kWhr. I naturally proceeded to do a cost-effectiveness calculation of what I am paying to abate carbon if I chose LADWP's green power option.

Ignoring for a moment the issues such as whether higher demand by LADWP customers for green power simply leads to reshuffling of green electrons from other regions and whether the green sources are really green and assuming the average carbon intensity of electricity in California is 0.5 kg CO2/kWhr, if I signed up for LADWP's green power, then for $0.03 cents I am reducing my emission by 0.5 kg CO2, which implies a cost of $60 per ton of CO2. If my electricity was the US average mix with a higher carbon intensity of 0.7kg CO2/kWhr, this reduces to $42 per ton CO2 and if I am on the margin displacing coal with a carbon intensity of 0.95 kgCO2/kWhr, I am paying only $32 per ton CO2. (If you  kept track of the number of things I said I am ignoring and number of things I  said I am assuming and you disapprove of it, I am sorry to say you should not consider economics as a profession :) ) 

This is not bad at all when compared to having to purchase a solar panel or electric car and having to wait for several years for an economic and environmental pay back. This seems to suggest there are economies of scale in grid scale solar and wind, which are likely to be the marginal sources of green electricity (I am assuming new large hydro and nuclear are either excluded or unlikely to be built. If, however, they are part of the green portfolio it needs more investigation). I am refraining from a comparison to hybrid cars for under some conditions hybrids have lower or even negative cost of carbon abatement i.e., the net present value of the investment is lower for the hybrid car compared to a gasoline car. But of course there is positive payback period and a slightly higher upfront cost compared to conventional cars compared to the green power option.

LADWP offers one to choose the fraction of monthly use that one would like to derive from green power. This of course does not affect the cost-effectiveness from an individual's standpoint. But the question of what happens when a large number of consumers demand green power, how does this affect the price of brown electricity, how does electricity consumption rebound as a result, how does it impact emissions and how do we avoid such unintended consequences - these are more complex and interesting questions. I have several hypotheses that can make for an interesting graduate thesis or dissertation.

My apologies to my fictional followers of this post for being slower than the economy in growing the number of posts. I however think a local minimum has been reached and so the next post is unlikely not take this long.

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