The Cost of Net Zero Electrification of the U.S.A.

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Ken Gregory, P. Eng.

This article by Ken Gregory, P. Eng. is a critique of an influential report  by Thomas Tanton “Cost of Electrification: A State-by-State Analysis and Results” and provides corrected new capital cost estimates to achieve net zero emissions in the U.S.A. Estimating the increased operating costs is beyond the scope of the study.  This post provides a condensed version of the blog post previously published at Friends of Science here.

Executive Summary

Many governments have made promises to reduce greenhouse gas emissions by replacing fossil fuels with solar and wind generated electricity and to electrify the economy. A report by Thomas Tanton estimates a capital cost of US$36.4 trillion for the U.S.A. economy to meet net zero emissions using wind and solar power. This study identifies several errors in the Tanton report and provides new capital cost estimates using 2019 and 2020 hourly electricity generation data rather than using annual average conditions as was done in the Tanton report.  This study finds that the battery costs for replacing all current fossil fuel fired electricity with wind and solar generated electricity, using 2020 electricity data, is 109 times that estimated by the Tanton report. The total capital cost of electrification is herein estimated, using 2020 data, at US$433 trillion, or 20 times the U.S.A. 2019 gross domestic product. Overbuilding the solar plus wind capacity by 21% reduces overall costs by 18% by reducing battery storage costs. Allowing fossil fuels with carbon capture and storage to provide 50% of the electricity demand dramatically reduces the total costs from US$433 trillion to US$24 trillion, which is a reduction of 94.6%. Battery storage costs are highly dependent on the year’s weather and the seasonal shape of electricity demand.

The U.S.A. government has set a target to reduce greenhouse gas emissions from fossil fuel use and cement manufacturing to net zero economy-wide by no later than 2050. Some believe this could be achieved by replacing most fossil fuel use with non-emitting energy sources and sequestering carbon dioxide (CO2) emissions from the remaining fossil fuel use by carbon capture and storage (CCS).

Mr. Tanton is President of T2 & Associates, a firm providing consulting services to the energy and technology industries. T2 & Associates are active primarily in the area of renewable energy and interconnected infrastructures. Mr. Tanton is also Director of Science and Technology at Energy and Environment Legal Institute. He has provided expert testimony regarding energy technology to the House Energy and Commerce Committee and several state legislatures.

The executive summary of the Tanton report states for the U.S.A. “Electrifying the entire nation, with a goal of eliminating the direct consumption of fuel would cost between US$18 trillion and US$29 trillion in first costs.”  The lower cost assumes that dispatchable fossil fuels are used to generate electricity with carbon capture and storage to electrify the U.S.A. economy. The higher cost assumes only solar and wind (S+W) are used to replace other power sources for electricity generation with batteries for backup energy to handle the solar and wind intermittency.

The Tanton report says that the costs were based on the average monthly demand for natural gas, ignoring the seasonal variations. The demand in January in the residential sector is 2.5 times higher than the average monthly demand for natural gas. This must be taken into account to protect public health and safety. The report says “This would add approximately $7 trillion to our estimates for a total of over $36 trillion.”

The review of the Tanton report found 10 major problems. Here I summarize only five of the problems.

  1. The battery storage costs are far too low and do not account for seasonal, daily and hourly changes of S+W output.
  2. Nuclear, hydro, biomass, geothermal and waste heat sources do not need to be replaces. Accepting these sources causes the fraction of power generation that should be replaced to be reduced from 90% to 60% which is the fossil fuel portion for 2020.
  3. The S+W average capacity factor should be reduced from 33% to 28%.
  4. Natural gas used in buildings was double counted as that volume was also included in natural gas used for power generation.
  5. Costs for converting off-road vehicles (e.g., tractors) to electricity are excluded.

The net effect of the identified errors is that the Tanton report underestimated the costs of “decarbonizing” the US electrical energy system in the case without using fossil fuels.

I created a spreadsheet to calculate the battery storage requirement assuming that the hourly fossil fuel fired electricity generation is all or partially replaced by S+W energy. I assumed that the battery efficiency is 90%, meaning that charging the battery with 100 MWh and discharging 90 MWh leaves the battery storage unchanged. The spreadsheet calculates hourly imbalance between the customer demand for electricity and the supply of S+W and fossil fuel fired electricity. The battery charge is adjusted from the imbalance to account for the battery efficiency.

Battery storage costs were estimated at US$347 per kWh of energy storage capacity from a US Energy Information Agency report. The battery costs of the Tanton report buys storage capacity equal to 0.22 days of average electricity generation.

I created 7 cases utilizing the 2019 and 2020 solar plus wind hourly production profiles. Four cases assume that 0%, 50%, 40% and 60% of actual 2019 or 2020 fossil fueled electricity generation would be used and the other portion would be provided by S+W electricity to supply electricity demand that is currently provided by fossil fuel and S+W power. Henceforth, the term “electricity demand” means the electricity demand provided by fossil fuel and S+W generation. Hydro, nuclear and biomass fueled electrical generation are held constant. Three cases assume that S+W generation capacities are higher than required to replace the fossil fuel fired electrical energy but the S+W power output is limited to a maximum value. The overcapacity of S+W generation increases its cost but reduces the variability of the used generation and reduces battery costs. The electricity requirements for replacing directly used fossil fuels were calculated in each case using the same fraction of fossil fuels for electricity generation as the current electricity demand.

The cases with fossil fuel fired electricity include costs for carbon capture and storage (CCS) and reduce the amount of solar and wind power that would be required to meet net zero emissions. The costs of CCS are based on estimates published by the US EIA in 2020.  The total CCS costs were estimated at $2,583/kW of net plant capacity. All costs are in US 2019 dollars. In the cases where fossil fuel fired electricity is used, the maximum fossil fuel fired generation is reduced by 15% to account for the extra fuel required to capture the CO2 from the exhaust gas. The aviation and shipping costs are the cost of carbon capture and storage (CCS) for the fossil fuels used. Airplanes and ships are assumed to continue to use fossil fuels in all cases.

Figure 1 shows the actual hourly net S+W net electricity generation for the years 2019 and 2020 for the contiguous 48 states. The graph shows the electricity generation is extremely variable. The use of S+W generation from 48 contiguous states implicitly assumes that there is sufficient unconstrained transmission capacity to share any excess or to cover any shortfall among the states.

Figure 1

Case 1

This case is equivalent to the Tanton report case of replacing non-renewables with S+W energy. I assume that the S+W energy added equals the fossil fuel generated electrical energy it replaces and battery storage would be used to provide (or store) electrical energy when wind and solar energy generation are less than (or greater than) the total hourly demand.

Figure 2 shows the hourly S+W energy that would be required if the fossil fuel fired electric energy was replaced with S+W energy with battery backup using the 2020 S+W production profile.

Figure 2

Figure 3 shows the change in battery energy storage required to backup the S+W energy to avoid energy shortfalls utilizing the 2019 and 2020 S+W production profiles. The S+W energy produced in the case over each year is equal to the fossil fuels fired electrical energy plus the S+W energy actually produced in the USA during the year.

Figure 3

The table case 1 shows the existing demand (ED), days of battery storage required, battery losses, the battery storage used and the solar+wind multiplier. The battery storage is the maximum energy storage level less the minimum energy storage level of each year. The days of storage is 365 days times the required storage percentage of the total demand. The solar + wind multiplier is the factor by which the S+W capacity was increased to replace the annual fossil fueled generated electricity.

Case 1Solar and wind replaces fossil fuels
Existing demand ED (TWh)[1]30262937
Days of storage26.930.7
Battery losses for ED (TWh)41.441.5
Battery storage for ED (TWh)206.0228.3
Solar+wind multiplier7.8066.602
Storage cost ED (US$ B)[2]77,42485,689
Total cost of ED (US$ B)79,37987,552
Conversion from nat. gas (US$ B)119,922136,313
Convert buildings (US$ B)9,4799,479
Electric vehicle costs (US$ B)6,6446,644
Vehicle electricity (US$ B)169,906193,129
Aviation and shipping CCS (US$ B)191191
Total cost (US$ B)385,550433,308
Total storage cost (SU$ B)358,933406,697

Table 1

The Tanton report assumes that 0.22 days of battery storage was required using annual average values, while the hourly analysis shows that using the 2019 and 2020 S+W production variability, the days of battery storage required for the US economy powered without fossil fuels would be 26.9 days and 30.7 days, respectively. Considering only the current electricity demand, the battery storage costs using the 2020 production profile is US$85.7 trillion, or 109 times the US$ 0.786 trillion battery storage costs estimated in the Tanton report.

The total cost to electrify the USA is US$386 trillion with the 2019 profile and US$433 trillion with the 2020 profile. To put these costs in perspective, the USA nominal gross domestic product (GDP) in 2019 was US$21.43 trillion. The 2020 total cost of electrifying the US economy is equivalent to over 20 times the US 2019 GDP.

Case 2

In Case 2 the S+W capacity is increased from case 1 with the goal of reducing storage requirements. This creates excess S+W capacity; consequently the S+W output must be limited to a fraction of its capacity. This wastes generating capacity but reduces battery storage requirements. The maximum S+W dispatched to satisfy demand is reduced from 100% to 47.1% of generation capacity. The total battery storage costs with the 2020 production profile drops from case 1 to case 2 by US$78.6 trillion.

Figure 4 shows the hourly S+W energy required for case 2 using the 2020 S+W production profile.

Figure 4

The battery storage capital costs with the 2020 production profile declines by US$78.6 trillion. The total cost with the 2020 profile is reduced by 17.7% due to lower storage costs despite higher S+W capacity of 21.2% compared to case 1. The total cost of case 2 is US$317 trillion and US$357 trillion using the 2019 and 2020 S+W production profiles, respectively.

Case 3

In Case 3 the fossil fuel fired generation capacity in maintained at current levels but it provides 50% and S+W provides 50% of total demand. The S+W capacity is reduced compared to case 1 and the S+W energy output isn’t limited as it was in case 2.

By allowing fossil fuels to provide 50% of electricity demand, costs of electrifying drop dramatically. The maximum capacity of fossil fuel fired electricity with the 2020 production profile is maintained at the actual capacity of 486 GW, but it only provides electricity equal to an average power of 307.2 GW. Battery storage costs are nominal at only US$0.9 trillion with the 2019 profile and US$0.1 trillion with the 2020 profile. CCS costs are US$2.2 trillion. The total cost with the 2020 profile is US$23.5 trillion, which is only 5.4% of the case 1 total cost.

Figure 5 shows the fossil fuel fired and S+W electrical generation with the 2020 production profiles.

Figure 5

During much of the year the fossil fuel fired electricity production is far below capacity, even going to zero a times, but for months fossil fuels provide most of the electrical demand. The fact that fossil fuel generation is vastly less expensive that battery storage is what drives the cost down.

Case 4

In case 4, fossil fuel provides 50% of the electricity demand and the S+W capacity is increased by 6% from the case 3 value but the S+W power generation is limited to a maximum of 57.5% of its capacity with the 2020 profile. The total cost of the case decreases by US$0.46 trillion with the 2019 production profile but increases US$0.18 trillion with the 2020 production profile.

Cases 5, 6 and 7

In cases 5 and 6 the fossil fuel share of electricity generation decreases to only 40% and S+W contributes 60% of electricity demand. In case 7 the fossil fuel share of electricity demand is 60%. The 2020 production profile gives lower total costs than the 2019 production profile. This is because the 2020 profile has lower total electricity demand and, for cases 5 and 6, lower storage requirements. The actual 2020 electricity demand was materially affected by the COVID pandemic. Case 6 has lower costs than case 5 because the lower battery storage requirements more than offset the higher S+W capacity costs. Case 7 has the lowest total cost of all cases for both production profiles because it uses the highest fraction of fossil fuels which are dispatchable and not weather dependent.

Summary of Cases

Table 3 summarizes the total costs of the seven cases.

Total cost of electrificationUS$ trillionUS$ trillion
CaseFossil Fuel %S+W increase capacity20192020

Table 2

Conclusions and Discussion

I reviewed the Tanton report which estimated the capital costs of the electrification of the USA without the use of fossil fuels. I listed several issues with the report. The most important problem was that without fossil fuels providing electricity back up for intermittent and variable wind and solar energy, battery storage back up is extremely expensive. The calculations show that total battery storage costs for existing electricity demand is 109 times the Tanton estimate and the total battery costs for existing and new electricity demand is 88 times the Tanton estimate when using the 2020 production profile.

The total cost of electrification without fossil fuels is estimated at US$386 trillion and US$433 trillion using the 2019 and 2020 energy production profiles, respectively. Since the weather and consequently the battery storage costs are so variable, the actual battery storage costs would be higher than estimated here to provide a reasonable amount of contingency battery reserve. The cost of US$433 trillion is equivalent to over 20 times the US 2019 GDP. It would cost every adult (18 year and over) a total of US$1.7 million!

The total electrification capital costs with the 2020 production profile are reduced by 18% by overbuilding the solar plus wind capacity by 21%. The tradeoff is that battery storage costs are significantly reduced.

When fossil fuels provide 50% of the total electricity demand, it is also providing backup services for the S+W electricity, so battery cost are mostly eliminated and electrification capital costs are reduced to about US$24 trillion. Capital costs can be further reduced to about US$23 trillion by allowing fossil fuels to provide 60% of the total electricity demand.

Note that the estimates for CCS assume that coal or combined cycle natural gas fired power plants are used, but these high efficiency power plants are generally unsuitable for backing up S+W generation because the rapid swings necessary to match total generation to net demand (the demand left over after subtracting that supplied by extremely variable W+S generation) puts a great deal of thermal strain on the plant components, thereby increasing maintenance costs.  It also reduces the thermal plants’ fuel efficiency. Thermal backup power is more often provided by smaller, more flexible simple-cycle gas turbines that have lower capital costs but also lower fuel efficiencies.

The simple cycle gas plant will emit 57% more CO2 than a combined cycle gas plant for the same electricity output. This suggests that the capital costs estimated herein for CCS may be low and the operating costs for backup power will be much higher than they are currently.

Please see the entire article here (PDF file).

[1] TWh = Terrawatt-hours = 1000 GWh. “Demand” means electricity energy requirements.

[2] B = billion.

via Watts Up With That?

January 12, 2022