World Bank Power Projects:Crossroads on Renewable Energy

David WheelerKevin Ummel

Center for Global Development

Kyoto, 1997

Copenhagen, 2009

What Has ChangedSince Kyoto?

• Carbon Emissions

• Climate Impact

• The South’s Role

• Clean Technology Fund

• Carbon Pricing

• New Technologies

CO2 Emissions: Greater Than Predicted

20,000

40,000

60,000

80,000

100,000

120,000

1990 2010 2030 2050 2070 2090

25,000

30,000

35,000

40,000

1990 1995 2000 2005 2010 2015

IPCC Worst-Case Scenario

Projected

Actual

1990 - 2100

Climate Impacts: Faster Than Predicted

"The situation is so desperately serious that any delay could push us past the tipping point”

Ban Ki-Moon – Bali, 2007

• Ice Cap Melting• Greenland• West Antarctica

• Extreme Weather Events• Droughts• Floods• Cyclones

2005

2007

Texas +California

Developing Countries’ Role Has Changed

Kyoto Protocol (1997)

• The North Caused Global Warming• The North Should Fix It• The South Should Focus on Poverty

“We don’t accept the idea that the emerging nations are the ones who have to make sacrifices, because poverty itself is already a sacrifice.”

Brazil’ President da Silva, G8 Meeting, June, 2007 1900 2000 2100

Current Situation

CO2 Emissions, 1900 - 2100(History + IPCC)

South North

Developing-Country View

300

350

400

450

500

550

600

1980 2000 2020 2040 2060 2080 2100

Year

Global

South

300

350

400

450

500

550

600

1980 2000 2020 2040 2060 2080 2100

Global

South

300

350

400

450

500

550

600

1980 2000 2020 2040 2060 2080 2100

Global

South

Atm

osph

eric

CO

2 C

once

ntra

tion

(ppm

)

*IPCC Scenario A1F1IPCC

Critical Threshold

RealCritical

Threshold?

A Carbon-Intensive South Faces Environmental Disaster,No Matter What the North Does

Implications for the 2009 Copenhagen Conference

• North – South: All Countries at the Table• Efficient Mitigation• Rapid Clean Technology Diffusion• Support for Adaptation

CleanTechnology

Fund

Carbon Pricing (1)

Operating:European Union Emissions Trading System

(EU Allowance Units)Price Per Ton of CO2Current: $35.33Expected (New Climate Action Plan): $50.00

ProposedAustraliaUS (Warner – Lieberman, others)

Expected Price Per Ton of CO2: $20 - $40(Citigroup, JP Morgan ChaseMorgan Stanley, Bank of America)

Cap-and-Trade Systems

IMF Fossil Fuel Price Indices, 2004 - 2008

0

50

100

150

200

250

300

350

400

2004M1 2004M7 2005M1 2005M7 2006M1 2006M7 2007M1 2007M7 2008M1

Coal (Australia)

Coal (South Afr.)

Gas (Indonesia)

Oil (Combined)

Carbon Pricing (2)

William Nordhaus, Yale $8 700Current CDM $15US Warner-Lieberman Bill $20-40EU cap-and-trade (now) $35EU (after new reform) $50Martin Weitzman, Harvard $50Thomas Schelling, Maryland $50Sir Nick Stern, LSE $80 550James Hansen, NASA $200+ 350

Carbon Charges: Prices and Consequences

ChargeCO2

Concentration

0

5

10

15

20

25

30

2007M3 2007M5 2007M7 2007M9 2007M11 2008M1

Coal Price Increase Since 2007 Q1:Equivalent Charge for CO2 Emissions ($/Ton)

We Have NoShortage ofEnergy

Annual Solar Radiation:80,000 Terawatts

Total Energy Need in 2050:50 Terawatts

New Technologies(Example: Solar Thermal)

(1)ReflectorsMove With

the Sun

(2)Water Boils

In Fixed-PipeReceivers

(3)Heat StorageFor 24-HourOperation

(4)-(5)Steam Turbine

Generation

(6)Water

CondensationAnd Re-Use

Source: Ausra, Inc.(www.ausra.com)

Solar Thermal Technology(Compact Linear Fresnel Reflector)

Solar Thermal TechnologyArea ( ) Required to Power the Entire US*

* Khosla and O’Donnell (2007)

Solar Thermal Power: Status in the US(Similar in Europe)

San Luis Obispo County

175 MW CapacityStartup in 2010

Example:PG & E, California with Ausra, Inc.

500 MW Operating2 Gigawatts Under Agreement

Worldwide Solar Energy Supply

Direct Normal Radiation: Average daily KWh per square meter

0 - 1 1 - 2 2 - 3 3 - 4 4 - 5 5 - 6 6 - 7 7 - 8 8 - 9

Data from NASA’s Surface Meteorology and Solar Energy Database

Necessary for solar techs…

Possible Learning Curves for Solar Thermal Power

Static Project Analysis

Dynamic Program Analysis

4

6

8

10

12

14

0 5000 10000 15000 20000

10%

15%

20%Cos

t (ce

nts/

kWh)

Cumulative Capacity (MW)Supercritical Coal Cost7.65 ¢/kWh

• Private Investors Look at Present Value(Capital, Operations & Maintenance, Fuel)

• CDM Credits Are Available for Emissions Averted • Clean Technology Fund Covers the Remaining Difference

Static Project Analysis

Dynamic Program Analysis

CLFR Solar Thermal

vs.

Supercritical Coal

0

500

1,000

1,500

2,000

0 5 10 15 20

Program Costs ($Million)

Program Year

456789

1011121314

0 5 10 15 20

Program Year

Cos

t

Solar Thermal Coal

Solar Learning Curve

Costs Reach Parity in Year 6

With CDM Credit of $15/Ton CO2,Subsidy No Longer Needed by Year 5

PresentDiscountedCost

Static Project Analysis

Dynamic Program Analysis

Program Benefit

Year

010,00020,00030,00040,00050,00060,00070,000

0 5 10 15 20 25 30

Tota

l MW

Expansion Field: 650,000 MW

0102030405060

0 5 10 15

Year

500

MW

Uni

ts

Solar Generators Operating

Program Ends Cost Parity Program Ends

Year YearProgram Ends Program Ends

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

0 5 10 15

01,000,000,0002,000,000,0003,000,000,0004,000,000,0005,000,000,000

0 5 10 15 20 25 30

CO2 Emissions Averted

Tons Discounted Discounted

Learning Rate (% Cost decline when cumulative output doubles) 15% 15% 15% 15%

Levelized Costs (cents/kWh) CLFR Solar Thermal (cents/kWh) 10.53 13.42 16.31 16.31 Supercritical Coal (cents/kWh) 7.65 7.65 7.65 5.82

Switching Charge ($/Ton CO2)Static Switching Charge $31.47 $63.05 $94.64 $114.64Dynamic Charge - Program Only $7.85 $15.31 $24.96 $28.50Dynamic Charge - Full Impact $0.42 $1.28 $3.21 $9.45

ResultsProgram Years 1 4 7 14Years to Cost Parity 3 6 12 24Total Payment Required ($Million) 547 3,048 8,945 21,712Total Tons CO2 Averted (Million) 12,823 22,379 23,857 15,727Social Rate of Return (%) 6,960 2,241 835 217

Dynamic Program Assessment:Some Results

Conclusions

• Critical Problem: Rapid Carbon Abatement• Critical Sector: Baseload Power• Ultimate Objective: Renewable Cost<Coal Cost• Solar Thermal Power is a Viable Candidate• Excellent Solar Potential in LDC’s (esp. Africa)• Static Cost Differential Has Narrowed• Dynamic Program Analysis Conclusions:• Cost Parity with Coal in 5-10 Years• Very High CO2 Abatement Potential• Very Low CO2 Switching Charges