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Table of Contents

Cover Image

Copyright

Dedication

Foreword

Preface-Reducing the Carbon Footprint: A Multidimensional Problem

About the Contributors

Introduction-Carbon Constrained: The Future of Electricity Generation

Chapter 1. Stabilizing World CO2 Emissions

1.1. Introduction

1.2. The magnitude of the task

1.3. Achieving global emission reductions

1.4. Paths to emission reductions

1.5. Conclusion

Chapter 2. Carbon Policies

2.1. Introduction

2.2. Options for CO2 emission reduction

2.3. An electricity market model with carbon policy

2.4. Simulation results

2.5. Conclusion

Chapter 3. Emerging Carbon Markets and Fundamentals of Tradable Permits

3.1. Introduction

3.2. Carbon market size

3.3. Cap-and-trade schemes

3.4. New environmental markets

3.5. Market oversight

3.6. Market registries and tracking systems

3.7. Conclusion

Chapter 4. Making It Personal

4.1. Introduction

4.2. Basic features of a national carbon allowance scheme

4.3. U.K. case study

4.4. Danish case study

4.5. Conclusion

Chapter 5. Addressing Climate Change

5.1. Introduction

5.2. The pros and cons of local and global scales

5.3. A policy framework for blending local and global scales

5.4. Conclusion

Chapter 6. Eliminating CO2 Emissions from Coal-Fired Power Plants

6.1. Introduction

6.2. The basics of carbon capture and storage

6.3. Carbon capture technologies: Retrofit options for coal-fired power plants

6.4. Integrated CO2 capture designs

6.5. The zero-emission concept

6.6. Carbon storage options

6.7. Conclusion

Chapter 7. The Role of Nuclear Power in Climate Change Mitigation

7.1. Greenhouse gas emissions and nuclear power

7.2. The cost of nuclear power

7.3. Nuclear's critical growth regions

7.4. Nuclear power's impact on GHG emissions

7.5. Conclusion

Chapter 8. Barriers and Policy Solutions to Energy Efficiency as a Carbon Emissions Reduction Strategy

8.1. Introduction

8.2. The magnitude of the energy efficiency resource

8.3. Integration of energy efficiency into climate change mitigation policies

8.4. Policies and programs to overcome barriers and market imperfections

8.5. Conclusion

Chapter 9. Wind Power

9.1. Introduction

9.2. The global wind power market

9.3. Twenty percent wind electricity by 2030

9.4. The potential global role of wind power

9.5. Conclusion

Chapter 10. Solar Energy

10.1. Introduction

10.2. Solar resource and conversion technologies

10.3. Solar technology cost and market trends

10.4. High penetration limits

10.5. Potential for mitigating carbon emissions

10.6. Conclusion

Chapter 11. Geothermal Power

11.1. Introduction

11.2. Geothermal power from naturally occurring reservoirs

11.3. Geothermal in the United States

11.4. Engineered geothermal systems: manmade reservoirs

11.5. Conclusion

Chapter 12. Hydroelectricity

12.1. Introduction

12.2. Current use and potential of hydropower

12.3. Barriers to future development of hydro resources

12.4. Overcoming barriers to future hydro development

12.5. GHG emissions associated with hydropower

12.6. Conclusion

Chapter 13. Ontario

13.1. Introduction

13.2. The setting in Ontario

13.3. The evolution of the coal-replacement policy

13.4. The coal-replacement plan

13.5. Stakeholder assessments of the phase-out strategy

13.6. Challenges with the phase-out strategy

13.7. Conclusion

Chapter 14. Kicking the Fossil-Fuel Habit

14.1. Background: NZ energy policy and its context

14.2. Historical development of the New Zealand system

14.3. Integrating renewables

14.4. Norway and Iceland as models

14.5. Modeling the future NZ portfolio

14.6. Evaluating the current policy

14.7. Conclusion

Chapter 15. Carrots and Sticks

15.1. Introduction

15.2. Context

15.3. Incentives, obligations, and responses to climate change

15.4. Conclusion

Chapter 16. CO2 Regulations

16.1. Introduction

16.2. Improving ETS market design for massive deployment of mature low-emitting technologies

16.3. Choosing complementary tools for public policymaking

16.4. ETS from an international perspective

16.5. Conclusion

Chapter 17. Low-Carbon Electricity Development in China

17.1. Introduction

17.2. China's power sector

17.3. Power sector emissions

17.4. Decarbonizing China's power sector

17.5. Conclusion

Chapter 18. California Dreaming

18.1. Introduction

18.2. Southern California Edison's fuel mix

18.3. A brief description of cap and trade for California

18.4. What this means for SCE ratepayers

18.5. Conclusion

Chapter 19. RTOs, Regional Electricity Markets, and Climate Policy

19.1. Introduction

19.2. Alternative GHG policy instruments and implications for RTO functions

19.3. Implications of GHG policy for power system operations

19.4. Implications of GHG policy for design of RTO spot markets

19.5. Implications of GHG policy for resource adequacy

19.6. Implications of GHG policy for transmission policy and planning

19.7. Conclusion

Epilogue. Two Surprises and One Insight

Index

Copyright

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Dedication

This book is dedicated to the memory of

João Lizardo Rodrigues Hermes De Araujo

(1941–2008)

Lizardo, as he was known to his friends and colleagues, was born on May 26, 1941, in Manaus in Amazonas, Brazil. In 1965 he married Hildete Pereira de Melo, with whom he had three children: Diogo, Pedro, and Rodrigo.

Lizardo earned a B.S. in electronic engineering from the Technological Institute of Aeronautics (ITA) in 1964 and a Ph.D. in applied mathematics from the University of Toulouse in France in 1968.

Lizardo dedicated 43 years to teaching and research, including supervising 26 master's and doctoral theses by his students. His scientific career began at the Federal University of Paraíba in 1965, followed by a long association with the Graduate School in Engineering (COPPE) at the Federal University of Rio de Janeiro, starting in 1970. At COPPE, he participated in the creation of the Program of Systems Engineering and of the Interdisciplinary Area of Energy. From 2004 to 2008 he was general director of the Electric Energy Research Centre (CEPEL) of the Brazilian Electrical Centrals (ELETROBRÁS).

He was a visiting scholar at the Imperial College in London, the Lawrence Berkeley National Laboratory in Berkeley, California, and the Science Policy Research Unit (SPRU) at the University of Sussex in the United Kingdom.

During his distinguished career, Lizardo published numerous articles, book chapters, and books on energy, optimization, mathematical modelling, and regulation. He contributed two chapters on the Brazilian electricity sector to two prior books by the editor of this volume, published in 2006 and 2008. At the time of his death, Lizardo was in the midst of completing a third chapter for the present volume.

Lizardo was a man of integrity and wisdom who blessed all who knew him as family, friend, teacher, and colleague.

Foreword

Michael Grubb

November 2008

Electricity has become such a fundamental part of our lives that we take it for granted. Despite this fact, generating power has faced many challenges as it developed and now finds itself at the center of another storm: how to prevent massive disruption to the world's climate. In facing this challenge, electricity curiously finds itself with a Janus's head, looking both ways: simultaneously under pressure as the world's biggest source of greenhouse gas emissions, yet widely touted as the solution to other, even more intractable sources of CO2 from transport and even heat. Whether electricity can really both decarbonize and expand hinges on one main question: whether a carbon-constrained world can effectively foster low-carbon electricity generation at scale.

With a new U.S. administration at last committed to getting serious about climate change and global negotiations gathering pace toward a grand deal on new commitments after the current provisions of the Kyoto Protocol expire, this book presents a timely overview and analysis of this question. In its sheer breadth and scope it represents a hugely valuable and ambitious undertaking.

The book is structured neatly in three broad parts. Part 1 sets the context and sketches the different policy instruments potentially in play—the emerging experience and some of the new frontiers. Part 2 assesses the technical options for decarbonizing power generation—a wide sweep of options assessed from standpoints around the world. Part 3 looks at the initiatives, plans, and prospects in five diverse regions of the world before homing in on some of the key initiatives and instruments in the United States. In adopting this approach, the book neatly frames the way that the combined challenges of policy and technological choice are played out in many diverse locations—with lessons for all.

I recently had the experience of editing a volume focused just on the prospects for decarbonizing the power sector in the United Kingdom. ¹ It proved a much bigger task than we had bargained for, though highly relevant, as the U.K. Climate Change Committee, established to advise the U.K. government on future carbon targets, subsequently recommended an ambitious set of goals based on underlying analysis that placed the power sector at the absolute heart of implementation. To attempt such analysis at a global level is a daunting but wonderful undertaking, and Perry Sioshansi and all the contributing authors should be congratulated for a tremendous compendium of insights and experience from around the world. If you want a timely, diverse, and global perspective on one of the great challenges of our time—read this book.

¹A low-carbon electricity system for the UK: technology, economics and policy, Cambridge University Press, May 2008.

Preface-Reducing the Carbon Footprint: A Multidimensional Problem

Wolfgang Pfaffenberger

Decarbonization of energy supply is among the key issues facing policymakers in the years ahead. And it is a daunting task, given the enormity and immediacy of the problem as described in the 2008 edition of the World Energy Outlook, released by the International Energy Agency (IEA) in November. To address the problem requires careful consideration and balance among multiple dimensions, technical, economic, social, and political. In this preface I give a short summary of these dimensions and their implications for successful approaches to address the problem.

The technical dimension

To get an idea about the possibilities of reducing carbon emissions, it is useful to take a look at the factors determining the level of emission. The following formula contains six elements, highlighted beneath with reflections on their relevance for decarbonizing electricity generation—the topic of the present volume.

¹

C = carbon, PE = primary energy consumption, FE = final energy consumption, UE = useful energy consumption (after losses), GDP = gross domestic product

¹Hensing, Pfaffenberger, and Ströbele (1998; S. 183).

1. CO2 emission per unit of carbon. At present this factor is equal to 1, meaning that for one unit of carbon burned, one unit of CO2 will be released. Theoretically there is the possibility of reducing this factor by using an appropriate end-of-the-pipe technology. Such technologies are currently in an experimental phase, and only future research and development will teach us whether it will become a technologically viable and economically feasible option in the future that can contribute considerably to decarbonizing the electricity generation industry.

2. Carbon content of primary energy. The fuel mix available for electricity generation determines the amount of CO2 emitted per unit of electricity. In this context, fuel switching provides an important potential source for reducing carbon emissions. The availability of low-carbon or carbon-free fuels is partly determined by natural conditions (e.g., potential for hydropower, availability of wind resources sites, and many other factors) and partly by the political framework and policies (e.g., availability of nuclear power generation, among others).

3. Primary energy needed per unit of electricity or efficiency of energy transformation from primary energy into electricity. Carbon emissions are reduced if fuels are used more efficiently in the process of generating electricity. The average efficiency of fossil-fuel plants in many countries is far below the efficiency level available by present best technology. So, modernization of existing suboptimal plants offers significant opportunities for reducing carbon emissions.

For thermal plants, the efficiency can be further improved if it is possible to use some of the by-product heat for heating and cooling processes in a combined heat and power (CHP) process, also called cogeneration. For this to be effective, an integrated approach for producing heat and electricity is required. For some time, there has been the vision for distributed generation allowing such an integrated approach. Increasing the future share of CHP is an important determinant of CO2 emissions from the electricity sector. How much of this potential will be utilized in the future depends on many currently unknown variables, including availability of low-cost, durable CHP generators, network management for a high share of distributed generation, compatibility of CHP with a higher share of renewables from intermittent sources, and other factors.

4. Electricity needed per unit of useful energy demanded (distribution and end-use efficiency). It is a well-known fact that electricity consumers use electricity to meet specific energy service needs such as lighting, heating, or air conditioning (AC). The amount of electricity needed to produce one unit of AC service depends on the losses of electricity in the generation, transmission, and distribution system and in the AC device that delivers the final service. The losses in distribution in modern systems are relatively low and can be controlled by the network operators, but the loss in the end-use appliances depends on the quality of the appliances, and there may be a trade-off between the efficiency of the appliance and its price. If consumers are nearsighted² and select appliances with the lowest front-end costs, they will end up with higher electricity consumption over the life of the devices. This represents a lost opportunity for society and a market failure requiring some sort of policy intervention. ³

²Stoft (2008, S. 9) mentions nearsightedness of consumers as one of the important problems for CO2 reduction.

³Chapter 8, by Prindle et al., in this volume covers some of these market failures and how to address them.

5. Useful energy needed per unit of GDP. Following with the energy services example, the amount of AC service needed to maintain a comfortable temperature in a building is dependent on the quality of the building, notably the amount of insulation. The better the building is protected against external temperature fluctuations, the lower will be the demand for AC services. In addition, the level of required AC services depends on the habits of the building habitants. Both of these factors are outside the control of the electricity generation industry but can be influenced through education, better monitoring and thermostats, and other means.

Modernization of capital stock and change of habits and lifestyles are important factors for decarbonization of electricity generation. As the chapters of this book make clear, we cannot rely entirely on changes in the supply side of the equation to reduce the industry's carbon footprint. Changes in the demand side as well as changes in energy consumption habits and—perhaps more profoundly—lifestyle changes could ultimately be needed to address the carbon problem.

6. The level of economic activity. The level of economic activity clearly influences the level of energy use and carbon emissions. The relationship between energy use and economic output, however, is not linear. Higher economic growth, for example, may lead to substitution of more efficient capital stock, with positive consequences for carbon emissions. Many studies have documented that robust economic growth may be sustained with frugal energy use. The relationship between aggregate energy use and economic output plays a significant role, especially for rapidly developing economies such as China and India.

The economic dimension

Looking at the various factors influencing carbon emissions to find an efficient path for reducing carbon emissions, one might expect marginal cost of reducing CO2 to be about the same for all alternative options. Many studies, however, have shown⁴ that the cost of reducing CO2 is considerably different between sectors and for applications within each sector. To find the most economically efficient path, it is important to seek and pursue opportunities for carbon reduction that have the lowest costs among all the sectors of the economy.

⁴For example, see Vattenfall (2007).

In this context, it is not economically efficient, for example, to pursue high-cost but low-carbon opportunities in the electricity generation sector if electricity conservation can produce the same results at lower costs. By the same token, if low-cost opportunities exist in the transportation sector, these must be pursued before higher-cost opportunities in electricity generation are captured. To reach an efficient equilibrium, an integrated approach is necessary across all sectors—on a global scale, since the carbon problem is global in scope.

The social dimension

Economists are mainly interested in rational allocation of resources. In society, however, people have an implicit understanding of the free-riding potential available in a complex and partly transparent social system. Therefore, aspects of fairness and distribution are of high importance, and often there is a strong tension between the perceived or expected distributional impact of changes and their economic rationale. The pure economic solution is therefore often not socially acceptable. Reducing the carbon footprint is not free and will have significant cost impacts on many components of the economy. The transformation to a decarbonized economy is a secular task. It is quite likely, therefore, that the political system representing the social dimension and the economic sectors facing the changes will be in conflict. In such a situation, irrational solutions are often the only solutions available. The current European debate on climate policy delivers many examples of irrational decisions that are politically expedient. ⁵ A recent publication by Stoft⁶ gives several interesting ideas on how to shape more rational policies.

⁵See Weimann (2008) for more details.

⁶Stoft (2008).

The political dimension

The problem's political dimension is further complicated by the different time horizons affecting climate change (decades to centuries); the time horizon of assets in the electricity generation business (decades); and the time horizon of consumers, voters, and politicians (typically months to years). Decision making in these various segments necessarily follows different patterns with different discount rates and different priorities. To address these significant disparities, yet again, an integrated approach is needed. In my view, this could be the most difficult challenge facing us in trying to address the carbon problem.

I am convinced that a market solution would be best for electricity-producing companies as well as society as a whole. For such a market solution to be successful, we need a clearly defined set of long-term goals for CO2 reduction that would give investors a clear framework for decision making and for energy-intensive consumers a level of cost transparency and certainty that currently does not exist.

The likelihood of international agreements that would help stabilize the concentration of carbon in the atmosphere is at best uncertain at present. If nations or groups of nations such as the United States, the European Union, and others follow different targets and strategies defined by themselves, a large free-rider potential is created and issues of international competitive advantages and disadvantages will arise. An implicit condition for a successful global climate policy is international cooperation.

References

[1] Hensing, I.; Pfaffenberger, W.; Ströbele, W., Energiewirtschaft. (1998) Oldenbourg, München .

[2] IEA, World Energy Outlook. (2008) ; Paris.

[3] Stoft, S., Carbonomics: How to Fix the Climate and Charge It to OPEC. (2008) Diamond Press, Nantucket, Mass .

[4] Vattenfall, Global Mapping of Greenhouse Gas Abatement Opportunities up to 2030. (2007) ; Stockholm.

[5] Weimann, J., Die Klimapolitik katastrophe. (2008) Metropolis, Marburg .

About the Contributors

Parviz M. Adib is director with APX Inc., a leading platform provider for energy and environmental markets, including carbon commodities. He is involved in consulting services covering power and environmental markets. His responsibilities include analyses of markets and development of successful strategies, including development of renewable energy credits and carbon offsets.

Dr. Adib's main research interests include the development of environmental commodity markets, energy and public policy, and market oversight. Prior to joining APX, Dr. Adib worked at the Public Utility Commission of Texas in various capacities, including the director of the Market Oversight Division, where he performed the duties of the ERCOT Market Monitor. He is also the former chairman of the Energy Intermarket Surveillance Group.

Dr. Adib has a Ph.D. in Economics from the University of Texas at Austin, where he taught graduate and undergraduate courses.

Erica Allis is currently a consultant for the United Nations Environment Programme, Division of Technology, Industry, and Economics (UNEP DTIE), where she provides technical assistance and policy recommendations in Cleaner Production and Energy Efficiency (CPEE) initiatives in developing economies. In this position she works to promote sustainable production and consumption patterns among industry professionals and consumers.

Ms. Allis's research interests include water and energy policy and conflict resolution methods in resource-scarce regions, where competing demands have the potential to escalate into conflict.

Ms. Allis holds a bachelor of science in geology from the University of Arkansas and a master's of public policy from the Lyndon B. Johnson School of Public Affairs at the University of Texas.

Geoff Bertram is senior lecturer in economics at Victoria University of Wellington, New Zealand. Prior to joining the faculty at Victoria University, he was employed as a research officer at the Institute of Economics and Statistics at Oxford University.

Dr. Bertram's research interests include the economics of utility regulation and industry restructuring, with particular reference to energy and infrastructure sectors. He has also published widely on the economics of small island states and the economic histories of New Zealand and Peru.

Dr. Bertram holds a B.A. Honors degree from Victoria University and a D.Phil. in economics from Oxford University. He has published over 50 peer-reviewed papers and books.

Jean-Paul Bouttes is executive vice president of Corporate Strategy, Prospective and International Affairs at Electricité de France (EDF). His responsibilities and main interests include issues related to the economics of the electricity sector and related public policies such as security of supply, climate change, competition, and regulation.

He joined EDF in 1982 and has held various positions in the Corporate Strategy Division, Economics Department, and Industrial Strategy for Generation and Trading. Mr. Bouttes was also professor of economics at Ecole Polytechnique in Paris.

Mr. Bouttes is a graduate of Ecole Polytechnique, Paris, and Ecole Nationale de la Statistique et de l'Administration Economique.

Marilyn Brown is a professor of energy policy in the School of Public Policy at the Georgia Institute of Technology. Her research has focused on the impacts of policies and programs aimed at accelerating the development and deployment of sustainable energy technologies. She has led several energy technology and policy scenario studies and is a national leader in the analysis and interpretation of energy futures in the United States. In this capacity, she has testified before Congress and state legislatures.

Prior to her present position she was at Oak Ridge National Laboratory, where she led programs in energy efficiency, renewable energy, engineering science, and technology. She remains a Distinguished Visiting Scientist at ORNL. Dr. Brown serves on the boards of directors of the American Council for an Energy-Efficient Economy and the Alliance to Save Energy and is a member of the National Commission on Energy Policy and the National Academies Board of Engineering and Environmental Systems. Her latest edited book, Energy and American Society: Thirteen Myths, was published in 2007 by Springer.

Dr. Brown has a Ph.D. in geography from the Ohio State University and a master's degree in resource planning from the University of Massachusetts.

Qimin Chai is a Ph.D. candidate of management science and engineering in the School of Public Policy and Management at Tsinghua University. He is an assistant researcher in the Institute of Energy and Environmental Economics and in the China Automotive Energy Research Center at the Tsinghua University Low Carbon Energy Laboratory. He is also a visiting scholar in the Precourt Institute at Stanford University.

Mr. Chai's main research interests include energy and environmental economics, climate change, and low-carbon energy policy.

Mr. Chai has a B.A. in engineering from Zhejiang University.

Emile J. L. Chappin is a Ph.D. researcher at the Faculty of Technology, Policy, and Management of Delft University of Technology. His research is on modeling and transition management of energy infrastructures.

Mr. Chappin's main research interests include modeling, simulation and gaming of complex systems, data analysis, visualization and interpretation, and life-cycle analysis.

He holds bachelor's and master's of science degrees in systems engineering, policy analysis, and management from Delft University of Technology.

Douglas Clover is a Ph.D. candidate at the School of Geography Environment and Earth Sciences, Victoria University of Wellington, where he is studying the environmental and energy implications that might arise from the increased use of electric vehicles.

Mr. Clover has worked extensively in energy and transport policy, focusing on the role of market and government measures that promote environmental sustainability. Before returning to study, he was the leader of the Parliamentary Commissioner for the Environment's energy and transport research team.

He has bachelor's degrees in zoology and forestry science and an M.Sc. in resource management, all from the University of Canterbury.

Nigel Cornwall is managing director of Cornwall Energy Associates, where he is engaged in U.K. market design, policy, and regulatory issues for regulators and market participants. He also edits and publishes Energy Spectrum, a weekly publication covering the United Kingdom's electricity markets.

He was intimately involved in the restructuring of the electricity market in Britain in the 1980s and has worked on a variety of market reforms elsewhere. More recently, he has focused on design and implementation of the new electricity trading arrangements, NETA, in Britain, and he was one of the main negotiators for electricity suppliers during the new market redesign process. Mr. Cornwall is active in industry governance processes in both the electricity and gas markets in the United Kingdom and is a regular commentator on the low-carbon agenda and its market impact.

Mr. Cornwall has a B.A. in modern history from Pembroke College, Oxford, and an M.Sc. in politics from Birkbeck College, London.

François Dassa is head of Corporate International Affairs within the Prospective and International Affairs Division of Electricité de France (EDF). His experience includes work at EDF's Corporate Strategy Division and in regulatory affairs. He cofounded EDF Italia, the commercial branch of EDF in Italy, where he acted as head of Key Accounts and deputy director for Strategic Affairs and Energy Procurement. He was also appointed visiting professor of economics at the Paris Dauphine University.

Mr. Dassa is a graduate of Ecole des Mines de Paris.

Paul Denholm is a senior energy researcher at the National Renewable Energy Laboratory (NREL), where he examines systems integration of renewable electricity generation sources such as wind and solar.

Dr. Denholm's main research interests include examining the technical, economic, and environmental benefits and impacts of large-scale deployment of renewable electricity generation, including the limits of intermittency and quantifying the need for enabling technologies such as energy storage, plug-in hybrid electric vehicles, and long-distance transmission.

Dr. Denholm holds a B.S. in physics from James Madison University, an M.S. in instrumentation physics from the University of Utah, and a Ph.D. in environmental studies and energy analysis from the University of Wisconsin-Madison.

Laurens de Vries is assistant professor at the Faculty of Technology, Policy, and Management of Delft University of Technology. He performs research and teaches in the field of electricity market design, analyzing the mutual relationships between the physical infrastructure and its economic organization and regulation. He focuses on long-term issues such as generation adequacy and restructuring power sectors in OECD as well as in developing countries.

Dr. De Vries has an M.Sc. in mechanical engineering from Delft University of Technology, holds an M.A. in environmental studies from the Evergreen State College, and obtained his Ph.D. from the Faculty of Technology, Policy, and Management of Delft University of Technology.

Easan Drury is a research associate at the National Renewable Energy Laboratory (NREL), where he works as a solar energy analyst in the Energy Forecasting and Modeling group, examining the technical and economic implications of large-scale renewable energy deployment.

Dr. Drury's main research interests include modeling the U.S. photovoltaics market by quantifying the impacts of PV costs, electricity rate structures, and state and federal incentives on PV adoption.

Dr. Drury has a B.A. in physics from the University of California, Berkeley, and an M.S. and Ph.D. in engineering sciences from Harvard University.

Gerard P. J. Dijkema is associate professor of Energy and Industry, Faculty of Technology, Policy, and Management, TU Delft. His specialization is systems innovation for sustainability. He serves as the chairman of Dutch price for innovation and sustainability and is an elected member of the General Council of the Delfland Water Authority.

His main areas of interest include understanding, development, and transition of energy infrastructure as large-scale sociotechnical systems, effectively and timely transformation of industry networks, and water and energy infrastructure systems. To this end, much of his research involves model-based decision support to help stakeholders develop sustainable innovations, policies, and strategies.

Dr. Dijkema graduated as a chemical engineer from Twente University of Technology and holds a Ph.D. from Delft University of Technology.

Tina Fawcett is a senior researcher based at the Environmental Change Institute within Oxford University's Centre for the Environment. Dr. Fawcett's main research interests are personal energy use and carbon dioxide emissions, U.K. and international energy policy, household energy efficiency, and personal carbon allowances.

Dr. Fawcett has a Ph.D. in energy policy from University College, London. She is coauthor of a book on climate change, energy use, and personal carbon allowances, How We Can Save the Planet, which has been published in both U.K. and U.S. editions.

Neilton Fidelis Silva is a professor at the Federal Institute of Education, Science and Technology of Rio Grande do Norte (IFE-RN), Brazil, and a researcher at COPPE, the Post-Graduate Engineering School of the Federal University of Rio de Janeiro (UFRJ).

He is currently working for the Presidential Office of the Brazilian Government as assistant to the Executive Secretary of the Brazilian Forum on Climate Change.

His research focuses on energy planning, renewable energy, and climate change.

Professor Silva's qualifications include a D.Sc. from the Federal University of Rio de Janeiro and a B.Sc. and M.Sc. in electrical engineering from the Federal University of Rio Grande do Norte.

Peter Fraser is manager of Wholesale Power Policy at the Ontario Energy Board. His responsibilities include electricity price regulation, oversight of wholesale electricity markets, regulatory aspects of electric reliability, and the review of power system plans.

Mr. Fraser's main professional interests are in electricity policy and markets. From 1998–2004, Mr. Fraser worked at the International Energy Agency (IEA) in Paris as senior electricity policy advisor. Prior to working for the IEA, he spent nearly 9 years as energy policy advisor at the Ontario Ministry of Energy.

Mr. Fraser holds master's degrees in physics from Queen's University, Kingston, and in environmental studies from York University, Toronto, and a B.Sc. in physics from the University of Toronto.

Rob Graber is vice president of EnergyPath Corporation, a consultancy advising clients on financial and investment strategies in energy industries. Mr. Graber has over 30 years of experience in energy industries and over 20 years at GE Nuclear Energy, where he directed financial and marketing strategy in GE's nuclear services business in San Jose, California.

Mr. Graber's current focus is on the applications of advanced methodologies to value power plants, particularly nuclear power plants, for decision makers in global power markets. Mr. Graber also has a research interest in the history of nuclear power's political, social, economic, and financial currents and the renewed interest in nuclear power throughout the world. He maintains an extensive database on global nuclear power performance, costs, and investments.

He has an advanced degree in nuclear engineering and received an MBA in economics with honors from the Stern School of Business at New York University.

Michael Grubb is chief economist at the U.K. Carbon Trust and chairman of the international research organization Climate Strategies. He is also a part-time senior research associate at Cambridge University and a visiting professor at Imperial College, London. He was recently appointed to the U.K. Climate Change Committee, established under the U.K. Climate Change Bill to advise the government on future carbon budgets and to report to Parliament on their implementation.

Professor Grubb is author of seven books and numerous journal publications and reports and most recently edited a book examining the economic and policy dimensions of developing a low-carbon electricity system in the United Kingdom. He has held advisory positions with governments, companies, and international studies on climate change and energy policy and has been a lead author for several IPCC reports on mitigation, including the IPCC Fourth Assessment Report. He is editor-in-chief of the journal Climate Policy and is on the editorial board of Energy Policy and Environmental Science and Policy. His most recent works have been directing Climate Strategies research on carbon market instruments, covering the evolution, competitiveness, and design dimensions of the EU ETS and assessing the international carbon mechanisms of the Kyoto Protocol.

He has a degree from Cambridge University and a doctoral thesis from the Cavendish Laboratory on the integration and analysis of intermittent electricity sources.

Maureen Hand is a senior engineer at the National Renewable Energy Laboratory (NREL) in the National Wind Technology Center. She recently participated in a collaborative effort among public and private organizations to investigate the potential for wind energy to provide 20 percent of future U.S. electricity needs. Her role was to coordinate the analytical effort to support the study.

Prior to this project, Dr. Hand investigated active control designs for utility-scale wind turbines. She also contributed to experimental investigation of wind turbine aerodynamics, both in field test conditions as well as the NASA National Full-Scale Aerodynamics Complex 80′ × 120′ wind tunnel.

Dr. Hand has a B.S. in mechanical engineering from the University of Wyoming and holds an M.S. and a Ph.D. in mechanical engineering from the University of Colorado.

Frank Harris is senior environmental economist at Southern California Edison. He is responsible for evaluating environmental and energy legislation and regulation, providing policy recommendations to SCE management and developing SCE submittals to California regulatory agencies. In this capacity, he represents SCE before the California Air Resources Board, the California Public Utilities Commission, and the California Energy Commission.

Dr. Harris's main research interests include environmental policy and energy economics. Prior to his current position with SCE, he was an adjunct professor of economics at the University of California at Irvine.

Dr. Harris holds B.A. degrees in economics and finance from the University of Texas at Dallas. He holds a Ph.D. in economics from the University of California at Irvine, where he specialized in energy and health policy and public choice.

Udi Helman is a principal market economist with the California Independent System Operator (CAISO). His current work is focused on market design and policy analysis, including policies to achieve California targets for greenhouse gas emissions reductions and renewable portfolio standards.

Prior to joining CAISO he worked at the Federal Energy Regulatory Commission (FERC) on electricity market design issues, including wholesale energy, ancillary service and installed capacity markets, transmission usage pricing, and transmission property rights. He has published extensively, including contributing two book chapters to prior books edited by F. P. Sioshansi in 2006 and 2008.

He has B.A. and M.A. degrees from the University of Toronto and a Ph.D. from Johns Hopkins University in applied economics and systems analysis.

Roy Hrab is policy advisor in the Regulatory Policy and Compliance Branch of the Ontario Energy Board, where he develops policy options and recommendations related to electricity operations, conducts research on current and emerging issues, and undertakes strategic regulatory planning.

Prior to joining the Board, he was engaged in public policy and economic research projects at the Institute for Competitiveness and Prosperity and the Government of Ontario's Panel on the Role of Government.

He holds B.A. and M.A. degrees in economics from the University of Toronto.

Frede Hvelplund is professor in energy planning at the Department of Development and Planning, Aalborg University. He is a member of an interdisciplinary research group for sustainable energy with interest in public regulation, sustainable energy, political economy, and social anthropology.

His current research is focused on technologies that can facilitate transition from fossil fuel–based to sustainable energy systems. He is author and coauthor of several books and articles on the interrelationships between sustainable energy systems and public regulation.

Dr. Hvelplund's educational background is in economy and social anthropology, and he has a Dr.Techn. degree from Aalborg University.

Klaus S. Lackner is the Ewing-Worzel Professor of Geophysics in the Department of Earth and Environmental Engineering and a member of the Earth Institute at Columbia University. He is the director of the Lenfest Center for Sustainable Energy and the chair of the Department of Earth and Environmental Engineering in the School of Engineering and Applied Sciences. He is a member of GRT, a company that hopes to develop a commercially viable device to capture CO2 directly from the atmosphere.

Professor Lackner's career includes work at the Stanford Linear Accelerator Center and Los Alamos National Laboratory. His current interests are focused on developing environmentally acceptable technologies for the use of fossil fuels, including carbon capture and sequestration, zero-emission coal plants, carbon electrochemistry, and the study of large-scale energy infrastructures.

Dr. Lackner received his Ph.D. in 1978 in theoretical physics from the University of Heidelberg and held postdoctoral positions at the California Institute of Technology.

Joanna Lewis is an assistant professor of science, technology, and international affairs at Georgetown University's Walsh School of Foreign Service.

Her research focuses on renewable energy industry and policy development in China, mechanisms for low-carbon technology transfer in the developing world, and expanding options for multilateral engagement in a post-2012 international climate change agreement. Dr. Lewis also serves as the primary technical advisor for the Asia Society's Initiative for U.S.-China Cooperation on Energy and Climate and as an international advisor to the Energy Foundation China Sustainable Energy Program in Beijing. She has previously worked at the Pew Center on Global Climate Change and Lawrence Berkeley National Laboratory and was a visiting scholar at Tsinghua University in Beijing.

Professor Lewis holds a master's degree and a Ph.D. in energy and resources from the University of California, Berkeley, and a bachelor's degree in environmental science and policy from Duke University.

Robert M. Margolis is a senior energy analyst in the Washington, DC, office of the National Renewable Energy Laboratory (NREL), where he leads analysis of markets and policies related to solar photovoltaics.

His main research interests include energy technology and policy; research, development, and demonstration policy; and energy-economic-environmental modeling. Previously, he was a member of the research faculty at Carnegie Mellon University and a research fellow at Harvard University.

He holds a B.S. in electrical engineering from the University of Rochester, an M.S. in technology and policy from the Massachusetts Institute of Technology, and a Ph.D. in science, technology, and environmental policy from Princeton University.

Mark Mehos is the principal program manager for Concentrating Solar Power (CSP) at the National Renewable Energy Laboratory (NREL), where he supervises the development of low-cost, high-performance, and high-reliability systems that use concentrated sunlight to generate power.

He has led the High Temperature Solar Thermal Team at NREL since 1998 and has managed the Concentrating Solar Power Program since 2001. He has participated on and conducted analysis for several high-profile task forces on solar energy and is currently the leader for the International Energy Agency's SolarPACES Solar Thermal Electric Power Systems task.

Mr. Mehos holds a B.S. in mechanical engineering from the University of Colorado and an M.S. in mechanical engineering from the University of California at Berkeley.

Niels I. Meyer is Emeritus Professor of Physics at the Technical University of Denmark.

Dr. Meyer's main research interests include policies for sustainable energy development, with focus on renewable energy systems. Dr. Meyer is past president of the Danish Academy of Technical Sciences and past member of the Danish Energy Supervisory Commission.

Dr. Meyer has a Ph.D. and a Dr.Sc. in physics from the Technical University of Denmark.

Bruce G. Miller is the associate director of Penn State's EMS Energy Institute. He leads fossil and biomass fuel utilization, emissions control, and direct coal liquefaction research, development, and demonstration projects.

Mr. Miller has been involved with energy RD&D since 1981, with an emphasis on combustion and gasification systems, advanced fuel characterization, emissions characterization and control, hardware development and testing, behavior of inorganic constituents in utilization systems, and coal liquefaction. He has worked with coal-based systems his entire career and is a leading biomass utilization expert. His publications include two books, Coal Energy Systems (2005) and Combustion Engineering Issues for Solid Fuel Systems (2008), and numerous journal articles and technical reports.

Mr. Miller received his B.S. and M.S. in chemical engineering from the University of North Dakota.

Alan Moran is director of the Deregulation Unit at the Institute of Public Affairs (IPA). His work covers regulatory issues concerning energy, water, housing, and infrastructure.

He has published widely on energy and regulation, including the Australian chapter in Electricity Market Reform: An International Perspective, edited by Sioshansi and Pfaffenberger, in 2006. In 2007 he published Regulation of Infrastructure, coauthored by Warren Pengilley.

His work on housing includes a book, The Tragedy of Planning: Losing the Great Australian Dream (2006).

He has degrees in economics, including a Ph.D. from the University of Liverpool in the United Kingdom.

Reiner Musier is vice president with APX Inc., a leading platform provider for energy and environmental markets, including carbon commodities. He is responsible for the company's market strategy and represents APX in discussions with regulators, policymakers, environmental groups, corporations, and the trade press.

Dr. Musier's area of specialization is in technology and software for environmental and energy markets. Prior to his present position, he was vice president with the Siemens Corporation division providing solutions for energy and commodities trading, risk management, market operations, and simulation.

Dr. Musier holds Ph.D. and M.S. degrees from the Massachusetts Institute of Technology and a B.S. from Northwestern University.

Ah-Hyung Alissa Park is the Lenfest Junior Professor in Applied Climate Science in the Department of Earth and Environmental Engineering at Columbia University and the associate director of the Lenfest Center for Sustainable Energy of the Earth Institute.

Professor Park's main research interests include carbon sequestration, CO2 capture using nanoparticle ionic materials, coal-to-liquid and waste-to-liquid technologies, and particle technology. Prior to her current position, she was a postdoctoral researcher at the Ohio State University and led a research group developing a coal-to-jet-fuel technology.

Professor Park has a B.A.Sc. and an M.A.Sc. in chemical engineering from the University of British Columbia in Canada and holds a Ph.D. in chemical engineering from the Ohio State University.

Wolfgang Pfaffenberger is adjunct professor in economics (European Utility Management) at Jacobs University, Bremen, and is professor emeritus in economics at the University of Oldenburg. He was director of Bremer Energie Institut from 1997 to 2006 and president of the German branch of IAEE (GEE) from 1995 to 1999.

His main interest is energy policy and the reform of natural gas and electricity markets. He has published extensively in this area.

He has degrees in economics, including a Ph.D. from Freie Universität Berlin.

William Prindle is a vice president with ICF International, a global energy-environment consultancy. He helps lead the firm's energy efficiency work for government and business clients, including major support work for U.S. EPA's ENERGY STAR® and related efficiency programs as well as utility efficiency program development. He also supports the firm's corporate energy management, carbon management, and sustainability advisory services.

He was previously policy director at the American Council for an Energy-Efficient Economy (ACEEE), where he led research and advocacy work on energy and climate policy for federal and state governments. Prior to that, he directed buildings and utilities programs for the Alliance to Save Energy and previously was a management consultant.

Mr. Prindle received his B.A. in psychology from Swarthmore College and an M.S. in energy management and policy from the University of Pennsylvania.

Luiz Pinguelli Rosa is director of COPPE, the Institute of Post-Graduate Studies and Research in Engineering at Federal University of Rio de Janeiro, and professor of the Energy Planning Program and Secretary General of the Brazilian Forum on Climate Change. Formerly he was president of Centrais Elétricas Brasileiras SA (ELETROBRAS). He served on the Intergovernmental Panel on Climate Change from 1998 to 2001 and is a member of the Brazilian Academy of Sciences.

His current research interests include energy planning, energy technology, and climate change. Through his long professional career, he has been engaged in theoretical physics, nuclear engineering, and studies of the contribution of the energy sector to the greenhouse effect, including measurements of greenhouse gas emissions from hydro reservoirs.

Professor Rosa has an M.Sc. in nuclear engineering from Federal University of Rio de Janeiro and a D.Sc. in physics from Catholic University of Rio de Janeiro.

Geoffrey Rothwell is senior lecturer and director of the Honors Programs in the Department of Economics, Stanford University, and associate director of Stanford's Public Policy Program. Since 2001, he has been the chief economist of the Economic Modeling Working Group of the Generation IV International Forum through the U.S. Department of Energy, Office of Nuclear Energy.

Dr. Rothwell has written extensively on the economics of nuclear power and electricity regulation, including Electricity Economics: Regulation and Deregulation, with Tomas Gomez, published in 2003. His current research focuses on building econometric-cost engineering models of the nuclear fuel cycle—in particular, uranium enrichment, nuclear fuel fabrication, reprocessing, and geologic disposal.

He received both his M.A. in jurisprudence and social policy and his Ph.D. in economics from the University of California, Berkeley.

Harry Singh is a vice president with RBS Sempra Commodities in Stamford, Connecticut, where he works on power and environmental market issues across North America.

Prior to his current position, he was a senior advisor at the Federal Energy Regulatory Commission (FERC), where he worked in the Office of Energy Market Regulation on policy issues in electric power markets and with the Office of Enforcement on several investigations. He worked on the design of long-term transmission rights, Order 890, the Competition NOPR leading to Order 719, Order 679 on Market Based Rates, a report to Congress on the state of electric competition and market redesign in California. He held various positions at PG&E Corporation and its regulated and unregulated subsidiaries.

He holds a Ph.D. in electrical engineering from the University of Wisconsin-Madison.

Fereidoon Sioshansi is president of Menlo Energy Economics, a consulting firm based in San Francisco serving the energy sector. Dr. Sioshansi's professional experience includes working at Southern California Edison Company (SCE), the Electric Power Research Institute (EPRI), National Economic Research Associates (NERA), and, most recently, Global Energy Decisions (GED), now called Ventyx. He is the editor and publisher of EEnergy Informer, is on the Editorial Advisory Board of The Electricity Journal, and serves on the editorial board of Utilities Policy.

Dr. Sioshansi's interests include climate change and sustainability, energy efficiency, renewable energy technologies, regulatory policy, corporate strategy, and integrated resource planning. His two recent edited books, Electricity Market Reform: An International Perspective, with W. Pfaffenberger, and Competitive Electricity Markets: Design, Implementation, Performance, were published in 2006 and 2008, respectively.

He has degrees in engineering and economics, including an M.S. and a Ph.D. in economics from Purdue University.

Paul Sotkiewicz is senior economist in the Market Services Division at the PJM Interconnection, LLC, where he provides analysis and advice on market design and performance with particular attention to demand response mechanisms, intermittent and renewable resource integration, market power mitigation strategy, and the potential effects of climate-change policy on PJM's markets.

Prior to joining PJM, Dr. Sotkiewicz was the director of Energy Studies at the Public Utility Research Center (PURC), University of Florida, involved in executive education and outreach programs in regulatory policy and strategy. Prior to that he was at the Federal Energy Regulatory Commission (FERC), where he conducted research, analysis, and advice on market design issues related to ISO/RTO markets. His research and publications cover electricity market design; tariff and rate design related to the deployment of distributed generation, energy efficiency, and demand response; and the effect of different regulatory policies or industry conditions on the cost-effectiveness of cap-and-trade air pollution programs.

Dr. Sotkiewicz received a B.A. in history and economics from the University of Florida, an M.A. in economics from the University of Minnesota, and a Ph.D. in economics from the University of Minnesota in 2003.

Benjamin K. Sovacool is a research fellow in the Energy Governance Program at the Centre on Asia and Globalization at the National University of Singapore. He is also an adjunct assistant professor at the Virginia Polytechnic Institute and State University, where he has taught for the Government and International Affairs Program and the Department of History.

Dr. Sovacool recently completed work on a grant from the U.S. National Science Foundation's Electric Power Networks Efficiency and Security Program, investigating the impediments to distributed and renewable power systems. He has also worked closely with the Virginia Center for Coal and Energy Research, the New York State Energy Research and Development Authority, the Oak Ridge National Laboratory, and the U.S. Department of Energy's Climate Change Technology Program. His recent edited book, Energy and American Society: Thirteen Myths, was published in 2007; The Dirty Energy Dilemma: What's Blocking Clean Power in the United States was published in 2008.

He holds a Ph.D. in science and technology studies from the Virginia Polytechnic Institute and State University, an M.A. in rhetoric from Wayne State University, and a B.A. in philosophy from John Carroll University.

Gary Stern is the director of Market Strategy and Resource Planning for Southern California Edison Company (SCE), where he manages resource planning, capacity and energy market design, and monitoring the wholesale electricity market in California.

Dr. Stern's main research interests include greenhouse gas legislation focusing on cap-and-trade market design, electricity market design, simultaneous optimal auctions, resource adequacy, and capacity markets. His recent endeavors have included working on carbon cap-and-trade market design, implementation of an increased renewable portfolio standard for California, and electrification of transportation as a carbon-reducing option. He is also involved in the design and development of a capacity market for California.

Dr. Stern earned a Ph.D. in economics, an M.A. in economics, and a B.A. in mathematics, all from the University of California at San Diego.

Jean-Michel Trochet is EDF senior economist within the Prospective and International Affairs Division of Electricité de France (EDF). He is a member of the Steering Committee of the Sustainable Development Chair at Ecole Polytechnique and General Secretary of the French Affiliate of the International Association for Energy Economics (IAEE).

Prior to his current position, he worked as an economist in EDF in the Corporate Strategy Division, the Industrial Strategy for Generation and Trading Division, and the General Economic Studies Department. He has taught at Institut d'Economie Publique in Marseille (IDEP) and Centre d'Etudes et Programmes Economiques in Paris.

Mr. Trochet is a graduate of Ecole des Mines de Paris.

Kenneth H. Williamson is a consultant in geothermal energy. He spent much of his career with Unocal Corporation, the world's largest developer of geothermal resources, where he was involved in the exploration and development of geothermal resources in the United States, Europe, Latin America, and Southeast Asia in both geoscientific and engineering roles. As general manager of Geothermal Technology and Services, he was responsible for worldwide exploration, technology development, and technical support.

Prior to joining Unocal in 1981, Dr. Williamson was a principal scientific officer in the British Geological Survey, where he carried out geothermal exploration and research in the Caribbean, Latin America, South Pacific, and Africa.

Dr. Williamson has a B.Sc. in physics from the University of Aberdeen and a Ph.D. in geophysics from Imperial College, London.

Ryan Wiser is a staff scientist at Lawrence Berkeley National Laboratory. He leads research in the planning, design, and evaluation of renewable energy policies and on the costs, benefits, and market potential of renewable electricity sources.

Dr. Wiser's recent analytic work has included studies on the economics of wind power; the treatment of renewable energy in integrated resource planning; the impact of state-level renewables portfolio standards; trends in solar costs; and the risk mitigation value of renewable electricity. Dr. Wiser regularly advises state and federal agencies in the design and evaluation of renewable energy policies, is an advisor to the Energy Foundation's China Sustainable Energy Program, and is on the Corporate Advisory Board of Mineral Acquisition Partners. Prior to his employment at Berkeley Lab, Dr. Wiser worked for Hansen, McOuat, and Hamrin, Inc., the Bechtel Corporation, and the AES Corporation.

Dr. Wiser received a B.S. in civil engineering from Stanford University and holds an M.S. and a Ph.D. in energy and resources from the University of California, Berkeley.

Jay Zarnikau is president of Frontier Associates, where he provides consulting assistance to utilities, retail electric providers, large industrial energy consumers, and retail trade associations in the design and evaluation of energy-efficiency programs, retail market strategies, electricity pricing, demand forecasting, and energy policy.

Dr. Zarnikau formerly served as a vice president at Planergy, manager at the University of Texas at Austin Center for Energy Studies, and a division director at the Public Utility Commission of Texas. His publications include articles in The Energy Journal, Resource and Energy Economics, Energy Economics, IEEE Transactions on Power Systems, Energy, and The Electricity Journal.

Dr. Zarnikau has a Ph.D. degree in economics from the University of Texas at Austin, where he also teaches statistics as a part-time visiting professor.

Xiliang Zhang is professor of energy economics and executive director of Institute of Energy and Environmental Economics, Tsinghua University. He serves as the secretary general of the New Energy Committee of China Energy Research Society and associate editor of the international journal Energy for Sustainable Development.

Dr. Zhang has conduced research on sustainable energy technology innovation and diffusion, markets, and policies for China. He played a key role in drafting China's Renewable Energy Law, sponsored by the Environmental Protection and Resource Conservation Committee of the National People's Congress. He is the coprincipal investigator of two key research projects funded by the National Science Foundation of China: China's Energy-Related CO2 Control Technology and Policy and Modelling Energy Development and Utilization Strategy in Western China. He is also leading a team to carry out research into the China Roadmap for Renewable Energy Technology Development at Tsinghua University. Dr. Zhang is a lead author for Energy Supply of the 4th IPCC Assessment Report.

Dr. Zhang received his Ph.D. in management science and engineering at Tsinghua University in 1997.

Introduction-Carbon Constrained: The Future of Electricity Generation

Fereidoon P. Sioshansi

Menlo Energy Economics

Abstract

The electric power sector—like the energy sector in general—has entered a new phase in its evolution, one in which emissions of greenhouse gases can no longer be assumed to be costless. This fact will gradually and profoundly change electricity generation—and utilization—in the coming decades. This volume of collected chapters is focused on examining why these changes are necessary, how they may be implemented, and what might be their implications for the generation, cost, and consumption of electricity.

Historical context

Human welfare and energy use are strongly correlated. Access to affordable energy improves our quality of life and increases productivity. Electricity, the most convenient, versatile, and (at the point of consumption) cleanest form of energy, plays a crucial role in sustaining today's modern economies. As countries develop and mature, their relative dependence on electricity increases. This phenomenon means that more advanced economies typically convert a higher percentage of their primary energy to generating and consuming electricity.

Looking through human history, two gradual transitions are observed. With carbon as a new constraint, a third transition is taking shape.

▪ The first period, beginning from the dawn of human civilization to the Industrial Revolution, can be characterized by agrarian societies using relatively little energy, virtually all from renewable sources, and a negligible per capita carbon footprint.

▪ The second period, beginning from around the 1800s to the beginning of the Information Age, can be characterized by significantly increased reliance on cheap and abundant fossil fuels and virtual abandonment of renewable resources, with the exception of hydroelectricity. During this period, per capita carbon emissions increased dramatically, especially among developed countries—a trend that is now sweeping across rapidly developing countries.

▪ The third period, covering the recent past and going forward, can be characterized by increasing concerns about climate change and a concentrated effort to rely more heavily on renewable resources, low-carbon or noncarbon fuels, and efficient utilization of energy. ¹

¹In his seminal book The Third Wave, Alvin Toffler described human civilization as having gone through three distinct stages of evolution: from primitive agrarian societies to industrialization to the contemporary dawn of the Information Age, corresponding to the three phases of energy use outlined here.

The predominant challenge since the Industrial Revolution has been to find and exploit large quantities of fossil fuels to feed the growing needs of the global economy. With rapidly improving technology and by taking advantage of ever-increasing economies of scale, the unit cost of energy—measured in dollars per barrel of oil, cents per lumen of lighting, or cents/kWh of electricity—fell continuously for decades. The rise of the unit cost of energy, exemplified by increases in oil prices, is a relatively recent phenomenon.

Some experts believe that with the continued growth in world population (Figure 1) and growing per capita energy consumption, we are entering a new phase, one characterized by diminishing marginal returns. If this proves to be the case, natural resources in general, and energy resources in particular, will cost more.

The carbon problem in context

Since the dawn of the Industrial Age, large quantities of greenhouse gases (GHGs) have been and continue to be released into the atmosphere. These emissions may be characterized as natural—say, from the decay of organic