A critical analysis of the 2014 IPCC Report on capital cost of mitigation and of renewable energy.

Ted Trainer

14.3.2016

9,280w

Abstract:  The Report by the IPCC Working Group 3 on mitigation has been widely reported as showing that a 430 – 480 ppm emissions target can be achieved at a low investment cost in relation to GDP. However there are several reasons why the Report cannot be regarded as having established these claims, mainly to do with the very few sources referred to on the crucial cost issues, the problems evident in those sources, and difficulties encountered when investment sums allocated to various sectors are examined. An exploration of the possible investment required by the renewable energy sector indicates that the costs associated with achieving desired emissions targets would be very high.  This strengthens the case that effective policies for dealing with climate and other global problems cannot be achieved unless there is transition from consumer societies committed to affluence and growth.

Keywords: Climate change.  IPCC. Mitigation. Renewable energy. Limits to growth.

Corresponding Author: Ted Trainer, 54 Dryandra St., Wadalba, Australia. 2259. tedtrainertsw@gmail.com, 0407011149

Highlights:

Š      Clarification of the logic and structure of the Report.

Š      Only five pages in Chapter 16 deal with renewable system cost estimates.

Š      The core conclusions are based on only about three references.

Š      These studies are open to fundamental criticism.

Š      An alternative approach indicates higher system costs than the Report.

1.     Introduction.

The IPCC Working Group 3 Report (IPCC, 2014) arrives at the extremely important general conclusion that a desirable greenhouse gas emission target can be achieved at an affordable cost.  An example summary statement is,

“…based on the idealised assumptions that all countries of the world begin mitigation immediately, there is a single global carbon price applied to well functioning markets, and key technologies are available, find that meeting a 430 – 480 ppm CO2eq. goal by century’s end would entail a reduction in the amount global consumers spend of 1 - 4% in 2030, 2 - 6% in 2050, and 3 – 11% in 2100 relative to what would happen without mitigation.  (Ch.6, p. 02.) 

An even more reassuring passage suggesting a very low cost has been widely quoted;

“These numbers correspond to an annualised reduction of consumption growth of .04 - .14 (median .06) percentage points over the century…” (IPCC, Summary for Policy Makers, p. 17.)

This conclusion will be informing policy thinking at the highest levels of government, business and NGOs, and reinforcing within general publics the comforting belief that not only are there solutions to the greenhouse problem but that they will involve negligible costs.  The credibility of this conclusion is likely to be indubitable, given that it the IPCC says it reflects 38,315 review studies, 1,200 scenarios analysed, 38 expert reviewers from 66 countries and 38 governments. 

However even a superficial scanning of the Report reveals that that the grounds for the above conclusion are far from satisfactory.  Among the points to be considered below are the absence of derivations and transparent cases enabling assessment of the validity of conclusions arrived at, the lack of clear target contributions from the nuclear, CCS, renewable and conservation sectors, the failure to deal with analyses questioning the potential of renewable energy, and the failure to show how cost conclusions are arrived at or that they are plausible.  However by far the most important problem is that despite the impressive numbers of contributors referred to above suggesting findings based on massive amounts of scientific research, the crucial conclusions on the cost of adequate mitigation action are based on only one to five papers, all of which are open to major criticism.

2.    Procedure.

Because the point of this inquiry is firstly to determine how satisfactory the Report’s general conclusion is, the process mostly involves examining the assumptions and derivations leading to it.  Several questionable aspects of the Report will be briefly discussed.  Some of these relate to the problem of how well the conclusions are connected to or derive from the lengthy review chapters, but the main issues are to do with the capital cost estimates given in the last chapter.  A brief illustrative exploration of possible costs of large scale resort to renewable alternatives is then undertaken. This indicates that the capital cost is likely to be far higher than this report estimates.  The discussion concludes that the Report’s reassuring tone and the general impression it gives, as evident in the above quotes, are unwarranted and seriously misleading. 

These issues raise concerns regarding the IPCC WG3’s processes and approach to its tasks, the reliability of its statements, and its influence on important public policy questions.  However this critique does not question the IPCC’s analysis of climate change and is not intended to cast doubt on it. 

3.    Results.

The following sections outline the findings of critical inquiry into a number of the Report’s most important elements, along with the reasons supporting the claim that the treatment of these is unsatisfactory.

3.1  The structural/logical issue.

As is the case with renewable energy proposals, the crucial issue with respect to mitigation is not what can be achieved, it is at what cost can it be achieved, and whether this is affordable. This question is not taken up in the WG 3 Report until the last of the sixteen chapters. It would be reasonable to assume that the above quoted summary conclusion that the cost would be low is built on the lengthy and detailed deliberations presented in the preceding fifteen chapters of the Report.  This is not the situation.  The preceding fifteen chapters provide detailed and valuable summaries of a great deal of recent research on technologies and issues related to mitigation of climate change, such as the emissions situation, conservation possibilities for transport, industry, agriculture and buildings, sources of finance, investment risk and uncertainty, strategies being implemented in different countries, financial implications for the Third World, spin-off benefits of mitigation effort, and forms of cooperation required.  However where costs are mentioned in these discussions they refer only to specific technical devices or strategies and are not part of any process of deriving an overall cost sum for meeting the 450 - 480 ppm target.  It is not until Chapter 16 that any notion of an overall mitigation strategy or its cost is considered.  In that 61 page chapter only 5 pages are given to present and future/required investment costs, and the crucial cost conclusions are stated “out of the blue” in Fig. 16.  These are not connected to or derived from or shown to follow from any content within the preceding fifteen chapters of the more than 1000 page report. 

Only six references are given for all of the content represented in each of Figs. 16.3 (costs for present to 2029) and 16.4 (costs for 2030 – 2049.)  For some of the most important items there are only one to three references cited.  It is argued below that none of these sources provides satisfactory support for the cost conclusions stated. 

The Reports procedure aligns with the general IPCC process, which is to summarise studies published on various topics.  It is appropriate for the resulting generalisations to be stressed and given widespread publicity when they derive from large numbers of studies, but that is not the case with the Chapter 16 cost conclusions. 

The situation would not be so disturbing if the very few studies involved were transparently thorough, sound and convincing.  Unfortunately the following brief notes on these studies show that they do not provide satisfactory support for their cost conclusions. Standard meta-analysis procedure is based on evaluation of relevant studies and rejection of unsatisfactory studies.  The Report does not do this.

            3.2  Notes on the studies summarised.

The six studies referred to as sources for cost figures represented in Fig. 16.3 are UNFCC, 2008, IEA, 2011, Riahi, et al., 2012, Carraro and Masetti 2012, McCollum, et al. 2013, and McKinsey and Company, 2010.  The Carraro and Massetti source is of little relevance to the overall renewables cost issue, and the McKinsey and Co source is confined to transport energy conservation potential.  Thus the crucial figures are taken mainly from four sources.  These draw some of their major cost conclusions from each other, and some of the main authors contributing to them overlap and are associated with the Global Energy Assessment agency. (For a detailed critique of the GEA 2011 report see Trainer, 2011.)

The four sources which deal with cost estimation are lengthy and detailed but none of them shows that its conclusions should be taken seriously.  All only present cost claims, explicitly in the form of scenarios.  Use of scenarios is a common practice but is in general of little or no value, unless reasons are given for thinking that the scenarios are plausible or can be achieved.  To be of value scenarios must be open to evaluation, with all assumptions and derivations that have been made clearly set out, enabling verification and possible reworking with different assumptions and data.  Some of the high-profile claims that renewable energy can meet 100% of demand have made the detail in their supporting cases transparent and this has enabled major challenges to their plausibility. (For critical analyses of twelve cases see Trainer, 2014a.)

Thus the conclusions these four sources provide on required/sufficient future investment sums cannot be taken with any confidence as none of these reports provides detailed and transparent analyses of a) supply targets in view of probable growth rates and conservation achievements, b) the quantities of plant of various kinds required to meet supply targets despite problems such as intermittency, winter radiation levels, embodied energy costs, long distance transmission difficulties, ramp rates, back-up and storage, energy conversion (especially to liquids), grid extension and adjustment and stabilisation, efficiencies of all components and conversions, total system energy losses and costs, and c) the probable capital costs of all components and sectors in the required supply system. None of these conditions is met by the Chapter 16 treatment, and the references given there at best deal with only a few of these issues, and do so in ways that are superficial and/or challengeable and/or not possible to assess.

            3.3  Quantitative Problems.

The cost figures given in Figs. 16.3 and 16.4 pose a number of significant questions and problems. To enable these to be discussed the main figures are summarised in Table 1. (The values given are medians, and usually there is considerable variation around these.)  Note that these investment sums are only being claimed by the Report to be sufficient to halve global emissions, by 2050, (see Fig. 7.14), and the Report stresses that considerably higher investments will be needed between 2050 and 2100 by which time it anticipates emissions will have been reduced to zero.  (The issue is slightly confused by the use of a different emission target in these figures,  i.e., 430 – 530 ppm, not the 430 – 480 ppm target stated in the quote at the beginning of this paper.)  Throughout the Report the lower target refers to a better than 67% chance of keeping temperature rise under two degrees. However some notable climate scientists have concluded that much more stringent targets than these should be adopted.  The “carbon budget” approach of Anderson and Bows (2011), and Meinshausen et al., (2009) indicate that all emissions must cease well before 2050. Had this target been taken cost conclusions would have been significantly higher.

Table 1.

Investment sums

($billions p.a.)

Item.                            Present.     Additional         Additional         Total in 2050

                                                         needed        needed between

                                                         by 2030         2030 and 2050.

-------------------------------------------------------------------------------------------------

Total energy                       1200                    

Total electricity                    550                                                            

Electricity generation           300              120                    400                       820

Fossil-power generation      170              - 25                  -140                           5

Electricity transmission        250   

Renewable energy               150                90                   225                       465

Fossil power plants + CCS                         20                  200                        220

Extraction of fossil fuels       500               -50                   -450                          0

Nuclear                              c.  10                30                    120                      160

Efficiency/conservation                             340                    700                    1040

                  ------------------------------------------------------------------------------------------

Other important numbers within the Report (to be used below) are:

Š      The Report does not seem to make clear what the required total energy demand is likely to be in 2050 or 2100. One of the four major supporting references for Figs. 16.3 and 16.4, by Riahi et al., claims that conservation effort will reduce 2050 total primary demand from the business as usual level they expect, 900 EJ/y, down to 700 EJ/y.  No significant case is given for this conclusion. Various sources (e.g., IEA, 2012) estimate business as usual demand will approximately double by 2050 which would mean a considerably higher target, possibly in the region of 1100 EJ/y which is almost 60% higher than the IPCC target. A figure for final energy is not given but 600 EJ/y will be assumed here (mainly because much less fossil fuel will be being converted.)

Š      Fig 7.14 (Ch. 7, p. 65) shows that by 2050 low carbon sources are to provide 63% of primary energy.  If the foregoing estimate of 2050 primary energy demand by Riahi et al. is taken low carbon sources will be providing 441 EJ/y of primary energy.

Š      Fig. 7.13 (Ch. 7, p. 64) shows that electricity will be 34% of final energy delivered in 2050.  From above this loosely indicates an electricity demand of 34% x 600 EJ/y = 204 EJ/y, corresponding to c. 6,473 GW.  

Š      Fig .7.13 shows that low carbon sources will be providing 95% of electricity, which would be 194 EJ/y, corresponding 6,150 GW.

No explanations or derivations are given for these figures but it is to be assumed that they represent patterns indicated by the scenarios summarised.  They enable examination of a several problematic aspects of the WG3 claim that the stated investment quantities would be sufficient and affordable.

3.3.1.  Energy conservation.

It is evident from the above figures that the prospects for achieving the emission target are thought to depend greatly on reductions due to conservation effort.  The Report stresses this and it is evident in the large sums for conservation in the two tables, and in Table 1 above.  Chapters 8, 9,10 and 11 discuss many situations in which studies estimate the possible magnitude of particular reduction efforts.  However the Report does not put these together to derive a probable total energy system conservation achievement or cost.  In the study by Riahi, et al. an overall reduction of 22% is claimed to be possible from the 900 EJ/y expected business as usual 2050 primary demand, but no reasoning or demonstration is given for the claim.

There is therefore little or no support given in the GW3 Report for the claim that an annual investment of $340 billion will be sufficient to bring energy demand down to the desired (but unspecified) level. 

There are at least two major reasons for doubting the general conclusions put forward in the four chapters on conservation potential in transport, buildings, industry and to a lesser extent agriculture.  The first is that many studies answer this question simply by estimating how much would use of carbon based energy sources decline with various increases in the price put on carbon. That is, at what price would various industries move from carbon fuels to other forms, resulting in what reductions to emissions.  The problems with this approach are that it assumes that there are alternatives to which industries could shift and that power from these would be available at the cost prompting the shift.  However it is far from certain that sufficient alternatives would be available at an acceptable cost if large fractions of transport, building, agricultural and industrial energy demand were to be shifted to them (especially in view of the accelerating problems of integration associated with variability when renewable penetration is high.) This is part of the general question of whether non-carbon sources can provide most or all of the energy required, and there is a considerable case that they cannot do so at an affordable cost. (E.g., Trainer, 2014b.)

The second major concern is that none of the chapters seems to consider the energy costs of saving energy.  The achievements claimed seem to be solely gross reductions, not net reductions. (The term “embodied energy” is briefly referred to within a few paragraphs in Chapter 9, without dealing with probable embodied energy costs.)

For instance Chapter 9 reviews many studies discussing the savings that can be achieved by better building design and it is claimed that of the energy used in buildings 20% - 40% can be saved.  However the chapter makes no reference to the fact that it takes a considerable amount of energy to produce, install and run energy saving materials and equipment in buildings.

The much acclaimed German Passivhaus provides an impressive example.  It is said that this design can reduce energy consumption by 75% or more, aligning with the claim made by Riahi et al., that a factor four achievement is possible for housing. (2012, p. 1224.) However this kind of claim usually refers only to energy consumed within the house, and does not take into account the energy used to install the typically elaborate insulation and heat transfer equipment.   A recent study by Crawford and Stephen (2013) found that the total life-cycle energy cost for the Passivhaus is actually greater than for a normal German house. 

Similarly Chapter 8 on transport makes no reference to the fact that the large gain in efficiency frequently claimed to be possible for electric vehicles typically only refers to “tank/battery to wheels”, and leaves out the energy losses in getting the electricity from the windmill or solar thermal farm to the battery (which might be 4,000 km away), charging the battery, battery replacement, batteries sitting idle much of the time, and especially the embodied energy cost of producing energy-intensive plastics etc. for the bodies, batteries, and engine parts of electric vehicles.  Also car weights should be considered. The typical 9 litres per 100km for a normal car today refers to a fairly heavy vehicle, not a very light electric car.

The State Government of Victoria's trial of EVs found that they reduce emissions only if powered by renewable energy.  (Carey, 2012.)  Otherwise life-cycle emissions taking into account all factors in addition to fuel are actually 29% greater than those of petrol driven cars.  It is thought that one new battery will be needed over a car’s lifetime, but even assuming no replacement the ratio would still be in favour of petrol driven vehicles, i.e., the total EV/ICV emissions ratio would be 1.29.  Mateja (2003) finds that electric cars involve much higher embodied energy costs than normal cars. Bryce (2010) says 60% of the life cycle energy and environmental cost of these cars is to do with their production and disposal, not their on-road performance.

In addition the discussion of carbon mitigation for both buildings and industry savings is confused by brief references to part of the achievements being due to use of low-carbon energy within these sectors. This makes it impossible to estimate how much might be achieved by what is normally meant by conservation effort, i.e., energy saving due to design, construction and operation, as distinct from savings due to switching to use of low emission energy to operate systems and structures

There is also little or no discussion in the conservation chapters of the Jevons or “rebound” effect whereby energy conservation achievements can bring about greater use of the cheaper energy.

To summarise, the WG 3 report leaves us without an overall energy sector target or a stated possible reduction achievable by the $340 billion p.a. investment that is claimed to be sufficient.   Fig. 16.3 lists only three studies as the sources for this figure, and none of them provide a derivation for it. 

3.3.2      Fossil fuels.

Table 1 shows that in the 2030 - 2050 period there will be no investment in fossil fuel production, but all the scenarios in Fig. 7.14 show that carbon emissions remain substantial, expected to only halve from their present 49.5 GT/y by 2050, but to taper from there to zero by 2100.  It does not seem to be explained how there could be so much use of fossil fuels in 2050 and beyond without considerable investment.  

It is also not clear how the required emissions path could keep cumulative emissions below the 1000 GT “budget” argued by Meinshausen et al. (2009) and subsequently commonly accepted.  The WG 3 Report confirms that the AR5 accepts the figure.  (See p. 31 of Chapter 6.)  Yet as has been noted above even the most favourable paths represented in various figures given in the Report (see Representative Concentration Path 2.6 in Figs 6.4 and 6.6) show emissions only declining from the present 50 GT/y to around 25 GT/y by 2050 and not reaching zero until around 2070 – 2100.  This path would represent a cumulative emissions total to 2100 of almost 2000 GT, well beyond the Meinshausen et al. budget.

3.3.3       Carbon capture and sequestration.

The Report points out that there is at present little clear evidence or agreement regarding the potential, difficulties and costs associated with carbon capture and storage (CCS.)  It is stated that there are only 8 commercially operating plants, of small scale, with another 8 under development. (Ch. 6, p.13.), and that around 80% -  90% of emissions can be extracted, at an estimated increase in power plant cost ranging from  21% – 91%.

Sufficient potential sites for storage are said to exist. A “technical practical” capacity of 39,000 GT is given, but this does not take into account whether the sites are within reasonable distance of emission sources.  It is noted that at this (early) point in time sites which have been found close enough to emission sources are only capable of taking 300 GT. (Ch. 7, p. 65.)  More significantly the large scale review referred to (Dooley, 2013) concluded that although “theoretical” capacity is 35,000 GT, “effective” capacity is 13,500 GT, and “practical” capacity is 3,900 GT. The Report’s most optimistic mitigation path, RCP2.6 involves much CCS, corresponding to around 500 EJ/y of primary energy (see Fig. 2 in van Vuuren et al., 2011).  Assuming that this would produce c. 170 EJ/y of electricity, and thus c. 47 GT of CO2, visual inspection of Fig. 2 suggests that at the present rate of emission the amount of “practical capacity” Dooley identifies would be used up in about 80 years. 

There are a number of areas where it is difficult to make sense of the quantities given in or implied by the figures.  For instance if CCS captured 85% of emissions, the 47 GT/y production rate would result in about 7 GT/y being released to the atmosphere but the RPC2.6 trajectory is supposed to reduce emissions to zero or negative by 2100.

It is not made clear what proportion of electricity is to come via CCS but Figs.16.3 and 16.4 put investment needed in CCS by 2050 at $220 billion p.a.  Unfortunately estimates of capital and operating costs for CCS power plant, and for storage, vary considerably.  For instance the IPCC gives $15/t for storage but the Australian CSIRO estimates up to $140/t.  The IEA (2011) says plant with CCS capacity will cost 74% more than average OECD plant capital cost, but the multiple in AETA (2012) is closer to 25%.  If an uncertain all-inclusive capital cost assumption of $5,000/kW (i.e., adding the cost of āO2 pumping and storage equipment) is made, this would mean that the $220 billion p.a. would enable construction of roughly 44 CCS power stations each year, and would maintain 2,220 in use (assuming a 50 year life.)  Assuming these operate at a 0.8 capacity factor, and 25% of their energy output would be needed to operate the CCS process (at the low end of the Report's range), net output from plant fitted with CCS capacity would be around 1,332 GW. This estimate will be used below in deriving the amount of renewable plant needed.

3.3.4 Nuclear energy.

Table 1 above shows that the 2050 investment rate in nuclear energy is $160 billion p.a.  When fuel production, decommissioning and waste disposal costs are added this sum might enable construction of 30 new reactors each year, and sustain c. 1500 in use (on a quite favourable life assumption), corresponding to about 1,200 GW assuming operation at 0.8 capacity. (Also to be used below.)

3.3.5      The “Representative Concentration Pathways”, (RCPs.)

The IPCC reports and related literature often allocate the many scenarios that have been put forward to four groups, with RCP2.6 representing those expected to achieve a sufficient reduction in emissions (i.e., keeping “forcing” down to c. 2.6 W/m2.)  As noted above such a “scenario” is of no value unless there is reason to believe it is achievable and affordable. The concern regarding this frequently referred to RCP is that the argument which appears to be given for its plausibility in the Report and the related references is seriously mistaken, as will be explained here.

Again the WG 3 report does not provide information enabling the rationale to be clearly understood and assessed but some of the key literature referred to indicates what the reasoning is.  The central sources would seem to be the works of Vuuren, et al., especially their 2011 paper, “RCP2.6; Exploring the possibility to keep global mean temperature increase below 2 degrees C.“  It is said that RCP2.6  “…is shown to be technically feasible in the IMAGE integrated assessment modelling framework.”  The source referred to (Bouwman, Kram and Goldwijk, 2006) reveals that the supporting argument, put within one paragraph, is only to do with the carbon price that would drive energy users off carbon-based fuels sufficiently to produce the RCP 2.6 emission path.  The case in Bowman is summarised as “…the carbon price needed to induce these changes rises rapidly from $25/t to $200 by 2020…” (p. 107; see also the plot on p.108.)  Similarly the WG 3 report says, “…models…tend to agree that at about $100 - $150/t the electricity sector is largely decarbonised.” (Chapter 6, p. 63.)  On the same page it is said that in many scenarios “…$100/t is sufficient to produce large scale utilization of bioenergy with CCS.”

The obvious flaw in this argument has been noted above.  It assumes that there would be alternative sources to turn to, and that their cost would correspond to the carbon and thus energy price associated with the point at which abandonment of fossil fuels would occur.  Firstly there is a substantial case that this will not be the situation, i.e., that renewable sources cannot substitute for fossil fuels to provide anticipated global demand, or that technically they could do so but that the cost would be economically disruptive if not unaffordable. (Trainer, 2013, 2014a, 2014b, 2014c.)

More importantly, a carbon price of $100/t would add relatively little to the wholesale cost of electricity, in the region of a 50% rise from the approximately 3 - 5 cents per kWh it costs to produce electricity in a coal-fired power station. Although this might not be far from the “levelised cost” of electricity from a single wind turbine, that is not what matters here. The question is what would the price of electricity have to be to cover the cost of a supply system containing a large amount of redundant plant and storage needed to reliably deliver power despite intermittency and continuous days of mid-winter intense cold, calm and cloudy conditions, much of the system located at great distance (e.g., solar thermal plant in the Sahara for Europe), net of embodied energy costs for plant and thousands of kilometres of new transmission lines, and all the grid adjustment costs that come with high penetration of intermittent sources?  Taking some but not all of these factors into account indicates that a capital cost (not including O and M) for sufficient solar thermal plant to deliver 1 kW would be in excess of $50,000.  (See the derivation in Trainer, 2014c.) A carbon price of $100/t would not drive electricity suppliers from coal generation to that option.

3.4     An alternative analysis.

The lengthy foregoing discussion has been necessary to now point to inadequacies in the IPCC analysis of capital costs.  This section roughly indicates an alternative analysis which suggests that the capital cost of a low carbon energy sector would be much greater than the IPCC concludes.

To summarise the above figures, it appears that according to the IPCC the low carbon power sector needs to be capable of delivering 6,150 GW, and the nuclear plus CCS sectors need to be sufficient to deliver around 1,332 plus 1,060 = 2,392 GW.  This would leave 3,760 GW to come from renewable sources.  The question thus set is whether the investment sum for the renewable sector stated in Figs. 16.3 and 16.4, a total of $465 billion p.a. by 2050, is likely to be sufficient for this.  The following discussion indicates that this sum would be far too low.

To be able to explore this area it is necessary to have estimates of the capital cost of sufficient generating plant to deliver, as distinct from generate, a net 1 kW via wind and PV, in winter at a location such as Sydney. (As has been noted, solar thermal costs are likely to be much higher than wind and PV and will be disregarded here.  Trainer, 2014c.)

3.3.6.1  Wind. 

AETA (2012) states the capital cost of wind $2,250 per peak kW.  Miskelly (2014) shows that the capacity factor for the whole Australian wind system can be 24% in some winter months.  (The UK annual average can be 18%. Jefferson, 2012.) This means that sufficient wind plant to deliver an average I kW flow in winter would be $2,250/0.24 = $9,375.  Wind turbines are usually assumed to have a 20 year life whereas for PV systems the assumption is usually 30 years. (Hughes, 2012, provides evidence that the wind figure might be in the region of 12 years.)  Prorating to compare with an assumed 30 year life for PV raises this to $14,060.  Taking the commonly stated embodied energy cost of wind energy of around 5% into account it would raise this cost of sufficient plant to deliver 1 kW to around $14,800, (although Lenzen and Treloar, 2003 arrived at a much higher embodied energy cost via an attempt to include thorough accounting of all “upstream” factors.)

3.3.6.2  PV.

For PV the AETA reported fully installed capital cost PV of $3,800/kW(p), will be used. (2012, p. 43.) (However much higher figures are given by NREL, 2010, $(US)7,690 for rooftop and  $4,790 for commercial scale.  Significantly higher 2010 figures are also given by Black and Vetch, 2012. The recent cost fall makes estimation uncertain.)  This is the cost of a sufficient area of PV modules and balance of system to produce 1kW in peak radiation at (an assumed) 15% efficiency.  In other words if that area received peak radiation for 24 hours, i.e. 24 kWh/m2/d, it would produce a constant 1 kW, but in winter in the Sydney region (34 degrees south) radiation only totals about 5 kWh/m2.  Therefore 24/5 = 4.8 times as large an area would be needed to produce an average 1kW in winter (ignoring the need for storage.)  The capital cost of sufficient PV plant to produce the equivalent of a constant average 1 kW in winter would therefore be around $18,240. (Wilson, 2011, states the annual average as $20,000, so his winter figure would be considerably higher than $18,240.)

This figure refers to gross output but many factors reduce this to yield a delivered quantity.  The common assumption has been that these losses can be represented by a “performance factor” of around 80%. However recent attempts to carry out thorough assessments of the embodied energy costs and “downstream” losses associated with PV have found considerably lower values. Prieto and Hall, (2013) arrive at a performance factor of 65% for the Spanish utility system, Weisbach, et al. (2013) find that PV EROI (energy return on energy invested in system production) is in the region of 4+, or half or less of the commonly claimed value.  Palmer (2013) finds that for rooftop PV in Melbourne ER is between 2 and 3.  As this issue would seem to be unsettled a performance factor of 70% will be assumed here.  This would bring the capital cost of sufficient PV plant to deliver the equivalent of a constant net 1 kW in winter at Sydney to $26,000. (This does not include the cost of inverter replacement for rooftop systems.)

            3.3.6.3 Renewable sector investment cost estimation.

It will be assumed that half of the 3,760 GW required from the renewable sector is to come from wind and half from PV sources, i.e., 1,880 GW from each.  To simplify the derivation it will at first be incorrectly assumed that there is no problem of intermittency and storage and that all energy produced by wind and solar can be used, and that there will be no periods in which wind or solar cannot meet their quotas. In other words the first question will be what amount of wind and solar capacity would produce the equivalent of 3,760 GW x 8,760 hours in a year from each source, disregarding whether or not the energy is produced when it can be used or will be available when it is needed.

The capital cost of sufficient plant to deliver 1,880 million kW of wind power at $14,800 per kW delivered in winter would be $27.8 trillion.    Because this per kW cost assumption has been adjusted from a 20 year turbine life to a 30 year life, the annual capital cost for the wind sector would be $0.93 trillion p.a.

The above capital cost for the PV sector would be 1,880 million kW at $26,000 =  $48.9 trillion, i.e., $1.6 trillion p.a. assuming a 30 year lifetime.  The wind plus solar total would be $2.53 trillion p.a.

This derivation is no more than a crude ball-park indicator of the magnitude of the investment task, and there would be somewhat more optimum mixes of contributing assumptions.  However the resulting investment figure is approximately 5.4 times the sum of the renewables investment figure needed by 2050 that is stated in the Report’s Tables 16.3, and 16.4. Note that this is to provide only a very small percentage of the total energy required in 2050, i.e., to provide the 37% of the electricity that is to come from the renewable sector.

Here is a rough cross check. Let us assume that all of the $465 billion p.a. investment the Report regards as sufficient went into wind, the cheapest option.  This would enable construction of ($465 billion)/($2,250/kw) = 207 GW of peak capacity p.a. If turbine lifetime is 20 years this investment rate could maintain a fleet with a peak output of 4,140 GW. Taking the wind capacity factor into account indicates that the average output would be 1,035 GW, or 983 GW if a 5% embodied energy cost is taken in to account.   But the output needed from the renewable sectors is 3, 760 GW.

However the actual investment sums required could be expected to be far higher than those arrived at in the above simplified exercise because it makes no provision for dealing with intermittency or the need to store energy.  As has been stated it was wrongly assumed that all wind and solar power generated can be used when it is generated, and that these sources can meet their allotted share of demand at all times.  Yet there is often little or no wind input, and there is no solar radiation for about fifteen hours of every winter day.  Most important are the big gaps.  Virtually the whole European continent can experience cloudy, cold and calm conditions for many consecutive days during which sun plus wind make negligible contributions.  (Bach, 2011, Burger, 2013, Flocard and Perves, 2012, Oswald, Raine and  Ashraf-Ball, 2008, Miskelly 2012.) To include provision for intermittency either a great deal of storage capacity, or oversized wind and PV capacities, would have to be added to this analysis, considerably increasing system cost.

The magnitude of the cost implications of dealing with intermittency is made clear in the study by Connolly et al. (2012) of the conditions that would enable almost all electricity supply from wind in Ireland via pumped hydro storage. Irish demand is on average 3.5 GW. Fig. 22 shows that 2 GW of wind capacity would enable wind to contribute 20% of demand without storage.  But to be able to contribute 96% the energy storage rate would have to rise to 9 GW and the storage volume to a surprising 500 GWh.  In other words as penetration rises above 50% generating capacity and storage required rise at an accelerating rate, and if wind was to supply almost all demand then storage i.e., pumping capacity would have to be 2.7 times average national power demand and there would have to be enough storage to meet demand for six days.  Note that Ireland is possibly the best wind region in the inhabited world.

The reason for these high figures is that intermittency determines that surpluses to be stored, especially from wind, often become available at very high rates over short periods. If they are to be fully captured at those times very large capacity to pump water to high dams must be on hand (or to compress air or generate hydrogen because the problem arises with all forms of storage except biomass.)  Fig. 22 shows that much more important is the need for very large capacity to store the surpluses to enable generation through all following periods of low or negligible wind generation until storage can be topped up.

In Ireland 3.5 GW of coal-fired power plant would meet demand, at a cost of around $11 billion.  Fig. 22 from Connolley et al. show that to meet demand over time from wind would require 500 GWh or storage and at the lowest cost quoted in the PHS literature (on existing systems built at ideal sites) this would cost $50 billion, not including the wind turbines. About 16 GW of coal-fired capacity could be built for that sum. (Note also that existing PHS systems are not designed to cope with highly variable input energy, so their cost is much less than of systems intended to store wind energy.)

The two important conclusions for this discussion are that there will be times when the combined solar and wind sources will need to be more or less totally substituted for by a very large back up or storage source, and large amounts of generating and pumping capacity must be on hand to store surpluses when they are available. The above derivation of a $2.53 trillion p.a. cost for the renewable sector does not take these points into account.  It appears therefore that the cost of sufficient wind and solar capacity plus sufficient back-up capacity to do this, would probably be several times the above figure, yet the sum stated as sufficient combining Figures 16.3 and 16.4 is  $465 billion p.a.

The extent of the wind and solar penetrations assumed are also problematic.  The above exercise assumes that wind and solar sources would each provide around 40+% of power.  However it seems to be generally accepted that wind can only provide about 20 – 25% of power before difficulties begin to be encountered, such as grid de-stabilisation and the need to export or dump power. (Lenzen, 2009.)  (Some countries such as Denmark enjoy unusually favourable circumstances enabling higher penetrations, notably large neighbours capable of taking surpluses.) Higher penetrations can be dealt with, but at an accelerating and uncertain cost. It is noteworthy that the WG 3 Report recognises the need for large expenditure on grid adjustment to accompany the increased dependence on low-carbon sources.

Similar limits apply to PV. Denholm and Margolis (2007) see 10 - 20% as the penetration limit and believe it is not likely to be more than 15%.  This seems to be valid because if in each day PV was to contribute much more than 20% of the total power needed, but could only do this during the c. 7 hours of daylight, during those hours most other sources would have to be idled.

Neither the Report nor the references cited deal with storage, and the Report includes only a brief mention of the problem of intermittency.

            3.3.6.4  Liquid fuels.

Similar difficulties seem to surround the provision of liquid fuels.  It is not clear what quantity is assumed for 2050 but the Report’s figures indicate that only a very small proportion of final demand could come from this source. Riahi, et al. (2012, p. 1248) estimate total global bioenergy primary potential at 140 EJ/y and GEA estimates 100 – 270 EJ/y. If a c. 33% efficiency of conversion of biomass to liquid fuels is assumed then the highest GEA figure would enable only 90 EJ/y of liquid fuel. The IEA estimates that 78 EJ/y of liquid fuel could be produced from biomass. Biomass is the best source for backing up intermittent power generators so the quantity set aside for this would have to be subtracted from that available for liquid fuel.

3.4  Similar problems in the 2011 IPCC WG3 report on renewable energy.

These concerns to do with methodology, interpretation, scarcity of supporting studies, and misleading generalisation also characterised the 1000 page 2011 IPCC WG3 Report on renewable energy.  (IPCC, 2011.)  A published critique of that report (Trainer, 2012) raising similar issues to those evident in this 2014 report was sent to the IPCC but was not responded to and is not referred to in the 2014 report.  The 2011 report’s optimism regarding the possibility of replacement of fossil energy systems with renewable systems was based on only one source, the Greenpeace study (Teske, 2010), which it has been argued contains major flaws. (Trainer, 2010.)

4.     Discussion.

The IPCC Working Group 3 Report summarises a great deal of valuable information but its significance derives primarily from its cost conclusions, set out in two figures in the last chapter.  They underlie the Report’s confident, reassuring and widely recognised conclusion that the emissions target to limit temperature rise to the desired 2 degrees can be achieved at an acceptable cost.  However there are several fundamental problems with the Report, which can be summarised as follows.

Š      The emission target can be challenged as too low, involving a 67% chance of achieving 430 – 480 ppm, and the demand target is similarly questionable, i.e., providing for a global per capita energy consumption rare that is only 30% of the present Australian rate. These targets significantly reduce expected quantities of plant and capital costs.

Š      The crucial cost conclusions can only be regarded as claims, which cannot be assessed. It is not possible to examine the reasoning underlying them, either within the Report or within the sources referred to. 

Š      The discussion of costs occupies only five of the Report’s c. 1000+ pages, and the main conclusions are based on only one to four studies. 

Š      There is no consideration of whether or not these studies are sound.  

Examination of the studies reveals that they do not enable the supporting reasoning to be assessed, they do not (attempt to) establish their claims publicly, and they do not constitute satisfactory analyses. 

Š      Analysis of the investment conclusions stated in Figs. 16.3 and 16.4 reveal major difficulties in understanding how various components of demand are to be met, notably with respect to transport, the CCS component, liquid fuel, meeting the renewable energy target, feasible penetration levels for wind and solar, and the fossil fuel contribution.  In addition it is not possible to assess the effectiveness or sufficiency of the conservation sum.

Š      Most importantly it appears that the investment cost stated for the renewable energy sector is a small fraction of what the actual sum would be.  The total investment sum that would actually be needed to achieve the 430 – 480 ppm emission target would appear to be far higher than the Report states.

Thus the main problem with the Report is the reassuring impression it gives and the confidence with which it indicates its conclusions can be taken.  It asserts that solutions are available and these will involve relatively low and affordable costs.  The argument in this critique has been that for a number of major reasons these claims cannot be regarded as having been established, and that investment costs associated with meeting the targets would probably be far greater than those stated.

The Report does point out that a considerably greater effort will have to be made in the second half of the century, and this will involve probably 3 times pre-2050 annual investment costs as a percentage of GDP. However the Report does not consider the disturbing nature of these figures.  Firstly consider resource implications. The Report assumes that by 2100 world GDP will have multiplied by a possible factor of 10, and it states that the energy investment required might be 11% of GDP.  If GDP is 10 times as great as at present this means that the equivalent of present world GDP would be being spent each year constructing energy systems.  That would be c. $72 trillion p.a., which is around 70 times the present annual amount the Report says is being invested in energy provision. The Report makes no reference to the feasibility of providing the necessary materials inputs for such a scale of production.

Secondly, at present the amount US spends on energy appears to be in the region of 8% – 10% of GDP, which is 6 - 7.5 times the amount the Report says is invested in energy production p.a.  Murphy and Hall (2011) and others point out that those periods when energy outlays rise to 10% of US GDP are usually accompanied by recession.  This sets the question, if energy investment were to rise from the present 1.3% of GDP (Fig. 16.2) to say the 4% median estimate the Report gives for 2050, or the 7% median it gives for 2100, what would the associated total energy expenditure be?  It would probably be far above 10% of GDP, even disregarding the above case that the WG3 predicted investment cost sums are far too low.

It should be stressed that if world population rises to 9.7 billion as is likely then the target assumed, i.e., the provision of 700 EJ /y of primary energy, would only correspond to a global per capita average consumption of about 72 GJ.  The present Australian average is c. 270 GJ per person, almost 4 times as great.  The WG3 report does not deal with the basic “limits to growth” predicament set by the prospect of raising 9.7 billion to present rich world rates of energy consumption.

5.    Conclusions and policy implications.

The argument above has been that the 2014 IPCC Working Group 3 Report on mitigation does not provide satisfactory support for the reassuring conclusions it arrives at.  In addition to a number of issues where considerable uncertainty regarding quantities remain unclear or problematic, there is reason to believe that the crucial capital cost conclusions stated at the end of the Report are far too low.

Few energy issues hold more important policy implications than the question of whether or not alternatives to carbon emitting energy sources can sustain energy-intensive societies, and enable these for all the world's people.  It is commonly assumed that they can, but this is far from settled.  If they cannot then societies committed to economic growth and affluent lifestyles face extreme challenges and policy choices. There would seem to be only two policy options. The first is to make a very large commitment to nuclear energy, involving tens of thousands of fourth generation breeder reactors and the reprocessing of large volumes of Plutonium.  The second option is to recognise that the problem cannot be solved on the supply side and to move to social, economic and cultural systems which enable a high quality of life for all on dramatically reduced levels of energy consumption.  

The Simpler Way vision (Trainer 2014) is based on the premise that it will not be possible or desirable to raise all people to anywhere near present rich world energy consumption rates or “living standards”. Basic footprint analyses (e.g., WWF, 2014) show that rich world “living standards” generate per capita resource demands that would be around ten times sustainable rates for all people by 2050.  The Simpler Way case is that sustainability cannot be achieved unless there is radical transition to mostly small and localised zero-growth economies, far lower GDP, participatory forms of government, economies driven by rational consideration of need and not by market forces or profit, and a culture of frugality, cooperation and non-material satisfactions. 

The need to give serious consideration to such a transition is obscured by claims that “technical fixes” will enable continued pursuit of affluence and growth. The IPCC’s WG 3 Report reinforces this comforting view by asserting that the climate change problem can be solved by technical advances which avoid any need to question lifestyles or systems, at an easily affordable cost. 

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