Could Increased Electricity Usage be the Answer to Climate Change?

Greenhouse gas emissions from the transportation and heating sectors

Fossil fuels used in the production of electricity produce 28% of our greenhouse gas emissions. One would think that reducing our electricity usage would reduce our greenhouse gas emissions. But, some experts suggest that just the opposite is true. They say that we can reduce our greenhouse gas emissions by increasing our electricity consumption for electric vehicles and heat pumps.

Reducing electricity usage would reduce the greenhouse gas emissions associated with the production of electricity. However, electricity is not our only source of greenhouse gas emissions. 

Source: USEPA

We use fossil fuels for 90% of our transportation requirements. And we use fossil fuels for almost all of our residential and commercial heating requirements. This usage accounts for 29% and 12% of greenhouse gas emissions respectively. We can reduce greenhouse gas emissions in these sectors only by reducing their use of fossil fuels. In both cases electricity is the only available alternative to fossil fuels.

Electric Vehicles

Many experts view electric vehicles (EV) as the best way to reduce greenhouse gas emissions in the transportation sector. And state and federal governments are already offering incentives for drivers to purchase EVs. However, only 2% of new cars sold in America are EVs. Buyers have been slow to embrace EVs because of the following:

  • Time it takes to charge the vehicle;
  • Range of driving on a single charge;
  • Cost as compared to conventional cars; and
  • Lack of charging stations.

The automobile industry is working on these issues. And it will probably resolve them within the next several years. However, even if the American public fully embraces EVs, there is a question of the extent to which EVs will actually benefit the environment.

EV tailpipe emissions (including emissions associated with electricity used to charge the battery) are less than conventional auto tailpipe emissions. But tailpipe emissions are not the only source of greenhouse gas emissions. The “well to wheel” emissions – that is, tailpipe emissions plus the emissions from electricity required to produce the automobile – must also be considered. And, because of the electricity required to produce the EV battery, it takes more electricity to produce an EV than to produce a conventional auto.

Based on today’s mix of electricity production facilities the “well to wheel” emissions for EVs may actually be greater than for conventional autos. We will not, therefore, get the full benefit of EVs until more electric production is converted from fossil fuels to renewables.

Heat Pumps

Historically, we have used fossil fuels for almost all of our space heating requirements. But, during the 1970s there was a perception of a natural gas shortage. Without the availability of natural gas we started to use heat pumps fueled by electricity for space heating. After natural gas was once again readily available, heat pumps fell out of favor. In many cases the heat pumps installed in the 1970s were removed and replaced by conventional fossil fueled furnaces. Today, we get virtually all of our space heating from furnaces fueled by natural gas, oil or propane.

Now, with fossil fueled furnaces identified as a source of greenhouse gas emissions, heat pumps are getting a new lease on life. Heat pumps operate in the same way as air conditioners. In an air conditioner the hot air inside the home is transferred to a coolant which is condensed and compressed to transfer the heat outside. In a heat pump the hot air outside the home is transferred to a coolant which is condensed and compressed to transfer the heat inside. Although it may seem counterintuitive, outside air that is as cool as 32 degrees Fahrenheit contains enough hot air to be useful in a heat pump operation. When the outside air goes below 32 degrees the heat pump must use some type of auxiliary heating system to heat the indoor air.

The following video explains the operation of a heat pump:

Heat pumps operate on electricity. And electricity generation produces greenhouse gas emissions. However, even with today’s mix of electric generation facilities, the greenhouse gas emissions from the electricity used to run a heat pump are less than the greenhouse gas emissions produced from a fossil fueled furnace. And the greenhouse gas emissions associated with heat pump usage will further decrease as more electric production is converted from fossil fuels to renewables.

Conversion to EVs and Heat Pumps

No one is going to ask us to immediately replace our conventional autos and fossil fueled furnaces with electric vehicles and heat pumps. In fact, until more of our electric generation comes from renewables the electrization of the transportation and space heating sectors might have limited benefits. Therefore, conversion to electric vehicles and heat pumps should occur over the next 10 or 20 years in parallel with the greening of electric production.

It should also be noted that the current electric generation mix is geared towards meeting a peak demand that occurs on hot summer afternoons when air conditioners are in use. The increased electric consumption associated with the electrization of the transportation and heating sectors could cause a shift in the electricity load curve. This shift will have to be accommodated as new generating plants are added to the system.

Author

I. David Rosenstein worked as a consulting engineer and attorney in the electric industry for 40 years. At various times during his career he worked for utility customers, Rural Electric Cooperatives, traditional investor owned regulated utilities and deregulated power generation companies. Each of his posts in this blog describes a different aspect of the past, present or future of the electric industry. 

Is a Carbon Tax the Answer to Climate Change?

Increasing Interest in a Carbon Tax

Fossil fuel combustion causes 82% of the greenhouse gas emissions in this country.  Those that believe that human activity causes climate change agree that we must reduce those emissions. While there is no consensus on how to achieve these reductions support has been growing for a carbon tax. See the Environmental Defense Fund’s explanation of a cap and trade program, which is another viable method to reduce greenhouse gases.

Pollution from power plant that could be reduced with carbon tax
Source: butane.chem.uiuc.edu

A carbon tax is a fee imposed on the burning of fossil fuels. Such a fee forces users of carbon-based fuels to pay for the detrimental impact on the environment of their use.  For a detailed explanation of how a carbon tax might be used to reduce greenhouse gas emissions visit the Carbon Tax Center web site.

Forms of a carbon tax are already in effect or proposed in numerous countries including England, Ireland, Australia, Chile, Sweden, Finland and New Zealand. Forms of a carbon tax are also in effect in 10 states. And several bills have been introduced in Congress which would implement a national carbon tax.

How a Carbon Tax Would Work

There are numerous versions of a carbon tax. However, in this Post I will focus on a form of the tax that is assessed at the time that fossil fuels are mined or imported into the country. Presumably, those that pay the tax will pass the cost along in their sales price. Ultimately, the cost of the tax will be reflected in the of the price of gasoline and electricity.

The tax would also affect the cost of certain plastics that use fossil fuels but capture the carbon and do not emit greenhouse gases. This use of fossil fuels does not add to greenhouse gas emissions. Therefore, most carbon tax proposals provide credits for such plastics that zero out the cost of the tax.  

Impact on the Price of Electricity

Electric power production from coal, oil and natural gas causes one-third of the greenhouse gas emissions associated with fossil fuels. If a carbon tax is enacted the cost of electricity produced by coal, oil and natural gas will undoubtedly increase.

Opponents of a carbon tax base most of their opposition on the impacts that these price increases could have upon the economy.  For a good argument against a carbon tax see the article entitled 10 Reasons to Oppose a Carbon Tax on the American Energy Alliance web site. For a detailed discussion of the impact of a carbon tax see the paper entitled Effects of a Carbon Tax on the Economy and the Environment prepared by the Congressional Budget Office.

Opponents of the carbon tax contend that the cost of the tax will simply be passed along to electric customers in the form of price increases. However, such an argument does not fully consider the operation of deregulated markets that govern most of today’s electric consumption.

In the competitive markets each regional Independent System Operator (ISO) manages a power exchange where electricity is bought and sold. Hundreds, or even thousands, of generating plants participate in each of these ISO markets. These plants operate on fossil fuels, nuclear or renewable resources.  They all hope to sell their production to the market at or above their operating costs.

Each ISO follows a set of rules that dictates the order in which it will purchase power from these plants. These rules require the ISO to dispatch the plants in reverse order of their cost of production. Thus, during hours when electric consumption is low the ISO will dispatch only the lowest cost production. The ISO will dispatch higher cost production only during hours when consumption increases.

The following graph shows how an ISO dispatches different types of generation at different prices as consumption varies throughout a 24 hour period:

Carbon tax could impact economic dispatch position of fossil fuel plants
Source: pjm.com

As can be seen from the above, the ISO dispatches low cost renewable and nuclear power during low usage hours.  The ISO adds more expensive natural gas combined cycles, coal and combustion turbine oil plants only during higher usage hours.  

If a carbon tax causes the fossil fueled plants to become expensive it would certainly increase the price of electricity during hours when those plants are in operation. However, there is good reason to believe that the fossil fueled plants’ hours of operation may decrease. Their increased operating costs should increase opportunities for additional renewables to compete, and be dispatched, at price levels that are lower than the new cost of fossil fueled generation. This would limit the use of fossil fuel generation to hours when consumption reaches very high levels. In other words, the carbon tax would increase renewable generation and reduce the hours in which high priced fossil fueled generation is in use.

The Level of the Carbon Tax

One argument against a carbon tax is that it constitutes a political decision to force certain behavior – in this case reduced use of fossil fuels. However, it could also be argued that the current failure to recover the societal cost of carbon usage from its users constitutes a political decision to subsidize the use of fossil fuels.

The Environmental Defense Fund estimates that the detrimental societal cost of carbon usage is currently around $40/ton of carbon dioxide. Other estimates are both higher and lower. However, whatever the true cost of carbon emissions, it would seem that that cost should be borne by the carbon users rather than by society in general. Implementation of a carbon tax that at least equates to the societal cost of carbon usage would not be a new political decision. It would reverse an existing political decision to subsidize fossil fuel use.

Where Will the Revenues Go?

Revenues from a carbon tax could be substantial. Estimates are that a modest tax of $15/ton of carbon dioxide would result in $80 billion in tax revenues. There is a question of how that $80 billion should be used. Suggestions include using the funds to reduce the national debt, using the funds to finance renewable generation projects, and using the funds as tax credits for low income families to partially offset the increased costs of gasoline and electricity caused by the tax. Any carbon tax legislation will have to include the answer to the question of where the tax dollars go.

Author

I. David Rosenstein worked as a consulting engineer and attorney in the electric industry for 40 years. At various times during his career he worked for utility customers, Rural Electric Cooperatives, traditional investor owned regulated utilities and deregulated power generation companies. Each of his posts in this blog describes a different aspect of the past, present or future of the electric industry.