What do the goals of slowing or stopping climate change, achieving a successful energy transition, accelerating the deployment of renewable energy-producing technologies, realizing the European Green Deal, and achieving net-zero emissions have in common? The reduction of greenhouse gases (GHG)! In order to comply with these goals, we need to also look at our grids efficiency.
We have discussed in earlier posts whether the private sector is ready for a transition, what needs to be done to achieve an energy transition, how the energy sector can be revolutionized, looked at the costs of emissions, seen innovative technologies that can generate heat and electricity, laid-out problems that our power grid has, as well as potential solutions, and many more.
In the post on energy conversion factors, we looked at commercially available PEFs of power plants in operation versus theoretical values of technologies currently in development. Generated energy is then fed into the grid from the generation sites to reach the distribution lines and final consumers.
Our current infrastructure, and, consequently the distribution of power, does not function at the highest possible efficiency. That is because not all the energy is utilized between production and consumption.
This post will look at overall statistics of how much of the primary energy is essentially consumed. The results are shocking. Globally, only around 70 per cent of the total primary energy consumption actually reached the consumers. Twenty-two per cent of the losses can be accredited to the transmission via high-voltage lines and roughly 1.5 per cent to low-voltage distribution.
Numbers can vary for country, continent and year, depending on the energy mix, as different energy sources show different energy conversion efficiency rates. Efficiency losses associated with the transmission and distribution lines in developed countries such as the United States, Germany, or Singapore were in the low to mid-single digits, whereas developing countries saw numbers in excess of 50 per cent.
An estimated half of the carbon dioxide equivalents that are lost in transmission and distribution can be avoided through the deployment of more advanced technologies, the replacement of inefficient wires, and the upgrading of existing infrastructure. Further, the adoption of digital technologies such as blockchain, smart meters and AI can help establish power-flow routines that help establish a better configuration of power- and distribution lines.
The lost carbon dioxide equivalents accumulate worldwide to almost a billion metric tons of carbon dioxide; that is more than the entire chemicals sector emits per year, globally. Practically this means that we should also try to help emerging/developing countries to leap dirty fossil fuel options to generate electricity by providing top-notch technologies.
Assuming 100 per cent efficiency is unrealistic, as electric currents generate heat, that simply cannot be captured and utilized at every single second, as one example. Consequently, the longer the distance from generation site to consumption site, the more is lost. This is simply thermodynamics. Nevertheless, efficiency losses can be reduced to an extent, and therefore, the environmental impact of the energy sector reduced. To quantify the costs that occur from emitted CO2 that can directly be tied to the above described inefficiencies, we use CO2 prices, that we have derived in the EW-Factor.
Carbon prices, as was discussed in the post that first introduced the EW-Factor, are estimated based on the following:
A report by the Climate Leadership Council (CLC) examines the consequences of taxing carbon at $43 per ton starting in 2021, roughly corresponding to the council proposed in 2017. An increase of 5% above inflation annually would result in a CO2 tax of $112 by 2035. The German Government proposed an even more drastic carbon tax, which would rise to $180 until 2030. Nevertheless, we have chosen a more conservative approach, as we do not want to be overambitious and present the CO2 costs as being even more severe. This approach is also in line with the European Union Emissions Trading System (EU ETS).
The average price for emission certificates, measured in metric tons, in the years 2020 and 2021 are $40 and $44, respectively. Multiplying that with emission equivalencies of the lost energy along the entire lifecycle, we get approximately $38 billion and $41,8 billion, respectively. As already mentioned, it is not realistic to avoid all energy losses caused by transformation and distribution, but merely about half. Even then, the numbers are still in the low-mid twenty billion.
Just think of what can be created with more than $20 billion. Let’s look at solar power plants for example. The costs per watt of solar installation vary, depending on various factors such as costs of panels, costs of land, cost of capital, and so on. However, the costs usually lie somewhere around $1 per watt. Hence, a 1-megawatt solar farm would cost around $1 million.
The cumulative installed capacity of solar photovoltaics was 586.4 GW, globally in FY2019. The global weighted average LCOE for utility-scale solar projects was $60 per MWh in FY2019. By using the avoided costs of improving energy transformation efficiency and distribution alone, we could add around 20 GW per year, assuming costs of $1 per watt. By today, installation costs may even be as low as $0.80 or $0.90 per watt for utility-scale projects. In other words, more than 4 per cent of the to-date installed capacity of solar could be added each year if emissions due to grid inefficiencies are reduced by half.
Decentralised Energy Resources (DER), such as smart cities and more localised generation sites as seen with renewables, will substantially contribute to reducing grid efficiency losses by shortening the transmission distances. But it is not just the inefficiencies that our grid has to improve on. Still, the overall stability of the grid needs to be at the forefront of the energy transition as well if we want to achieve a higher degree of electrification and an increasing share of renewables.