ER100/PP184/ER200/PP284, Fall 2022 Problem Set #4 Total Points: 75 for ER110/PP184; 100 for ER200/PP284 1) Environmental Economics [25 points ER100, 35 points ER200] Imagine you are the governor of a US state and a member of the US Climate Alliance. You are committed to reducing your state’s greenhouse gas (GHG) emissions in order to achieve goals set out by the 2016 Paris Climate Agreement. You want to invest in renewables such as wind and solar, but due to the cheap price of natural gas, utilities in your state have no economic incentive to transition to renewables. Therefore, you would like to account for the social cost of carbon (SCC) and impose a carbon tax on all GHG emissions from energy production. The table below provides data for two major natural gas-fired power plants currently operating in your state. Plant Name Capacity (MW) Thermal efficiency (%) Average Annual Capacity Factor Annual Energy Production (MWh) Current Price of Energy Production (¢/kWh) Pavilion (Single Cycle) 400. 33.0 0.90 3.154 x 106 8.1 Fairdale (Combined Cycle) 450. 54.0 0.90 3.548 x 106 6.9 a) Assume that natural gas is quantified in terms of its internal energy content in million-Btu, and is estimated to emit roughly 53 kg CO2/million-Btu when combusted (source: USEIA). Therefore, what are the annual CO2 emissions (in tonnes) for each power plant? [8 points] b) Now you want to set a carbon tax on emissions that captures the social cost of carbon. You decide to set the tax at $40./tonne-CO2. Using your answers from part a, what will the new cost of energy production be for each of the plants? If the cost of renewable energy production is 9.0 ¢/kWh, which plant(s), if any, now have higher production costs than renewables and would therefore be incentivized to transition to clean energy? [7 points]c) Even if renewables appear to be price competitive compared to natural gas in some instances on a cost per kWh basis, what might prevent or delay a transition to renewable energy production? Provide at least 5 reasons. [10 points] d) [ER200 ONLY] What are some possible drawbacks of employing a statewide carbon tax as the sole strategy to reduce GHG emissions? Provide at least 5 reasons. [10 points] 2) Energy Efficiency at Home [25 points ER100, 30 points ER200]: Suppose you have two kettles – a plug-in electric kettle and a stovetop kettle. The electric kettle uses electricity from a natural gas fired power plant, while you boil water in your stovetop kettle on a natural gas burner. a) Based on the following information, which of these kettles demonstrates a higher energy efficiency? Please calculate the efficiencies of each kettle and express answers as percentages. [10 points] - The natural gas power plant converts chemical energy of the natural gas to electrical energy with 58% efficiency. - High-voltage power lines from the power plant to your house convey electricity with 92% efficiency. - The electric kettle converts electrical energy to thermal energy in the water with 85% efficiency. - The stove burner converts chemical energy of natural gas to thermal energy with 98% efficiency (the other 2% is light). - The stovetop kettle transfers 35% of the stove’s thermal energy to the water in the kettle. b) Electric kettles are quite efficient, but people often use them carelessly and boil more water than they need. If the average kettle ends up boiling 2 times as much water as needed, how does this change the efficiency? [5 points] c) [ER 200 ONLY] What other factors, beyond efficiency, might consumers consider when choosing kitchen appliances? [5 points]d) Suppose you are boiling water to make your morning coffee. List 3 steps that might be included in a life cycle analysis of the coffee grounds. What is the potential impact of each step in terms of energy and carbon emissions? [10 points] 3) Learning Curve Analysis [25 points ER100, 35 points ER200]: The cost of solar photovoltaic technology for PV modules has declined dramatically over the past 40 years. The learning curve model can be used to describe this cost reduction in relation with the increasing cumulative installation: the more we install PV modules, the better and cheaper we can make them. According to the learning curve for Cadmium Telluride (CdTe) PV modules (red triangles), the global average module price at cumulative installation of 100. MW is $3.5 per watt (US $2011). The price reduces to $0.85 per watt (US $2011) when cumulative installation becomes 10,000. MW. Note: The data for thin film PV modules is presented in cost, while that for Si wafer PV modules is presented in price. Correspondingly, the learning curve model for thin film PV modules uses cost, whereas the learning curve model for Si wafer PV modules uses price. a) Based on the learning curve model, calculate the progress ratio for CdTe modules. [10 points] b) The Nuclear Industry is one that has not necessarily reaped the benefits of increased installations. The figure below shows the average and min/max reactor construction costs per year of completion date for the US and France versus cumulative capacity completed. Source: (Grubler, 2010) i) The cumulative installation in France by the end of 1977 was about 2.0 GW, and the cost (in 1998 French Francs) was about FF7000. per kilowatt (FF 7.00 per watt). The model suggests that the cost moves to about FF25000 per kilowatt (FF25 per watt) by 1999, with 70. GW of cumulative installation. What is the average rate of change of cost per year for nuclear reactors in France between 1977 and 1999? [7 points] ii) Given the information about nuclear reactors in France in question (i) above, use the learning curve model to project the reactor construction cost per kilowatt in 2020 based on the 1999 costs. Assume that 2GW of nuclear reactors areinstalled annually and neglect inflation on prices. (Hint: calculate b first using 1977 and 1999 values) [8 points] c) [ER200 ONLY] Why may approximations by simple learning curve models be inadequate in predicting future costs? List 3 reasons. [10