May 21 (Bloomberg) -- In the late 1990s, regulators in some U.S. states began to make electric utilities sell their nuclear reactors to private operators. They weren’t trying to help head off climate change, yet they managed to do just that.
Deregulation was supposed to bring down power prices. The sale of nuclear plants to nonutility owners, such as Exelon Corp., was part of the process and was intended to serve that goal. But it also helped offset more greenhouse gas emissions in the 2000s than all of the wind and solar generation in the country combined.
Increased nuclear output is an example of what I call “low-tech cleantech,” or the intelligent management of our energy infrastructure to make it more efficient. A small improvement in nuclear operations can have a much bigger impact than double-digit growth in renewable power sources for a simple reason: Nuclear reactors today generate far more of the U.S.’s electricity than wind turbines and solar panels.
When nuclear reactors were sold to nonutility buyers, the new owners faced strong incentives to increase output. They wanted to make a profit, and, unlike utilities, they weren’t compensated by electricity rates set by the public-utilities commissions. Rather, they earned wholesale market prices for every kilowatt-hour of power they sold to the grid. My Haas School colleague Lucas Davis and I found that these divested nuclear power plants increased their electricity output by about 10 percent compared with plants that remained with utility owners. One way they did this was shortening the down time for the reactors’ refueling.
A 10 percent improvement might seem inconsequential. But multiply that small change by the country’s large base of reactors: Nuclear power accounted for more than 20 percent of total electricity generated in the U.S. in 2000, while wind and solar accounted for less than 0.2 percent.
After the Fukushima disaster in Japan, nuclear power once again is making people skittish. However one might feel about it, these facts are plain: It’s carbon free and widely available, produced by more than 100 U.S. reactors.
Getting more power from these plants can offset electricity production from carbon-emitting coal and natural-gas plants. The additional power from the nonutility reactors was almost enough to meet electricity demand for all households in New England.
Low-tech cleantech solutions won’t revolutionize the energy industry. They won’t make venture capitalists rich. And they won’t, by themselves, lead to the 80 percent reduction in greenhouse-gas emissions by 2050 that many climate scientists suggest we need. But they can offset a lot of carbon in the short run. In an industry where plants routinely last more than 50 years, small adjustments have lasting impacts.
Improved efficiency at coal plants provides another example of low-tech cleantech. My University of California, Davis colleague Jim Bushnell and I showed that the fuel efficiency of the Southeastern coal plant we studied was 3 percent higher when particular operators were at the controls. This is comparable to a car getting better gas mileage when a “coaster” is at the wheel than when a lead foot is driving. With a coal-fired power plant, the potential savings in fuel and forgone emissions of having a “coaster” in charge are big.
Imagine the greenhouse-gas savings if efficient operators controlled every U.S. coal plant. A 3 percent gain may sound puny, but, when applied to the more than 600 coal plants in the U.S., it could offset more carbon than the nuclear improvements I discussed above.
The results would be even more dramatic in India and China, where almost 70 percent and 80 percent, respectively, of electricity is generated from burning coal. Back-of-the-envelope calculations suggest that improving the fuel efficiency of Chinese coal plants by about 5 percent would offset more carbon emissions than all of the non-hydro renewable energy in the world.
So why aren’t utilities already seizing these opportunities? The problem is, at least partly, bad incentives. In most of the world, electricity-sector managers don’t have to fight for profits and share in a free market. In U.S. states that haven’t deregulated, utilities can pass along their fuel costs to customers. In China, too, many plants receive coal at heavily subsidized prices.
Removing bad incentives and encouraging managers to improve the efficiency of existing power plants may be the most immediate low cost, large-scale solution we have in the battle against climate change.
(Catherine Wolfram is associate professor of business administration at the Haas School of Business at the University of California, Berkeley, where she is co-director of the Energy Institute. She is a contributor to Business Class. The opinions expressed are her own.)
Read more opinion online from Bloomberg View.
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