Whenever the conversation turns to greening the world’s energy supply, a lot of the ideas tend to emphasize new and futuristic sources of power. Build more wind turbines. Stack up more solar panels. Make sure fresh coal plants don’t get built.
Here’s an example: In a recent column for Bloomberg, Wolfram described what happened in the 1990s after some U.S. states began deregulating their electricity sectors. Utilities sold off their nuclear reactors to private operators. And, Wolfram found in a recent paper with Lucas Davis, electricity output at these newly privatized reactors increased 10 percent compared with those that stayed in the hands of tightly regulated utilities. That small boost in carbon-free power, she notes, “helped offset more greenhouse gas emissions in the 2000s than all of the wind and solar generation in the country combined.”
How did these nuclear plants magically become so much more effective? It all comes down to incentives. After deregulation, Wolfram told me in a phone interview, plant owners could now make a profit by selling as much electricity as possible on the wholesale market. That gave the owners incentives to make small tweaks like reducing the amount of time that the reactors needed to be shut off for refueling. That involves a lot of tricky organizational maneuvers, and until deregulation, operators rarely felt the need to figure it out.
And there are all sorts of small tweaks like this that get ignored because of misaligned incentives. Even today, Wolfram notes, many U.S. power plants still don’t have incentives to operate as efficiently as possible. There are many coal plants in the Southeast that are regulated under “cost-of-service” rules, in which power plants can pass their fuel costs onto consumers. That means there’s less reason to operate as efficiently as possible. And a carbon tax wouldn’t necessarily fix this — not if utilities could just pass costs onto consumers.
Bruce Buckheit, a former EPA official, concurs. He notes that the efficiency of the U.S. coal fired fleet has remained flat since the 1970s. And a variety of research (pdf) suggests that small improvements in operations could boost the overall efficiency of the U.S. coal fleet by as much as 5 percent. (Wolfram, for instance, has found that a coal plant’s efficiency can vary as much as 3 percent depending on the skill of the guy sitting at the controls.) That may not sound like much, says Buchkeit, but spread across hundreds of coal plants, there are real carbon savings to be had here.
So would more deregulation produce these savings? Perhaps. Another possibility, though, is that the EPA could start regulating carbon emissions from existing fossil-fuel plants — something that remains a possibility after the agency set limits on emissions from new plants this year.
Meanwhile, Wolfram says, the place where truly significant gains could be had are in China and India. Both countries are building coal plants at a staggering pace, with coal accounting for 70 to 80 percent of their electricity. For the most part, their plants are often newer and more efficient than coal plants in the United States. But plant owners in these countries don’t necessarily have incentives to operate these plants as efficiently as possible.
“Back-of-the-envelope calculations,” Wolfram estimates, “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.”
That’s a big deal. It won’t, by itself, get carbon emissions low enough to avert severe global warming. We’ll likely still need all those wind turbines and electric cars and other fancy low-carbon technologies that garner all the headlines. But those mundane carbon-belching coal plants and inefficient nuclear plants that will likely stick around for years to come shouldn’t get ignored, either.