A CHANGE is in the works that could go a long way toward making alternative energy less alternative, and more attractive to consumers and businesses.
It’s not a technological fix from some solar-cell laboratory in Silicon Valley or wind-turbine researcher in Colorado or the development of some superbug to turn wood waste into ethanol.
Rather, the change would come from Washington, if Congress does what it has talked about and puts a price tag on greenhouse-gas emissions. Suddenly the carbon content of fuel, or how much carbon dioxide is produced per unit of energy, would be as important as what the fuel costs. In fact, it might largely define what the fuel costs.
That could shake up the economics of energy, handicapping some fuels and favoring others. Those that produce hefty emissions, like coal and oil, would likely look much worse. And some — sunlight, wind, uranium, even corn stalks and trash as well as natural gas — would probably look much better. “Carbon-negative” fuels that take carbon dioxide out of the atmosphere as they are made, might even become feasible.
Carbon dioxide is what economists call an “externality,” something that imposes a cost on somebody other than the manufacturer. At some point, the thinking goes, Congress will force industries to pay those costs, either with a tax or a cap-and-trade system in which allowances will cost money. The consensus in the energy business is that lawmakers will come up with a charge that could start at $10 per metric ton or more.
On Thursday, a Senate subcommittee approved a bill to establish a cap-and-trade system for carbon dioxide, and the Democratic leadership is eager to have the Senate pass it by year’s end. But prospects in the House are less certain.
Still, with all the talk about a carbon charge, “your perspective shifts,” said Revis James, an economist at the Electric Power Research Institute, a nonprofit utility consortium in Palo Alto, Calif. “We’re definitely going to be paying a bill here for wanting to reduce these emissions.”
Some companies are already counting on paying such a bill. In October, NRG, an electric company in Princeton, N.J., made the first application in three decades for permission to build a nuclear power plant. In an interview, the chairman, David Crane, said his calculations showed that such a plant would be cost effective if the price of carbon dioxide emissions ran into “double digits” per ton.
The Electric Power Research Institute’s staff estimates the effect of a charge on carbon dioxide emissions on the price of a kilowatt-hour, the amount of electricity needed to run 10 100-watt bulbs for an hour. Natural gas produces 0.84 pounds of carbon dioxide per kilowatt-hour, and coal produces more than twice as much, 1.9 pounds.
At $10 per metric ton, the impact is minimal. But at $50 a ton, for example, the cost of a kilowatt-hour produced by coal goes from about 5.7 cents to about 10 cents. Wind power currently isn’t competitive, according to the institute’s calculation, but it becomes competitive when carbon dioxide costs $25 a ton. By their calculations, nuclear energy, with negligible carbon dioxide emissions, looks sensible at a small carbon charge.
Here’s how the new economics might work for solar power, according to Charles F. Gay, the vice president and general manager of solar business at Applied Materials, a California semiconductor company that has branched into that field.
Solar power from photovoltaic cells is very expensive, about 25 to 30 cents per kilowatt-hour. But compare a kilowatt-hour produced by such cells, which emit no carbon dioxide, with one produced by a conventional coal plant. At $20 or $30 a ton, the 1.9 pounds of carbon dioxide emitted in producing that kilowatt-hour costs 2 to 3 cents. That cuts into coal’s price advantage and — when coupled with progress in reducing the cost of solar power through manufacturing and economies of scale — gives solar power “a much larger chance to be relevant,” Mr. Gay said. Solar thermal systems, which use mirrors to concentrate sunlight to boil water, might benefit even sooner.
The new calculus of energy would not be limited to electricity. Like a kilowatt-hour, a gallon of ethanol is a commodity. But its impact on the environment depends on how it is made. Ethanol is a prime example of a product with what Lee Schipper, an energy and transportation expert at the World Resources Institute, calls “closet carbon.” That is, carbon dioxide embedded in the production of what is supposedly a renewable product.