By Francis Vanek, Ph.D.
School of Civil & Environmental Engineering
220 Hollister Hall,
Ithaca, NY 14853-3501
For reasons of ensuring sustainable access to energy for the future and preventing environmental damage, we as a society need to change the way we use energy. This change involves both developing new technologies and introducing these technologies into everyday use in an intelligent, systematic way. Instinctively, we focus on developing new technologies perhaps because these are the most tangible actions in bringing about transformation. However, the systematic integration component is equally important if we want to be successful in our aims
This article suggests five questions to ask in the pursuit of a systems approach to thinking about energy. It is written from the perspective of an engineer or technologist, but oriented toward thinking about the economy and society as well. It is intended to be understandable from a general quantitative perspective that does not require a specific science or engineering background in any discipline or energy technology.
Question 1: The energy resource: how much and how dense?
As a starting point, both the availability and density of energy resources affect their viability. They vary from extremely dense (nuclear) to relatively dense (fossil fuels, hydropower) to relatively diffuse (solar).
Both factors come into play when evaluating the future role that a resource can play. For example, run-of-the-river hydropower is a promising option in the U.S., to the extent that it does not require impounding large amounts of water behind a dam, and flooding usable land. It also benefits from the relatively high density of kinetic energy in moving water, which allows it to produce electricity at relatively low cost. However, even if all the projected capacity for run-of-the-river hydro was built out, it would only contribute a few percent to our total electricity demand. This does not mean it is not worth doing, but we know that we will look elsewhere for additional sustainable energy. At the other extreme, the amount of solar energy striking the US landmass is vast, but it is more diffuse, so it is harder to convert to practical human uses in a cost-effective way.
Question 2: The conversion technology: what is its typical cost per unit of capacity and capacity factor?
The cost per kW is a standard measure for evaluating how much an energy technology costs. For a given amount of capacity, multiply the desired capacity by the cost per kW to get the total cost of the system.
Cost per kW is useful for evaluating how a technology is evolving in cost-effectiveness over time, but in other settings it can be misleading. This is because the measure is based on maximum power output, and, to varying degrees, technologies will not run at their maximum output all the time. Capacity factor is a related measure that tells us how much a technology actually produces on average once it is installed, compared to if it were producing at maximum for every hour of the year. So, if a household wind turbine were rated at 10 kW, it could produce 87,600 kWh in a year; if it actually produces 8,760 kWh, its capacity factor is 10%. Nonrenewable energy sources like fossil or nuclear power plants typically have higher capacity factors than renewables like solar or wind because they do not depend on an intermittent resource.
Question 3: The economics: what is the life cycle cost?
The cost per kW and capacity factor still don’t tell the whole story about the economics of an energy technology, so life cycle cost can be used to create a more complete picture. A simple way to look at life cycle cost is to divide it into three parts: capital cost, fuel cost (if there is any), and operating cost (a catch-all or balance of cost that includes all labor, materials, overhead, etc.). Capital cost is incurred once at the beginning of an energy system’s life cycle, but it can be spread out over the investment lifetime (25 years is a good standard) using discounting, which weights cost incurred at the beginning of the life cycle more heavily than annual costs along the way. Once all costs are in annual terms, one can divide the sum of all costs by the average output per year to calculate the levelized cost of energy (for example, in the case of electric power, divide cost by output to calculate levelized cost in $/kWh).
Levelized cost becomes a way of comparing different options for providing energy on a level playing field. On the one hand, levelized cost tends to work against renewable energy sources that have high capital cost which must be discounted over many years. On the other hand, renewables do not incur the major externality cost of emitting CO2 to the environment, so if the levelized cost of fossil fuel options includes the cost of carbon (which may happen in the future under a carbon cap-and-trade or tax scheme), renewable options are favored.
Question 4: The other positive and negative considerations: what are they?
Every energy alternative has some degree of positive or negative consequences for its surroundings, and for a complete treatment of sustainability, this should be listed and considered as well. Does the technology incur some local nuisance? Is it bad for wildlife? Is it aesthetically pleasing or not? Just because the characteristics of an energy system do not fall under the headings of levelized cost or greenhouse gas reduction does not mean that they are not important, or cannot make or break a project.
For example, we might compare utility-scale wind turbines and Photovoltaic panels in the northeastern U.S. Wind farms in windy locations (along the Great Lakes or on ridge tops) have a cost effectiveness advantage compared to PV, because the turbines benefit from economies of scale, while PV panels are hampered by relatively low average insolation (about 40% less than the southwest, if one uses data from Springerville station in Arizona as a benchmark). But inevitably wind turbines must be placed in high elevations, and they must be high off the ground where they are visible for miles around. Also, there is enough population density throughout the northeast that on-shore wind farms will be close to people. Some communities support these wind farms, but many others oppose them. Local opposition can be as much of a factor in preventing a project from succeeding as high cost.
Question 5: The technology: can it be transformed to overcome barriers raised by points 1-4?
If the first four questions result in undesirable answers, it is always possible to consider a way out: change the technology to solve the problem. For example, suppose high levelized cost is the problem. There may be ways to use R&D to advance the technology so that it is cheaper or more efficient, or build it on a larger scale so that it is more cost-effective. Also, the scaling up of the technology as it increases in installed capacity by an order of magnitude or more may make it cheaper to manufacture, also helping to bring the costs down. Impacts on air quality, climate change, or local impacts may also be addressable by changing the technology.
To conclude, it is apparent that even though energy solutions are heavily technology-dependent, questions of systems integration inevitably bring the engineer-technologist out of the realm of the purely technical and into considerations of economics, sociology, ecology, and so on. This is as it should be. Phenomena observed both in human society and in nature do not fall neatly into academic or professional disciplines, so we should expect that our energy solutions won’t be contained in just one discipline either.
Author’s note: Francis Vanek is, along with Cornell University colleague Lou Albright, author of the text and professional reference book Energy Systems Engineering: Evaluation and Implementation from McGraw-Hill. The questions developed in this article reflect the ideas developed in the book, as well as several years of teaching engineering and science students at Cornell about energy systems.