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External Cost of Fossil And Non-fossil Energy Systems
The Case of the Czech Republic
Milan ŠČASNÝ & Jan MELICHARCharles University Environment Center, Prague
NEEDS FORUM 2 “Energy Supply Security”
Krakow, 5-6 July 2007
Content
1. Paper Motivation and Its Goal
2. Methodology3. External Costs Estimates
fossils and non-fossils used in power sector non-energy sectors
4. (Not only) Concluding Remarks
5. Research on the ExternE in CEE region
Motivation
Technology’s attributes important for the choice– internal costs– energy supply security– external costs (other than security of supply)
External costs of energy generation from fossil fuels (200 € per capita) or
– 2% HDP in Hungary– 2.5% HDP in Czech Rep– 5% HDP in Poland
0
1
2
3
4
5
6
7
8
9
Czech Republic Hungary Poland
bln
. €
up-stream
production - GHG
production - non-GHG
Goals
Technologies’ ranking– which technology outperform its substitutes?– what are the external costs of (some) renewable energies
and fossil plants?– factors and assumptions that influence the external cost
values
Document uses of the ExternE method for more comprehensive technology impact assessment
Externality as a source of market failure deviation from the first-best neoclassical world in which the price
mechanism takes care of socially (Pareto) optimal resource allocation signal failure market prices no longer reflect social costs (or benefits)
„An external effect exists when an actor’s (the receptor’s) utility (or profit) function contains a real variable whose actual value depends on the behaviour of another actor (the supplier), who does not take these effects of his behaviour into account in his decision making process“ (Baumol and Oates 1988; Verhoef 2002) and “… the effect produced is not a deliberate creation but an intended or incidental by-product of some otherwise legitimate activity“ (Mishan 1971)
„…externality arises when the social or economic activities of one group of persons have an impact on another group and when that impacts is not fully accounted, or compensated for; by the first group“ (ExternE; EC 2003)
ExternE method impact assessment (e.g. health risk), not of pressures (e.g.
emissions of pollutants)
damage associated with certain process depend site (location) technology time
preference structure of the population– how much are you willing-to-pay for avoiding adverse impacts ?
market price (e.g. building materials, crop, medical treatment of illness, …) non-market valuation (e.g. dis-welfare due to illness, premature death,
landscape amenities, noise, ….)
impact assessment at each spatial level, i.e. local, regional, hemispheric, global effects
life cycle impacts considered particularly, but not only, for renewables and nuclear energy
bottom-up approach for the complex pathways>‘impact pathway approach’
Impact pathway approachPOLLUTANT
& NOISE EMISSIONS
MONETARY VALUATION
TRANSPORT & CHEMICAL
TRANSFORMATION
DIFFERENCES OF PHYSICAL IMPATS
ExternE> Impacts categories
Pollutant/burden
particulate mattersparticulate matters SOSO22, NOx, NOx COCO2 2 (CH(CH44)) OO33
CO, VOCCO, VOC trace poll. (HM, dioxines)trace poll. (HM, dioxines) noisenoise odourodour
Impact category
Human healthHuman health- morbiditymorbidity- mortalitymortality- dvlp. impairmentdvlp. impairment
Building materialsBuilding materials CropsCrops Climate changeClimate change Forests Forests Natural ecosystemsNatural ecosystems VisibilityVisibility Cultural heritageCultural heritage
External costs calcualtions
Model assumptions, i.e. DRFs, monetary values, modelling (ExternE methodology 2005-update)
EcoSense v4.1 software tool 2003 emission and reference technology data external costs mostly of process, i.e. energy
generation in the plant
Power sector in the Czech Republic
0.47%
3.92%
0.87%
31.24%
1.68%
61.82%
Coal
Oil
Natural gas
Renewables, waste
Nuclear
Hydro
Electricity generation Heat generation83 TWh (35% in CHP’s) 143 PJ (75% in CHP’s)
4.92%
27.11%
5.63%
62.34%
Coal
Oil
Natural gas
Renew ables, w aste
Czech fossil power plants External costs in €c/kWh (2003)
0 1 2 3 4 5 6 7 8
Liberec (oils)
Ledvice
Hodonín (lignit)
Počerady
Tisová I, II
Prunéřov II
Tušimice II
Chvaletice
Mělník II
Prunéřov I
Mělník I
Poříčí
Dětmarovice (hard_coal)
Mělník III
Karlovy Vary (gas)
Vřesová PPC
Brno Č.Mlýn (gas) materials
crops
morbidity
mortality
climate change
Note: Czech Republic and Poland (2002), Hungary (2003) and Romania (2004)
CEE fossil power plants external costs in €c/kWh
11.7313.48
3.963.813.20 1.33
6.49 6.34
1.08 2.08
10.03
0
3
6
9
12
15H
ard
coal
CR
Br.
coa
l C
R
Lig
nite
CR
Br.
coa
l H
U
Har
d co
alH
U
Nat
.gas
HU
Br.
coa
l P
L
Har
d co
al P
L
Gas
, oi
l R
O
Gas
RO
Lig
nite
RO
€ ce
nt
per
kW
h
MaterialsCropsGlobal warmingMorbidityMortality
Biomass heating plant> technology parameters
Bystřice Trhové Sviny Žlutice
Type of fuelwood chips, rape
strawwood, natural gas wood chips,
straw
Fuel consumption t/year 8 761 3 894 4 920Installed capacity MW 9 11,59 7,9Heat supply GJ/year 50 866 40 240 35 013
Stack height m 50 62 30Flue gas temperature C 176 140 144
Particulate matters t/year 1,30 1,91 2,44SO2 t/year 0,65 0,30 0,88NOX t/year 1,94 1,25 2,80
Biomass heating plant> external costs in €/GJ
0,0
0,2
0,4
0,6
0,8
1,0
1,2
Bystřice Trhové Sviny Žlutice
€/GJ
materials crops morbidity mortality
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
Bystřice Trhové Sviny Žlutice
€/tonne
SO2 NOX PM10
Biomass heating plant> external costs comparison in €/GJ
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
Bys
třic
e
bio
mas
s (9
MW
)
Trh
ové
Svi
ny
bio
mas
s (1
1.5
9 M
W)
Žlu
tice
b
iom
ass
(7.9
MW
)
Brn
o Č
.Mlý
n
NG
(9
5 M
W)
Kar
lovy
Var
y N
G (
1.3
MW
)
Dě
čín
N
G C
ZT
, ge
oth
(2.7
4 M
W)
Mě
lník
I b
row
n c
oal
CH
P
Dě
tmar
ovi
ce
har
d c
oal
Ho
do
nín
lig
nite
Po
čera
dy
bro
wn
co
al C
HP
€/G
J
building, materials cropsmorbidity mortalityclimate change
Biogas> electricity productiontechnology parameters & externalities
compare with>– natural gas 1.0-1.5 €c/kWh– hard coal 2.8 €c/kWh– brown coal 3.2-4.6 €c/kWh– lignite 5.8 €c/kWh
Plevnice ČOV ChebSource of gas agricultural
biogas stationsewage water treatment plant
biogas thous. m3 567,8 542,5installed capacity MW 0,24 0,123nett electricity supply MWh/year 820 700
particulate matters t/year 0,003 0,014SO2 t/year 0,001 0,007NOX t/year 0,26 0,28
External costs c€/kWh 0,10 0,15
Wind power> technology parameters & externalities
Source: ECLIPSE Project
Caveat>• only impacts of up-
stream processes included
• impact due to noise and landscape amenities might likely increase damage
Pollutant Emission (kg/kWh)
Unit damage (€/tonne)
External costs
(c€/kWh)
%
Arsenic 2,06E-10 80 000 1,70E-06 0%Cadmium 3,90E-11 39 000 1,57E-07 0%CO 7,32E-03 19 1,44E-02 40%Chromium 1,15E-10 31 500 3,73E-07 0%Lead 2,44E-09 1 600 000 4,03E-04 1%Nicl 1,13E-09 3 800 4,43E-07 0%NOX 1,50E-05 2 908 4,50E-03 13%
NMVOC 1,49E-06 1 124 1,73E-04 0%Particulates 7,81E-06 11 723 9,47E-03 27%SO2 2,24E-05 2 939 6,80E-03 19%
Total 0,0357
Vestas 600installed capacity kW 600full load capacity hours/year 2 500nett electricity production kWh/year 1 485 000life-time years 20regulation pitchtubus height 37blades numbers 3
External costs for ‘competing’ technologies (CZ)
0
1
2
3
4
5
6
7
Win
d
Bio
gas
Nat
ural
gas
la
rge
Ene
rgo
gas
Nat
ural
gas
sm
all
Har
d c
oal
Bro
wn
coal
C
HP
Bro
wn
coal
Lig
nite
Hea
vy o
il
c€/kWh
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
naftavenkov
B30 venkov naftaměstošpička
B30 městošpička
benzínvenkov
E5 venkov benzínměstošpička
E5 městošpička
provoz výroba
Bio-fuels> external costs of production and use as propellant€ per 100 vehicle-km (passenger EURO III with 1.2 to 2.0 l)
Nafta – diesel venkov – rural areasB30 – 30%+ of biodiesel město špička – urban in peak
hoursBenzín – petrolE5 – 5% bioetanol content Source: Melichar and Máca 2006
Bio-fuels used as propellantsexternal costs of production
€/ton €/GJMethanol production
Heat – conversion
Electricity -conversion
Agro diesel
fertilizers
0
0,5
1
1,5
2
2,5
bioetanol bionafta
produkcemetanolu
teplokonverze
elektřinakonverze
agro nafta
hnojivo
0
10
20
30
40
50
60
bioetanol bionafta
produkcemetanolu
teplokonverze
elektřinakonverze
agro nafta
hnojivo
bioetanol – made from wheatbionafta – biodiesel from rape
Source: Melichar and Máca 2006
Municipal Waste Treatment Options> landfilling (SWDS) versus
incinerating (WIP)
-10 -5 0 5 10 15 20 25
WIP – heat & electricity
WIP - present state (h+ele)
WIP - heat
WIP – electricity
SWDS – LFG for electricity
SWDS – LFG for heat
SWDS - flaring
WIP - no recovery
SWDS - present state
€ per t of waste
Source: Havránek and Ščasný 2007 (MethodEx)
Sensitivity Analysis, Assumptions and Policy-uses
Spatial dimension of damage> Who is the victim?
0%
20%
40%
60%
80%
100%
Hodoní
n
Tisová
I, II
Tušimice
II
Prunéř
ov I
Dětm
arov
ice
Libe
rec
Měln
ík I
Karlo
vy V
ary
Žlutic
e
Trhov
é Svin
y
Brno Č
erve
ný M
lýn
Bystři
ce
%
buildings, materials crops morbidity mortality climate change
0%
20%
40%
60%
80%
100%
Materials Morbidity Mortality
Hard coal CR Hard coal All countries
0%
20%
40%
60%
80%
100%
Materials Morbidity Mortality
Brown coal CHP CR Brown coal CHP All countries
Social optimality perspective>Monetary values for valuing impacts
Human health impacts€2000
ExternE
Values for Czech Rep (€2000)
based on own research
adjusted by GDP PPP
Myocardial infarction 3 260 - 1 043
Chronic bronchitis 169 330 - 54 186
Minor restricted activity days 45 11 14
Restricted activity days 110 54 35
Bronchodilator use 40 - 13
Cough 45 11 14
Lower respiratory symptoms 8 - 3
Asthma attack 75 - -
Chronic cough 240 - 77
Ceberovascular hospital admission 16 730 - -
Respiratory hospital admission 4 320 360 1 382
Symptom days 45 11 14
Acute YOLL* (3% discount rate) 75 000 41 250 24 000
Chronic YOLL* (3% discount rate) 50 000 27 500 16 000
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
Urbanbenzineuro3
Ruralbenzineuro3
Urbannaftaeuro3
Ruralnaftaeuro3
Urbanbenzineuro2
Ruralbenzineuro2
Urbannaftaeuro2
Ruralnaftaeuro2
Kč/
km
ExternE morbidita
ČR morbidita
Směn. kurz morbidita
Social optimality perspective>Comparison of external costs estimates
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
Urbanbenzineuro3
Ruralbenzineuro3
Urbannaftaeuro3
Ruralnaftaeuro3
Urbanbenzineuro2
Ruralbenzineuro2
Urbannaftaeuro2
Ruralnaftaeuro2
Kč/
km
ExternE celkem
ExternE mortalita
ČR mortalita
Směn. kurz mortalita
Source: Máca and Melichar 2007
Preferences, and thus impacts, vary among countries
Should impacts, lives say, be valued equally?
Value adjustment can provide better damage estimates, however, own country-specific estimates are even better
Social Cost of Climate Change
damage estimates differ due to assumptions used, i.e. discount functional form and discount rate, equity weighting…
default reference value 19 € per ton CO2 (ExternE 2005; BeTa ‘07)– 2.4 € and 40 € per t CO2 used as lower and upper bound
0 100 200 300 400 500
Dětmarovice
Počerady
Hodonín
Mělník II
Mělník III
Mělník I
Poříčí
Tisová I, II
Prunéřov I
Prunéřov II
Ledvice
Tušimice II
Chvaletice
Dvůr Králové
mil. €
20 694
42 433
69 935
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
Aggregation 40 € Aggregation 19 € Aggregation 2.4 €
mil. CZK
building materials crops morbidity mortality climate change
Municipal Waste Treatment Options> WIP and SWDS ranking can change
due to the assumptions on MSC of Carbon used
Source: Havránek and Ščasný 2007 (MethodEx)
GHG Scenario VS1 VS2 VS3 VS4 VS5 VS6 VS7
Project ExternE 2005 MethodEx MethodEx MethodEx MethodEx NEEDS NEEDS Discounting n.a. 1% PRTR 1% PRTR 1% PRTR 1% PRTR 1% PRTR Weitzman
Equity weighting n.a. Regional values
Regional values
Equity weighted
Equity weighted
Regional values
Regional values
Statistical metric n.a. Median 1% trim mean 5% trim mean 1% trim mean Median Median
2005 19.0 2.3 11.7 29.8 57.5 4.9 7.0 2015 19.0 3.2 11.7 26.4 46.5 4.8 6.9 2025 19.0 3.4 12.6 28.6 63.6 4.4 6.6
0,0
10,0
20,0
30,0
40,0
50,0
60,0
70,0
€/ t
on
of
dis
po
sed
or
inci
ner
ated
was
te
GHG scenarios
Construction and dismantling
Air pollution
Greenhouse gasses
External costs versus retail price
Brown coal 1.11 CZK/kWh
Industry 1.58 CZK/kWh
Households2.38 CZK/kWh
0,0
0,5
1,0
1,5
2,0
2,5
Libe
rec
Hodoní
n
Počer
ady
Prunéř
ov II
Tušimice
II
Dětm
arov
ice
Měln
ík II
I
Karlo
vy V
ary
Vřeso
vá P
PC
Brno Č
erve
ný M
lýn
Kč/kWh
buildings, materials crops morbidity mortality climate change
Current versus advanced (planned) technologies, €c/kWh
0 1 2 3
Nuclear (PWR, reprocessing)
Wind (on-shore 1 MW, 6.5 …
Hydro (300 kW)
Photovoltaic (sc-Si, 3.12 kW)
Natural Gas
Lignit (IGCC, 450 MW)
Hard cola (IGCC, 450 MW)
Up-, down- stream
Production
0 1 2 3
Nuclear (PWR, reprocessing)Wind (on-shore 1 MW, 6.5 m/s)
Wind (off-shore 5 MW)Hydro (300 kW)
Photovoltaic (sc-Si, 3.12 kW)Natural gas (CC, 817 MW)
Biofuels (Organican Rankine …Lignit (IGCC, 450 MW)
Hard coal (IGCC, 450 MW)Hard coal (PFBC, 450 MW)Fuel cells (PAFC, 200 kWe)
Climate change
Health
Other
Source: IER (2005)
Concluding remarks We have the method that can be used to calculate
externalities of energy generation, i.e. the ExternE based on IPA as its core
External costs of energy generation significantly differ due to the technology used, location and time
Although, there is no technology with zero impact, renewable energies are less environmentally harmful, i.e. have less adverse impacts, than fossil-based technologies
– burning biomass results in damage of 0.5 to 1.0 € per GJ of heat that causes mostly adverse health effects
– electricity generation from biogas produces the externalities of 0.10-0.15 €c/kWh, wind power at least of 0.04 €c/kWh (plus process)
– externalities associated with renewable-technologies are one order lower, i.e. the external costs of natural gas are 1.0-1.5 €c/kWh, hard coal 2.8 €c/kWh, brown coal 3.2-4.6 €c/kWh or lignite 5.8 €c/kWh
Concluding remarks
Technology always matters> – more advanced gas-technology is less adverse than more
emission intensive biomass-technology– CHP’s are better-off than plants without co-generation– waste treatment with energy recovery always dominates
treatment without recovery– impacts of up-stream processes need to be considered in
properly conducted technology impact assessment
Concluding remarks
Limits of full assessment> assessment has not covered all impact categories
– (dis-)amenities of renewables (noise, landscape, biodiversity) cannot be modelled by EcoSense, but need to be analysed by conducting original non-market valuation study or benefit transfer technique
– impacts of up- and down-stream processes can be important (biomass and bio-fuel production, extracted and transported fossils etc.)
– nuclear cycle assessment (radionuclides, accidents, risk perception)– security of supply – preference for more secure supply of energies– Transmission lines – effect on landscape, likely on property value
Capacity building and information exchange are not certainly useless action
…As always, more research needed
Research on External Costs in CEE
IP NEEDS> quantify external costs for reference energy technologies in 6 CEE countries (2006-2008)
– AGH University of Science and Technology, Krakow– Atomic Energy Research Institute, Budapest (fossils, biomass, nuclear, CBA, GA) – Charles University Environment Center, Prague (fossils, biomass, nuclear, CBA, GA) – Polish Academy of Sciences, MEERI, Krakow (fossils + upstreams, CBA) – PROFING, Bratislava (fossils, biomass, nuclear, CBA, GA) – Stockholm Environment Institute Tallinn Center, Estonian Institute for Sustainable
Development, Tallin (fossils, renewables) – University of National and World Economy, Sofia (fossils+upstreams, nuclear, GA)
CASES> full costs assessment of energy systems (2006-08)– Charles University Environment Center, Prague– Lithuanian Energy Institute, Kaunas– University of Warsaw - Warsaw Ecological Economic Center, Warszawa
IP EXIOPOL> external costs assessment for energy, waste, industry… in EU in extended I-O framework (2006-2010)
Milan Ščasný, Ph.D.
Charles University Environemnt Center
U Kříže 8, 158 00 Prague 5