How should we generate electricity?

Last post, we described a simple model of an economy that uses 100 GW of electricity. The economy was assumed to initially be predominantly fossil fuels. We got order of magnitude estimates for various scenarios of how to transition from fossil fuels to either solar / wind or natural gas.

This post directly compares the results from the last post. It concludes with my own opinion of which strategy we should pursue.

For this model, I will state numbers for both the 100 GW model economy and numbers for a 500 GW economy – about the size of the US.

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Prerequisites: Part III: A Simple Model.

Originally Written: March 2021.

Confidence Level: Calculations are approximate, but are the right order of magnitude. The policy recommendations involve some value judgments, but hopefully you recognize the usefulness of the model even if you find that you disagree with the recommendations.

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Comparisons

It is now time to make comparisons between the strategies described in the last post.

The most straightforward thing to compare is cost. We already calculated construction and replacement costs for each of the strategies. These are in the “Construction Cost” and “Replacement Cost” rows of the comparison tables below. We should also calculate the return on investment. In order to do that, we need to have some estimates for the revenue generated by the new electricity.

A typical price for electricity in the US is 10¢ per kilowatt-hour. We’re going to assume that the price of electricity says that same. For our 100 GW model, electricity is a $\$$90 billion / year industry. The US uses about 500 GW of electricity. This is an approximately $\$$450 billion / year industry in the US.^[1]The actual US electricity industry is closer to $\$$400 billion / year for 489 GW. These numbers are in the “Total Revenue” row.

For some scenarios, the new power sources only account for a fraction of the electricity produced. This is given in the “Percent New Power” row for each comparison. The new power sources can only capture that fraction of the total revenue, as recorded in the “New Power Revenue” row.

The revenue from the new power sources should cover the replacement costs to maintain this capacity. Any operating profit beyond this can be calculated as a return on investment. The “Return on Investment” row is calculated as ( “New Power Revenue” – “Replacement Cost” ) / ( “Construction Cost” ). Inverting this fraction gives the “Time to Recover Investment” row.

These are estimates for the return on investment in a simple model economy. The real world is hard, so actual returns on investment would likely be lower. If the model has a clearly positive return on investment, that indicates that it should be possible to make it work in the real world. Even if something does not have a good return, if the societal benefits of pursuing that strategy are high enough, it might be worth raising the price of electricity or having the government subsidize these power sources. But we would prefer to avoid that.

There are several other rows too, which are different for different comparisons. They should be self-explanatory.

Now let’s go through our comparisons, focusing on similar strategies for solar / wind vs. nuclear.

Building At Capacity

Building new power sources at capacity does not fully replace fossil fuels. On demand power sources are more useful from the perspective of the grid, so we would still need some natural gas capacity.

Both versions of this strategy currently exist, in Germany and France, respectively. We could look at what they have done in detail in order to replicate these strategies elsewhere.

		100 GW Model		500 GW US-Scale Model
		Solar / Wind	Nuclear	Solar / Wind	Nuclear
Construction Cost		$180 billion	$480 billion	$0.9 trillion	$2.4 trillion
Replacement Cost		$9 billion / year	$12 billion / year	$45 billion / year	$60 billion / year
Percent New Power		40%	80%	40%	80%
Total Revenue		$90 billion / year	$90 billion / year	$450 billion / year	$450 billion / year
New Power Revenue		$36 billion / year	$72 billion / year	$180 billion / year	$360 billion / year
Return on Investment		15%	12%	15%	12%
Time to Recover Investment		6.5 years	8 years	6.5 years	8 years
Land Use		9,400 sq. mi.	negligible	1.6% of continental US	negligible
Percent Fossil Fuel Remaining		50%	15%	50%	15%

• Building the new solar / wind power costs less than half as much as building the new nuclear power.
• The cost to maintain the new nuclear power is slightly more than the cost to maintain the new solar / wind power.
• Solar / wind have a better return on investment, but the return for nuclear is good as well.
• Solar / wind power plants cover 1.6% of the continental US, an area the size of Pennsylvania, while the land use by nuclear power is smaller than the land used by fossil fuel it replaces.
• Fossil fuels still account for 50% of the power generated when using this strategy for solar / wind, while they only account for 15% when using this strategy for nuclear.

Solar and wind are much less expensive, but also replace much less of our current fossil fuel usage.

Building Over Capacity

Building more capacity allows us to more fully replace fossil fuels.

		100 GW Model		500 GW US-Scale Model
		Solar / Wind	Nuclear	Solar / Wind	Nuclear
Construction Cost		$450 billion	$660 billion	$2.25 trillion	$3.3 trillion
Replacement Cost		$22 billion / year	$17 billion / year	$110 billion / year	$85 billion / year
Percent New Power		92%	95%	92%	95%
Total Revenue		$90 billion / year	$90 billion / year	$450 billion / year	$450 billion / year
New Power Revenue		$83 billion / year	$86 billion / year	$420 billion / year	$420 billion / year
Return on Investment		13%	10%	13%	10%
Time to Recover Investment		7.5 years	10 years	7.5 years	10 years
Land Use		23,000 sq. mi.	negligible	3.9% of continental US	negligible
Maximum Excess Power		180 GW	30 GW	900 GW	150 GW
Fossil Fuel Backup Needed		70 GW	0 GW	350 GW	0 GW

• Building the new solar / wind power costs less than building the new nuclear power.
• Maintaining the nuclear power costs less than maintaining the solar / wind power.
• After 40 years, nuclear is slightly cheaper.
• Solar / wind have a better return on investment, but the return for nuclear is good as well.
• Solar / wind power plants cover 3.9% of the continental US, an area the size of Arizona, while the land use by nuclear power is smaller than the land used by the fossil fuels it replaces.
• The maximum excess electricity produced by solar / wind is 6 times larger than the maximum excess electricity produced by nuclear. Excess electricity for nuclear is also more predictable for nuclear than for solar / wind.
• Solar / wind requires significant fossil fuel capacity to be maintained indefinitely as a backup for the intermittent sources. Nuclear does not require fossil fuel backup.

The total cost for these two scenarios are similar, with nuclear slightly more expensive in the short term and solar / wind slightly more expensive in the long term. The intermittency of solar / wind causes more excess (wasted?) power and requires fossil fuel backup.

Building with Batteries

		100 GW Model		500 GW US-Scale Model
		Solar / Wind	Nuclear	Solar / Wind	Nuclear
Power Construction Cost		$450 billion	$540 billion	$2.25 trillion	$2.7 trillion
Power Replacement Cost		$22 billion / year	$14 billion / year	$110 billion / year	$70 billion / year
Storage Time Needed		36 hr	3 hr	36 hr	3 hr
Battery Construction Cost		$450 billion	$38 billion	$2.25 trillion	$0.14 trillion
Battery Replacement Cost		$90 billion / year	$8 billion / year	$450 billion / year	$40 billion / year
Batteries Needed Current US Production		15	1.2	75	6
Total Construction Cost		$900 billion	$580 billion	$4.5 trillion	$2.9 trillion
Total Replacement Cost		$112 billion / year	$22 billion / year	$560 billion / year	$110 billion / year
Percent New Power		99%	90%	99%	90%
Total Revenue		$90 billion / year	$90 billion / year	$450 billion / year	$450 billion / year
New Power Revenue		$89 billion / year	$81 billion / year	$445 billion / year	$405 billion / year
Return on Investment		– 2.5%	10%	– 2.5%	10%
Time to Recover Investment			10 years		10 years
Land Use		23,000 sq. mi.	negligible	3.9% of continental US	negligible

• Nuclear needs less than 1/10 as much energy storage to work. This is still 6 times our current production of lithium ion batteries.
• In order to have grid-scale storage, we need to dramatically increase our battery production – or the production of other energy storage methods. Even these estimates are too low, because they oversimplify the demand fluctuations.
• Nuclear is clearly less expensive to build and costs only 1/5 as much to maintain.
• Nuclear still has a decent return on investment. Solar / wind would have to be subsidized indefinitely or have higher electricity prices.
• Solar / wind still use a lot of land.

The difference in the number of batteries makes nuclear cost much less in this strategy.

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Policy Recommendations

As long as they only produce a minority of our electricity, solar and wind look like the best alternatives to fossil fuels. Building new solar or wind capacity costs significantly less than building new nuclear capacity. There is enough spare capacity in the other power sources that you don’t have to worry about intermittency and lulls.

If you take into account the capacity factor and lifetime of the power sources, then nuclear becomes competitive with solar and wind. If we want to replace most or all of our electricity, then nuclear is clearly better. The intermittent nature of solar and wind require much more energy storage than we currently produce. The cost of the energy storage overwhelms the cost difference in building the power sources themselves.

Currently, only one country gets a majority of their energy from wind and solar: Denmark. Denmark is unusually well suited for offshore wind, because the North Sea is both windy and shallow.^[2]Shallow seas are much easier to build wind turbines in. Denmark deals with lulls by importing electricity from its neighbors. Denmark’s example cannot be scaled up to an entire continent.

National

Of the strategies I described for a 100 GW national economy, the best one is building nuclear over capacity. Building nuclear with batteries is similar, but requires a dramatic scaling up of battery production.

The biggest concern is that this produces too much electricity at night. This seems like the sort of problem that would solve itself if we adjusted the prices accordingly.

We should be building significantly more nuclear power plants. Any political blocks to building more nuclear power need to be removed. The regulatory process can be significantly sped up without compromising safety.^[3]At least in the US. I don’t know as much about nuclear regulations in other countries.^[4]Why Nuclear Power Has Been a Flop by Jack Devanney (2020) has a list of proposals for regulatory reform. Here is a book review by Jason Crawford.

It will probably take about 15 years to build all of these new power plants. France transitioned from 7% nuclear to 70% nuclear in the 15 years following the 1973 Oil Crisis.^[5]Source: See Figure 5 here. This also tells a similar story, but in absolute instead of relative terms. Any country which is less than 50 years behind France technologically could do the same.

This generation of nuclear power plants would last about 40 years. By this point, fusion should be ready to power the world.

If we did want to include solar/wind as a significant part of our energy supply, we should build power lines designed to move electricity for thousands of miles. If we can move electricity on a continental scale, we could build in the places best suited for them instead of close to where the electricity is needed. This would improve the capacity factor and could help combat lulls.

Global

In 2015, a major international agreement on greenhouse gas emissions was signed in Paris. What should it have included, if we were serious about replacing fossil fuels for electricity?

• All developed countries should obtain over 50% of their electricity from nuclear power in the next 15 years. If they want to instead pursue solar / wind, then fossil fuel capacity should be < 50% of total power production. This precludes having an entire fleet of fossil fuel plants as backup. “Developed” here means “nuclear capable”.^[6]This includes the largest emitter, China. If this goal is not met, there should be automatic sanctions targeting sales of energy to or from that country.
• These sanctions should also apply to the countries which are not part of or have violated the Non-Proliferation Treaty: India, Pakistan, Israel, Iran, and North Korea. They can either be nuclear capable states, which implies a certain level of responsibility for global problems, or they can get rid of their nuclear weapons.
• Developing countries can continue to use fossil fuels. The risk of nuclear weapons proliferation is not worth their (small) contribution to climate change. If they want to use nuclear power and are a low risk of nuclear weapons proliferation, then developed countries should help them.
• Increased research funding for grid-scale energy storage, next generation geothermal, and fusion.

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Conclusions

When making major decisions, it is important to try to predict how different strategies will work. You should build a simple model to analyze the different strategies. Even if the model is very approximate, it can still provide useful information.

This series of posts presents a simple model for transitioning an economy from fossil fuels either to solar & wind or to nuclear.

This model shows the advantages of choosing nuclear power, if we want to fully stop using fossil fuels for electricity. The intermittency of solar & wind requires either maintaining significant fossil fuel backup or building grid-scale energy storage. These increase the cost of solar & wind far beyond what is suggested by only looking at the cost to build new capacity.

There is a lot more that could be done with this model. We could make it more realistic by using a better model for demand, including seasonal variability and spare capacity for surge demand. We could include a better climate model for the lulls. We could use a more fine scale resolution of the costs and capacity factors, instead of using a single number for the entire strategy. These additions could make the model more accurate, but also more complicated to use.

One possible conclusion for building nuclear over capacity is that we should build the full daytime demand of 120 GW as nuclear power, and reserve the 10 GW of hydroelectricity for surge demand.

If you disagree with my policy recommendations, I encourage you to use this model, modify this model, or present your own model, as part of your argument. This makes it clear where our disagreements are. Are you assuming that battery production will become much cheaper as we scale it up?^[7]Which is not an unreasonable assumption, if it follows similar trends and solar and wind power production. I don’t think it’s fair to include it because nuclear might also become cheaper … Continue reading Do you have a different plan for dealing with lulls? Have you decided that other considerations make it worth it to subsidize solar & wind indefinitely?

Using a model of how the strategies work makes our discussions more informative and productive, and hopefully make us better at solving the problems we face.