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

milan.scasny@czp.cuni.cz