Category Principles, technologies, and impacts

Emissions trading

Each country that is part of the Kyoto Protocol has set limits on the amount of greenhouse gases that it can emit, but many countries have limits above their current production. The surplus amount can be purchased by other countries, which allows them to not reduce their emissions if they so wish. Countries also receive credit for any CO2 sinks that they develop, such as creating a forest, or for work on carbon abatement in developing countries.

Setting up the scheme has proved difficult since it requires records and monitoring of emissions. A smaller scheme for emissions trading has been set up by the European Union.

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Carbon abatement policies

At the first UN international Earth Summit held in Rio de Janeiro, Brazil, in 1992, the United Nations Framework Convention on Climate Change (UNFCCC) was adopted. Its provisions on tackling global warming were strengthened in 1997 in Kyoto, Japan, where an amendment was negotiated, called the Kyoto Protocol. Under this protocol, industrialized countries agreed that they would reduce their emissions of greenhouse gases by 5.2% compared with those of 1990. If a given country’s emissions were not falling in line with this reduction, then that country would be allowed to engage in emissions trading. The greenhouse gases specified are carbon dioxide, methane, sulfur hexafluoride, MFCs, and CFCs.

The protocol came into force in February 2005...

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Designing safe systems

One of the ways that a system can be made safer is by adding redundancy. If we have a key component, e. g. a relay, that has a probability of failure of q, then, by adding another relay in parallel, so that both would need to fail for the system to fail, the reliability (i. e. the probability of not failing) is improved from (1 — q) to (I — q2), see Exercise 10.9. For example, if q = 0.1 the reliability improves from 90% to 99%. However, it is important that both components are independent. The reliability would be less, for example, if both components were from the same batch using the same type of bad resistor, or if the main power supply and the backup cables ran through the same duct (because they would both fail if there were a fire in the duct)...

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Cost-benefit analysis and risk assessment

Cost-benefit analysis (CBA) is the basic method that is widely used when trying to decide upon whether to embark on a given project. The first step is to identify the benefits of the project and to assign a monetary value to them. The cost of the project is then calculated and, if the benefits outweigh the cost, then the project is cost-effective. CBA is usually used for calculating the costs and benefits to society. In terms of these, a tax has no net effect, whereas external costs such as pollution and global warming should be included. When the project also involves an assessment of the risk of fatalities or injuries it is called risk-cost-benefit analysis.

Assigning a cost to a human life is something that we are reluctant to do...

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Life cycle analysis (LCA) and external costs

Besides the costs involved in manufacture, installation, and operation there are related costs that can affect the cost of electricity. If there were a tax on the emission of carbon, that would increase the cost of electricity from fossil fuel power stations. There is a cost in reducing other emissions that are damaging, such as SO2 from coal, which gives rise to acid rain. Renewable energy has substantial environmental benefits and these can be given a monetary value from the amount of CO2 and other emissions saved. The external cost (mainly environmental) of coal-fired generation is estimated to be 4 euro cents/kWh compared to 0.2 euro cents/kWh for wind energy. If this external cost were included, the price of electricity in Europe from coal would roughly double.

In the combustion of mu...

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Learning curve estimation

It is common experience from a broad range of technologies that costs fall as production increases. In particular, costs decrease roughly linearly with cumulative production when plotted on a log/log scale. The learning rate for a technology is the percentage reduction in costs for a doubling in cumulative production; typically the learning rate is between 10 and 30% for industrial products and tends to be larger in the developing stages. It is the global cumulative production that matters, not the production in a particular country. Although it appears rather simplistic, learning curves have been shown to provide good cost estimates—the technique was first noted in the construction of aircraft in the 1930s...

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Discounted cash flow analysis

The translation of future money to its present value is called discounted cash flow analysis and the interest rate used is called the discount rate R. For N equal annual amounts A, the present value Vp is given by

VP=A[1 ~{1 +R)~N]/R. (1U)

Derivation 11.1 Discount rate and the present value

An amount of Q pounds invested today will be worth Q(1 + R)n pounds after n years if the interest (discount) rate is R. So if A pounds are received in n years time, its present value is A/(l + R)n. The present value Vp of a series of annual payments A made over N years is therefore

VP = A/(l + R) + A/(l + R)2 + A/(l + Rf – f ■/. + A/(l + R)N.

Put x— 1/(1 •+-#); then

Vp = Ax(l +x 4-xa 4- – f x14"’).

Let S = 1 + x + x2 I – • • • + x! V~l; then.

xS = x + x2 -h ••• + — S — 1 xiV.

So S = ...

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Economics of energy production

For all energy technologies we can break down the money involved into three parts. First, capital is required to build the plant. Second, money is needed to maintain and operate (M & O) the plant, and, finally, there is the revenue obtained from selling the energy. A simple measure of the competitiveness of a plant is the time required to pay back the cost of manufacture and installation, allowing for the annual cost of M & O. However, this payback time does not quantify the return on the investment. To calculate this we must take account of the fact that the value of revenue received in the future is worth less than if it were received today...

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