WEBVTT 00:00:00.000 --> 00:00:02.428 align:middle line:90% [SQUEAKING] 00:00:02.428 --> 00:00:03.874 align:middle line:90% [RUSTLING] 00:00:03.874 --> 00:00:08.212 align:middle line:90% [CLICKING] 00:00:08.212 --> 00:00:10.640 align:middle line:90% 00:00:10.640 --> 00:00:15.240 align:middle line:84% R SCOTT KEMP: So yesterday, or Monday's class, 00:00:15.240 --> 00:00:20.380 align:middle line:84% was probably the most boring class, I hope, of the semester, 00:00:20.380 --> 00:00:22.960 align:middle line:84% just reviewing really basic things. 00:00:22.960 --> 00:00:27.560 align:middle line:84% This may be the most depressing class of the semester. 00:00:27.560 --> 00:00:30.640 align:middle line:84% And then I think things will get more interesting from here. 00:00:30.640 --> 00:00:33.120 align:middle line:84% So we're going to just finish out 00:00:33.120 --> 00:00:38.240 align:middle line:84% calculating the cost of nuclear and do 00:00:38.240 --> 00:00:40.160 align:middle line:84% some of this phenomenology that we talked 00:00:40.160 --> 00:00:44.000 align:middle line:84% about to try to understand what drives these costs 00:00:44.000 --> 00:00:46.680 align:middle line:90% and what is important. 00:00:46.680 --> 00:00:47.180 align:middle line:90% All right. 00:00:47.180 --> 00:00:50.960 align:middle line:90% So I guess it's time. 00:00:50.960 --> 00:00:56.300 align:middle line:84% So in the last class, we derived this formula, 00:00:56.300 --> 00:01:01.030 align:middle line:84% which is just essentially the investment 00:01:01.030 --> 00:01:04.230 align:middle line:84% cost at the end of building your plant. 00:01:04.230 --> 00:01:06.810 align:middle line:84% This formula applies to any technology. 00:01:06.810 --> 00:01:10.170 align:middle line:84% And we saw the sensitivity to construction timelines. 00:01:10.170 --> 00:01:12.990 align:middle line:84% And we mentioned that this is one 00:01:12.990 --> 00:01:15.030 align:middle line:84% of the reasons why we're interested in trying 00:01:15.030 --> 00:01:17.590 align:middle line:84% to move towards factory fabrication, 00:01:17.590 --> 00:01:19.790 align:middle line:84% because these long construction timelines 00:01:19.790 --> 00:01:25.790 align:middle line:84% for stick-built technology are driving the costs way up, 00:01:25.790 --> 00:01:27.910 align:middle line:84% two and a half to three times what 00:01:27.910 --> 00:01:30.910 align:middle line:84% it would be if we were able to just build this very rapidly. 00:01:30.910 --> 00:01:33.130 align:middle line:90% And so that's the motivation. 00:01:33.130 --> 00:01:36.030 align:middle line:84% There's a secondary trade-off about factory fabrication 00:01:36.030 --> 00:01:38.590 align:middle line:84% that we'll talk about in a couple of classes. 00:01:38.590 --> 00:01:41.390 align:middle line:84% But now you know where it comes from. 00:01:41.390 --> 00:01:44.470 align:middle line:84% But when we look at the overnight costs, 00:01:44.470 --> 00:01:46.930 align:middle line:90% we are ignoring this component. 00:01:46.930 --> 00:01:48.850 align:middle line:84% When we look at the investment cost, 00:01:48.850 --> 00:01:50.530 align:middle line:90% we're including this component. 00:01:50.530 --> 00:01:53.230 align:middle line:84% And these particular numbers are calculated for essentially 00:01:53.230 --> 00:01:57.770 align:middle line:84% a 4% real interest rate, which is a little bit low. 00:01:57.770 --> 00:01:58.910 align:middle line:90% 8 minus 4. 00:01:58.910 --> 00:02:00.150 align:middle line:90% So 4 is the inflation rate. 00:02:00.150 --> 00:02:01.630 align:middle line:90% 8 is the interest rate. 00:02:01.630 --> 00:02:05.730 align:middle line:84% Typically, it's-- historically, it's thought to be about 5%. 00:02:05.730 --> 00:02:09.490 align:middle line:84% But financing has become a little easier in recent years. 00:02:09.490 --> 00:02:11.970 align:middle line:84% There's just so much money floating around 00:02:11.970 --> 00:02:14.910 align:middle line:90% that I'm going to put it at 4%. 00:02:14.910 --> 00:02:17.730 align:middle line:84% And then what that does is it biases these numbers. 00:02:17.730 --> 00:02:21.970 align:middle line:84% It makes them a little bit smaller at very long timescales 00:02:21.970 --> 00:02:23.910 align:middle line:84% because you pay less interest on the loan. 00:02:23.910 --> 00:02:27.290 align:middle line:84% So the difference between the overnight and the investment 00:02:27.290 --> 00:02:28.570 align:middle line:90% cost is smaller. 00:02:28.570 --> 00:02:31.210 align:middle line:84% So we did this calculation and we put the total investment cost 00:02:31.210 --> 00:02:31.710 align:middle line:90% here. 00:02:31.710 --> 00:02:34.650 align:middle line:84% But I warned you not to get too worried yet, 00:02:34.650 --> 00:02:38.890 align:middle line:84% because these are just before-- these are just 00:02:38.890 --> 00:02:42.410 align:middle line:84% the amounts of money the loan is at the beginning of building 00:02:42.410 --> 00:02:43.650 align:middle line:90% your plant. 00:02:43.650 --> 00:02:47.170 align:middle line:84% But it turns out like not all plants are created equal 00:02:47.170 --> 00:02:49.570 align:middle line:90% in terms of how long they run. 00:02:49.570 --> 00:02:54.690 align:middle line:84% So nuclear plants traditionally have been scheduled 00:02:54.690 --> 00:02:57.360 align:middle line:90% to run for about 40 years. 00:02:57.360 --> 00:03:00.580 align:middle line:84% And even today, we still have that as the licensing goal. 00:03:00.580 --> 00:03:04.000 align:middle line:84% But in reality, most nuclear plants 00:03:04.000 --> 00:03:06.040 align:middle line:84% run for about 60 years, which really 00:03:06.040 --> 00:03:10.760 align:middle line:84% makes them the most enduring kind of plant 00:03:10.760 --> 00:03:12.800 align:middle line:90% that we really have out there. 00:03:12.800 --> 00:03:17.520 align:middle line:84% So if you're a person whose job is to do this officially 00:03:17.520 --> 00:03:20.040 align:middle line:84% for the utility, you're going to select 00:03:20.040 --> 00:03:22.880 align:middle line:84% n equals 40, because that's the officially licensed design 00:03:22.880 --> 00:03:23.380 align:middle line:90% lifetime. 00:03:23.380 --> 00:03:25.380 align:middle line:84% And that's how you're going to run your company. 00:03:25.380 --> 00:03:27.180 align:middle line:84% And you're going to set it for 40 years. 00:03:27.180 --> 00:03:30.960 align:middle line:84% But we're not interested in what the accountants do. 00:03:30.960 --> 00:03:35.060 align:middle line:84% We are interested in what is the right choice for society. 00:03:35.060 --> 00:03:37.320 align:middle line:90% So we need the true number. 00:03:37.320 --> 00:03:40.700 align:middle line:84% And the true number is something like 60. 00:03:40.700 --> 00:03:44.520 align:middle line:84% So we're going to use 60 to convert this 00:03:44.520 --> 00:03:48.040 align:middle line:90% into an annual payment. 00:03:48.040 --> 00:03:50.700 align:middle line:90% So how do we do that? 00:03:50.700 --> 00:03:54.280 align:middle line:84% You remember that these are our different types 00:03:54.280 --> 00:03:58.410 align:middle line:84% of costs that we have to take into consideration. 00:03:58.410 --> 00:04:01.390 align:middle line:84% We're only focusing right now on the capital cost. 00:04:01.390 --> 00:04:03.930 align:middle line:84% The capital cost is not the investment cost. 00:04:03.930 --> 00:04:06.630 align:middle line:84% This is the monthly capital or annual capital charge 00:04:06.630 --> 00:04:07.710 align:middle line:90% that we want. 00:04:07.710 --> 00:04:09.250 align:middle line:90% And how do we do that? 00:04:09.250 --> 00:04:11.410 align:middle line:84% Someone remember from last class? 00:04:11.410 --> 00:04:12.250 align:middle line:90% I explained it. 00:04:12.250 --> 00:04:14.910 align:middle line:90% 00:04:14.910 --> 00:04:16.990 align:middle line:90% Nobody remembers? 00:04:16.990 --> 00:04:18.709 align:middle line:90% It's this equation. 00:04:18.709 --> 00:04:21.010 align:middle line:84% Remember these boring equations I threw up here? 00:04:21.010 --> 00:04:22.530 align:middle line:90% Here's why we use them. 00:04:22.530 --> 00:04:25.990 align:middle line:84% So here is the investment cost that we pay out 00:04:25.990 --> 00:04:27.680 align:middle line:84% at the end of the construction period. 00:04:27.680 --> 00:04:29.430 align:middle line:84% And then we want to figure out essentially 00:04:29.430 --> 00:04:33.130 align:middle line:84% what is our annual charge over the whole lifetime, 00:04:33.130 --> 00:04:36.950 align:middle line:84% over 60 periods, that we're paying to pay off our loan? 00:04:36.950 --> 00:04:41.910 align:middle line:84% And this is the formula to do that for n periods 00:04:41.910 --> 00:04:43.870 align:middle line:90% at a certain interest rate. 00:04:43.870 --> 00:04:45.950 align:middle line:84% So the question I will present to you 00:04:45.950 --> 00:04:50.090 align:middle line:84% is, what value for r and what value for n? 00:04:50.090 --> 00:04:52.070 align:middle line:84% We've just talked about what value for n. 00:04:52.070 --> 00:04:54.632 align:middle line:84% We're going to use 60 for nuclear. 00:04:54.632 --> 00:04:56.590 align:middle line:84% There are other numbers for other technologies. 00:04:56.590 --> 00:04:59.330 align:middle line:90% What about the value for r? 00:04:59.330 --> 00:05:00.030 align:middle line:90% Thoughts? 00:05:00.030 --> 00:05:05.672 align:middle line:90% 00:05:05.672 --> 00:05:07.630 align:middle line:84% AUDIENCE: It means the interest rate, isn't it? 00:05:07.630 --> 00:05:07.850 align:middle line:90% So-- 00:05:07.850 --> 00:05:08.910 align:middle line:84% R SCOTT KEMP: It is the interest rate. 00:05:08.910 --> 00:05:10.410 align:middle line:90% But which interest rate is it? 00:05:10.410 --> 00:05:13.630 align:middle line:84% Is it the real interest rate or is it the nominal interest rate? 00:05:13.630 --> 00:05:16.170 align:middle line:90% 00:05:16.170 --> 00:05:18.810 align:middle line:84% AUDIENCE: It should be the nominal, right? 00:05:18.810 --> 00:05:22.290 align:middle line:84% R SCOTT KEMP: So if you are doing-- 00:05:22.290 --> 00:05:26.410 align:middle line:84% if you're an accountant, you would 00:05:26.410 --> 00:05:31.250 align:middle line:84% get a loan that is denominated in nominal dollars. 00:05:31.250 --> 00:05:35.290 align:middle line:84% You'd have to pay back that loan in nominal dollars. 00:05:35.290 --> 00:05:37.530 align:middle line:84% And you would be interested in figuring out 00:05:37.530 --> 00:05:39.690 align:middle line:90% what your payment is. 00:05:39.690 --> 00:05:44.930 align:middle line:84% Payment A, not P. And you would do that with a nominal interest 00:05:44.930 --> 00:05:45.430 align:middle line:90% rate. 00:05:45.430 --> 00:05:48.450 align:middle line:84% But if we are just trying-- one of the issues 00:05:48.450 --> 00:05:54.080 align:middle line:84% with this is if you are thinking, as you go forward, 00:05:54.080 --> 00:05:57.720 align:middle line:84% you will get more and more money in revenues 00:05:57.720 --> 00:05:59.000 align:middle line:90% because of inflation. 00:05:59.000 --> 00:06:01.960 align:middle line:84% The nominal dollar amount will go up and up and up. 00:06:01.960 --> 00:06:06.265 align:middle line:84% So we're not-- then you have to do a cash flow analysis. 00:06:06.265 --> 00:06:08.640 align:middle line:84% And maybe you have to do amortized loans and other things 00:06:08.640 --> 00:06:09.140 align:middle line:90% like this. 00:06:09.140 --> 00:06:10.820 align:middle line:84% It depends on the financing structure. 00:06:10.820 --> 00:06:12.360 align:middle line:90% Blah, blah, blah, blah. 00:06:12.360 --> 00:06:14.720 align:middle line:84% We're not really interested in that. 00:06:14.720 --> 00:06:16.840 align:middle line:84% What we're going to do is just treat everything 00:06:16.840 --> 00:06:19.200 align:middle line:90% in real dollars. 00:06:19.200 --> 00:06:24.080 align:middle line:84% We just want to just say we'll treat all future dollars 00:06:24.080 --> 00:06:25.200 align:middle line:90% as having equal value. 00:06:25.200 --> 00:06:29.020 align:middle line:84% And we'll use the real interest rate. 00:06:29.020 --> 00:06:32.880 align:middle line:84% I'm not being-- I don't think I'm being adequately clear here. 00:06:32.880 --> 00:06:35.480 align:middle line:90% Does that make sense to people? 00:06:35.480 --> 00:06:39.120 align:middle line:84% We're just, by using the real interest rate, 00:06:39.120 --> 00:06:43.600 align:middle line:84% we can ignore the effect of inflation on future revenues 00:06:43.600 --> 00:06:48.960 align:middle line:84% and just figure out what the real cost is in today's dollars 00:06:48.960 --> 00:06:52.990 align:middle line:90% and just be done with it. 00:06:52.990 --> 00:06:54.630 align:middle line:90% Yes. 00:06:54.630 --> 00:06:57.990 align:middle line:84% AUDIENCE: It's for loans designed keep everything 00:06:57.990 --> 00:06:58.970 align:middle line:90% in nominal dollars. 00:06:58.970 --> 00:07:01.730 align:middle line:84% I can see how they incorporate inflation. 00:07:01.730 --> 00:07:03.650 align:middle line:84% If it's a loan on your house or something, 00:07:03.650 --> 00:07:04.430 align:middle line:84% and they're like, all right, we'll 00:07:04.430 --> 00:07:06.090 align:middle line:84% take care of all of that for you. 00:07:06.090 --> 00:07:07.910 align:middle line:84% When you're talking about billions, 00:07:07.910 --> 00:07:09.160 align:middle line:90% do they still work in nominal? 00:07:09.160 --> 00:07:10.868 align:middle line:84% R SCOTT KEMP: They don't do-- banks don't 00:07:10.868 --> 00:07:12.050 align:middle line:90% do loans for nuclear plants. 00:07:12.050 --> 00:07:16.550 align:middle line:84% It's like bond financing and all kinds of other instruments. 00:07:16.550 --> 00:07:19.630 align:middle line:84% So what I'm doing is like, I'm not really 00:07:19.630 --> 00:07:21.870 align:middle line:90% getting into the financing. 00:07:21.870 --> 00:07:23.750 align:middle line:84% I'm just trying to give you-- these tools 00:07:23.750 --> 00:07:26.330 align:middle line:84% are very simple net present value calculations. 00:07:26.330 --> 00:07:28.190 align:middle line:90% And I'm saying it-- 00:07:28.190 --> 00:07:31.590 align:middle line:84% there's a way to still use them without understanding 00:07:31.590 --> 00:07:35.350 align:middle line:84% the complexity of actual finance to get 00:07:35.350 --> 00:07:37.150 align:middle line:90% an answer that is meaningful. 00:07:37.150 --> 00:07:42.150 align:middle line:84% And we can and we can do that if we stick to real dollars. 00:07:42.150 --> 00:07:42.970 align:middle line:90% That's the goal. 00:07:42.970 --> 00:07:45.170 align:middle line:84% But yeah, it's much more complicated, 00:07:45.170 --> 00:07:48.590 align:middle line:90% as you're pointing out. 00:07:48.590 --> 00:07:49.510 align:middle line:90% All right? 00:07:49.510 --> 00:07:52.550 align:middle line:84% So we're going to use a smaller value here. 00:07:52.550 --> 00:07:54.450 align:middle line:90% We're going to use 4. 00:07:54.450 --> 00:07:59.090 align:middle line:84% All right, so there's the lifetime of all the plants. 00:07:59.090 --> 00:08:01.130 align:middle line:90% Where do these data come from? 00:08:01.130 --> 00:08:03.170 align:middle line:84% You should always ask this when you see it, 00:08:03.170 --> 00:08:07.410 align:middle line:84% because these numbers have big impacts on the results. 00:08:07.410 --> 00:08:11.450 align:middle line:84% These data all come from the EIA. 00:08:11.450 --> 00:08:14.950 align:middle line:84% It's based on their surveys of historical plant life. 00:08:14.950 --> 00:08:18.970 align:middle line:84% So these are what they say plants-- 00:08:18.970 --> 00:08:21.450 align:middle line:84% because remember by law, all utilities 00:08:21.450 --> 00:08:24.590 align:middle line:84% must constantly report what's going on to the EIA. 00:08:24.590 --> 00:08:27.230 align:middle line:84% So these are all good numbers except for these two numbers, 00:08:27.230 --> 00:08:32.250 align:middle line:84% which I have unilaterally changed from 40 to 60 to reflect 00:08:32.250 --> 00:08:35.169 align:middle line:84% what is happening with life extensions and the fact that now 00:08:35.169 --> 00:08:40.330 align:middle line:84% we are pushing nuclear plants through this past the 40-year 00:08:40.330 --> 00:08:42.169 align:middle line:90% design threshold. 00:08:42.169 --> 00:08:45.707 align:middle line:84% So what that does is this brings down this number a little bit. 00:08:45.707 --> 00:08:47.290 align:middle line:84% But I think this is a reasonable thing 00:08:47.290 --> 00:08:51.880 align:middle line:84% to do because basically, we've demonstrated this is feasible. 00:08:51.880 --> 00:08:53.520 align:middle line:84% So now we have the capital charge 00:08:53.520 --> 00:08:55.020 align:middle line:90% for the different technologies. 00:08:55.020 --> 00:08:58.640 align:middle line:90% 00:08:58.640 --> 00:09:03.080 align:middle line:84% So I guess you can see that this is 00:09:03.080 --> 00:09:05.560 align:middle line:84% where you see there are now some technologies dropping 00:09:05.560 --> 00:09:07.320 align:middle line:90% behind nuclear-- 00:09:07.320 --> 00:09:11.740 align:middle line:90% solar-thermal, fuel cells. 00:09:11.740 --> 00:09:15.240 align:middle line:90% 00:09:15.240 --> 00:09:17.748 align:middle line:90% I guess that's kind of it. 00:09:17.748 --> 00:09:19.540 align:middle line:84% But you never see these plants being built. 00:09:19.540 --> 00:09:20.840 align:middle line:90% And you can now understand why. 00:09:20.840 --> 00:09:24.360 align:middle line:84% They just have very high outgoing capital costs. 00:09:24.360 --> 00:09:27.240 align:middle line:84% Let me also highlight natural gas, which 00:09:27.240 --> 00:09:29.760 align:middle line:84% is the most popular thing in the United States, 00:09:29.760 --> 00:09:33.560 align:middle line:90% which are these three here. 00:09:33.560 --> 00:09:37.040 align:middle line:84% This one with carbon capture and storage, these without, 00:09:37.040 --> 00:09:43.560 align:middle line:84% are both under $100 per kilowatt per year of capacity. 00:09:43.560 --> 00:09:47.410 align:middle line:84% Solar with storage is almost the same. 00:09:47.410 --> 00:09:49.270 align:middle line:90% This is four hours of storage. 00:09:49.270 --> 00:09:51.590 align:middle line:90% Four hours of storage is not-- 00:09:51.590 --> 00:09:53.670 align:middle line:84% four hours of storage is good now. 00:09:53.670 --> 00:09:55.548 align:middle line:84% If you wanted to have a fully solar grid, 00:09:55.548 --> 00:09:57.590 align:middle line:84% you would probably need to go a little bit higher 00:09:57.590 --> 00:10:00.230 align:middle line:84% than four hours of storage, probably close to 12 hours 00:10:00.230 --> 00:10:02.910 align:middle line:90% storage. 00:10:02.910 --> 00:10:06.090 align:middle line:90% So that's still pretty good. 00:10:06.090 --> 00:10:07.670 align:middle line:90% Wind is not bad. 00:10:07.670 --> 00:10:09.510 align:middle line:90% It's not as cheap. 00:10:09.510 --> 00:10:10.830 align:middle line:90% Still 162. 00:10:10.830 --> 00:10:13.350 align:middle line:84% This is, remember, only the capital charge. 00:10:13.350 --> 00:10:21.630 align:middle line:84% Geothermal is more expensive here at 221. 00:10:21.630 --> 00:10:24.910 align:middle line:84% Geothermal is interesting, though, because there's actually 00:10:24.910 --> 00:10:27.850 align:middle line:84% quite a lot of it in the South of the United States, 00:10:27.850 --> 00:10:29.150 align:middle line:90% the Southwest. 00:10:29.150 --> 00:10:33.070 align:middle line:84% And it is dispatchable and almost zero carbon, 00:10:33.070 --> 00:10:34.470 align:middle line:90% like nuclear. 00:10:34.470 --> 00:10:38.230 align:middle line:84% So it is a competitor with nuclear in that sense. 00:10:38.230 --> 00:10:43.390 align:middle line:84% I've pointed out geothermal, and I pointed out wind and solar. 00:10:43.390 --> 00:10:46.940 align:middle line:84% And you could argue that this is unfair to point out comparisons 00:10:46.940 --> 00:10:48.900 align:middle line:84% at this stage, because we have not 00:10:48.900 --> 00:10:54.380 align:middle line:84% taken into account the variable costs yet, or the fixed O&M 00:10:54.380 --> 00:10:55.460 align:middle line:90% costs. 00:10:55.460 --> 00:10:58.540 align:middle line:84% However, all of these things are basically fuel-free 00:10:58.540 --> 00:11:01.280 align:middle line:84% and, therefore, have very low variable costs. 00:11:01.280 --> 00:11:04.740 align:middle line:84% And so comparing them at this stage is actually kind of fair. 00:11:04.740 --> 00:11:07.140 align:middle line:84% But yeah, solar is amazingly cheap. 00:11:07.140 --> 00:11:08.680 align:middle line:84% As a carbon-free source of energy, 00:11:08.680 --> 00:11:11.900 align:middle line:84% it's the cheapest one we have right now, $110. 00:11:11.900 --> 00:11:15.380 align:middle line:84% And that explains why China is installing, 00:11:15.380 --> 00:11:24.940 align:middle line:84% if you do the math, 1.3 gigawatts of capacity per day. 00:11:24.940 --> 00:11:31.340 align:middle line:84% This is a 1 and 1/3 nuclear plants of capacity per day. 00:11:31.340 --> 00:11:34.140 align:middle line:84% Capacity does not mean generation. 00:11:34.140 --> 00:11:38.260 align:middle line:84% But even if the generation were only, say, 10% or 20%, 00:11:38.260 --> 00:11:42.700 align:middle line:84% you're still talking about a couple of nuclear power plants 00:11:42.700 --> 00:11:46.480 align:middle line:84% a week being installed by China equivalent. 00:11:46.480 --> 00:11:52.000 align:middle line:84% So this is driven by the insanely low cost 00:11:52.000 --> 00:11:54.820 align:middle line:84% of Chinese solar panels and, of course, 00:11:54.820 --> 00:11:58.040 align:middle line:90% by their very low cost of labor. 00:11:58.040 --> 00:12:01.000 align:middle line:84% But if you're worried about climate change, 00:12:01.000 --> 00:12:06.160 align:middle line:84% this gets carbon-free power on the grid fast for cheap. 00:12:06.160 --> 00:12:09.640 align:middle line:90% And that's what really matters. 00:12:09.640 --> 00:12:12.580 align:middle line:84% Over a period of 10 years, one nuclear construction. 00:12:12.580 --> 00:12:14.820 align:middle line:84% But these people can do it in one day. 00:12:14.820 --> 00:12:17.120 align:middle line:84% It is not a solution for climate change. 00:12:17.120 --> 00:12:22.440 align:middle line:84% And that's really the key takeaway here. 00:12:22.440 --> 00:12:26.800 align:middle line:84% So how is it that any of these plants get 00:12:26.800 --> 00:12:28.900 align:middle line:90% built if this is all true? 00:12:28.900 --> 00:12:34.840 align:middle line:84% If nuclear is so expensive, why do any nuclear plants get built? 00:12:34.840 --> 00:12:41.310 align:middle line:84% Well, it has to do with how reactors are financed. 00:12:41.310 --> 00:12:45.350 align:middle line:84% Many, many utility projects are financed 00:12:45.350 --> 00:12:50.910 align:middle line:84% through bonds, which are issued in a variety of rates. 00:12:50.910 --> 00:12:53.910 align:middle line:84% And they have to pay the money back 00:12:53.910 --> 00:12:57.270 align:middle line:84% to the people who gave them, who loaned them money. 00:12:57.270 --> 00:13:00.870 align:middle line:84% But nuclear plants have always been a little different. 00:13:00.870 --> 00:13:05.310 align:middle line:84% And that's partly because of their size. 00:13:05.310 --> 00:13:08.270 align:middle line:84% It's partly because of the history of where they come from. 00:13:08.270 --> 00:13:11.550 align:middle line:84% And then, partly because of a lot of very effective lobbying 00:13:11.550 --> 00:13:15.230 align:middle line:84% that goes on from organizations like NEI. 00:13:15.230 --> 00:13:19.950 align:middle line:84% So in the United States, there are-- and in South Korea-- 00:13:19.950 --> 00:13:22.630 align:middle line:90% there are bond offerings. 00:13:22.630 --> 00:13:25.910 align:middle line:84% But they get a lot of risk-free rate loans 00:13:25.910 --> 00:13:27.130 align:middle line:90% from the federal government. 00:13:27.130 --> 00:13:29.165 align:middle line:90% They call these loan guarantees. 00:13:29.165 --> 00:13:30.790 align:middle line:84% Basically, the federal government says, 00:13:30.790 --> 00:13:35.030 align:middle line:84% we will guarantee that, say, $4 billion of your plant, 00:13:35.030 --> 00:13:38.270 align:middle line:84% you can take a loan, and we guarantee to whoever loans 00:13:38.270 --> 00:13:41.460 align:middle line:84% you that money that you will not default. 00:13:41.460 --> 00:13:44.220 align:middle line:84% And so you can charge the risk-free rate, which means 00:13:44.220 --> 00:13:46.460 align:middle line:90% a very, very low interest rate. 00:13:46.460 --> 00:13:48.240 align:middle line:84% And then as part of that process, 00:13:48.240 --> 00:13:51.500 align:middle line:84% if you look at the details, the bank that issues that loan 00:13:51.500 --> 00:13:53.900 align:middle line:90% is actually a government-owned. 00:13:53.900 --> 00:13:58.580 align:middle line:84% So it's essentially money from the government for free. 00:13:58.580 --> 00:14:00.080 align:middle line:84% I mean, they have to pay it back. 00:14:00.080 --> 00:14:01.680 align:middle line:84% But they get to borrow it for free. 00:14:01.680 --> 00:14:03.900 align:middle line:84% So that delay in construction that 00:14:03.900 --> 00:14:08.620 align:middle line:84% leads to that inflation of cost, that doesn't matter anymore 00:14:08.620 --> 00:14:12.300 align:middle line:84% because the multiplier on the overnight cost 00:14:12.300 --> 00:14:15.300 align:middle line:90% essentially goes to unity. 00:14:15.300 --> 00:14:21.620 align:middle line:84% The other thing that we did for Vogtle is we 00:14:21.620 --> 00:14:26.340 align:middle line:84% just sued Westinghouse for $3.7 million. 00:14:26.340 --> 00:14:29.060 align:middle line:84% So that was a good chunk of change. 00:14:29.060 --> 00:14:33.277 align:middle line:84% And for Vogtle, this is the two new reactors. 00:14:33.277 --> 00:14:35.860 align:middle line:84% If you're not familiar, these are the two most recent reactors 00:14:35.860 --> 00:14:37.780 align:middle line:90% built in the United States. 00:14:37.780 --> 00:14:41.440 align:middle line:84% They got authorization from the Public Utility Commission 00:14:41.440 --> 00:14:45.440 align:middle line:84% to begin billing their customers for nuclear power 00:14:45.440 --> 00:14:49.920 align:middle line:84% before 10 years before they started making the power. 00:14:49.920 --> 00:14:54.960 align:middle line:84% So they just basically, through ratepayers, 00:14:54.960 --> 00:14:58.080 align:middle line:84% billed them for the cost of the plant. 00:14:58.080 --> 00:15:01.320 align:middle line:84% So all of this reduced their finance costs dramatically. 00:15:01.320 --> 00:15:04.400 align:middle line:84% And that combination of things is allowed 00:15:04.400 --> 00:15:07.000 align:middle line:90% Vogtle to be built in the US. 00:15:07.000 --> 00:15:09.260 align:middle line:84% But it is not a generalizable strategy. 00:15:09.260 --> 00:15:09.760 align:middle line:90% Yeah? 00:15:09.760 --> 00:15:11.510 align:middle line:84% AUDIENCE: You said "we" sued Westinghouse. 00:15:11.510 --> 00:15:12.760 align:middle line:90% Who is "we"? 00:15:12.760 --> 00:15:14.560 align:middle line:84% R SCOTT KEMP: The people who built 00:15:14.560 --> 00:15:17.220 align:middle line:84% Vogtle, which I can't remember the name of the company. 00:15:17.220 --> 00:15:17.933 align:middle line:90% Yeah? 00:15:17.933 --> 00:15:19.600 align:middle line:84% AUDIENCE: Can you talk a little bit more 00:15:19.600 --> 00:15:21.520 align:middle line:90% about risk-free rate loans? 00:15:21.520 --> 00:15:24.840 align:middle line:84% How often are they given out, and maybe what portion of Vogtle 00:15:24.840 --> 00:15:25.980 align:middle line:90% is financed with them? 00:15:25.980 --> 00:15:30.440 align:middle line:84% R SCOTT KEMP: So there've been three or four 00:15:30.440 --> 00:15:37.750 align:middle line:84% of these offerings in loss, going back to the Energy Policy 00:15:37.750 --> 00:15:39.830 align:middle line:90% Act of 2005. 00:15:39.830 --> 00:15:43.750 align:middle line:84% And the rule is that up to 50% of the plant 00:15:43.750 --> 00:15:48.350 align:middle line:84% can be financed through these federal loan guarantee programs. 00:15:48.350 --> 00:15:49.990 align:middle line:90% So that's kind of the rule. 00:15:49.990 --> 00:15:53.490 align:middle line:84% Initially-- I have another slide, 00:15:53.490 --> 00:15:56.390 align:middle line:84% but I can't really remember off the top of my head. 00:15:56.390 --> 00:16:00.030 align:middle line:84% But initially, when that policy was announced, 00:16:00.030 --> 00:16:05.270 align:middle line:84% there were something like 29 license applications to the NRC. 00:16:05.270 --> 00:16:10.030 align:middle line:84% And at the time, we had not built any nuclear plants since 00:16:10.030 --> 00:16:13.550 align:middle line:84% the '70s or ordered any plants since the '70s. 00:16:13.550 --> 00:16:16.370 align:middle line:84% And no one really knew what it would cost to build a plant. 00:16:16.370 --> 00:16:19.430 align:middle line:84% So these vendor forecasts that I showed you in a previous slide 00:16:19.430 --> 00:16:21.710 align:middle line:84% were taken to be somewhat serious. 00:16:21.710 --> 00:16:25.470 align:middle line:84% And the size of the loan guarantee program 00:16:25.470 --> 00:16:32.710 align:middle line:84% was sized so that it could fully fund something like 15, 14 or 15 00:16:32.710 --> 00:16:35.030 align:middle line:84% nuclear plants, which when you consider that they only 00:16:35.030 --> 00:16:38.580 align:middle line:84% pay for half, gives you the 29 licensed applications. 00:16:38.580 --> 00:16:40.900 align:middle line:90% So it all may work out. 00:16:40.900 --> 00:16:43.200 align:middle line:84% And that's where both the Sumner, VC, 00:16:43.200 --> 00:16:48.460 align:middle line:84% Sumner, and the Vogtle plant got started. 00:16:48.460 --> 00:16:53.580 align:middle line:90% Almost everyone-- 20, I guess. 00:16:53.580 --> 00:16:56.540 align:middle line:90% The 28 is reactors, not sites. 00:16:56.540 --> 00:17:00.110 align:middle line:90% So 24 of the-- 00:17:00.110 --> 00:17:07.420 align:middle line:84% or 25 of the 29 plants for which they did a license application 00:17:07.420 --> 00:17:12.240 align:middle line:84% to the NRC, went to the point of doing that license application. 00:17:12.240 --> 00:17:13.880 align:middle line:84% And then they realized, actually, 00:17:13.880 --> 00:17:16.020 align:middle line:84% we're not going to be able to afford this. 00:17:16.020 --> 00:17:19.900 align:middle line:84% And the two that went forward were Sumner and Vogtle. 00:17:19.900 --> 00:17:23.040 align:middle line:84% And then Sumner also abandoned the project halfway through. 00:17:23.040 --> 00:17:27.660 align:middle line:84% I think they spent $7 billion on Sumner before the Public Utility 00:17:27.660 --> 00:17:31.920 align:middle line:84% Commission said, despite the fact that we spent $7 billion 00:17:31.920 --> 00:17:34.520 align:middle line:84% so far, we still determined that the residual costs 00:17:34.520 --> 00:17:37.920 align:middle line:84% or the remaining costs would be so high that it's not 00:17:37.920 --> 00:17:42.360 align:middle line:84% in the interest of our customers to continue with this project. 00:17:42.360 --> 00:17:44.680 align:middle line:90% So they closed the project. 00:17:44.680 --> 00:17:48.600 align:middle line:90% Only Vogtle survived, of the 29. 00:17:48.600 --> 00:17:50.440 align:middle line:90% So that's two of the 29. 00:17:50.440 --> 00:17:53.680 align:middle line:84% And it happened because of all of these shenanigans 00:17:53.680 --> 00:17:57.260 align:middle line:84% to basically get free money from the public, sue Westinghouse. 00:17:57.260 --> 00:18:00.020 align:middle line:84% And they got a second round of loan guarantees. 00:18:00.020 --> 00:18:02.160 align:middle line:84% And oh, one thing I didn't mention. 00:18:02.160 --> 00:18:09.160 align:middle line:84% This was truly brilliant for Vogtle. 00:18:09.160 --> 00:18:11.300 align:middle line:84% They started the project in 2009. 00:18:11.300 --> 00:18:14.140 align:middle line:84% Does anyone remember what happened in the economy in 2008? 00:18:14.140 --> 00:18:15.080 align:middle line:90% AUDIENCE: Crash. 00:18:15.080 --> 00:18:17.240 align:middle line:84% R SCOTT KEMP: There was a huge crash, right? 00:18:17.240 --> 00:18:19.960 align:middle line:84% So interest rates were really low. 00:18:19.960 --> 00:18:22.920 align:middle line:84% And they went on to the bond market, 00:18:22.920 --> 00:18:28.648 align:middle line:84% and they issued all these bonds at something like 1%. 00:18:28.648 --> 00:18:30.440 align:middle line:84% And then the inflation rate was much higher 00:18:30.440 --> 00:18:37.250 align:middle line:84% than 1% So in fact, they made money by issuing bonds, 00:18:37.250 --> 00:18:41.050 align:middle line:84% by taking loans, because they had to pay back at 1% 00:18:41.050 --> 00:18:44.590 align:middle line:90% but inflation was 3%. 00:18:44.590 --> 00:18:48.630 align:middle line:84% So sometimes you will see a calculation of the overnight 00:18:48.630 --> 00:18:54.910 align:middle line:84% cost for Vogtle, and it will be smaller than the number that I 00:18:54.910 --> 00:18:58.490 align:middle line:84% show you at $19,000 per kilowatt of capacity. 00:18:58.490 --> 00:19:00.310 align:middle line:84% And the reason it's smaller is because they 00:19:00.310 --> 00:19:03.190 align:middle line:84% fail to take into account the details of that funding. 00:19:03.190 --> 00:19:06.122 align:middle line:84% So Professor [INAUDIBLE] has his own number. 00:19:06.122 --> 00:19:07.330 align:middle line:90% And I talked to him about it. 00:19:07.330 --> 00:19:07.930 align:middle line:90% He's like, oh, really? 00:19:07.930 --> 00:19:09.970 align:middle line:84% Like they actually made money off the bond offering? 00:19:09.970 --> 00:19:10.470 align:middle line:90% I go, yeah. 00:19:10.470 --> 00:19:13.770 align:middle line:84% You have to add that back in to find the true technical cost. 00:19:13.770 --> 00:19:19.330 align:middle line:84% So that's why that plant is so expensive, 00:19:19.330 --> 00:19:22.230 align:middle line:84% but also why it was able to be built. 00:19:22.230 --> 00:19:25.230 align:middle line:84% It's a remarkable moment in history 00:19:25.230 --> 00:19:28.550 align:middle line:90% where they could do that. 00:19:28.550 --> 00:19:34.100 align:middle line:84% OK, other countries, they don't work this way. 00:19:34.100 --> 00:19:37.260 align:middle line:84% China, it just comes out every year out of the national budget. 00:19:37.260 --> 00:19:38.920 align:middle line:84% That used to be the case for India. 00:19:38.920 --> 00:19:40.980 align:middle line:90% India a while ago-- 00:19:40.980 --> 00:19:44.180 align:middle line:84% I can't remember how long ago, maybe 10 years ago-- 00:19:44.180 --> 00:19:49.940 align:middle line:84% switched so that it's now 33% comes out of the annual budget. 00:19:49.940 --> 00:19:53.700 align:middle line:84% And then 60% they take from foreign loans, 00:19:53.700 --> 00:19:59.700 align:middle line:84% principally, so issuing bonds on the US bond market. 00:19:59.700 --> 00:20:03.500 align:middle line:84% Japan has these government-backed risk-free 00:20:03.500 --> 00:20:06.200 align:middle line:84% loans, essentially loan guarantees 00:20:06.200 --> 00:20:08.740 align:middle line:84% but for the full amount of their reactors. 00:20:08.740 --> 00:20:11.040 align:middle line:90% And France has this. 00:20:11.040 --> 00:20:13.440 align:middle line:84% It's essentially a government-owned utility, right? 00:20:13.440 --> 00:20:17.380 align:middle line:84% So most of these people don't have to compete. 00:20:17.380 --> 00:20:19.660 align:middle line:84% They don't have to engage in financing 00:20:19.660 --> 00:20:23.740 align:middle line:84% of a normal construction project because they're 00:20:23.740 --> 00:20:25.400 align:middle line:90% government-owned operations. 00:20:25.400 --> 00:20:27.240 align:middle line:84% They just come out of the national budget. 00:20:27.240 --> 00:20:27.860 align:middle line:90% Yeah? 00:20:27.860 --> 00:20:29.360 align:middle line:84% AUDIENCE: This is kind of a tangent, 00:20:29.360 --> 00:20:32.620 align:middle line:84% but how much does like a fully operational coal plant cost 00:20:32.620 --> 00:20:33.120 align:middle line:90% today? 00:20:33.120 --> 00:20:34.880 align:middle line:90% Because that should be-- 00:20:34.880 --> 00:20:38.020 align:middle line:84% you would expect a nuclear power plant to be that plus, 00:20:38.020 --> 00:20:40.842 align:middle line:84% I don't know, a little bit more, because you-- 00:20:40.842 --> 00:20:41.800 align:middle line:90% R SCOTT KEMP: Well, OK. 00:20:41.800 --> 00:20:43.540 align:middle line:84% AUDIENCE: Architecture is all going to be the same. 00:20:43.540 --> 00:20:45.957 align:middle line:84% And like obviously, you're going to have your containment. 00:20:45.957 --> 00:20:50.640 align:middle line:84% But the differences between the boiler construction and whatnot 00:20:50.640 --> 00:20:52.060 align:middle line:90% are not terribly different. 00:20:52.060 --> 00:20:53.477 align:middle line:84% R SCOTT KEMP: There's your answer. 00:20:53.477 --> 00:20:58.360 align:middle line:84% Top line, 209, $300 to build a coal plant. 00:20:58.360 --> 00:21:01.060 align:middle line:84% And for the nuclear plant, I mean, this is the loan payment. 00:21:01.060 --> 00:21:04.680 align:middle line:84% So this is the-- if you just want the total investment cost, 00:21:04.680 --> 00:21:09.580 align:middle line:84% $11,000 per kilowatt of capacity versus $5,000. 00:21:09.580 --> 00:21:10.420 align:middle line:90% It's about twice. 00:21:10.420 --> 00:21:10.962 align:middle line:90% AUDIENCE: OK. 00:21:10.962 --> 00:21:20.020 align:middle line:84% R SCOTT KEMP: Now remember, this is assuming these EIA numbers, 00:21:20.020 --> 00:21:22.820 align:middle line:84% which we've seen in the spectrum for the overnight costs. 00:21:22.820 --> 00:21:23.780 align:middle line:90% There's a whole range. 00:21:23.780 --> 00:21:26.200 align:middle line:90% These numbers are smaller-- 00:21:26.200 --> 00:21:28.510 align:middle line:84% I'm sorry, bigger than the vendor estimates, 00:21:28.510 --> 00:21:31.510 align:middle line:84% but quite a bit smaller than what we saw for Vogtle. 00:21:31.510 --> 00:21:36.310 align:middle line:84% So these are vendor estimates plus the contingency. 00:21:36.310 --> 00:21:41.730 align:middle line:84% And it assumes also that, if you're looking at this number, 00:21:41.730 --> 00:21:44.750 align:middle line:84% it assumes that it gets built in six years, which 00:21:44.750 --> 00:21:46.470 align:middle line:90% hasn't been done in a while. 00:21:46.470 --> 00:21:51.230 align:middle line:84% So part of it is that this number is high 00:21:51.230 --> 00:21:53.370 align:middle line:84% because of safety considerations, 00:21:53.370 --> 00:21:56.550 align:middle line:84% because of delays, so many things that 00:21:56.550 --> 00:21:58.830 align:middle line:90% make it more complex. 00:21:58.830 --> 00:22:01.910 align:middle line:84% Part of it is that this number sometimes gets inflated and also 00:22:01.910 --> 00:22:03.470 align:middle line:90% drives up the cost. 00:22:03.470 --> 00:22:05.550 align:middle line:84% So it's coming from multiple places. 00:22:05.550 --> 00:22:07.370 align:middle line:84% And you've got to deal with all of them 00:22:07.370 --> 00:22:10.230 align:middle line:84% if you want to figure out a way to make it cheaper. 00:22:10.230 --> 00:22:15.750 align:middle line:84% That's kind of the story I'm trying to weave for you today. 00:22:15.750 --> 00:22:16.250 align:middle line:90% All right. 00:22:16.250 --> 00:22:18.125 align:middle line:84% So now you can understand why other countries 00:22:18.125 --> 00:22:19.210 align:middle line:90% are able to do this. 00:22:19.210 --> 00:22:21.290 align:middle line:84% It basically becomes a matter of national policy. 00:22:21.290 --> 00:22:22.830 align:middle line:84% We're going to build these plants. 00:22:22.830 --> 00:22:26.190 align:middle line:84% And it doesn't really matter that they're expensive, 00:22:26.190 --> 00:22:30.820 align:middle line:84% because they don't have to compete in a competitive market. 00:22:30.820 --> 00:22:32.900 align:middle line:84% It's a nationalized electric system, 00:22:32.900 --> 00:22:34.780 align:middle line:84% and it just costs whatever costs. 00:22:34.780 --> 00:22:38.620 align:middle line:84% And it's just a decision to do it. 00:22:38.620 --> 00:22:39.240 align:middle line:90% All right. 00:22:39.240 --> 00:22:43.100 align:middle line:90% So this is just a quick-- yes? 00:22:43.100 --> 00:22:45.640 align:middle line:84% AUDIENCE: Can you repeat again, besides lobbying, 00:22:45.640 --> 00:22:50.192 align:middle line:84% what are the reasons why we want to build nuclear plants? 00:22:50.192 --> 00:22:52.400 align:middle line:84% R SCOTT KEMP: Why are the reasons who wants to build? 00:22:52.400 --> 00:22:54.340 align:middle line:84% We in the United States, or we the people? 00:22:54.340 --> 00:22:55.720 align:middle line:90% We in the US? 00:22:55.720 --> 00:22:57.500 align:middle line:90% AUDIENCE: Yeah. 00:22:57.500 --> 00:23:02.780 align:middle line:84% R SCOTT KEMP: It is principally the vendors who sell the plants, 00:23:02.780 --> 00:23:07.420 align:middle line:84% the lobbyists who work for them, and some, 00:23:07.420 --> 00:23:09.480 align:middle line:84% I would go out on a limb, and say 00:23:09.480 --> 00:23:12.020 align:middle line:84% somewhat corrupt public utility commission officials who 00:23:12.020 --> 00:23:16.180 align:middle line:84% get paid off, some of who have gone to jail, who 00:23:16.180 --> 00:23:18.120 align:middle line:90% get incentivized to do this. 00:23:18.120 --> 00:23:23.220 align:middle line:84% But if you are looking at it from a social benefit 00:23:23.220 --> 00:23:29.640 align:middle line:84% perspective, if you're the technology-neutral philosopher 00:23:29.640 --> 00:23:33.700 align:middle line:84% king, as it were, you would not choose it at these prices. 00:23:33.700 --> 00:23:36.680 align:middle line:90% 00:23:36.680 --> 00:23:38.460 align:middle line:90% Today, right? 00:23:38.460 --> 00:23:40.680 align:middle line:84% So we'll look a little bit about-- 00:23:40.680 --> 00:23:41.980 align:middle line:90% we're going to keep going. 00:23:41.980 --> 00:23:45.520 align:middle line:84% There's going to be some dynamics associated 00:23:45.520 --> 00:23:51.680 align:middle line:84% with trying to decarbonize the grid that push you 00:23:51.680 --> 00:23:57.360 align:middle line:84% towards technologies that are dispatchable and always 00:23:57.360 --> 00:24:00.680 align:middle line:84% available, in a way, for wind and solar. 00:24:00.680 --> 00:24:04.220 align:middle line:84% And so the next half of this class, what we're going to do 00:24:04.220 --> 00:24:07.120 align:middle line:84% is we're going to study that effect 00:24:07.120 --> 00:24:11.000 align:middle line:84% and how much that comes back to rescue nuclear 00:24:11.000 --> 00:24:14.960 align:middle line:84% to see if-- because you really want dispatchable technology, 00:24:14.960 --> 00:24:17.580 align:middle line:84% and wind and solar are not that, right? 00:24:17.580 --> 00:24:19.880 align:middle line:90% So we're going to keep going. 00:24:19.880 --> 00:24:20.700 align:middle line:90% There's a lot here. 00:24:20.700 --> 00:24:23.020 align:middle line:84% But we have to construct it piece by piece. 00:24:23.020 --> 00:24:25.750 align:middle line:90% So let's keep going. 00:24:25.750 --> 00:24:26.250 align:middle line:90% All right. 00:24:26.250 --> 00:24:31.270 align:middle line:84% I just want you to remember these terms. 00:24:31.270 --> 00:24:34.510 align:middle line:84% You'll come across them in your career. 00:24:34.510 --> 00:24:36.730 align:middle line:84% Investment cost is that number at the end. 00:24:36.730 --> 00:24:40.270 align:middle line:84% Future value or rate base cost is basically the same thing. 00:24:40.270 --> 00:24:45.270 align:middle line:84% Overnight cost is the technology cost without the part caused 00:24:45.270 --> 00:24:47.710 align:middle line:84% by the construction delay, the interest 00:24:47.710 --> 00:24:49.270 align:middle line:90% paid during construction, IDC-- 00:24:49.270 --> 00:24:50.710 align:middle line:90% Interest During Construction. 00:24:50.710 --> 00:24:55.470 align:middle line:84% And levelized cost, we haven't talked about yet. 00:24:55.470 --> 00:24:57.030 align:middle line:84% And I think I have a slide, but I'm 00:24:57.030 --> 00:25:00.270 align:middle line:84% going to wait a little bit later to get to levelized cost. 00:25:00.270 --> 00:25:01.870 align:middle line:84% Levelized cost is kind of, if you 00:25:01.870 --> 00:25:05.010 align:middle line:84% want a single number for the cost of electricity, 00:25:05.010 --> 00:25:05.860 align:middle line:90% it's way to do that. 00:25:05.860 --> 00:25:07.610 align:middle line:84% But there's a lot of embedded assumptions. 00:25:07.610 --> 00:25:11.950 align:middle line:84% So you have to be careful about using levelized cost. 00:25:11.950 --> 00:25:13.830 align:middle line:90% OK. 00:25:13.830 --> 00:25:16.170 align:middle line:90% So that gets us into part two. 00:25:16.170 --> 00:25:20.270 align:middle line:84% How does nuclear compete in the market given this cost 00:25:20.270 --> 00:25:22.660 align:middle line:90% structure? 00:25:22.660 --> 00:25:27.840 align:middle line:84% All right, so let me just go back here. 00:25:27.840 --> 00:25:30.700 align:middle line:90% 00:25:30.700 --> 00:25:36.700 align:middle line:84% This is an equation in Q that gives us a straight line, 00:25:36.700 --> 00:25:37.800 align:middle line:90% a family of lines. 00:25:37.800 --> 00:25:40.820 align:middle line:84% It intersects the axis at the capital 00:25:40.820 --> 00:25:43.740 align:middle line:90% plus fixed costs, the y-axis. 00:25:43.740 --> 00:25:48.060 align:middle line:84% And then it has a slope related to the variable cost. 00:25:48.060 --> 00:25:48.720 align:middle line:90% All right. 00:25:48.720 --> 00:25:51.980 align:middle line:84% So for every technology, we should 00:25:51.980 --> 00:25:55.260 align:middle line:90% have some family of lines. 00:25:55.260 --> 00:25:56.840 align:middle line:90% And this is such a family. 00:25:56.840 --> 00:26:03.180 align:middle line:84% And using real data, this data is a few years old. 00:26:03.180 --> 00:26:06.720 align:middle line:84% But I can't regenerate all the plots every year. 00:26:06.720 --> 00:26:13.860 align:middle line:84% So we're just going to use it to get a feel for what's happening. 00:26:13.860 --> 00:26:17.180 align:middle line:84% And this is a four-technology system. 00:26:17.180 --> 00:26:21.360 align:middle line:84% And the x-axis is in hours per year. 00:26:21.360 --> 00:26:23.940 align:middle line:84% And there's 8,760 hours in a year. 00:26:23.940 --> 00:26:28.945 align:middle line:84% So this is, if you will, a measure of capacity factor. 00:26:28.945 --> 00:26:29.820 align:middle line:90% Does that make sense? 00:26:29.820 --> 00:26:34.600 align:middle line:84% What fraction of the time the plant operates. 00:26:34.600 --> 00:26:36.810 align:middle line:84% So if it operates for 2,000 hours a year, 00:26:36.810 --> 00:26:42.760 align:middle line:84% it's roughly 20% capacity factor, something like that. 00:26:42.760 --> 00:26:45.640 align:middle line:84% So depending on how often we run the plant, 00:26:45.640 --> 00:26:50.840 align:middle line:84% we'll see that the lowest cost option technology will change. 00:26:50.840 --> 00:26:54.200 align:middle line:84% So it's looking strictly at the investment cost. 00:26:54.200 --> 00:26:55.920 align:middle line:84% And it's just to say if we're only 00:26:55.920 --> 00:27:00.800 align:middle line:84% looking at where it intersects here on the y-axis, that's 00:27:00.800 --> 00:27:02.260 align:middle line:90% not a sufficient explanation. 00:27:02.260 --> 00:27:04.360 align:middle line:84% We also need to look at this slope. 00:27:04.360 --> 00:27:11.240 align:middle line:84% So in this system, we see that there are-- 00:27:11.240 --> 00:27:14.680 align:middle line:84% well, let's just look at the technologies. 00:27:14.680 --> 00:27:15.840 align:middle line:90% Geothermal is purple. 00:27:15.840 --> 00:27:16.340 align:middle line:90% I'm sorry. 00:27:16.340 --> 00:27:19.190 align:middle line:84% They're very close, but geothermal is purple. 00:27:19.190 --> 00:27:22.090 align:middle line:84% And it has no slope, essentially flat. 00:27:22.090 --> 00:27:23.930 align:middle line:84% Almost-- it's not actually technically flat. 00:27:23.930 --> 00:27:27.510 align:middle line:84% There's some maintenance costs, but it's almost flat. 00:27:27.510 --> 00:27:32.910 align:middle line:84% And that's because there's no fuel cost. 00:27:32.910 --> 00:27:36.030 align:middle line:84% Coal and natural gas have fuel costs. 00:27:36.030 --> 00:27:37.870 align:middle line:90% Let's just look at this one. 00:27:37.870 --> 00:27:40.270 align:middle line:84% This one is natural gas simple, which 00:27:40.270 --> 00:27:42.910 align:middle line:84% means you take the natural gas and you put it in 00:27:42.910 --> 00:27:44.790 align:middle line:90% and you burn it. 00:27:44.790 --> 00:27:48.030 align:middle line:84% And then you run it through your turbine. 00:27:48.030 --> 00:27:50.030 align:middle line:90% This one is combined cycle. 00:27:50.030 --> 00:27:53.390 align:middle line:84% So this has a second heat recovery step 00:27:53.390 --> 00:27:56.870 align:middle line:84% which takes the steam that comes off, 00:27:56.870 --> 00:28:01.230 align:middle line:84% the cooler steam, and then uses it to drive another turbine. 00:28:01.230 --> 00:28:03.230 align:middle line:84% So this has two turbines in it and makes 00:28:03.230 --> 00:28:07.810 align:middle line:84% more use of the heat coming out of the natural gas. 00:28:07.810 --> 00:28:12.690 align:middle line:84% And so its per-unit energy cost is lower, 00:28:12.690 --> 00:28:15.310 align:middle line:90% so the slope is shallower. 00:28:15.310 --> 00:28:16.950 align:middle line:90% Does that makes sense? 00:28:16.950 --> 00:28:22.300 align:middle line:90% So what is this telling us? 00:28:22.300 --> 00:28:25.260 align:middle line:84% Well, it's saying that if we need 00:28:25.260 --> 00:28:27.560 align:middle line:84% to build a plant that's going to run most of the time, 00:28:27.560 --> 00:28:29.310 align:middle line:84% we probably want to use-- despite the fact 00:28:29.310 --> 00:28:32.060 align:middle line:84% that it costs more to build this plant initially, 00:28:32.060 --> 00:28:34.420 align:middle line:84% we want to use this technology if we're 00:28:34.420 --> 00:28:36.020 align:middle line:90% using it most of the time. 00:28:36.020 --> 00:28:38.620 align:middle line:84% But if we have to build some capacity that just comes 00:28:38.620 --> 00:28:46.060 align:middle line:84% on during peak hours, like around 5:00 PM in the afternoon 00:28:46.060 --> 00:28:48.820 align:middle line:84% as the sun is setting and everyone is going home 00:28:48.820 --> 00:28:51.220 align:middle line:84% and turning on the air conditioners in the summer, 00:28:51.220 --> 00:28:55.518 align:middle line:84% then the capital investment for this technology is too high. 00:28:55.518 --> 00:28:58.060 align:middle line:84% We'll use the cheaper technology that has more expensive fuel 00:28:58.060 --> 00:28:59.840 align:middle line:90% costs and we'll have this. 00:28:59.840 --> 00:29:04.660 align:middle line:84% So the optimal mix will always be at least a couple 00:29:04.660 --> 00:29:05.980 align:middle line:90% of technologies. 00:29:05.980 --> 00:29:08.000 align:middle line:84% You can also have a three-technology system. 00:29:08.000 --> 00:29:12.540 align:middle line:84% So imagine that the cost of building a geothermal plant 00:29:12.540 --> 00:29:16.903 align:middle line:84% had come down a little bit from R&D. Then 00:29:16.903 --> 00:29:19.320 align:middle line:84% what we would see is that would, if we could bring it down 00:29:19.320 --> 00:29:22.400 align:middle line:84% to this level, we would have a three-technology system. 00:29:22.400 --> 00:29:26.400 align:middle line:84% And for some small amount of capacity 00:29:26.400 --> 00:29:33.400 align:middle line:84% that is running all of the time, which we call base load, 00:29:33.400 --> 00:29:34.820 align:middle line:90% we would be using geothermal. 00:29:34.820 --> 00:29:38.360 align:middle line:84% That would be the optimal base load generator. 00:29:38.360 --> 00:29:41.040 align:middle line:84% But this is not telling us anything 00:29:41.040 --> 00:29:43.960 align:middle line:84% about how much of each of these technologies we should build. 00:29:43.960 --> 00:29:47.200 align:middle line:84% This is just telling us which technology to build given 00:29:47.200 --> 00:29:48.880 align:middle line:90% a certain capacity factor. 00:29:48.880 --> 00:29:53.680 align:middle line:84% How can we convert this into a measure of how many plants 00:29:53.680 --> 00:29:54.920 align:middle line:90% we need? 00:29:54.920 --> 00:30:00.080 align:middle line:90% So there is a way to do this. 00:30:00.080 --> 00:30:02.540 align:middle line:84% So the way we do it is we look at a demand curve. 00:30:02.540 --> 00:30:05.000 align:middle line:90% So here is the actual demand. 00:30:05.000 --> 00:30:08.080 align:middle line:84% We tend to use ERCOT in class, because ERCOT, which 00:30:08.080 --> 00:30:11.040 align:middle line:84% is the Texas electrical grid, publishes 00:30:11.040 --> 00:30:13.640 align:middle line:90% all their data on the web. 00:30:13.640 --> 00:30:16.750 align:middle line:84% And as a result, academics use ERCOT data all the time, 00:30:16.750 --> 00:30:17.890 align:middle line:90% and it's very nice. 00:30:17.890 --> 00:30:21.830 align:middle line:84% And ERCOT gets a lot of free research as a result of this. 00:30:21.830 --> 00:30:23.910 align:middle line:84% But you would look at your local demand. 00:30:23.910 --> 00:30:27.950 align:middle line:84% And this is an actual demand curve for one year going 00:30:27.950 --> 00:30:30.850 align:middle line:90% for every hour, L 8,760 hours. 00:30:30.850 --> 00:30:33.330 align:middle line:84% We've plotted the actual total demand. 00:30:33.330 --> 00:30:35.830 align:middle line:84% And you can see here in the middle of the year 00:30:35.830 --> 00:30:37.950 align:middle line:84% where the summer happens in Texas, the demand 00:30:37.950 --> 00:30:39.590 align:middle line:90% for electricity goes up. 00:30:39.590 --> 00:30:41.210 align:middle line:84% And if you look really carefully, 00:30:41.210 --> 00:30:46.550 align:middle line:90% you can see this periodicity. 00:30:46.550 --> 00:30:48.290 align:middle line:90% And there's 52 peaks. 00:30:48.290 --> 00:30:52.110 align:middle line:84% So that's the weekday-weekend change 00:30:52.110 --> 00:30:53.790 align:middle line:84% with the weekday usage being higher 00:30:53.790 --> 00:30:55.570 align:middle line:84% and the weekend usage being lower. 00:30:55.570 --> 00:30:59.170 align:middle line:84% So that probably weekend weekend weekend weekend and so on. 00:30:59.170 --> 00:31:02.190 align:middle line:90% You can see this in the data. 00:31:02.190 --> 00:31:04.790 align:middle line:90% So I can take this demand data. 00:31:04.790 --> 00:31:10.270 align:middle line:90% And I could take out the most-- 00:31:10.270 --> 00:31:12.390 align:middle line:84% probably this peak here in the winter 00:31:12.390 --> 00:31:17.660 align:middle line:84% was probably some kind of weather anomaly, one that 00:31:17.660 --> 00:31:19.820 align:middle line:90% does not appear in general. 00:31:19.820 --> 00:31:21.100 align:middle line:90% You can go and see. 00:31:21.100 --> 00:31:24.100 align:middle line:84% In 2022 in December, was there some kind 00:31:24.100 --> 00:31:27.820 align:middle line:90% of weird weather event? 00:31:27.820 --> 00:31:30.340 align:middle line:84% I can take this and I can start sorting these 00:31:30.340 --> 00:31:32.020 align:middle line:90% by how high they are. 00:31:32.020 --> 00:31:36.740 align:middle line:84% So I'll these bars from highest to lowest. 00:31:36.740 --> 00:31:38.735 align:middle line:90% And here, I'll just do the sort. 00:31:38.735 --> 00:31:39.360 align:middle line:90% There they are. 00:31:39.360 --> 00:31:42.140 align:middle line:84% So this is the same, all the same bars. 00:31:42.140 --> 00:31:45.020 align:middle line:84% And I've just sorted them on the graph. 00:31:45.020 --> 00:31:50.620 align:middle line:84% And now it's telling me how many hours of the year I'm using 00:31:50.620 --> 00:31:55.600 align:middle line:84% 80,000 megawatts and how many hours I'm using 40,000 00:31:55.600 --> 00:31:56.500 align:middle line:90% megawatts. 00:31:56.500 --> 00:31:59.280 align:middle line:84% And I can basically, because I resorted the axis, 00:31:59.280 --> 00:32:04.100 align:middle line:84% I can now see how often I need a certain amount of capacity. 00:32:04.100 --> 00:32:05.820 align:middle line:90% Does that make sense? 00:32:05.820 --> 00:32:06.860 align:middle line:90% All right. 00:32:06.860 --> 00:32:11.730 align:middle line:84% So I can now put this plot, which 00:32:11.730 --> 00:32:15.950 align:middle line:84% is also a fraction of the year that I need a certain capacity. 00:32:15.950 --> 00:32:20.770 align:middle line:84% And I can draw a line's going straight down. 00:32:20.770 --> 00:32:27.410 align:middle line:84% And I can see that here is the switch. 00:32:27.410 --> 00:32:33.890 align:middle line:84% If I'm using a plant for less than whatever this is, 00:32:33.890 --> 00:32:37.890 align:middle line:90% 3,000-ish hours-- 00:32:37.890 --> 00:32:39.770 align:middle line:90% I guess I didn't write it down-- 00:32:39.770 --> 00:32:42.250 align:middle line:84% then I want the yellow technology. 00:32:42.250 --> 00:32:44.270 align:middle line:90% And how much capacity do I need? 00:32:44.270 --> 00:32:47.630 align:middle line:84% I need this much capacity to do it. 00:32:47.630 --> 00:32:49.610 align:middle line:90% Does that make sense? 00:32:49.610 --> 00:32:52.530 align:middle line:90% Which is 30,000 megawatts. 00:32:52.530 --> 00:32:54.770 align:middle line:84% So that's 30,000 megawatts of yellow. 00:32:54.770 --> 00:32:56.810 align:middle line:84% And then for the rest, I'm going to have green. 00:32:56.810 --> 00:33:00.890 align:middle line:84% And I'll built 50,000 megawatts of green. 00:33:00.890 --> 00:33:04.210 align:middle line:90% Does that make sense? 00:33:04.210 --> 00:33:06.890 align:middle line:84% So this is called a screening curve. 00:33:06.890 --> 00:33:09.290 align:middle line:84% And this is a way that you can determine 00:33:09.290 --> 00:33:11.173 align:middle line:84% how much of each technology you can build. 00:33:11.173 --> 00:33:12.590 align:middle line:84% And of course, it depends entirely 00:33:12.590 --> 00:33:14.010 align:middle line:90% on the shape of these lines. 00:33:14.010 --> 00:33:19.170 align:middle line:84% And I will point out that if I generate this plot 00:33:19.170 --> 00:33:22.790 align:middle line:84% and I omit a line, I will get the wrong answer. 00:33:22.790 --> 00:33:26.590 align:middle line:84% Like if I forget to put in a certain technology, that 00:33:26.590 --> 00:33:28.390 align:middle line:90% matters. 00:33:28.390 --> 00:33:30.270 align:middle line:90% I won't get the right answer. 00:33:30.270 --> 00:33:34.590 align:middle line:84% This is a modeling problem that happens all the time. 00:33:34.590 --> 00:33:39.310 align:middle line:84% So you'll see people do studies, and they'll 00:33:39.310 --> 00:33:40.450 align:middle line:90% choose their technologies. 00:33:40.450 --> 00:33:41.830 align:middle line:90% They'll say natural gas. 00:33:41.830 --> 00:33:45.110 align:middle line:84% And they'll choose nuclear, and they'll choose something else. 00:33:45.110 --> 00:33:48.510 align:middle line:90% And then they omit geothermal. 00:33:48.510 --> 00:33:51.030 align:middle line:84% And then they get an answer, and it's not the right answer 00:33:51.030 --> 00:33:53.352 align:middle line:84% because if you had included geothermal, 00:33:53.352 --> 00:33:55.310 align:middle line:84% the answer would be different, because you have 00:33:55.310 --> 00:33:56.870 align:middle line:90% these substitution effects. 00:33:56.870 --> 00:33:59.470 align:middle line:84% So whenever you look at a study about what 00:33:59.470 --> 00:34:01.350 align:middle line:84% is the optimal mix, you need to keep this 00:34:01.350 --> 00:34:04.550 align:middle line:84% in your mind and saying, OK, what were their modeling 00:34:04.550 --> 00:34:05.790 align:middle line:90% assumptions? 00:34:05.790 --> 00:34:08.060 align:middle line:84% Is this a complete set of assumptions? 00:34:08.060 --> 00:34:11.420 align:middle line:84% And therefore, can I believe these conclusions? 00:34:11.420 --> 00:34:14.060 align:middle line:84% Or have they-- so you can be sophisticated. 00:34:14.060 --> 00:34:18.920 align:middle line:84% Like well, they've omitted this particular technology. 00:34:18.920 --> 00:34:23.100 align:middle line:84% Let's say it has a very high fuel cost, 00:34:23.100 --> 00:34:24.600 align:middle line:90% but a very low capital cost. 00:34:24.600 --> 00:34:26.800 align:middle line:84% So it would actually come down here. 00:34:26.800 --> 00:34:28.820 align:middle line:84% And we can say, OK, so they've overestimated 00:34:28.820 --> 00:34:30.017 align:middle line:90% the amount of yellow. 00:34:30.017 --> 00:34:32.100 align:middle line:84% And there's another technology that would actually 00:34:32.100 --> 00:34:33.500 align:middle line:90% substitute in there. 00:34:33.500 --> 00:34:36.620 align:middle line:84% You can be smart about it if you understand the dynamics 00:34:36.620 --> 00:34:39.179 align:middle line:90% of each technology. 00:34:39.179 --> 00:34:40.580 align:middle line:90% Let's see. 00:34:40.580 --> 00:34:42.000 align:middle line:90% So I think I have this? 00:34:42.000 --> 00:34:42.500 align:middle line:90% Yes. 00:34:42.500 --> 00:34:44.520 align:middle line:90% So I've added this to the graph. 00:34:44.520 --> 00:34:49.133 align:middle line:90% What is this number, 32,000? 00:34:49.133 --> 00:34:50.800 align:middle line:84% AUDIENCE: It's always used all the time? 00:34:50.800 --> 00:34:53.420 align:middle line:84% R SCOTT KEMP: Oh, it never turns off. 00:34:53.420 --> 00:34:57.460 align:middle line:84% And that is what we call base load. 00:34:57.460 --> 00:35:01.880 align:middle line:84% You may hear phrases like oh, we need nuclear for base load. 00:35:01.880 --> 00:35:03.340 align:middle line:90% Who's heard this? 00:35:03.340 --> 00:35:05.140 align:middle line:90% Yep. 00:35:05.140 --> 00:35:09.710 align:middle line:84% Do you see any problem with natural gas providing this base 00:35:09.710 --> 00:35:10.210 align:middle line:90% load? 00:35:10.210 --> 00:35:16.850 align:middle line:90% 00:35:16.850 --> 00:35:20.450 align:middle line:84% Is there any reason I can't run my natural gas plant all 00:35:20.450 --> 00:35:23.750 align:middle line:84% the time or build 32,000 megawtts of natural gas? 00:35:23.750 --> 00:35:27.090 align:middle line:90% 00:35:27.090 --> 00:35:28.890 align:middle line:84% AUDIENCE: Depends what you consider. 00:35:28.890 --> 00:35:33.310 align:middle line:84% If it's just a matter of price or cost, you get an answer. 00:35:33.310 --> 00:35:35.450 align:middle line:84% You consider, as you said before, you're 00:35:35.450 --> 00:35:36.670 align:middle line:90% carbonizing the grid. 00:35:36.670 --> 00:35:38.490 align:middle line:90% Or maybe the answer [INAUDIBLE]. 00:35:38.490 --> 00:35:39.150 align:middle line:90% It depends. 00:35:39.150 --> 00:35:39.942 align:middle line:90% R SCOTT KEMP: Yeah. 00:35:39.942 --> 00:35:44.210 align:middle line:84% But in terms of the question, we need something for base load, 00:35:44.210 --> 00:35:46.870 align:middle line:84% base load will simply be the technology 00:35:46.870 --> 00:35:51.850 align:middle line:84% which is the lowest on this end of the graph. 00:35:51.850 --> 00:35:56.170 align:middle line:84% That's what will be dispatched as base load. 00:35:56.170 --> 00:36:00.650 align:middle line:84% There's no special properties of a generator that 00:36:00.650 --> 00:36:04.290 align:middle line:90% make it suitable for base load. 00:36:04.290 --> 00:36:07.710 align:middle line:84% However, the inverse is not true. 00:36:07.710 --> 00:36:09.990 align:middle line:84% There are properties of generators 00:36:09.990 --> 00:36:15.430 align:middle line:84% that make them unsuitable for non-base load applications. 00:36:15.430 --> 00:36:19.530 align:middle line:84% So the correct statement is not, we need nuclear for base load. 00:36:19.530 --> 00:36:21.670 align:middle line:84% The correct statement is, nuclear is really 00:36:21.670 --> 00:36:24.830 align:middle line:90% only suitable for base load. 00:36:24.830 --> 00:36:32.950 align:middle line:84% And the reason is that it has a very high x-axis. 00:36:32.950 --> 00:36:33.590 align:middle line:90% Hold on. 00:36:33.590 --> 00:36:35.830 align:middle line:90% There's nuclear. 00:36:35.830 --> 00:36:39.190 align:middle line:84% The reason is it has a very high intercept over here. 00:36:39.190 --> 00:36:42.450 align:middle line:84% Now this is nuclear with a 10-year construction. 00:36:42.450 --> 00:36:45.790 align:middle line:84% This is not the EIA-predicted nuclear. 00:36:45.790 --> 00:36:48.770 align:middle line:84% But you can see how it kind of operates. 00:36:48.770 --> 00:36:50.990 align:middle line:84% It operates similarly to geothermal. 00:36:50.990 --> 00:36:54.630 align:middle line:84% So if we could bring the cost of nuclear down, the capital 00:36:54.630 --> 00:36:58.830 align:middle line:84% costs, which is to bring it down with the intersect on this axis, 00:36:58.830 --> 00:37:00.430 align:middle line:84% at some point, it would come across 00:37:00.430 --> 00:37:04.860 align:middle line:84% and it would pop out underneath the green line here. 00:37:04.860 --> 00:37:07.460 align:middle line:84% And then it would be the base load technology. 00:37:07.460 --> 00:37:10.460 align:middle line:90% So that's what base load means. 00:37:10.460 --> 00:37:13.220 align:middle line:90% 00:37:13.220 --> 00:37:16.100 align:middle line:84% Best hope of financial success is 00:37:16.100 --> 00:37:18.620 align:middle line:84% to be operated as a base load generator. 00:37:18.620 --> 00:37:22.220 align:middle line:84% But we don't-- there's no requirement that base load must 00:37:22.220 --> 00:37:24.000 align:middle line:84% be serviced by something like nuclear. 00:37:24.000 --> 00:37:26.700 align:middle line:90% It can be serviced by solar. 00:37:26.700 --> 00:37:28.340 align:middle line:84% You just have to have the reliability 00:37:28.340 --> 00:37:31.180 align:middle line:90% to be on all the time. 00:37:31.180 --> 00:37:32.660 align:middle line:90% All right? 00:37:32.660 --> 00:37:35.660 align:middle line:90% So I guess I'm going to-- 00:37:35.660 --> 00:37:38.920 align:middle line:84% I think I'm going to skip a discussion of bidding. 00:37:38.920 --> 00:37:39.420 align:middle line:90% Yeah? 00:37:39.420 --> 00:37:42.820 align:middle line:84% AUDIENCE: What does this cost look like for nuclear 00:37:42.820 --> 00:37:44.120 align:middle line:90% that's already on the grid? 00:37:44.120 --> 00:37:47.180 align:middle line:84% So Texas has, I know, four large-scale nuclear power plants 00:37:47.180 --> 00:37:47.680 align:middle line:90% right now. 00:37:47.680 --> 00:37:48.840 align:middle line:90% What does this look like? 00:37:48.840 --> 00:37:52.150 align:middle line:90% 00:37:52.150 --> 00:37:53.880 align:middle line:90% R SCOTT KEMP: So yeah. 00:37:53.880 --> 00:37:58.920 align:middle line:84% So this is-- the question is, how much do we build? 00:37:58.920 --> 00:38:02.970 align:middle line:84% And we're taking into account all of the costs. 00:38:02.970 --> 00:38:11.170 align:middle line:84% However, as just pointed out, if the plant is already built, 00:38:11.170 --> 00:38:13.450 align:middle line:84% the annual payment is a sunk cost. 00:38:13.450 --> 00:38:16.970 align:middle line:84% So all that really matters is the slope. 00:38:16.970 --> 00:38:22.810 align:middle line:84% So what happens is the plants look at what they 00:38:22.810 --> 00:38:25.850 align:middle line:84% call their long-run marginal cost, 00:38:25.850 --> 00:38:29.190 align:middle line:84% and just say like not the instantaneous amount of cost 00:38:29.190 --> 00:38:33.250 align:middle line:84% it takes me to burn the next unit of gas 00:38:33.250 --> 00:38:38.250 align:middle line:84% or use the next gram of uranium, but that 00:38:38.250 --> 00:38:40.130 align:middle line:84% plus the additional maintenance cost 00:38:40.130 --> 00:38:43.770 align:middle line:84% that comes from operating the plants. 00:38:43.770 --> 00:38:45.930 align:middle line:84% And then they say, OK, it's going 00:38:45.930 --> 00:38:53.850 align:middle line:84% to cost me $0.05 to make a kilowatt hour of electricity. 00:38:53.850 --> 00:38:58.770 align:middle line:84% And so then in a market-based system-- 00:38:58.770 --> 00:39:04.030 align:middle line:84% and places like Vogtle are not a market-based system. 00:39:04.030 --> 00:39:07.070 align:middle line:84% But most of the United States is a market based system. 00:39:07.070 --> 00:39:11.950 align:middle line:84% Each power plant will make a bid. 00:39:11.950 --> 00:39:13.530 align:middle line:90% And there's a day-ahead market. 00:39:13.530 --> 00:39:16.190 align:middle line:84% And there's an hour-ahead market. 00:39:16.190 --> 00:39:19.430 align:middle line:84% There's various markets that people can bid in. 00:39:19.430 --> 00:39:26.870 align:middle line:84% And they will say, OK, I will make electricity at, 00:39:26.870 --> 00:39:29.390 align:middle line:84% and they quote their long-run marginal cost 00:39:29.390 --> 00:39:33.190 align:middle line:84% in principle, $0.05 a kilowatt hour. 00:39:33.190 --> 00:39:37.290 align:middle line:84% And then what the grid operator does is they say, 00:39:37.290 --> 00:39:39.390 align:middle line:90% OK, well, we need-- 00:39:39.390 --> 00:39:41.530 align:middle line:90% they have all these models. 00:39:41.530 --> 00:39:44.487 align:middle line:90% Let me just show you. 00:39:44.487 --> 00:39:46.070 align:middle line:84% So they have all these models for what 00:39:46.070 --> 00:39:49.530 align:middle line:84% they think the amount of electricity demanded will be. 00:39:49.530 --> 00:39:51.750 align:middle line:90% So maybe they're here. 00:39:51.750 --> 00:39:54.250 align:middle line:84% And OK, we're going to need to have a little bit more power. 00:39:54.250 --> 00:39:55.708 align:middle line:84% And we think it's going to be this. 00:39:55.708 --> 00:39:57.990 align:middle line:84% And we'll have-- there's also a market for generators 00:39:57.990 --> 00:40:02.148 align:middle line:84% that are on standby, and all this to deal with anomalies. 00:40:02.148 --> 00:40:03.940 align:middle line:84% But basically, they say, we can think we're 00:40:03.940 --> 00:40:05.220 align:middle line:90% going to need this much power. 00:40:05.220 --> 00:40:07.020 align:middle line:84% And they start going through all the bids, 00:40:07.020 --> 00:40:08.540 align:middle line:84% and they take the cheapest bid, and then 00:40:08.540 --> 00:40:11.140 align:middle line:84% the next most expensive bid, and the next more expensive bid, 00:40:11.140 --> 00:40:13.380 align:middle line:90% until they get enough power. 00:40:13.380 --> 00:40:16.540 align:middle line:84% And then they pay everyone the price 00:40:16.540 --> 00:40:19.220 align:middle line:84% of the highest, most expensive bid that 00:40:19.220 --> 00:40:23.140 align:middle line:84% was necessary to get enough electricity. 00:40:23.140 --> 00:40:24.400 align:middle line:90% And that's how it works. 00:40:24.400 --> 00:40:32.420 align:middle line:84% So when the demand is high, the generators 00:40:32.420 --> 00:40:35.070 align:middle line:84% that can make that demand might be peakers. 00:40:35.070 --> 00:40:37.320 align:middle line:84% They may be very expensive, maybe a couple of dollars. 00:40:37.320 --> 00:40:41.220 align:middle line:84% I have whole charts on this, but I put them out. 00:40:41.220 --> 00:40:43.680 align:middle line:84% They may be several dollars per megawatt, something really, 00:40:43.680 --> 00:40:44.780 align:middle line:90% really expensive. 00:40:44.780 --> 00:40:48.420 align:middle line:84% And for an hour, everyone will get this amazing amount 00:40:48.420 --> 00:40:50.820 align:middle line:90% of revenues of a dollar. 00:40:50.820 --> 00:40:54.300 align:middle line:84% And then if the demand goes down at the end of the day 00:40:54.300 --> 00:40:56.020 align:middle line:84% and we're going into the weekend, 00:40:56.020 --> 00:40:58.090 align:middle line:84% now everyone is getting like pittance, 00:40:58.090 --> 00:41:01.290 align:middle line:90% like $0.01 per kilowatt hour. 00:41:01.290 --> 00:41:04.570 align:middle line:84% So the nuclear plants, they never 00:41:04.570 --> 00:41:06.970 align:middle line:84% want to shut down, because shutting down a nuclear plant 00:41:06.970 --> 00:41:09.870 align:middle line:84% is a very time-consuming process. 00:41:09.870 --> 00:41:12.130 align:middle line:90% So they will basically bid 0. 00:41:12.130 --> 00:41:15.670 align:middle line:84% They will say, we'll make electricity at 0. 00:41:15.670 --> 00:41:18.850 align:middle line:84% The actual cost is something close to 0. 00:41:18.850 --> 00:41:23.330 align:middle line:84% And they'll make sure they get the batch. 00:41:23.330 --> 00:41:26.230 align:middle line:84% And they'll take whatever price they get. 00:41:26.230 --> 00:41:30.450 align:middle line:84% So if there's a lot of demand, they'll make $1.00 per kilowatt 00:41:30.450 --> 00:41:30.990 align:middle line:90% one day. 00:41:30.990 --> 00:41:33.488 align:middle line:84% And then when there's no demand, they'll make no money. 00:41:33.488 --> 00:41:35.530 align:middle line:84% And the hope is that they just make as much money 00:41:35.530 --> 00:41:38.250 align:middle line:84% as they possibly can to pay their bills. 00:41:38.250 --> 00:41:40.110 align:middle line:84% They may not be able to cover their bills. 00:41:40.110 --> 00:41:43.490 align:middle line:84% And so eventually the plant may shut down. 00:41:43.490 --> 00:41:48.490 align:middle line:84% But that's the goal, is to try to keep the plant ticking along 00:41:48.490 --> 00:41:50.170 align:middle line:90% by being in the market. 00:41:50.170 --> 00:41:53.930 align:middle line:90% So that's why these plants-- 00:41:53.930 --> 00:41:55.430 align:middle line:84% I won't say they're able to compete, 00:41:55.430 --> 00:41:58.070 align:middle line:84% but that's why they can sustain themselves, 00:41:58.070 --> 00:42:00.380 align:middle line:84% because their marginal cost, which goes back 00:42:00.380 --> 00:42:02.630 align:middle line:84% all the way to that slide, the NEI slide I showed you, 00:42:02.630 --> 00:42:04.150 align:middle line:90% is actually very low. 00:42:04.150 --> 00:42:06.670 align:middle line:84% It's certainly in a couple of cents 00:42:06.670 --> 00:42:09.190 align:middle line:84% per kilowatt hour, depending on the age of the plant. 00:42:09.190 --> 00:42:11.330 align:middle line:84% So all the plants have higher maintenance costs. 00:42:11.330 --> 00:42:13.390 align:middle line:84% And so what you'll see is older plants starting 00:42:13.390 --> 00:42:16.430 align:middle line:84% to shut down early because their maintenance costs are creeping 00:42:16.430 --> 00:42:18.830 align:middle line:84% up, and they basically can't cover 00:42:18.830 --> 00:42:22.350 align:middle line:90% their long-run marginal costs. 00:42:22.350 --> 00:42:23.650 align:middle line:90% Did that make sense to people? 00:42:23.650 --> 00:42:25.170 align:middle line:84% Does anyone have questions about bidding? 00:42:25.170 --> 00:42:25.390 align:middle line:90% Yeah. 00:42:25.390 --> 00:42:27.150 align:middle line:84% AUDIENCE: Would you not need to include the interest 00:42:27.150 --> 00:42:29.030 align:middle line:84% payment or the investment costs on top 00:42:29.030 --> 00:42:32.520 align:middle line:84% of the long-run marginal cost in order to break even? 00:42:32.520 --> 00:42:34.270 align:middle line:84% R SCOTT KEMP: So it depends if the utility 00:42:34.270 --> 00:42:35.910 align:middle line:90% wants to go bankrupt. 00:42:35.910 --> 00:42:36.870 align:middle line:90% [LAUGHTER] 00:42:36.870 --> 00:42:38.270 align:middle line:90% Yeah. 00:42:38.270 --> 00:42:41.850 align:middle line:84% If they're willing to go bankrupt, 00:42:41.850 --> 00:42:44.495 align:middle line:84% then they would include that and say, OK, it's not interesting, 00:42:44.495 --> 00:42:45.370 align:middle line:90% and they go bankrupt. 00:42:45.370 --> 00:42:48.590 align:middle line:84% But otherwise, they're going to eat that cost 00:42:48.590 --> 00:42:52.890 align:middle line:84% and spread it around their other operations. 00:42:52.890 --> 00:42:55.980 align:middle line:84% And then they would just say, to run this plant, which I already 00:42:55.980 --> 00:42:57.860 align:middle line:84% own, what is the incremental cost 00:42:57.860 --> 00:43:01.940 align:middle line:84% of running it versus incremental amount of money I can make? 00:43:01.940 --> 00:43:09.260 align:middle line:84% And you might ask, why don't people bid higher? 00:43:09.260 --> 00:43:14.460 align:middle line:84% They say, well, instead of bidding $0, I'll bid $0.50, 00:43:14.460 --> 00:43:16.940 align:middle line:84% even though my true cost is $0.30. 00:43:16.940 --> 00:43:19.900 align:middle line:84% And the answer is, well, then you might not be dispatched. 00:43:19.900 --> 00:43:24.940 align:middle line:84% It turns out that the best solution is always 00:43:24.940 --> 00:43:27.305 align:middle line:90% to bid your true marginal cost. 00:43:27.305 --> 00:43:28.680 align:middle line:84% And that's the dynamic of margin. 00:43:28.680 --> 00:43:31.900 align:middle line:84% This is the miracle of the Adam Smith's invisible hand 00:43:31.900 --> 00:43:36.940 align:middle line:84% in the market, that drives the cost to the true marginal cost. 00:43:36.940 --> 00:43:37.700 align:middle line:90% Yeah? 00:43:37.700 --> 00:43:39.160 align:middle line:84% AUDIENCE: How does nuclear ever break even? 00:43:39.160 --> 00:43:39.780 align:middle line:90% Or they just-- 00:43:39.780 --> 00:43:40.460 align:middle line:90% R SCOTT KEMP: How does what? 00:43:40.460 --> 00:43:41.877 align:middle line:84% AUDIENCE: Nuclear ever break even? 00:43:41.877 --> 00:43:44.380 align:middle line:90% Or they just don't? 00:43:44.380 --> 00:43:47.140 align:middle line:84% R SCOTT KEMP: Well, I think we'll actually kind of answer 00:43:47.140 --> 00:43:48.700 align:middle line:90% that in a moment. 00:43:48.700 --> 00:43:49.920 align:middle line:90% But here's the preview. 00:43:49.920 --> 00:43:52.820 align:middle line:90% It wasn't always so expensive. 00:43:52.820 --> 00:43:56.890 align:middle line:84% So here's the cost in real dollars. 00:43:56.890 --> 00:43:59.490 align:middle line:84% And you can see early on the costs were low. 00:43:59.490 --> 00:44:02.090 align:middle line:84% And it would just be slowly rising. 00:44:02.090 --> 00:44:05.170 align:middle line:84% So historical nuclear is both so old 00:44:05.170 --> 00:44:06.910 align:middle line:84% that they've paid off their loans, 00:44:06.910 --> 00:44:09.860 align:middle line:84% and the plants are basically just now being run. 00:44:09.860 --> 00:44:11.610 align:middle line:84% Remember, the loans are based on 40 years, 00:44:11.610 --> 00:44:14.010 align:middle line:84% and the plants go past 40 years, or sometimes even less 00:44:14.010 --> 00:44:14.810 align:middle line:90% than that. 00:44:14.810 --> 00:44:19.170 align:middle line:84% And so their costs are now just maintenance and operating costs. 00:44:19.170 --> 00:44:21.030 align:middle line:84% So it's a very different situation. 00:44:21.030 --> 00:44:24.170 align:middle line:84% An existing nuclear plant is very different economics 00:44:24.170 --> 00:44:27.850 align:middle line:84% than the choice to build a new nuclear plant. 00:44:27.850 --> 00:44:31.330 align:middle line:84% Anyway, we'll get to that in a moment. 00:44:31.330 --> 00:44:31.950 align:middle line:90% All right. 00:44:31.950 --> 00:44:36.570 align:middle line:84% So now you know how to dispatch different amounts of material 00:44:36.570 --> 00:44:38.190 align:middle line:90% or different numbers of plants. 00:44:38.190 --> 00:44:40.660 align:middle line:90% 00:44:40.660 --> 00:44:42.910 align:middle line:84% Let me just-- well, since we're talking about bidding, 00:44:42.910 --> 00:44:45.050 align:middle line:90% let me just mention one thing. 00:44:45.050 --> 00:44:48.330 align:middle line:84% Sometimes prices will for electricity 00:44:48.330 --> 00:44:54.310 align:middle line:84% will go negative because a bunch of generators on the grid, 00:44:54.310 --> 00:44:56.350 align:middle line:90% and demand drops. 00:44:56.350 --> 00:45:01.190 align:middle line:84% And it's a market signal to get your generators off the grid now 00:45:01.190 --> 00:45:02.330 align:middle line:90% or we're charging you. 00:45:02.330 --> 00:45:04.630 align:middle line:84% Otherwise, you're destabilizing this grid. 00:45:04.630 --> 00:45:07.630 align:middle line:84% And sometimes you hear people talk about negative electricity 00:45:07.630 --> 00:45:09.910 align:middle line:90% prices like it's a problem. 00:45:09.910 --> 00:45:11.010 align:middle line:90% And it's not. 00:45:11.010 --> 00:45:13.990 align:middle line:84% It's a market signal for the next hour 00:45:13.990 --> 00:45:17.230 align:middle line:84% that you better get your generator off the grid. 00:45:17.230 --> 00:45:19.090 align:middle line:90% It's not negative all the time. 00:45:19.090 --> 00:45:20.832 align:middle line:84% It's negative for an hour or two hours, 00:45:20.832 --> 00:45:22.290 align:middle line:84% and then it becomes positive again. 00:45:22.290 --> 00:45:24.230 align:middle line:90% And on average, they make money. 00:45:24.230 --> 00:45:28.110 align:middle line:84% But a lot of made of this because solar 00:45:28.110 --> 00:45:34.470 align:middle line:84% has created a situation where their marginal cost is $0. 00:45:34.470 --> 00:45:36.330 align:middle line:84% It cost them nothing to make electricity. 00:45:36.330 --> 00:45:39.470 align:middle line:84% If there's power coming out of the solar cells, 00:45:39.470 --> 00:45:41.710 align:middle line:90% it costs them nothing. 00:45:41.710 --> 00:45:43.310 align:middle line:90% So they bid $0. 00:45:43.310 --> 00:45:45.710 align:middle line:90% They always get dispatched. 00:45:45.710 --> 00:45:49.470 align:middle line:84% And in order to shut down those solar farms, 00:45:49.470 --> 00:45:51.340 align:middle line:84% the only way you get them to curtail 00:45:51.340 --> 00:45:56.380 align:middle line:84% is you start billing them so the price goes negative. 00:45:56.380 --> 00:45:59.460 align:middle line:90% So then you make less money. 00:45:59.460 --> 00:46:03.020 align:middle line:84% And this reduces the profits for everyone, right? 00:46:03.020 --> 00:46:06.500 align:middle line:84% And so some people who are very expensive generators don't like 00:46:06.500 --> 00:46:08.420 align:middle line:84% it because the average cost has gone down, 00:46:08.420 --> 00:46:11.660 align:middle line:84% because occasionally there are hours of negative pricing. 00:46:11.660 --> 00:46:14.120 align:middle line:84% And then they complain, oh, the electricity is negative. 00:46:14.120 --> 00:46:16.788 align:middle line:84% Well, the zero point is kind of arbitrary. 00:46:16.788 --> 00:46:19.080 align:middle line:84% All that really matters is that at the end of the year, 00:46:19.080 --> 00:46:20.455 align:middle line:84% you're still making some profits. 00:46:20.455 --> 00:46:22.300 align:middle line:90% It's not negative on average. 00:46:22.300 --> 00:46:24.780 align:middle line:90% So you're making less profit. 00:46:24.780 --> 00:46:26.740 align:middle line:84% And because you were an expensive technology 00:46:26.740 --> 00:46:29.260 align:middle line:84% and a cheaper technology has come around, 00:46:29.260 --> 00:46:31.300 align:middle line:90% yeah, you go out of business. 00:46:31.300 --> 00:46:34.260 align:middle line:84% And that's good for society because we 00:46:34.260 --> 00:46:35.780 align:middle line:84% want to make the most electricity we 00:46:35.780 --> 00:46:38.140 align:middle line:84% can for the cheapest amount of money. 00:46:38.140 --> 00:46:41.180 align:middle line:84% So don't get caught up in the whole negative electricity price 00:46:41.180 --> 00:46:41.680 align:middle line:90% thing. 00:46:41.680 --> 00:46:43.460 align:middle line:84% You see it occasionally from people 00:46:43.460 --> 00:46:46.080 align:middle line:84% who don't understand how markets work. 00:46:46.080 --> 00:46:46.580 align:middle line:90% Yeah? 00:46:46.580 --> 00:46:49.710 align:middle line:84% AUDIENCE: Is it negative for big industrial users of power, too? 00:46:49.710 --> 00:46:52.570 align:middle line:84% As in if you're operating a cement plant or something 00:46:52.570 --> 00:46:55.250 align:middle line:84% and you need a lot of heating power and the price 00:46:55.250 --> 00:46:57.650 align:middle line:84% goes negative, can you make a lot of money 00:46:57.650 --> 00:46:59.510 align:middle line:90% by suddenly shooting up demand? 00:46:59.510 --> 00:47:03.490 align:middle line:90% 00:47:03.490 --> 00:47:04.850 align:middle line:90% R SCOTT KEMP: You could. 00:47:04.850 --> 00:47:07.210 align:middle line:84% Yeah, if you were a consumer, you could-- yeah, 00:47:07.210 --> 00:47:12.290 align:middle line:84% so this is the business model for batteries. 00:47:12.290 --> 00:47:14.330 align:middle line:90% You build a battery plant. 00:47:14.330 --> 00:47:17.970 align:middle line:84% And then you wait for the price to go really low or negative. 00:47:17.970 --> 00:47:19.930 align:middle line:84% And then you make money taking power 00:47:19.930 --> 00:47:22.890 align:middle line:84% off the grid, which helps the grid operator stabilize 00:47:22.890 --> 00:47:24.210 align:middle line:90% the grid. 00:47:24.210 --> 00:47:27.490 align:middle line:84% And then when the price is positive, you sell it back. 00:47:27.490 --> 00:47:28.710 align:middle line:90% And that's a good thing. 00:47:28.710 --> 00:47:33.210 align:middle line:84% And that market incentive to create that business 00:47:33.210 --> 00:47:35.790 align:middle line:84% will both stabilize the grid and make you money. 00:47:35.790 --> 00:47:38.210 align:middle line:84% And that's what it's supposed to do. 00:47:38.210 --> 00:47:42.450 align:middle line:84% So yeah, there's indeed a way to make money there. 00:47:42.450 --> 00:47:43.130 align:middle line:90% Yeah? 00:47:43.130 --> 00:47:44.630 align:middle line:84% AUDIENCE: Isn't the main thing to be 00:47:44.630 --> 00:47:47.910 align:middle line:84% said about negative pricing, just the price volatility? 00:47:47.910 --> 00:47:51.770 align:middle line:84% Because equally well, in this whole picture in general, 00:47:51.770 --> 00:47:53.470 align:middle line:84% marginal price setting only works 00:47:53.470 --> 00:47:55.670 align:middle line:84% if you let the market fully do its thing. 00:47:55.670 --> 00:47:58.170 align:middle line:84% But we don't do that in the positive sense either. 00:47:58.170 --> 00:48:01.970 align:middle line:84% If there's a price peak that's massive, it gets capped. 00:48:01.970 --> 00:48:03.382 align:middle line:90% So peaker plants get in trouble. 00:48:03.382 --> 00:48:04.590 align:middle line:90% So you need capacity markets. 00:48:04.590 --> 00:48:05.798 align:middle line:90% Blah, blah, blah, blah, blah. 00:48:05.798 --> 00:48:07.270 align:middle line:84% So isn't that the whole argument, 00:48:07.270 --> 00:48:09.670 align:middle line:84% that you just increase volatility, 00:48:09.670 --> 00:48:13.250 align:middle line:84% and that negative prices in and of themselves, as you mentioned, 00:48:13.250 --> 00:48:14.390 align:middle line:90% are not bad? 00:48:14.390 --> 00:48:17.670 align:middle line:84% I feel like typically the argument is made like, 00:48:17.670 --> 00:48:20.110 align:middle line:84% look how much volatility is increasing 00:48:20.110 --> 00:48:23.090 align:middle line:84% and the negative prices are just a symptom of that? 00:48:23.090 --> 00:48:24.030 align:middle line:90% R SCOTT KEMP: Correct. 00:48:24.030 --> 00:48:24.530 align:middle line:90% Yeah. 00:48:24.530 --> 00:48:25.690 align:middle line:90% So that's correct. 00:48:25.690 --> 00:48:30.590 align:middle line:84% So volatility is an issue if the generators 00:48:30.590 --> 00:48:33.750 align:middle line:90% can't respond to volatility. 00:48:33.750 --> 00:48:36.870 align:middle line:84% So yeah, that's absolutely correct 00:48:36.870 --> 00:48:40.310 align:middle line:84% that for traditional thermal generators, 00:48:40.310 --> 00:48:43.590 align:middle line:84% a highly volatile market is problematic. 00:48:43.590 --> 00:48:48.280 align:middle line:84% For inverter-based generators, a highly volatile market 00:48:48.280 --> 00:48:51.060 align:middle line:84% is not problematic because they can instantaneously 00:48:51.060 --> 00:48:53.580 align:middle line:90% curtail within a millisecond. 00:48:53.580 --> 00:48:55.980 align:middle line:84% So people who are thermal generators 00:48:55.980 --> 00:48:59.580 align:middle line:84% or inertial generators complain about volatility. 00:48:59.580 --> 00:49:03.020 align:middle line:84% And those who are not inertial generators-- 00:49:03.020 --> 00:49:05.640 align:middle line:84% but there's also benefit to having inertial generators, 00:49:05.640 --> 00:49:08.060 align:middle line:84% because sometimes you have unpredictable fluctuations 00:49:08.060 --> 00:49:11.060 align:middle line:84% in demand, and inertial generators help prevent, 00:49:11.060 --> 00:49:13.460 align:middle line:90% essentially, voltage drops. 00:49:13.460 --> 00:49:16.000 align:middle line:84% So there's a lot-- as you pointed out, 00:49:16.000 --> 00:49:18.260 align:middle line:84% there's a lot of devil in the details. 00:49:18.260 --> 00:49:19.820 align:middle line:84% And there's a lot of additional what 00:49:19.820 --> 00:49:23.020 align:middle line:84% they call ancillary services that, in addition 00:49:23.020 --> 00:49:25.360 align:middle line:84% to just providing kilowatts on the power grid, 00:49:25.360 --> 00:49:27.160 align:middle line:84% you also want to stabilize the grid. 00:49:27.160 --> 00:49:29.380 align:middle line:84% You want to have high responsivity. 00:49:29.380 --> 00:49:31.560 align:middle line:84% All of these things are called ancillary services. 00:49:31.560 --> 00:49:35.620 align:middle line:84% And there are many markets emerging for all of them 00:49:35.620 --> 00:49:40.140 align:middle line:84% as the types and diversity of generators go up. 00:49:40.140 --> 00:49:43.780 align:middle line:84% In principle, these things are small perturbations as 00:49:43.780 --> 00:49:46.450 align:middle line:84% to the question that we're addressing 00:49:46.450 --> 00:49:51.170 align:middle line:84% in this class, which is how do we decarbonize society? 00:49:51.170 --> 00:49:54.350 align:middle line:84% Those are fixable through various small tweaks. 00:49:54.350 --> 00:49:58.170 align:middle line:90% 00:49:58.170 --> 00:50:01.510 align:middle line:90% OK, I mentioned levelized cost. 00:50:01.510 --> 00:50:06.530 align:middle line:84% And I didn't-- so now I'm going to finally tell you what it is. 00:50:06.530 --> 00:50:10.990 align:middle line:84% It's a reasonable cost to just talk about where things are. 00:50:10.990 --> 00:50:13.850 align:middle line:84% It's a reasonable metric to talk about where 00:50:13.850 --> 00:50:16.730 align:middle line:90% technologies are on the margin. 00:50:16.730 --> 00:50:23.370 align:middle line:84% Like today, and if we're talking about adding the next plant so 00:50:23.370 --> 00:50:26.410 align:middle line:84% that we're not fully reconfiguring the generation 00:50:26.410 --> 00:50:29.970 align:middle line:84% system, and we're just looking at, what is the-- 00:50:29.970 --> 00:50:32.690 align:middle line:84% this plant is shutting down because of end of life. 00:50:32.690 --> 00:50:34.190 align:middle line:90% I need to look at a new plant. 00:50:34.190 --> 00:50:35.570 align:middle line:90% What are my options? 00:50:35.570 --> 00:50:38.370 align:middle line:84% LCOE giving you a good measure of that. 00:50:38.370 --> 00:50:41.850 align:middle line:84% But to do it, it embeds an assumption 00:50:41.850 --> 00:50:44.920 align:middle line:84% about how often that plan will operate. 00:50:44.920 --> 00:50:49.640 align:middle line:84% So basically what it is-- oh, come on. 00:50:49.640 --> 00:50:51.480 align:middle line:90% I mean push this button. 00:50:51.480 --> 00:50:52.920 align:middle line:90% There we go. 00:50:52.920 --> 00:50:56.280 align:middle line:84% It's essentially discounted the net present value 00:50:56.280 --> 00:51:00.120 align:middle line:84% of all investment costs, maintenance costs, 00:51:00.120 --> 00:51:05.720 align:middle line:84% and fuel costs discounted going into the future, plus-- 00:51:05.720 --> 00:51:09.480 align:middle line:84% there's the discount rate-- divided by all the energy being 00:51:09.480 --> 00:51:12.040 align:middle line:90% produced by that plant. 00:51:12.040 --> 00:51:14.160 align:middle line:84% So it's a net present value of all 00:51:14.160 --> 00:51:16.920 align:middle line:84% of, essentially, the electricity over the whole life 00:51:16.920 --> 00:51:18.040 align:middle line:90% of the plant. 00:51:18.040 --> 00:51:22.640 align:middle line:84% And this energy out term, the denominator, 00:51:22.640 --> 00:51:26.080 align:middle line:84% embeds an assumption about how often that plant operates. 00:51:26.080 --> 00:51:28.640 align:middle line:84% It's like every period, there's going 00:51:28.640 --> 00:51:32.720 align:middle line:84% to be some amount of generation being produced. 00:51:32.720 --> 00:51:36.220 align:middle line:90% So it embeds that inside of it. 00:51:36.220 --> 00:51:39.480 align:middle line:84% Sometimes you see this discounted. 00:51:39.480 --> 00:51:44.100 align:middle line:84% They actually discount the energy itself. 00:51:44.100 --> 00:51:48.120 align:middle line:84% That is a formulation rooted in investment analysis. 00:51:48.120 --> 00:51:50.660 align:middle line:84% And it assumes that the value of energy 00:51:50.660 --> 00:51:55.598 align:middle line:84% can be moved around in time, which is like other products. 00:51:55.598 --> 00:51:58.140 align:middle line:84% You could consume it today, or you could consume it tomorrow. 00:51:58.140 --> 00:52:05.260 align:middle line:84% That's not a really good assumption for electricity 00:52:05.260 --> 00:52:08.380 align:middle line:84% because electricity demand is highly inelastic. 00:52:08.380 --> 00:52:11.500 align:middle line:84% So people need the power when they need the power. 00:52:11.500 --> 00:52:15.780 align:middle line:84% So it's generally better to use the LCO formulation that 00:52:15.780 --> 00:52:19.500 align:middle line:84% does not apply this discount factor to the denominator. 00:52:19.500 --> 00:52:22.460 align:middle line:84% But you'll see both of them in the literature. 00:52:22.460 --> 00:52:24.673 align:middle line:84% So you can just give a sense-- yeah? 00:52:24.673 --> 00:52:26.340 align:middle line:84% AUDIENCE: Wouldn't, then, the assumption 00:52:26.340 --> 00:52:29.620 align:middle line:84% be of discounting your energy that essentially your revenue 00:52:29.620 --> 00:52:32.540 align:middle line:84% that you are going to get from it in like a project finance 00:52:32.540 --> 00:52:35.148 align:middle line:84% model would be discounted itself? 00:52:35.148 --> 00:52:36.940 align:middle line:84% So wouldn't that be where it's coming from? 00:52:36.940 --> 00:52:37.720 align:middle line:90% Or-- 00:52:37.720 --> 00:52:41.065 align:middle line:90% R SCOTT KEMP: I think in a-- 00:52:41.065 --> 00:52:44.490 align:middle line:84% I guess it would depend on what you're using for the discount 00:52:44.490 --> 00:52:45.730 align:middle line:90% rate also, then. 00:52:45.730 --> 00:52:49.850 align:middle line:84% The way I think about it as a policy person is I 00:52:49.850 --> 00:52:52.150 align:middle line:90% use a real interest rate here. 00:52:52.150 --> 00:52:53.390 align:middle line:90% Revenues are constant. 00:52:53.390 --> 00:52:54.850 align:middle line:90% They don't get discounted. 00:52:54.850 --> 00:52:56.410 align:middle line:90% And it just-- right. 00:52:56.410 --> 00:52:57.710 align:middle line:90% So, yeah. 00:52:57.710 --> 00:52:58.210 align:middle line:90% Yeah? 00:52:58.210 --> 00:53:00.570 align:middle line:84% AUDIENCE: So then, the fuel costs are variable costs 00:53:00.570 --> 00:53:02.290 align:middle line:90% and difficult to predict. 00:53:02.290 --> 00:53:04.950 align:middle line:84% So what is normally used in this case? 00:53:04.950 --> 00:53:10.530 align:middle line:84% I mean, unless you hedge and you pursue or agree long-term 00:53:10.530 --> 00:53:14.490 align:middle line:84% contracts, you cannot be sure of the natural gas or oil price. 00:53:14.490 --> 00:53:15.970 align:middle line:90% R SCOTT KEMP: Yeah. 00:53:15.970 --> 00:53:18.380 align:middle line:84% AUDIENCE: Even for the next six months. 00:53:18.380 --> 00:53:19.130 align:middle line:90% R SCOTT KEMP: Yep. 00:53:19.130 --> 00:53:19.630 align:middle line:90% Yeah. 00:53:19.630 --> 00:53:21.265 align:middle line:90% So how do they deal with that? 00:53:21.265 --> 00:53:21.890 align:middle line:90% AUDIENCE: Yeah. 00:53:21.890 --> 00:53:24.515 align:middle line:84% R SCOTT KEMP: I think the answer is I don't have a good answer. 00:53:24.515 --> 00:53:25.330 align:middle line:90% Yeah. 00:53:25.330 --> 00:53:28.150 align:middle line:84% This is not something I've looked into. 00:53:28.150 --> 00:53:28.650 align:middle line:90% Yeah. 00:53:28.650 --> 00:53:31.370 align:middle line:90% 00:53:31.370 --> 00:53:31.870 align:middle line:90% OK. 00:53:31.870 --> 00:53:36.330 align:middle line:84% There's the other version that comes out in the finance world. 00:53:36.330 --> 00:53:39.000 align:middle line:84% But after spending a lot of time trying 00:53:39.000 --> 00:53:42.160 align:middle line:84% to understand the relative benefits for most electricity 00:53:42.160 --> 00:53:44.600 align:middle line:84% decision making, I would recommend the top version 00:53:44.600 --> 00:53:46.280 align:middle line:90% of this equation. 00:53:46.280 --> 00:53:49.160 align:middle line:84% So let me just show you what it means. 00:53:49.160 --> 00:53:54.960 align:middle line:84% So here's our more sophisticated screening curves. 00:53:54.960 --> 00:53:57.820 align:middle line:84% And LCOE is basically taking this and saying, OK, 00:53:57.820 --> 00:54:01.117 align:middle line:84% we're going to assume this plant operates 10% of the time. 00:54:01.117 --> 00:54:03.700 align:middle line:84% And we're going to assume this plant operates 24% of the time. 00:54:03.700 --> 00:54:06.440 align:middle line:84% We're going to assume this plant operates 28% of the time. 00:54:06.440 --> 00:54:08.840 align:middle line:84% And so then they make these assumptions, 00:54:08.840 --> 00:54:12.480 align:middle line:84% and then they calculate the LCOE, the single cost 00:54:12.480 --> 00:54:14.600 align:middle line:90% for electricity. 00:54:14.600 --> 00:54:17.500 align:middle line:84% So they assume nuclear plants run 90% of the time, 00:54:17.500 --> 00:54:20.120 align:middle line:84% and then you get-- which is about what they run. 00:54:20.120 --> 00:54:24.040 align:middle line:84% And so you can see these numbers tend not to change very much. 00:54:24.040 --> 00:54:29.680 align:middle line:84% It's really where big changes occur is down here in the peaker 00:54:29.680 --> 00:54:32.480 align:middle line:84% domain, people who are being dispatched 00:54:32.480 --> 00:54:35.320 align:middle line:90% just very occasionally. 00:54:35.320 --> 00:54:37.940 align:middle line:84% And they will have bigger fluctuations in their capacity 00:54:37.940 --> 00:54:38.440 align:middle line:90% factors. 00:54:38.440 --> 00:54:42.420 align:middle line:84% So LCOE is not a good metric if you're looking at single 00:54:42.420 --> 00:54:45.940 align:middle line:84% turbine, low-efficiency, very-cheap-to-build peaker 00:54:45.940 --> 00:54:46.980 align:middle line:90% technology. 00:54:46.980 --> 00:54:48.820 align:middle line:84% It is a reasonably good thing if you're 00:54:48.820 --> 00:54:52.700 align:middle line:84% trying to compare base load natural gas to base load 00:54:52.700 --> 00:54:55.320 align:middle line:84% geothermal to base load coal to base load nuclear. 00:54:55.320 --> 00:54:58.780 align:middle line:84% It's generally a reasonable thing to compare. 00:54:58.780 --> 00:55:00.120 align:middle line:90% Does that make sense? 00:55:00.120 --> 00:55:00.620 align:middle line:90% Yeah? 00:55:00.620 --> 00:55:01.200 align:middle line:90% All right. 00:55:01.200 --> 00:55:04.100 align:middle line:90% 00:55:04.100 --> 00:55:05.940 align:middle line:90% All right. 00:55:05.940 --> 00:55:09.540 align:middle line:84% So I promised you we would do a sensitivity study 00:55:09.540 --> 00:55:10.867 align:middle line:90% to the social cost of carbon. 00:55:10.867 --> 00:55:12.700 align:middle line:84% And so far, we have totally ignored the fact 00:55:12.700 --> 00:55:16.740 align:middle line:90% that natural gas emits carbon. 00:55:16.740 --> 00:55:18.760 align:middle line:84% So in practice, what does this do? 00:55:18.760 --> 00:55:21.820 align:middle line:84% Well, if we added a carbon tax, the natural gas line 00:55:21.820 --> 00:55:23.340 align:middle line:90% would go like that, right? 00:55:23.340 --> 00:55:24.860 align:middle line:90% It would get steeper. 00:55:24.860 --> 00:55:27.220 align:middle line:84% The cost to society is really steeper 00:55:27.220 --> 00:55:30.420 align:middle line:90% than the internalized cost. 00:55:30.420 --> 00:55:36.930 align:middle line:84% So let me show you what this looks like. 00:55:36.930 --> 00:55:41.170 align:middle line:90% So I wrote up this little code. 00:55:41.170 --> 00:55:45.770 align:middle line:90% (HUMS) All right, here it is. 00:55:45.770 --> 00:55:59.210 align:middle line:84% So again, these are slightly old inputs for the technologies. 00:55:59.210 --> 00:56:00.610 align:middle line:84% But you can see this is basically 00:56:00.610 --> 00:56:01.750 align:middle line:90% what we were looking at. 00:56:01.750 --> 00:56:03.950 align:middle line:84% They don't match the one in the previous slide. 00:56:03.950 --> 00:56:05.970 align:middle line:84% Here's geothermal, has come down in price. 00:56:05.970 --> 00:56:09.770 align:middle line:84% So in this case, geothermal is the base load technology 00:56:09.770 --> 00:56:12.890 align:middle line:90% of choice. 00:56:12.890 --> 00:56:15.890 align:middle line:90% Then natural gas is-- 00:56:15.890 --> 00:56:18.210 align:middle line:90% let's see, natural gas NCCS. 00:56:18.210 --> 00:56:20.610 align:middle line:84% So note, this is natural gas without carbon capture 00:56:20.610 --> 00:56:23.970 align:middle line:84% and storage, natural gas with carbon capture and storage. 00:56:23.970 --> 00:56:30.890 align:middle line:84% Nuclear empirical is basically the average construction time, 00:56:30.890 --> 00:56:33.490 align:middle line:84% not Vogtle, but the average construction 00:56:33.490 --> 00:56:36.560 align:middle line:84% time for recent nuclear plants in Western countries. 00:56:36.560 --> 00:56:40.400 align:middle line:84% And coal plus carbon capture and storage up there. 00:56:40.400 --> 00:56:45.440 align:middle line:84% So the only CO2-emitting option here 00:56:45.440 --> 00:56:48.900 align:middle line:84% is this natural gas without carbon capture and storage. 00:56:48.900 --> 00:56:53.360 align:middle line:84% So these are things that I think are reasonably in play. 00:56:53.360 --> 00:56:55.360 align:middle line:84% And you see the importance of geothermal 00:56:55.360 --> 00:56:57.040 align:middle line:90% is really an amazing technology. 00:56:57.040 --> 00:56:59.360 align:middle line:84% The Department of Energy is continuously, every year, 00:56:59.360 --> 00:57:02.480 align:middle line:84% issuing reports that say we should build more geothermal. 00:57:02.480 --> 00:57:06.000 align:middle line:84% And there's a lot of potential legal issues 00:57:06.000 --> 00:57:08.060 align:middle line:84% in the way, and also transmission issues, 00:57:08.060 --> 00:57:10.360 align:middle line:84% because you can't build geothermal anywhere. 00:57:10.360 --> 00:57:11.980 align:middle line:84% It has to be built in the Southwest. 00:57:11.980 --> 00:57:13.813 align:middle line:84% So you would need long-distance transmission 00:57:13.813 --> 00:57:15.600 align:middle line:84% to bring it to other parts of the country. 00:57:15.600 --> 00:57:19.040 align:middle line:84% But I think building big data centers in the Southwest 00:57:19.040 --> 00:57:22.320 align:middle line:90% would be a good idea. 00:57:22.320 --> 00:57:22.820 align:middle line:90% All right. 00:57:22.820 --> 00:57:26.280 align:middle line:84% So we see here we have a two-technology system, right? 00:57:26.280 --> 00:57:28.600 align:middle line:84% Geothermal is base load, and natural gas 00:57:28.600 --> 00:57:30.400 align:middle line:84% without carbon capture and storage 00:57:30.400 --> 00:57:32.805 align:middle line:90% as our peaker technology. 00:57:32.805 --> 00:57:33.680 align:middle line:90% Does that make sense? 00:57:33.680 --> 00:57:35.540 align:middle line:90% Everyone can interpret that? 00:57:35.540 --> 00:57:37.900 align:middle line:84% And let's just increase-- the social cost of carbon 00:57:37.900 --> 00:57:39.460 align:middle line:90% is currently zero. 00:57:39.460 --> 00:57:43.100 align:middle line:84% So let's just start bumping that up and see what happens. 00:57:43.100 --> 00:57:44.000 align:middle line:90% So here we go. 00:57:44.000 --> 00:57:46.853 align:middle line:84% You can see what's happened to the gas with no CCS. 00:57:46.853 --> 00:57:49.020 align:middle line:84% And you can see actually the geothermal is going up, 00:57:49.020 --> 00:57:51.180 align:middle line:84% too, because it turns out there's 00:57:51.180 --> 00:57:53.940 align:middle line:84% a little bit of emissions from geothermal. 00:57:53.940 --> 00:57:56.740 align:middle line:90% Not a lot, but it's not zero. 00:57:56.740 --> 00:57:57.280 align:middle line:90% All right. 00:57:57.280 --> 00:57:58.200 align:middle line:90% So there it is. 00:57:58.200 --> 00:58:01.760 align:middle line:84% And so far, the amount you build of each one isn't changing, 00:58:01.760 --> 00:58:04.700 align:middle line:84% but the technologies are still the same, too. 00:58:04.700 --> 00:58:09.420 align:middle line:84% And here, we have entered into the regime 00:58:09.420 --> 00:58:11.300 align:middle line:90% of a three-technology system. 00:58:11.300 --> 00:58:14.100 align:middle line:84% And now we have geothermal still as a base load. 00:58:14.100 --> 00:58:18.780 align:middle line:84% We have a little bit of natural gas with carbon capture 00:58:18.780 --> 00:58:20.140 align:middle line:90% and storage. 00:58:20.140 --> 00:58:21.435 align:middle line:90% And then we have-- 00:58:21.435 --> 00:58:23.060 align:middle line:84% just for peaker plants, the natural gas 00:58:23.060 --> 00:58:24.740 align:middle line:84% without carbon capture and storage. 00:58:24.740 --> 00:58:25.620 align:middle line:90% Yep? 00:58:25.620 --> 00:58:28.740 align:middle line:84% AUDIENCE: Where does the carbon emissions from geothermal? 00:58:28.740 --> 00:58:29.615 align:middle line:90% What's the mechanism? 00:58:29.615 --> 00:58:30.407 align:middle line:90% R SCOTT KEMP: Yeah. 00:58:30.407 --> 00:58:32.430 align:middle line:84% I'm not actually 100% sure about that. 00:58:32.430 --> 00:58:35.417 align:middle line:90% This would be a great-- 00:58:35.417 --> 00:58:37.750 align:middle line:84% geothermal, I think, would make-- for anyone interested, 00:58:37.750 --> 00:58:41.410 align:middle line:84% I think it would make a great final paper topic. 00:58:41.410 --> 00:58:46.810 align:middle line:84% Anytime I say I don't know, that's a final paper topic. 00:58:46.810 --> 00:58:49.070 align:middle line:84% Yeah, I've never really looked into it in depth. 00:58:49.070 --> 00:58:52.150 align:middle line:84% I just trust the data that is published. 00:58:52.150 --> 00:58:55.030 align:middle line:84% It used to be we would do this in a homework assignment. 00:58:55.030 --> 00:58:57.210 align:middle line:90% You'd go look up the data. 00:58:57.210 --> 00:58:59.410 align:middle line:84% But I took this homework assignment out. 00:58:59.410 --> 00:58:59.910 align:middle line:90% All right. 00:58:59.910 --> 00:59:01.910 align:middle line:84% So we got ourselves to a three-technology system 00:59:01.910 --> 00:59:06.170 align:middle line:84% and a social cost of carbon of $335. 00:59:06.170 --> 00:59:11.850 align:middle line:84% And I believe it's per kilogram of CO2, I believe. 00:59:11.850 --> 00:59:13.070 align:middle line:90% The units, I forgot. 00:59:13.070 --> 00:59:16.050 align:middle line:90% 00:59:16.050 --> 00:59:18.810 align:middle line:90% And then we can keep going. 00:59:18.810 --> 00:59:23.130 align:middle line:90% And now, nuclear shows up. 00:59:23.130 --> 00:59:26.670 align:middle line:84% This is nuclear if you can build it as fast as Westinghouse says 00:59:26.670 --> 00:59:29.960 align:middle line:84% it can be built at Westinghouse prices, 00:59:29.960 --> 00:59:33.360 align:middle line:84% not their original price prediction back in 2002 00:59:33.360 --> 00:59:36.880 align:middle line:84% of $1,000 [INAUDIBLE], but their current price prediction. 00:59:36.880 --> 00:59:39.840 align:middle line:84% And yeah, so we get quite a lot of nuclear 00:59:39.840 --> 00:59:42.200 align:middle line:90% as a base load showing up. 00:59:42.200 --> 00:59:47.760 align:middle line:84% And so social cost of carbon, to have some amount of nuclear, 00:59:47.760 --> 00:59:52.440 align:middle line:84% we see it is somewhere around $500 00:59:52.440 --> 00:59:56.480 align:middle line:90% that it begins to move over. 00:59:56.480 --> 01:00:01.100 align:middle line:84% And then as we keep upping the social cost of carbon-- 01:00:01.100 --> 01:00:04.120 align:middle line:84% let's get to $1,000, somewhere like there-- 01:00:04.120 --> 01:00:08.080 align:middle line:84% we see quite a lot of nuclear, essentially an entire nuclear, 01:00:08.080 --> 01:00:15.000 align:middle line:84% with just some, I think that's natural gas with CCS, 01:00:15.000 --> 01:00:18.680 align:middle line:84% for most of the peaker, and then just a tiny amount 01:00:18.680 --> 01:00:24.520 align:middle line:84% of carbon-emitting natural gas for like a very short occasional 01:00:24.520 --> 01:00:29.060 align:middle line:84% peaking during Super Bowl Sunday, right? 01:00:29.060 --> 01:00:32.040 align:middle line:90% So it totally depends. 01:00:32.040 --> 01:00:34.500 align:middle line:84% This is the phenomenology that I was 01:00:34.500 --> 01:00:36.160 align:middle line:90% talking about two classes ago. 01:00:36.160 --> 01:00:38.660 align:middle line:84% We want to do the sensitivity study 01:00:38.660 --> 01:00:42.300 align:middle line:84% to the social cost of carbon to understand what's going on. 01:00:42.300 --> 01:00:45.460 align:middle line:84% Now the key observation here is nuclear 01:00:45.460 --> 01:00:49.660 align:middle line:84% has a role, potentially a very large role. 01:00:49.660 --> 01:00:55.420 align:middle line:84% But you have to build it at this price, not this price. 01:00:55.420 --> 01:00:58.940 align:middle line:90% That's the key thing. 01:00:58.940 --> 01:01:02.820 align:middle line:84% So we still have to bring down the cost of nuclear 01:01:02.820 --> 01:01:03.800 align:middle line:90% in order to compete. 01:01:03.800 --> 01:01:04.660 align:middle line:90% Yeah? 01:01:04.660 --> 01:01:07.400 align:middle line:84% AUDIENCE: Just for regions without geothermal potential, 01:01:07.400 --> 01:01:10.200 align:middle line:84% what is the minimal SEC for nuclear? 01:01:10.200 --> 01:01:13.328 align:middle line:90% 01:01:13.328 --> 01:01:15.120 align:middle line:84% R SCOTT KEMP: It's already-- at this point, 01:01:15.120 --> 01:01:17.140 align:middle line:90% it's already more interesting. 01:01:17.140 --> 01:01:21.222 align:middle line:90% So let's just go back. 01:01:21.222 --> 01:01:22.680 align:middle line:84% AUDIENCE: Because in the Northeast, 01:01:22.680 --> 01:01:26.260 align:middle line:84% for instance, at least unless there's extra resource that I'm 01:01:26.260 --> 01:01:30.530 align:middle line:84% not aware of, the there's not a lot of potential for geothermal. 01:01:30.530 --> 01:01:32.250 align:middle line:90% R SCOTT KEMP: So let's see. 01:01:32.250 --> 01:01:36.170 align:middle line:84% Here, if we take geothermal out, nuclear still dominant. 01:01:36.170 --> 01:01:37.230 align:middle line:90% You have to keep going. 01:01:37.230 --> 01:01:45.290 align:middle line:90% 01:01:45.290 --> 01:01:49.210 align:middle line:84% So in this model, actually, if you can build nuclear fast, 01:01:49.210 --> 01:01:51.010 align:middle line:90% nuclear would be dispatched. 01:01:51.010 --> 01:01:52.330 align:middle line:90% Yeah. 01:01:52.330 --> 01:01:55.785 align:middle line:84% If you can build it at this price. 01:01:55.785 --> 01:01:57.910 align:middle line:84% If you can build it at this price, it would not be. 01:01:57.910 --> 01:01:59.950 align:middle line:84% It would still be better to do natural gas. 01:01:59.950 --> 01:02:05.610 align:middle line:90% 01:02:05.610 --> 01:02:09.050 align:middle line:84% Someone might have noticed there's a couple of generators 01:02:09.050 --> 01:02:10.390 align:middle line:90% that are not on this slide. 01:02:10.390 --> 01:02:13.250 align:middle line:90% 01:02:13.250 --> 01:02:13.890 align:middle line:90% AUDIENCE: Wind. 01:02:13.890 --> 01:02:14.410 align:middle line:90% Solar. 01:02:14.410 --> 01:02:16.975 align:middle line:90% R SCOTT KEMP: Wind and solar. 01:02:16.975 --> 01:02:17.850 align:middle line:90% AUDIENCE: Hydropower. 01:02:17.850 --> 01:02:18.470 align:middle line:90% R SCOTT KEMP: Hydro. 01:02:18.470 --> 01:02:18.970 align:middle line:90% Yeah. 01:02:18.970 --> 01:02:20.910 align:middle line:84% Hydro could, in principle, be on the slide. 01:02:20.910 --> 01:02:24.890 align:middle line:84% Hydro is like geothermal in that it's kind of regionally limited. 01:02:24.890 --> 01:02:26.080 align:middle line:90% But it's important. 01:02:26.080 --> 01:02:29.517 align:middle line:84% And there are places that have a lot of access to hydro. 01:02:29.517 --> 01:02:31.600 align:middle line:84% And if we had a lot of long-distance transmission, 01:02:31.600 --> 01:02:32.700 align:middle line:90% we could deal with hydro. 01:02:32.700 --> 01:02:36.560 align:middle line:84% But we'll have a class about grid issues. 01:02:36.560 --> 01:02:39.580 align:middle line:84% Does anyone want to guess why I omitted wind and solar? 01:02:39.580 --> 01:02:44.280 align:middle line:84% It's not just to make you feel better about nuclear. 01:02:44.280 --> 01:02:45.360 align:middle line:90% Yeah? 01:02:45.360 --> 01:02:48.640 align:middle line:84% AUDIENCE: If you take it off, the demand has met demand 01:02:48.640 --> 01:02:52.080 align:middle line:84% because you can't-- they always have zero costs anyways. 01:02:52.080 --> 01:02:54.640 align:middle line:84% So you essentially treat the remaining demand 01:02:54.640 --> 01:02:56.920 align:middle line:84% as a demand to be covered by these ones. 01:02:56.920 --> 01:02:58.100 align:middle line:90% R SCOTT KEMP: You're close. 01:02:58.100 --> 01:03:01.000 align:middle line:90% You're very close. 01:03:01.000 --> 01:03:02.080 align:middle line:90% Yeah? 01:03:02.080 --> 01:03:06.160 align:middle line:84% AUDIENCE: They can't generate at 100% capacity? 01:03:06.160 --> 01:03:09.740 align:middle line:84% R SCOTT KEMP: No, you can if you just build enough. 01:03:09.740 --> 01:03:10.240 align:middle line:90% Yeah. 01:03:10.240 --> 01:03:12.880 align:middle line:90% 01:03:12.880 --> 01:03:17.640 align:middle line:84% You can't choose when to have your wind power. 01:03:17.640 --> 01:03:21.840 align:middle line:84% This calculation, if you all remember, I went back 01:03:21.840 --> 01:03:30.080 align:middle line:90% and I sorted my demand curve. 01:03:30.080 --> 01:03:31.515 align:middle line:84% And I said, OK, I'm going to build 01:03:31.515 --> 01:03:33.140 align:middle line:84% some plant for this part of the demand, 01:03:33.140 --> 01:03:34.800 align:middle line:84% and some plant for this part of demand, 01:03:34.800 --> 01:03:36.340 align:middle line:84% some plant for this part of demand. 01:03:36.340 --> 01:03:37.980 align:middle line:84% Well, that assumes I can run that plant 01:03:37.980 --> 01:03:39.940 align:middle line:90% when that demand happens. 01:03:39.940 --> 01:03:43.220 align:middle line:84% And I can't necessarily do that with wind and solar. 01:03:43.220 --> 01:03:45.360 align:middle line:90% It's going to give me energy. 01:03:45.360 --> 01:03:46.420 align:middle line:90% And I might have demand. 01:03:46.420 --> 01:03:49.260 align:middle line:84% And they may or may not match up. 01:03:49.260 --> 01:03:54.540 align:middle line:84% So I can't use this methodology for generators 01:03:54.540 --> 01:03:56.180 align:middle line:90% that are not dispatchable. 01:03:56.180 --> 01:03:59.460 align:middle line:84% And wind and solar are not dispatchable. 01:03:59.460 --> 01:04:03.900 align:middle line:90% So how do we do it? 01:04:03.900 --> 01:04:07.060 align:middle line:90% So we use GenX. 01:04:07.060 --> 01:04:09.980 align:middle line:90% Who has heard of GenX? 01:04:09.980 --> 01:04:10.480 align:middle line:90% All right. 01:04:10.480 --> 01:04:13.220 align:middle line:90% A couple of people. 01:04:13.220 --> 01:04:17.220 align:middle line:84% So GenX was a code written as a final project 01:04:17.220 --> 01:04:19.060 align:middle line:90% paper for this class. 01:04:19.060 --> 01:04:21.020 align:middle line:84% And then it turned into a master's thesis, 01:04:21.020 --> 01:04:23.750 align:middle line:84% and then also a PhD of somebody else. 01:04:23.750 --> 01:04:26.010 align:middle line:84% And now there's a whole professor who got tenure 01:04:26.010 --> 01:04:29.250 align:middle line:90% on the basis of GenX. 01:04:29.250 --> 01:04:32.780 align:middle line:84% Let me just show you what GenX does. 01:04:32.780 --> 01:04:37.650 align:middle line:84% GenX is a linear programming optimization code. 01:04:37.650 --> 01:04:39.150 align:middle line:90% And what do I mean by that? 01:04:39.150 --> 01:04:42.215 align:middle line:84% Well, it means that I can define a functional constraint. 01:04:42.215 --> 01:04:44.090 align:middle line:84% So this is a functional constraint that says, 01:04:44.090 --> 01:04:48.330 align:middle line:84% for every four units of x, I have to have 01:04:48.330 --> 01:04:50.530 align:middle line:90% at least three units of y. 01:04:50.530 --> 01:04:51.550 align:middle line:90% That's just a function. 01:04:51.550 --> 01:04:55.970 align:middle line:84% I can write all kinds of arbitrary functions. 01:04:55.970 --> 01:05:01.330 align:middle line:84% And it gives me of family of lines. 01:05:01.330 --> 01:05:04.130 align:middle line:84% All these lines are solutions to that function. 01:05:04.130 --> 01:05:06.530 align:middle line:84% And then I have some feasible region. 01:05:06.530 --> 01:05:09.410 align:middle line:84% And I want to optimize or maximize or minimize 01:05:09.410 --> 01:05:12.090 align:middle line:84% something in this feasible region 01:05:12.090 --> 01:05:13.510 align:middle line:90% to come up with a solution. 01:05:13.510 --> 01:05:15.570 align:middle line:90% That's the basic idea. 01:05:15.570 --> 01:05:19.130 align:middle line:84% So what we do is we write functional constraints. 01:05:19.130 --> 01:05:22.280 align:middle line:84% For every generator, the cost of their electricity, 01:05:22.280 --> 01:05:25.840 align:middle line:84% how fast you can turn on the plant, how long the plant has 01:05:25.840 --> 01:05:28.400 align:middle line:84% to be off if you turn off the plant, because nuclear plants 01:05:28.400 --> 01:05:30.520 align:middle line:84% can't just turn on and off every second. 01:05:30.520 --> 01:05:33.280 align:middle line:84% You write all of these functional constraints 01:05:33.280 --> 01:05:34.780 align:middle line:90% and you put it into this model. 01:05:34.780 --> 01:05:36.420 align:middle line:84% And then you have this feasible region, 01:05:36.420 --> 01:05:44.940 align:middle line:84% which is defined by what is available for fuel, wind, sun, 01:05:44.940 --> 01:05:45.960 align:middle line:90% et cetera. 01:05:45.960 --> 01:05:49.160 align:middle line:84% And you do a cost minimization procedure 01:05:49.160 --> 01:05:52.680 align:middle line:84% to find out what is the minimum cost system. 01:05:52.680 --> 01:05:56.020 align:middle line:84% So this is higher dimensional concept. 01:05:56.020 --> 01:05:57.680 align:middle line:90% We have these planes. 01:05:57.680 --> 01:06:02.360 align:middle line:84% But the real answer is that this thing 01:06:02.360 --> 01:06:08.000 align:middle line:84% is optimizing over hundreds of thousands of dimensions. 01:06:08.000 --> 01:06:11.320 align:middle line:84% It's a very, very high-dimensional optimizer. 01:06:11.320 --> 01:06:18.160 align:middle line:84% And that's what it's doing to try to find the best outcome. 01:06:18.160 --> 01:06:20.200 align:middle line:84% Here are the assumptions that go into GenX. 01:06:20.200 --> 01:06:21.617 align:middle line:84% You should always know assumptions 01:06:21.617 --> 01:06:24.460 align:middle line:90% before you look at any model. 01:06:24.460 --> 01:06:26.260 align:middle line:84% They assume that each technology presents 01:06:26.260 --> 01:06:28.640 align:middle line:84% a specific dispatch profile that must be obeyed. 01:06:28.640 --> 01:06:30.360 align:middle line:84% That's part of the set of functions. 01:06:30.360 --> 01:06:33.242 align:middle line:84% Minimum load, maximum ramp rate, minimum cycle time-- 01:06:33.242 --> 01:06:34.700 align:middle line:84% if you turn off the plant, how long 01:06:34.700 --> 01:06:35.908 align:middle line:90% does it take to turn back on? 01:06:35.908 --> 01:06:37.740 align:middle line:90% That's cycle time. 01:06:37.740 --> 01:06:41.740 align:middle line:84% Minimum load-- you can't run a nuclear plant at 10% capacity. 01:06:41.740 --> 01:06:45.300 align:middle line:84% You have to run it at 30% or higher. 01:06:45.300 --> 01:06:49.060 align:middle line:84% Non-dispatchable-- and that's true for a lot of technologies. 01:06:49.060 --> 01:06:51.553 align:middle line:84% Non-dispatchable technologies are only available when 01:06:51.553 --> 01:06:52.720 align:middle line:90% the resources are available. 01:06:52.720 --> 01:06:56.420 align:middle line:84% You can only use solar if the sun is shining, and so on. 01:06:56.420 --> 01:06:59.800 align:middle line:84% Storage technologies can be added, but at additional cost. 01:06:59.800 --> 01:07:02.420 align:middle line:84% Each utilized component contributes some amount 01:07:02.420 --> 01:07:06.500 align:middle line:84% of electricity and CO2, which we track. 01:07:06.500 --> 01:07:10.880 align:middle line:84% You minimize the overall annual cost, 01:07:10.880 --> 01:07:14.020 align:middle line:84% which is the same thing as maximizing social welfare, 01:07:14.020 --> 01:07:16.540 align:middle line:84% by adjusting the generation mix to fulfill the energy 01:07:16.540 --> 01:07:21.450 align:middle line:84% demand at all times, subject to an imposed carbon constraint. 01:07:21.450 --> 01:07:25.150 align:middle line:84% So this is all kinds of solutions. 01:07:25.150 --> 01:07:29.530 align:middle line:84% And as I impose a carbon constraint, the solutions that 01:07:29.530 --> 01:07:31.770 align:middle line:84% gets more and more expensive, the cheapest solution 01:07:31.770 --> 01:07:34.230 align:middle line:84% is more and more expensive as we do the decarbonization. 01:07:34.230 --> 01:07:36.970 align:middle line:90% 01:07:36.970 --> 01:07:40.888 align:middle line:84% We don't have forecast errors, essential reliability services 01:07:40.888 --> 01:07:43.430 align:middle line:84% mentioned earlier, dealing with volatility, things like that. 01:07:43.430 --> 01:07:46.130 align:middle line:90% They're not incorporated. 01:07:46.130 --> 01:07:48.010 align:middle line:84% And we assume that demand essentially 01:07:48.010 --> 01:07:49.898 align:middle line:90% is unchanged over time. 01:07:49.898 --> 01:07:52.190 align:middle line:84% So the demand that we're going to stick into the model, 01:07:52.190 --> 01:07:54.050 align:middle line:84% we're going to stick in one year of demand. 01:07:54.050 --> 01:07:55.770 align:middle line:84% We assume that the demand basically 01:07:55.770 --> 01:07:57.910 align:middle line:84% looks the same next year and the year after that. 01:07:57.910 --> 01:08:00.890 align:middle line:84% And that's obviously not totally true. 01:08:00.890 --> 01:08:03.290 align:middle line:84% So you could generate synthetic demand 01:08:03.290 --> 01:08:05.010 align:middle line:90% and try to rerun the model. 01:08:05.010 --> 01:08:07.470 align:middle line:90% So these are the inputs. 01:08:07.470 --> 01:08:11.490 align:middle line:84% This is the original demand for a certain region over the year. 01:08:11.490 --> 01:08:12.790 align:middle line:90% This is just a zoom-up. 01:08:12.790 --> 01:08:15.430 align:middle line:84% You can see the hour of the year. 01:08:15.430 --> 01:08:19.520 align:middle line:84% You can see the day night day night day night observation. 01:08:19.520 --> 01:08:21.600 align:middle line:84% In fact, earlier it was mentioned 01:08:21.600 --> 01:08:23.032 align:middle line:90% that volatility is an issue. 01:08:23.032 --> 01:08:25.240 align:middle line:84% Specifically, the thing that people are worried about 01:08:25.240 --> 01:08:31.240 align:middle line:84% is the steepness of this slope, that as you're 01:08:31.240 --> 01:08:32.960 align:middle line:84% running all this demand during the day, 01:08:32.960 --> 01:08:35.920 align:middle line:84% and then at the end of the night, you go-- 01:08:35.920 --> 01:08:40.540 align:middle line:84% or steepness of these slopes, as you [INAUDIBLE] up demand. 01:08:40.540 --> 01:08:45.369 align:middle line:90% So that's where the issues are. 01:08:45.369 --> 01:08:48.240 align:middle line:84% We have wind data, real historical wind 01:08:48.240 --> 01:08:50.433 align:middle line:90% data for a given region. 01:08:50.433 --> 01:08:52.350 align:middle line:84% There's just a zoom-up just to give an example 01:08:52.350 --> 01:08:53.267 align:middle line:90% of what it looks like. 01:08:53.267 --> 01:08:55.859 align:middle line:84% We have solar data and the example, what it looks like. 01:08:55.859 --> 01:08:57.000 align:middle line:90% So it's pretty predictable. 01:08:57.000 --> 01:09:00.040 align:middle line:90% Middle of the day, sun shines. 01:09:00.040 --> 01:09:03.439 align:middle line:84% So this is the model that was used 01:09:03.439 --> 01:09:07.399 align:middle line:84% by the Future of Nuclear Energy in a Carbon-Constrained World 01:09:07.399 --> 01:09:08.319 align:middle line:90% report. 01:09:08.319 --> 01:09:10.720 align:middle line:84% This is a study that was run by Professor Jacopo 01:09:10.720 --> 01:09:13.319 align:middle line:90% Buongiorno in our department. 01:09:13.319 --> 01:09:17.998 align:middle line:84% And they have a certain set of assumptions. 01:09:17.998 --> 01:09:20.540 align:middle line:84% You can decide whether those assumptions are fair assumptions 01:09:20.540 --> 01:09:21.300 align:middle line:90% or not. 01:09:21.300 --> 01:09:23.620 align:middle line:84% My goal is to teach you about the assumptions. 01:09:23.620 --> 01:09:25.066 align:middle line:84% And I will show you their results. 01:09:25.066 --> 01:09:26.399 align:middle line:90% These are not models that I ran. 01:09:26.399 --> 01:09:30.140 align:middle line:84% These are models that they ran for their report. 01:09:30.140 --> 01:09:33.300 align:middle line:84% I'm also going to show you the complete model 01:09:33.300 --> 01:09:39.100 align:middle line:84% results as opposed to just select cuts in the model 01:09:39.100 --> 01:09:41.960 align:middle line:84% results, so you can see the phenomenology. 01:09:41.960 --> 01:09:44.620 align:middle line:84% That's what I wanted you to take from this class, 01:09:44.620 --> 01:09:47.420 align:middle line:84% the phenomenology of what happens as carbon becomes 01:09:47.420 --> 01:09:49.220 align:middle line:90% more problematic. 01:09:49.220 --> 01:09:52.819 align:middle line:84% So here are the assumptions that go in. 01:09:52.819 --> 01:09:56.300 align:middle line:84% I mentioned earlier that the cost of nuclear 01:09:56.300 --> 01:09:57.152 align:middle line:90% has been going up. 01:09:57.152 --> 01:09:58.360 align:middle line:90% This is in the United States. 01:09:58.360 --> 01:10:00.780 align:middle line:84% This is the cost of building nuclear plants. 01:10:00.780 --> 01:10:06.100 align:middle line:84% And there's Vogtle at the very end. 01:10:06.100 --> 01:10:08.760 align:middle line:84% Actually, the Vogtle number is a little low by $1,000, 01:10:08.760 --> 01:10:10.360 align:middle line:84% because when I generated this plot, 01:10:10.360 --> 01:10:11.840 align:middle line:90% the final accounting was not in. 01:10:11.840 --> 01:10:16.570 align:middle line:84% So it's a little bit higher than it shows. 01:10:16.570 --> 01:10:20.810 align:middle line:84% And then here's the construction duration for historical plants 01:10:20.810 --> 01:10:22.050 align:middle line:90% built in the US. 01:10:22.050 --> 01:10:22.790 align:middle line:90% Here's Vogtle. 01:10:22.790 --> 01:10:27.070 align:middle line:84% You can see it's actually in line with traditional durations. 01:10:27.070 --> 01:10:30.090 align:middle line:84% So in fact, the cost of Vogtle-- the very, very high cost 01:10:30.090 --> 01:10:33.050 align:middle line:84% of Vogtle was not because of construction delays. 01:10:33.050 --> 01:10:36.050 align:middle line:84% The construction delays are basically no worse 01:10:36.050 --> 01:10:37.890 align:middle line:90% than they've ever been. 01:10:37.890 --> 01:10:38.610 align:middle line:90% Yep? 01:10:38.610 --> 01:10:42.250 align:middle line:84% AUDIENCE: What plant was built in like the 1995-ish range that 01:10:42.250 --> 01:10:44.830 align:middle line:84% had like below-average costs by the looks of it, 01:10:44.830 --> 01:10:47.270 align:middle line:84% or roughly standard with the lower grouping there, 01:10:47.270 --> 01:10:49.670 align:middle line:84% but somehow was built over the course of 25 years? 01:10:49.670 --> 01:10:50.830 align:middle line:84% R SCOTT KEMP: That's a very good question. 01:10:50.830 --> 01:10:51.750 align:middle line:90% I'll go look it up. 01:10:51.750 --> 01:10:53.370 align:middle line:90% AUDIENCE: OK. 01:10:53.370 --> 01:10:57.490 align:middle line:84% R SCOTT KEMP: I mean, there's [INAUDIBLE] 2, which is like, 01:10:57.490 --> 01:11:01.010 align:middle line:90% has a 30-year construction time. 01:11:01.010 --> 01:11:04.970 align:middle line:84% And it was-- and that may be [INAUDIBLE] which 01:11:04.970 --> 01:11:07.590 align:middle line:84% was a government-owned plant and did not have, 01:11:07.590 --> 01:11:12.200 align:middle line:84% was not subject to financing issues. 01:11:12.200 --> 01:11:16.865 align:middle line:84% OK, so this just gives you the historical view of nuclear power 01:11:16.865 --> 01:11:17.740 align:middle line:90% in the United States. 01:11:17.740 --> 01:11:19.360 align:middle line:90% And here's what MIT did. 01:11:19.360 --> 01:11:24.360 align:middle line:84% They said, we're going to pick a high, middle, and low cost. 01:11:24.360 --> 01:11:27.300 align:middle line:84% And this is where-- just for your information-- 01:11:27.300 --> 01:11:30.040 align:middle line:84% this is where they come out on the dispersion. 01:11:30.040 --> 01:11:33.360 align:middle line:84% So you can judge for yourself whether you 01:11:33.360 --> 01:11:35.960 align:middle line:84% think the low cost is a reasonable number, if you 01:11:35.960 --> 01:11:38.025 align:middle line:84% think the high cost is a reasonable number. 01:11:38.025 --> 01:11:39.400 align:middle line:84% If you think the high cost should 01:11:39.400 --> 01:11:41.960 align:middle line:84% be closer to where the Vogtle number is, if you think 01:11:41.960 --> 01:11:45.600 align:middle line:84% this trend is real or not real, my magic ball 01:11:45.600 --> 01:11:47.440 align:middle line:90% is as good as yours. 01:11:47.440 --> 01:11:49.880 align:middle line:84% So you, you just pick a number that you think 01:11:49.880 --> 01:11:53.340 align:middle line:84% is the most fair cost and keep that number in your head, 01:11:53.340 --> 01:11:53.840 align:middle line:90% all right? 01:11:53.840 --> 01:11:57.340 align:middle line:84% Although I would say take a note at where-- how low is low? 01:11:57.340 --> 01:11:59.840 align:middle line:84% Just so you know, because we're all in it, 01:11:59.840 --> 01:12:01.640 align:middle line:84% that's going to show up in the results. 01:12:01.640 --> 01:12:02.920 align:middle line:90% But you pick a number. 01:12:02.920 --> 01:12:07.120 align:middle line:84% Here's what MIT picks, or Jacopo picked for his construction 01:12:07.120 --> 01:12:13.790 align:middle line:84% time, way down here, lower than essentially every one. 01:12:13.790 --> 01:12:17.430 align:middle line:90% We know what that does, right? 01:12:17.430 --> 01:12:20.630 align:middle line:84% When you pick a very low construction time, 01:12:20.630 --> 01:12:26.067 align:middle line:84% you get very low investment costs and very low capital 01:12:26.067 --> 01:12:26.650 align:middle line:90% return, right? 01:12:26.650 --> 01:12:30.010 align:middle line:84% So I would say they're being a little dodgy here. 01:12:30.010 --> 01:12:32.270 align:middle line:90% Real numbers are, like, here. 01:12:32.270 --> 01:12:35.830 align:middle line:84% But they only ran the model for one. 01:12:35.830 --> 01:12:40.630 align:middle line:84% This was a hidden parameter they didn't reveal. 01:12:40.630 --> 01:12:42.170 align:middle line:90% But they only chose one. 01:12:42.170 --> 01:12:46.430 align:middle line:84% So this is what we've got to go with, right? 01:12:46.430 --> 01:12:54.030 align:middle line:84% OK, so you've all chosen your favorite cost number. 01:12:54.030 --> 01:12:56.510 align:middle line:90% You ready for the results? 01:12:56.510 --> 01:12:57.390 align:middle line:90% All right. 01:12:57.390 --> 01:13:02.070 align:middle line:84% So there's the results for low cost, for mid cost, 01:13:02.070 --> 01:13:04.390 align:middle line:90% and for high cost. 01:13:04.390 --> 01:13:10.290 align:middle line:84% Across the x-axis is the percent decarbonization, 01:13:10.290 --> 01:13:12.050 align:middle line:84% assuming that we start from a period 01:13:12.050 --> 01:13:15.970 align:middle line:84% where everything is essentially natural gas. 01:13:15.970 --> 01:13:19.090 align:middle line:84% And this shows us-- this dotted line shows us 01:13:19.090 --> 01:13:21.290 align:middle line:84% where we are right now in our efforts 01:13:21.290 --> 01:13:23.890 align:middle line:84% to decarbonize the electric grid. 01:13:23.890 --> 01:13:26.570 align:middle line:90% And we don't know how far to go. 01:13:26.570 --> 01:13:29.990 align:middle line:84% We know the optimal amount is not zero. 01:13:29.990 --> 01:13:32.370 align:middle line:84% So it's not 100% decarbonization. 01:13:32.370 --> 01:13:34.110 align:middle line:84% It's included at earlier in this class. 01:13:34.110 --> 01:13:35.890 align:middle line:84% But whether it's like right there, 01:13:35.890 --> 01:13:38.710 align:middle line:84% or whether it's right there, or whether it's here, 01:13:38.710 --> 01:13:41.250 align:middle line:90% we don't know. 01:13:41.250 --> 01:13:47.930 align:middle line:84% So you want to proceed somehow along this curve, building 01:13:47.930 --> 01:13:53.510 align:middle line:84% technologies as you go, until we decide through whatever process, 01:13:53.510 --> 01:13:56.810 align:middle line:84% political process, that we've had enough decarbonization. 01:13:56.810 --> 01:14:00.850 align:middle line:84% OK, so this shows you the fraction 01:14:00.850 --> 01:14:03.330 align:middle line:84% of total generation that should be 01:14:03.330 --> 01:14:07.960 align:middle line:90% partitioned by different mixes. 01:14:07.960 --> 01:14:11.080 align:middle line:84% So you'll see here natural gas is dominant 01:14:11.080 --> 01:14:13.240 align:middle line:90% if you don't care about carbon. 01:14:13.240 --> 01:14:16.840 align:middle line:84% But actually, some wind and solar always 01:14:16.840 --> 01:14:21.040 align:middle line:84% gets built because it turns out even though it's not 01:14:21.040 --> 01:14:22.857 align:middle line:84% dispatchable, a little bit of solar 01:14:22.857 --> 01:14:24.440 align:middle line:84% that turns on in the middle of the day 01:14:24.440 --> 01:14:26.360 align:middle line:84% when the peak demand is highest is always 01:14:26.360 --> 01:14:29.600 align:middle line:84% going to be cheaper than paying for natural gas to do that. 01:14:29.600 --> 01:14:32.940 align:middle line:84% So even in a no-decarbonization scenario, 01:14:32.940 --> 01:14:36.080 align:middle line:90% you have some wind and solar. 01:14:36.080 --> 01:14:42.040 align:middle line:84% And then, as you decarbonize, various low-carbon technologies 01:14:42.040 --> 01:14:43.880 align:middle line:90% begin to grow into the system. 01:14:43.880 --> 01:14:49.120 align:middle line:84% So CCS is natural gas with carbon capture and storage. 01:14:49.120 --> 01:14:53.200 align:middle line:84% Pure battery storage on the grid is shown here in gray. 01:14:53.200 --> 01:14:56.160 align:middle line:84% And nuclear is shown here in purple. 01:14:56.160 --> 01:14:58.880 align:middle line:84% And depending on your cost assumptions about nuclear, 01:14:58.880 --> 01:15:03.040 align:middle line:84% it either shows up really early and you just 01:15:03.040 --> 01:15:07.510 align:middle line:84% build more and more nuclear, or you only 01:15:07.510 --> 01:15:10.210 align:middle line:84% build it after you reach 90% decarbonization. 01:15:10.210 --> 01:15:11.870 align:middle line:84% And even then, you may only build 01:15:11.870 --> 01:15:15.710 align:middle line:84% like 20% of your generation capacity of nuclear, which 01:15:15.710 --> 01:15:18.390 align:middle line:84% is-- we already have 20% of our generation capacity 01:15:18.390 --> 01:15:20.710 align:middle line:90% as nuclear today. 01:15:20.710 --> 01:15:24.190 align:middle line:84% So this is the result of the MIT study, 01:15:24.190 --> 01:15:29.350 align:middle line:84% assuming these plants can be built really fast, remember? 01:15:29.350 --> 01:15:32.110 align:middle line:84% And these are the prices of nuclear. 01:15:32.110 --> 01:15:34.550 align:middle line:84% So you pick your price, and this tells you 01:15:34.550 --> 01:15:38.830 align:middle line:84% whether nuclear is a good idea and when it's a good idea 01:15:38.830 --> 01:15:41.270 align:middle line:90% or not. 01:15:41.270 --> 01:15:42.902 align:middle line:84% And you don't have to-- this is not-- 01:15:42.902 --> 01:15:43.610 align:middle line:90% I didn't do this. 01:15:43.610 --> 01:15:45.710 align:middle line:84% This is Jacopo Buongiorno, so you can hopefully 01:15:45.710 --> 01:15:49.030 align:middle line:84% trust him that this is somewhat favorable towards nuclear. 01:15:49.030 --> 01:15:53.630 align:middle line:84% This is in the northern United States, New 01:15:53.630 --> 01:15:57.950 align:middle line:84% England, where there are very poor quality or poorer quality 01:15:57.950 --> 01:15:59.640 align:middle line:90% renewables. 01:15:59.640 --> 01:16:00.390 align:middle line:90% There's not a lot. 01:16:00.390 --> 01:16:01.770 align:middle line:90% It's high latitude. 01:16:01.770 --> 01:16:04.810 align:middle line:84% It's not a good place to build wind and solar. 01:16:04.810 --> 01:16:07.490 align:middle line:84% Here is the same simulation if we do it 01:16:07.490 --> 01:16:11.090 align:middle line:84% in the southern half of the United States. 01:16:11.090 --> 01:16:15.290 align:middle line:84% You'll see wind and solar just expands, because wind and solar 01:16:15.290 --> 01:16:18.250 align:middle line:90% makes a lot more sense there. 01:16:18.250 --> 01:16:24.770 align:middle line:84% And nuclear becomes, really, very tiny. 01:16:24.770 --> 01:16:33.130 align:middle line:84% So the story is that nuclear makes sense if it is cheap 01:16:33.130 --> 01:16:35.970 align:middle line:84% or if you need 100% decarbonization or something 01:16:35.970 --> 01:16:37.450 align:middle line:90% close to that. 01:16:37.450 --> 01:16:39.970 align:middle line:84% And we don't know how much we need. 01:16:39.970 --> 01:16:42.890 align:middle line:84% But both of these things must be true, basically. 01:16:42.890 --> 01:16:43.450 align:middle line:90% Yeah? 01:16:43.450 --> 01:16:45.490 align:middle line:84% AUDIENCE: And then the qualified renewables 01:16:45.490 --> 01:16:47.130 align:middle line:84% doesn't include hydro, in this case? 01:16:47.130 --> 01:16:48.610 align:middle line:84% R SCOTT KEMP: It does not include hydro. 01:16:48.610 --> 01:16:49.110 align:middle line:90% Yeah. 01:16:49.110 --> 01:16:52.130 align:middle line:90% So thank you for saying that. 01:16:52.130 --> 01:16:53.470 align:middle line:90% This does not include hydro. 01:16:53.470 --> 01:16:56.530 align:middle line:84% This does not include geothermal. 01:16:56.530 --> 01:17:02.090 align:middle line:84% So the only dispatchable sources of low-carbon electricity 01:17:02.090 --> 01:17:06.380 align:middle line:90% here are CCS and nuclear. 01:17:06.380 --> 01:17:09.200 align:middle line:90% 01:17:09.200 --> 01:17:11.180 align:middle line:90% And you'll see that-- 01:17:11.180 --> 01:17:17.520 align:middle line:90% 01:17:17.520 --> 01:17:18.100 align:middle line:90% well, OK. 01:17:18.100 --> 01:17:18.600 align:middle line:90% Yeah. 01:17:18.600 --> 01:17:23.800 align:middle line:84% So those are the two dispatchable technology. 01:17:23.800 --> 01:17:26.960 align:middle line:84% So you can say, well, what would happen if we put hydro? 01:17:26.960 --> 01:17:28.360 align:middle line:90% I mentioned this earlier. 01:17:28.360 --> 01:17:31.360 align:middle line:84% You get the wrong answers if you leave out a technology. 01:17:31.360 --> 01:17:35.983 align:middle line:84% So that depends on whether you think hydro or geothermal, that 01:17:35.983 --> 01:17:37.400 align:middle line:84% depends on whether you think those 01:17:37.400 --> 01:17:40.080 align:middle line:84% are reasonable technologies that we could build. 01:17:40.080 --> 01:17:42.400 align:middle line:84% I would say we probably have close to as much 01:17:42.400 --> 01:17:45.120 align:middle line:84% hydro as we can build, unless we start bringing down 01:17:45.120 --> 01:17:47.760 align:middle line:84% hydro from Canada, which is totally feasible, 01:17:47.760 --> 01:17:49.160 align:middle line:90% because they have excess hydro. 01:17:49.160 --> 01:17:51.926 align:middle line:90% 01:17:51.926 --> 01:17:55.640 align:middle line:84% But that requires long-distance grid transmission. 01:17:55.640 --> 01:17:58.200 align:middle line:84% Or we could build a lot of geothermal, 01:17:58.200 --> 01:18:01.750 align:middle line:84% which also requires long-distance grid transmission. 01:18:01.750 --> 01:18:04.010 align:middle line:84% But those were excluded from the model. 01:18:04.010 --> 01:18:05.670 align:middle line:90% [INAUDIBLE] 01:18:05.670 --> 01:18:07.270 align:middle line:90% Yep? 01:18:07.270 --> 01:18:10.830 align:middle line:84% AUDIENCE: Do you know how long the natural gas 01:18:10.830 --> 01:18:14.150 align:middle line:84% supply for the world was supposed to last, 01:18:14.150 --> 01:18:16.270 align:middle line:90% how many years [INAUDIBLE]? 01:18:16.270 --> 01:18:19.710 align:middle line:84% R SCOTT KEMP: I have not actually looked at that. 01:18:19.710 --> 01:18:21.730 align:middle line:84% So we'll talk about all the wind and solar. 01:18:21.730 --> 01:18:24.930 align:middle line:84% Could you really have enough wind and solar 01:18:24.930 --> 01:18:26.290 align:middle line:90% and geothermal to do it? 01:18:26.290 --> 01:18:28.670 align:middle line:84% But I don't have data for natural gas. 01:18:28.670 --> 01:18:31.790 align:middle line:84% AUDIENCE: I believe the estimate in Sustainable Energy 01:18:31.790 --> 01:18:33.290 align:middle line:90% was about 50 years. 01:18:33.290 --> 01:18:36.410 align:middle line:84% But he talked about how he keeps growing as we keep finding more. 01:18:36.410 --> 01:18:38.230 align:middle line:84% R SCOTT KEMP: Yeah, this is the problem. 01:18:38.230 --> 01:18:41.483 align:middle line:84% 50 years ago they said there was only 50 years left. 01:18:41.483 --> 01:18:42.650 align:middle line:90% AUDIENCE: I'd say about 100. 01:18:42.650 --> 01:18:43.873 align:middle line:90% R SCOTT KEMP: Yeah, it's-- 01:18:43.873 --> 01:18:47.390 align:middle line:84% AUDIENCE: Seems that actually [INAUDIBLE] 01:18:47.390 --> 01:18:51.570 align:middle line:84% the time that would take might make enough gas distribution. 01:18:51.570 --> 01:18:53.430 align:middle line:90% AUDIENCE: But then [INAUDIBLE]. 01:18:53.430 --> 01:18:56.070 align:middle line:84% R SCOTT KEMP: Yeah, that is if, in fact, natural gas really 01:18:56.070 --> 01:19:00.880 align:middle line:84% is constrained in that way, that would be a particularly 01:19:00.880 --> 01:19:01.630 align:middle line:90% interesting thing. 01:19:01.630 --> 01:19:03.785 align:middle line:90% So what would you see? 01:19:03.785 --> 01:19:05.910 align:middle line:84% We'd have to take it out of the model and rerun it. 01:19:05.910 --> 01:19:07.970 align:middle line:90% But you can think about it. 01:19:07.970 --> 01:19:10.710 align:middle line:84% Probably, this is the model saying, 01:19:10.710 --> 01:19:14.170 align:middle line:84% I don't care about carbon, I care about price. 01:19:14.170 --> 01:19:16.470 align:middle line:84% So then you say, OK, if you don't care about carbon, 01:19:16.470 --> 01:19:19.650 align:middle line:84% you care about price, what's the next best thing? 01:19:19.650 --> 01:19:22.850 align:middle line:90% Probably wind and solar. 01:19:22.850 --> 01:19:25.010 align:middle line:84% But it's a little bit dodgy because it's still 01:19:25.010 --> 01:19:26.930 align:middle line:84% subject to availability constraints and things 01:19:26.930 --> 01:19:27.750 align:middle line:90% like that. 01:19:27.750 --> 01:19:28.250 align:middle line:90% Yeah. 01:19:28.250 --> 01:19:32.650 align:middle line:90% 01:19:32.650 --> 01:19:34.890 align:middle line:90% All right. 01:19:34.890 --> 01:19:37.650 align:middle line:90% That's the end. 01:19:37.650 --> 01:19:42.270 align:middle line:84% So I promised you today would be the most depressing day. 01:19:42.270 --> 01:19:45.490 align:middle line:90% This is the depressing slide. 01:19:45.490 --> 01:19:50.560 align:middle line:84% But we'll talk more about other things that might change this. 01:19:50.560 --> 01:20:00.000 align:middle line:90%