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The PTC/ITC Omnibus Deal: Doing Some Math on Emissions

Many climate-change activists are uncomfortable with the idea of swapping an end to the oil export ban for an extension (and eventual phaseout) of tax credits for solar and wind. But how does the deal pencil out on carbon emissions? I took a whack at the math.

Start with the fact that on average the electric power sector in the United States emits about 500 metric tons of carbon dioxide for every gigawatt-hour of energy generated (see here and here).

GTM Research says the proposed extension of the solar investment tax credit will result in an additional 25 gigawatts of solar power capacity in the United States by 2021, around 62% of that utility-scale solar. Assuming capacity factors of 25% for utility and 18% for non-utility solar, this would produce about 27,000 GWh of electricity per year beginning in 2021.

If all that electricity displaces average grid electricity, it would result in an annual cut in carbon emissions of 13.5 million tons beginning in 2021 (27,000 x 500). Accounting for those 25 GW of additional solar arriving incrementally from 2016 through 2020, the total carbon emissions reduction brought about by the extension of the solar investment tax credit would be 108 million tons for the 10-year period 2016 through 2025.

Bloomberg New Energy Finance sees the five-year gain in solar being less robust that GTM, at 14.8 GW, which would shrink the cut in carbon emissions to about 64 million tons over the next 10 years.

On the wind side, BNEF estimates the PTC deal resulting in 19.3 GW of additional wind capacity through 2020. Assuming a capacity factor of 32% and using the same basic formula as with solar, this translates to decreased carbon emissions of 162 million tons from 2016 through 2025 thanks to the wind PTC component of the omnibus deal.

So with solar providing 64 million to 108 million tons in decreased carbon emissions over the next ten years and wind contributing a cut of 162 million tons, the proposed PTC/ITC extensions will bring total carbon emissions reductions of between 226 million and 270 million tons.

Meanwhile, Michael Levi estimates that on the higher side, lifting the oil export ban will result in “10 million tons a year of additional carbon dioxide emissions on average over the next decade,” or 100 million tons in ten years.

So in this very simplified analysis, the PTC/ITC extensions result in a net decrease in total carbon emissions of between 126 million and 170 million tons for the period 2016 through 2025.

UPDATE: A more sophisticated analysis has now arrived from Levi and Varun Sivaram! They show an even bigger win in carbon reductions with the deal:

The net impact of the exports-for-renewables-credits trade, then, is to reduce carbon dioxide emissions by at least 20-40 million metric tons annual over the 2016-2020 period. The most likely emissions reduction in our estimate is around 35 million metric tons. The climate benefit of the tax credit extension is over a factor of ten larger than the climate cost of removing the oil export ban over this period.

Levi and Sivaram get to their bigger number in part by assuming higher capacity factors for utility-scale solar (30%) and for wind (37%). (Thirty percent capacity factors are common for big utility-scale solar in the Southwest (see this story of mine from March), although elsewhere solar doesn’t do as well. Where the new solar comes will be a big factor in determining actual capacity factors. For wind, LBNL sees capacity factors in the 32-35 percent range. Again, where the new wind power comes will be a big factor in determining how productive it is.)

An even bigger factor in their outcome is the assumed carbon intensity for the generation displaced by solar and wind, between 640 and 800 tons/GWh vs. my 500. My number was based on EIA data showing total generation in 2013 of 4,065,964 GWh and emissions of 2,172 million tons for the electric power sector.