To be delivered September 7,
2000, to the U.S. House of Representatives,
Subcommittee on Space and
Aeronautics, Committee on Science
Dr. Molly K. Macauley
Senior Fellow
Resources for the Future
Macauley@rff.org
Mr.
Chairman and distinguished members of the subcommittee, thank you for inviting
me to meet with you today. My name is Molly K. Macauley and I am a Senior
Fellow at Resources for the Future, an independent, nonpartisan research
organization established in 1952 to conduct independent analyses of issues
concerned with natural resources and the environment. The views I present today are mine alone. Resources for the
Future takes no institutional position on legislative, regulatory, judicial, or
other public policy matters.
Background
I
am an economist and have been a member of the Resources for the Future staff
since 1983. During that time, I have
specialized in the analysis of space policy issues with a focus on
economics. I have conducted research on
space transportation and space transportation vouchers; economic
incentive-based approaches, including auctions, for the allocation of the
geostationary orbit and the electromagnetic spectrum; the management of space
debris; the allocation of resources on space stations; the public and private
value of remote sensing information; the roles of government and the private
sector in commercial remote sensing; and the economic viability of satellite solar
power for terrestrial power generation and as a power plug in space for
space-based activities. This research
has taken the form of books, lectures, and published articles. My research is
funded by grants from the National Aeronautics and Space Administration (NASA)
and by Resources for the Future (RFF).
Introduction
I
have been asked to speak today about the economics of space solar-power
generation (SSP). My comments are based
on recently completed research sponsored by NASA and conducted with experts
from the energy industry. NASA asked us
to look at SSP economics around 2020, when many space experts expect SSP to be
technically achievable. It is important to note that our purpose was
neither to advocate nor to discourage further investment in SSP but to provide
a framework by which to gauge its economic feasibility if such investment
occurs.
Our
daunting task was to characterize the market for electricity during that future
period. We were to identify key challenges for SSP in competing with
conventional electricity generation in developed and developing countries,
discuss the role of market and economic analysis as technical development of
SSP continues in the coming years, and suggest future research directions to
improve the understanding of the potential economic viability of SSP.
I’ve
listed my coauthors at the end of my remarks, as well as other experts with
whom we met to discuss specific aspects of the SSP market. These included
experts in epidemiology and public health; the economics of the environmental
and climate change-related effects of energy use; energy and national security;
nuclear power (for lessons learned in introducing new energy technologies); and
energy investment in developing countries.
I’d
also like to add that our study was funded by NASA but the Agency gave us full
liberty to carry out an independent course of study and publish our results. We
have presented our findings to NASA managers and technologists working on SSP
and many of our recommendations have been acted upon.
Summary of our Study
Satellite
solar power (SSP) has been suggested as an alternative to using terrestrial
energy resources for electricity generation.Â
In our study we considered the market for electricity from the present
to 2020, roughly when many experts expect SSP to be technically achievable. We
found that a variety of trends from the present to 2020 should influence
decisions about the design, development, financing, and operation of SSP. An important caveat associated with our
observations concerns the challenge of looking ahead two decades. We based our observations on what we believe
to be plausible estimates of a number of key indicators derived from the work
of respected national and international research groups, the information and
perspectives shared by the experts whom we consulted for the study, and our own
judgment. While we believe this
information is a valid basis for considering the competitive environment for
SSP, we urge our audience to appreciate the pragmatic process and somewhat
intuitive elements involved in their estimation. In what follows, I summarize our study. The full study is
available at http://www.rff.org.
Our
first set of observations concerns the market for electricity, in particular
the key attributes of this market that are most relevant to investment in SSP:
The Market for Electricity
and electricity in particular, during this period. Electricity demand growth
rates will vary significantly by region of the world and by stage of economic
development. The highest growth will be in developing economies.
towards decentralized, private ownership and management of utilities in most
countries (developed and developing)Ëœa major departure from the tradition of
nationalized utilities in many countries.
markets in developing economies likely will continue to be, or will be
perceived as risky due to capital constraints, infrastructure limitations, and
institutional and environmental factors.
higher than prevailing recent levels and very likely will be significantly
lower.
generation appears to be significantly less than some studies have indicated.
decisions in developing countries.Â
Willingness to pay for “clean” technologies tends to rise with
increasing incomes, but in developing countries, clean energy may not be
highest ranking among health and environmental concerns.
this timeframe, other than possible short-term supply disruptions caused by
political and economic factors.
Taken
together, these observations suggest that conventional electricity generation
in both developed and developing countries may be more than adequate in terms
of (1) cost, (2) supply, and (3)
environmental factors.
Our
second set of observations pertains specifically to challenges facing SSP:
Challenges for SSP in Competing
with Terrestrial Electricity Generation
difficult to assess the validity of estimated costs and likely competitiveness
of SSP. For this reason, as in many
space development initiatives, orders-of-magnitude reduction in the costs of
space launch and deployment and other key technologies is critical. If these reductions occur, the economic
viability of SSP would become more promising.Â
Until then, it is premature for the U.S. government to make commitments
such as loan guarantees or tax incentives specifically for SSP.
increasingly incorporate numerous environmental controls, eroding somewhat the
environmental advantage of non-fossil-fuel technologies such as SSP.
electric and magnetic fields generated by SSP are likely to be of significant
public concern.
some countries from participating in an SSP system operated by another country
or group of countries. Countries with
these concerns may require equity participation in SSP, limit their reliance on
SSP only to a small share of their energy portfolio, or decline use of the
technology altogether.
These
findings argue for the merits of furthering technical advance in technologies
required not only for SSP but also for other space activities, and for special
consideration of issues that transcend the technical design of SSP, such as
health and national security concerns.
We
also urged that economic study continue hand-in-hand with SSP technical
design. During the course of our study,
we shared our interim findings with the engineering teams working on SSP. All parties agreed that this interchange of
ideas was mutually beneficial and contributed markedly to deepening our
collective understanding of next steps for both the technical team‚s
engineering studies and our economic analysis.Â
The two must proceed in tandem, we all agreed, and specific
recommendations as to further economic and market studies follow:
The Role of Economic and Market
Analysis as Technical Considerations of SSP Progress
and economic analyses of SSP — that is, to both participate in conducting the
analysis and learn about the results.Â
The electric utility industry may be particularly interested in helping
to guide the development of SSP technical components that are also capable of
application in other terrestrial commercial power markets (for example,
development of solar cells).
of risk and uncertainty; include marketplace data about competition from terrestrial
energy markets; and provide a means for structuring an efficient long-term
technology development program that includes industry participation.
consider the relative return on taxpayer investment in SSP compared to other
technologies, in general, and energy technologies, in particular (for instance,
photovoltaics). It should be noted that
some past projections of large market penetration of new power generation
technologies have not been borne out by actual experience (for example,
nuclear, solar).
Finally,
we identified specific topics for future research:
Additional
Issues for Further Study
markets. SSP capabilities may have
applicability to non-terrestrial systems such as the International Space
Station, other large orbiting platforms, lunar bases, and other activities to
explore and develop space. The benefits
and costs of these opportunities should be investigated in the course of future
SSP analyses.
associated with SSP in both its terrestrial power and nonterrestrial power
markets should be assessed and discussed in public forums, engaging both scientists
and the public.
Additional Observations
I’d
like to conclude my comments by elaborating on several of our study’s
conclusions and making some additional observations relevant to our discussion
today.
Our
study did not consider the idea of satellites designed to relay power from
earth-based generation facilities, but some of the findings in our study might
be useful in discussion of that application of SSP.
The
cost of power in 2020
Our
study predicted the cost of U.S. electricity generation costs around the year
2020 — a challenging task, but one to which we brought the best information
and analysis that we could find. This estimate can be used as a benchmark for
the relay concept: if it were to come
on line in 2020 or so, can it provide electricity at less than this cost? If
so, it could be economically competitive.Â
The estimate is around 3 cents per kilowatt hour in developed countries,
and around 5.5 cents per kilowatt hour in developing countries.
The
environment
We
found that the environmental costs of electricity generation tend to be smaller
than popular discussion suggests. Issues of pollution, deforestation, and
global warming are receiving growing attention by the world community. However, cleaner forms of energy have been
introduced into both the developed and developing world in numerous initiatives
to ameliorate these problems, and some governments in developing countries have
already have begun to use renewable energy technologies as a tool of economic
development. Recent studies suggest that the damage, or social cost, of
electricity generated by conventional means may be relatively small,
particularly for the noncoal resources likely to figure increasingly in future
capacity additions to electricity supply.Â
The estimate of the social cost is about 2 cents per kilowatt hour.
Gas
prices, brown outs, running out of oil
The question, "are we running
out of oil?," has been a concern for at least the last 100 years. During the first half of the twentieth
century, analysts and officials of the U.S. Geological Survey predicted an
exhaustion of U.S. oil reserves within 10 to 20 years. Since then, there have been other alarming
studies about depletion, but time and again these have proven wrong. They fail to distinguish between proved,
recoverable reserves and discoverable resources. Technological change, including three-dimensional seismic
exploration, horizontal drilling, and deeper drilling in the oceans has led to
production prospects that were not predicted twenty-five years ago.
The brown-outs over the past year in
the western U.S. have been attributed
as much to inadequate management of fuel supplies and transmission capacity as
to shortages of fuel. The brown-outs were regional, not nationwide, suggesting
that there is no overall shortage but that transmission and distribution are
part of the challenge. In addition, the electricity industry estimates that
about 30,000 megawatts of additional power could be on line by 2010 if plant
constructions that have been announced take place.
Gasoline and home heating oil prices
have soared this year — but this is only the fourth time in over thirty years.
The price of oil now — about $30 a barrel — is nowhere near what it was in
the early 1980s, say, when the inflation-adjusted price was about $70 in
today’s dollars. The high gas prices have hardly affected the sales of
low-mileage auto models like sports utility vehicles and gas consumption is
still rising. The high prices were an annoyance
for many consumers and a hardship for some low-income families who depend on
oil to heat their homes. But for the
country as a whole, they have not constituted a real economic crisis and they
are now declining. For the future, from
time to time, unexpectedly, the world’s oil market will swing price
dramatically up, but also down.
Energy
security
The
perceived risks of dependence on imported energy could lead to support for
policies of greater self-sufficiency, leading in turn to higher electricity
costs or alternative sources of energy.Â
This question may present a rather unique challenge in the context of an
SSP regime. A country may not want to be reliant on another country’s
space-generated power for a significant portion of its baseload electricity. It therefore may look to equity
participation in SSP, seek other means of protecting itself against the
potential discontinuity of external supply, or possible reject SSP out of hand.
Investing
in developing countries
Another
issue that may arise in the application of SSP in developing countries is the
perceived risk associated with investing in these countries. The risk relates
to unstable governments, economies, and currencies.
Innovation
in power supply
Just
as SSP represents a potential innovation in electricity supply, so, too, are
new technological approaches being developed with which SSP would have to
compete. An example is micropower, small local power plants that do not suffer
huge transmission losses. Micropower may be most useful in developing countries
as an alternative to building large transmission grids.
I
hope these observations are useful in our discussion today, and thank you for
the opportunity to meet with you.
Authors and Experts Consulted
The study team for our SSP report included RFF scholars
and experts from the energy industry. Listed together with their affiliations
at the time of the study, they are:
Joel Darmstadter, Resources
for the Future
John N. Fini, Strategic
Insight, Inc.
Joel
S. Greenberg, Princeton Synergetics, Inc.
Molly K. Macauley, Resources
for the Future
John S. Maulbetsch, Energy
Power Research Institute
A. Michael Schaal, Energy
Ventures Analysis, Inc.
Geoffrey S. W. Styles,
Texaco, Inc.
James A. Vedda, Consultant
During the study,
the authors met several times with other experts to discuss specific aspects of
the SSP market. We are grateful for the
information and viewpoints shared with us in briefings by these individuals:
John F. Ahearne, Sigma Xi (formerly with the U.S.
Nuclear Regulatory Commission)
Jan A. J. Stolwijk, Department of
Epidemiology and Public Health, Yale University
  School of Medicine
Gary Payton, U.S. National Aeronautics and Space
Administration
Dallas Burtraw, Resources for the Future
Michael A. Toman, Resources for the Future
James Bond, The World Bank
Yves Albouy, The World Bank
