New Technology Will Determine the Pace of Decarbonization
On one side, we see President Biden and most major corporations working to accelerate the transition to renewable energy. On the other side, we see the Heritage Foundation’s Project 2025 and politicos in Texas desperately trying to revive the fossil fuel industry’s effort to “drill baby drill.” If July’s heat didn’t convince these folks about global warming, nothing will. It’s true that they now admit the planet is getting warmer, but they don’t think fossil fuels are the cause. In the end, ideology won’t matter. Scientific facts matter, and most people understand the reality of global warming. That is why the number of people working to innovate our energy system and move off fossil fuels grows every day. Price, convenience, and reliability will enable renewables to replace fossil fuels. The technology we need to complete the transition to renewable energy is not yet here and is still being developed. But the pace of technological innovation is accelerating. Politics and ideology will take a back seat to economic and technological reality.
It doesn’t take a genius to understand the advantages of renewable energy over fossil fuels. Fossil fuels must be extracted from the planet: that costs money and damages the environment. Then they must be transported to a place they can be burned: that costs money and damages the environment. Then they must be burned to generate electricity or heat: that costs money and damages the environment. There are plenty of fossil fuels left beneath the planet, but each day we use them they become scarcer because they are ancient in origin and finite. That means scarcity, which could lead to price increases (unless demand drops), and we are already familiar with the instability and widespread manipulation of fossil fuel pricing. In contrast, the basic fuel powering solar energy (or its products—wind and waves) is free, and the sun will outlast our species. The technology to turn solar power into electricity or heat is getting more efficient and less expensive, and the technology to store this intermittent source of energy is also getting more efficient, less toxic, and less expensive. Fossil fuel prices fluctuate while renewable energy prices are predictable and not subject to national blackmail. The current century-old electric grid is centralized and vulnerable. A modern energy system would be decentralized, computer-controlled, cost-effective, more efficient, and more reliable.
The government’s effort to push decarbonization is helpful, as are its expenditures on scientific and technological research and development. Technologies such as the internet, GPS, and smartphones were built with government R & D, but once commercialized, resulted in market demand that drove continued innovation. Although the pace of innovation is unpredictable, it is often faster than projected. Just as Malthus misunderstood the role of technology in agriculture, most of the trend lines on increased greenhouse gas production underestimate the potential role of innovation. Renewable energy’s cost-competitiveness with fossil fuels continues to grow. The advocates of increased fossil fuel use are promoting a technology and business model whose time has passed. The climate policy advocates who are depressed about our failure to make rapid progress might well take a closer look at the progress already made.
Technological transitions are not smooth and are often interrupted by unpredictable events like the brutal invasion of Ukraine or an American President who is divorced from factual reality. Nevertheless, an examination of the development of renewable energy technology indicates that renewables are already less expensive than fossil fuels and prices are rapidly being reduced. In an interesting piece in the electronic journal Joule, Matthew C. Ives, Penny Mealy, and J.Doyne Farmer of Oxford’s Martin School studied the competition between fossil fuels and renewables and observed that:
“The long-term trends provide a clue as to how this competition may be resolved: The prices of fossil fuels such as coal, oil, and gas are volatile, but after adjusting for inflation, prices now are very similar to what they were 140 years ago, and there is no obvious long-range trend. In contrast, for several decades the costs of solar photovoltaics (PV), wind, and batteries have dropped (roughly) exponentially at a rate near 10% per year. The cost of solar PV has decreased by more than three orders of magnitude since its first commercial use in 1958.”
Their scholarship utilizes historic data on the diffusion of technology to develop scenarios of future energy costs. They conclude that:
“Rapidly decarbonizing the global energy system is critical for addressing climate change, but concerns about costs have been a barrier to implementation. Most energy-economy models have historically underestimated deployment rates for renewable energy technologies and overestimated their costs. These issues have driven calls for alternative approaches and more reliable technology forecasting methods. Here, we use an approach based on probabilistic cost forecasting methods that have been statistically validated by backtesting on more than 50 technologies. We generate probabilistic cost forecasts for solar energy, wind energy, batteries, and electrolyzers, conditional on deployment. We use these methods to estimate future energy system costs and explore how technology cost uncertainty propagates through to system costs in three different scenarios. Compared to continuing with a fossil fuel-based system, a rapid green energy transition will likely result in overall net savings of many trillions of dollars—even without accounting for climate damages or co-benefits of climate policy.”
While predicting future technological development is difficult, and projections are far from certain, what is striking is the stability of fossil fuel costs and the fact that technological development in that arena is focused on improving our ability to extract fuel from more and more challenging locations. In contrast, technological development in renewable energy is focused on taking a cost-free source of energy and making it cheaper to absorb, convert to electricity, and store. Due to cost reductions and government subsidies, an increasing percentage of new facilities for generating energy are renewable. According to Susan Tierney and Lori Bird of the World Resources Institute:
“Solar and wind farms have dominated new power plant builds in the U.S. in recent years, while fossil fuel plants—particularly coal-fired plants—continue to be retired at record pace. In 2019, wind (9.1GW) and solar (5.3GW) represented 62% of all new generating capacity, compared to 8.3GW of natural gas, while 14GW of coal-fired capacity was retired. The U.S. Energy Information Administration (EIA) has also projected that most new electric generation added in the U.S. in 2020 could come from wind and solar, with new natural gas plants projected to represent less than a quarter of new generating capacity.”
While COVID disrupted these trends, they have resumed, and renewables are a growing portion of the U.S. energy mix. Despite the push by ideologues and the fossil fuel industry to denigrate renewable energy, the trend lines are obvious, and the future is clear. What is less clear is the pace of change. There are a wide variety of factors that will influence the rate of change in our energy system. Technological breakthroughs, while inevitable, are unpredictable. The availability of capital is also a variable, as is the availability and effectiveness of government subsidies. The organizational capacity to deliver renewable energy is also far from assured. For some businesses, the transition to renewable energy is a no-brainer. A big box chain, like Walmart, has huge stores with flat roofs and high energy consumption. For Walmart, solar power is an investment that rapidly pays for itself in reduced electricity costs. Walmart has plenty of capital, and the return on investment for renewables compares favorably to other uses of capital. For some organizations, the return on investment of scarce capital is less favorable. In those cases, new technology may be required to stimulate adoption.
Another obstacle to decarbonization is delegitimizing the transition by adhering to unrealistic targets. Targets can be useful symbols but can be destructive if they are set too high to reach or too low to do any good. The transition needs to be accomplished in stages and must be based on rigorous assessments of current levels of performance, and once that is understood, the focus should be on efforts to improve performance. Operational reality rather than symbolic talking points should guide this transition. In the short run, we continue to need and use fossil fuels. But each year we will likely use less fossil fuels and more renewables. This should be accompanied by microgrids that can better distribute energy and reduce blackouts. A modern, more efficient energy system powered by lower-cost fuel will be more reliable, less expensive, and will have the wonderful side effect of reducing pollution from fossil fuels —including greenhouse gasses.