The End of Doom (35 page)

The institute calculates that by 2025, the low-end levelized costs of solar PV will fall to $81 per megawatt-hour. By that time, the institute expects that coal plants will be required to capture their carbon emissions, so the levelized cost of coal will be $102 per megawatt-hour. Natural gas plants without carbon capture will face levelized costs of $44 per megawatt-hour. The report cautions that its calculations with respect to renewable energy generation do not take into account additional costs, such as backup generation or integration into the electric power grid. If included, such costs would substantially raise the levelized costs of renewable energy generation technologies.

One other authoritative analysis is the
Annual Energy Outlook
published by the US Energy Information Administration (EIA). In its 2014 report, the agency reckons that in 2019, the low-end cost of solar PV will be $101 per megawatt-hour. Conventional coal, nuclear, and natural gas levelized costs stand correspondingly at $87, $92.60, and $61.10 per megawatt-hour.

To judge from these estimates, the era of unlimited, nearly free solar power has certainly not yet arrived. But things are moving quickly. As recently as 2011, the EIA did not even bother trying to calculate levelized solar PV costs. In that year's report, the agency projected that the country would have an installed solar PV capacity of 8.9 gigawatts by 2035. As of the second quarter of 2014, the figure was already 15.9 gigawatts.

In 2008, global production capacity of solar cells/modules amounted to 7 gigawatts. Capacity is now projected to be 85 gigawatts in 2016. This rate of increase suggests a manufacturing capacity doubling time of about two years. As capacity ramped up, Lazard reports that the levelized costs fell from $323 per megawatt-hour in 2009 to $72 now. If Swanson's Law proves true, the levelized cost solar PV could be expected to fall to around $24 per megawatt-hour in the next ten years. That would not be too cheap to meter, but it would cost far less than any of the current forecasts for fossil fuel electric power generation technologies.

Of course, this rough projection does not take into account the huge issue of intermittency (the sun doesn't always shine) that makes solar power problematic as a baseload source of electricity. However, potentially disruptive innovations like the solar subcell developed by German Fraunhofer Institute for Solar Energy Systems that can turn 44.7 percent of sunlight that strikes it into electricity or Sakti3's new high-capacity battery that the Michigan-based company claims offers double the energy density of current lithium-ion technology at a fifth the cost could accelerate the wider adoption of solar power.

Will Wadhwa's prophecy come true? Perhaps not, but wagering against human ingenuity has always been a bad bet.

Let us turn now to how to consider human ingenuity might be better harnessed to solve the climate/energy conundrum than trying to impose various forms of carbon rationing on the world.

The Emerging Climate and Energy Consensus

“The Kyoto Protocol is dead. There will be no further global treaties that set binding limits on the emissions of greenhouse gases (GHG) after Kyoto runs out in 2012.” That's what I wrote back in 2004 when I was reporting on the 10th Conference of the Parties to the UNFCCC in Buenos Aires, Argentina. I also cited the prediction of Taishi Sugiyama, a senior researcher at Japan's Central Research Institute of Electric Power Industry, who flatly stated that Kyoto signatories Canada, Japan, and Russia would withdraw from the treaty after 2012. As noted earlier, Sugiyama's prediction has come true.

Instead of UN carbon-rationing schemes, Sugiyama recommended in 2004 that a clean energy technology-push approach be formalized in a Zero Emissions Technology Treaty. Such a treaty would have greater appeal because it avoids the inevitable conflicts over allocating emissions targets and because most countries recognize the importance of long-term technological progress. Sugiyama presciently argued that a global cap-and-trade system is way too premature for developing countries to join because effective low-cost ways to cut carbon emissions simply don't exist. “I cannot imagine a cap-and-trade system over the whole globe without low-cost energy and emissions control technologies,” said Sugiyama. Ten years later, Sugiyama's insight that the Kyoto Protocol is a dead end and that the best way to address man-made global warming is to develop clean energy sources so that they become cheaper than fossil fuels is emerging as the new energy technology consensus.

In May 2014, former undersecretary for global affairs Timothy Wirth, who was the Clinton administration's lead negotiator for the Kyoto Protocol, and former South Dakota senator Thomas Daschle conceded that “the international community should stop chasing the chimera of a binding treaty to limit CO
2
emissions.” They note that more than two decades of UN climate negotiations have failed because “nations could not agree on who is to blame, on how to allocate emissions, or on projections for the future.” Both firmly believe that man-made global warming poses significant risks to humanity.

To address those risks, Wirth and Daschle now advocate that the climate negotiators adopt a system of “pledge and review” at the 2015 Paris conference of the parties to the UNFCCC. In such a scheme, nations would make specific pledges to cut their carbon emissions, to adopt clean energy technologies, and to wring more GDP out of each ton of carbon emitted. The parties would review their progress toward reducing greenhouse gas emissions every three years and make further pledges as necessary to achieve the goal of keeping the increase in average global temperature under 2°C. Since there would be no legally binding targets, there would be no treaty that would require politically difficult ratification. If insufficient progress is being made by 2020, they argue that countries should consider adopting a globally coordinated price on carbon.

Wirth and Daschle note that the markets for renewable energy, especially wind and solar, as well as natural gas, the least carbon-intensive fossil fuel, are expanding. Crucially the two believe that the 2015 UN climate change conference in Paris should aim to “help accelerate the pace of technological adoption and change, toward the day when the cleanest energy sources are also the cheapest and thus become dominant.” Clearly they have joined the emerging consensus that schemes to prevent climate change by rationing carbon—for example, by imposing a cap-and-trade scheme or taxation—are doomed to failure.

Why failure? Because of the “iron law of climate policy,” argues University of Colorado political scientist Roger Pielke Jr. Pielke's iron law declares that “when policies focused on economic growth confront policies focused on emissions reductions, it is economic growth that will win out every time.” People and their governments are very reluctant to give up the immediate benefits of economic growth—more goods and services, jobs, better education, and improved health—that access to modern fuels make possible in order to avert the distant harms of climate change.

Make Clean Energy Cheaper Than Fossil Fuels

“The paramount goal of climate policy should be to make the unsubsidized cost of clean energy cheaper than fossil fuels so that all countries deploy clean energy because it makes economic sense,” is how the Information Technology and Innovation Foundation sums up the new consensus. This perspective is also endorsed by many other policy groups, including the Breakthrough Institute and the Brookings Institution.

“Societies that are able to meet their energy needs become wealthier, more resilient, and better able to navigate social and environmental hazards like climate change,” correctly notes the Breakthrough Institute's 2014
Our High Energy Planet
report. Keeping people in developing countries in comparative energy poverty will only slow energy innovation. “The way we produce and use energy will become increasingly clean not by limiting its consumption, but by using expanded access to energy to unleash human ingenuity in support of innovating toward an equitable, low-carbon global energy system,” asserts the Breakthrough Institute report.

The first plank of the new consensus is that it is wrong to try to restrain the growth of greenhouse gas emissions by denying adequate access to modern fuels to the poor. For example, the Breakthrough Institute report rejects the International Energy Agency's anemic recommendation that annual access to 100 kilowatt-hours of electricity per person is sufficient. That is the amount of electricity that the average American burns in three days and the average European consumes in five days. One reasonable threshold might be 8,000 kilowatt-hours, which is the quantity that the average Japanese citizen uses in a year.

Second, activist opposition to safe hydraulic fracturing to release vast quantities of natural gas trapped in deep underground shale formations is counterproductive. Burning natural gas releases about half the carbon dioxide that burning coal does. In fact, the 2013 IPCC
Physical Science
report identifies power generation using natural gas as a “bridge technology” that can be deployed now. Consequently, the IPCC report notes, “Greenhouse gas emissions from energy supply can be reduced significantly by replacing current world average coal
‐
fired power plants with modern, highly efficient natural gas combined
‐
cycle power plants.” Coal-fired electric power plants that emit lots of carbon dioxide are largely being shut down in the United States because they cost more than plants that emit far less carbon dioxide by burning cheap natural gas produced through fracking.

Third, environmentalist hostility to all forms of nuclear power is similarly perverse. Generating electricity using nuclear power emits almost no greenhouse gases while assuring a stable supply of baseload power. Activist resistance to nuclear power may be lessening. No one would accuse climate researchers James Hansen, Kerry Emanuel, Ken Caldeira, and Tom Wigley of excessive moderation when it comes to banging the climate crisis drum. In November 2013 the four joined the new consensus by issuing an open letter challenging the broad environmental movement to stop fighting nuclear power and embrace it as a crucial technology for averting the possibility of a climate catastrophe by supplying zero-carbon energy. The letter point-blank states that “continued opposition to nuclear power threatens humanity's ability to avoid dangerous climate change.” The four add, “While it may be theoretically possible to stabilize the climate without nuclear power, in the real world there is no credible path to climate stabilization that does not include a substantial role for nuclear power.”

The fourth and most provocative plank of the new energy technology consensus is that government research and development spending on zero-carbon forms of energy supply must be dramatically ramped up. “Robust government support, including significant investment for clean energy research, development, and demonstration (RD&D), is necessary to make energy technologies cheaper than fossil fuels,” argues the ITIF.

Those of us who appreciate the power of competition and market incentives to call forth new technologies and drive down prices must recognize that governments have been massively meddling in energy markets for more than a century. Consequently, it's really impossible to know what the actual price of energy supplies would be in a free market. Notorious examples include the attempts at petroleum cartelization by the Organization of Petroleum Exporting Countries (OPEC) and Russia's constant jiggering of the price of natural gas sold to European countries. In many countries, electricity is generated and distributed by government agencies that are not accountable to consumers.

For example, in the United States, a system of electricity regulation that chiefly benefited producers at the expense of consumers was established at end of the nineteenth and the beginning of the twentieth centuries. And no segment of energy supply has gone unmolested by the federal government. A comprehensive 2011 analysis of US federal government energy tax, regulatory, and research and development incentives finds that they have amounted to more than $837 billion (2010 constant dollars) since 1950. Of that amount, $153 billion was spent on energy research and development. By 2010, nuclear energy had received $74 billion in R&D funding, coal, $36 billion, and renewables, $24 billion. Federal R&D for oil, natural gas, and geothermal totaled $21 billion. These subsidies undoubtedly distorted both the supply and demand for these forms of energy, thus masking the actual comparative costs and benefits of each.

The better course would be to establish a level playing field by eliminating all energy subsidies and incentives and letting the cheapest technologies developed by innovators win in the marketplace. Proponents of markets must continue to push policy in this direction, but given the history of pervasive government intervention in energy markets, it is unlikely that governments will suddenly step back and allow markets to decide how to innovate and produce energy in the future. Energy production, especially for electricity, approximates a government-sanctioned monopoly that has the unfortunate side effect of stifling private innovation in energy production technology. Given that situation, the new consensus in favor of government-subsidized energy production research and development that aims to make zero-carbon energy supplies cheaper than fossil fuels looks like the least bad likely policy option for addressing concerns about climate change.

How much do proponents of the new consensus want to spend on clean energy R&D? The ITIF report suggests investing $70 billion per year globally, which amounts to less than 13 percent of the funds spent worldwide on fossil fuel subsidies now. In addition, $70 billion in R&D funding represents only about a quarter of the $254 billion spent in 2013 on deploying currently expensive and technologically clunky renewable power technologies. Given those figures, the ITIF's estimate of what it would take to develop cheap zero-carbon technologies looks like a bargain.