Re-thinking energy policy

With the global agreement at the recent climate change conference in Paris, the spotlight is now on how the energy sector will play an increasingly more positive role in meeting the challenges. Ed Crooks writes a very good article in the Financial Times on how the problem should be tackled. What are your views?

 

Energy revolution needed to power the future

Early in the Paris climate talks last month, Todd Stern, the US special envoy for climate change, set out for a group of reporters the administration’s view on how the problem should be tackled.

“We have a lot of technology that is available right now on the shelf,” he said. “It’s being used, and can be used more, to drive emissions down now. But to get where we need to get, we need more.”

The need for more innovation in energy was one of the strongest points of agreement at the Paris talks. Some have suggested that the most important news to come out of the conference was not the final accord, signed with great fanfare by the governments of 195 countries, but the commitments made by governments and wealthy individuals to research and develop technologies that can help the climate.

Energy innovation is a concept that has become almost universally popular — among all from the most traditional of oil companies to the most radical of environmental groups.

For all the rising enthusiasm, though, investing in innovation remains a hazardous and uncertain business in energy, as in other industries. There are many potentially significant technologies out there, a few of them described in this report. Some of them may have a huge impact on the world’s greenhouse gas emissions, many more are likely to fizzle out and fail.

The Paris accord committed its signatories to holding the rise in global temperatures since pre-industrial times to “well below” 2 degrees centigrade, while “pursuing efforts” to keep that increase to 1.5 degrees. To meet that objective, they also agreed that global greenhouse gas emissions should reach a peak “as soon as possible” and then start falling rapidly.

If we were allowed only to use today’s technology, those objectives could in theory still be achieved.

Mark Jacobson of Stanford University and Mark Delucchi of the University of California Davis have published papers arguing that it would be possible to derive all the world’s energy, for all uses, from only wind, solar and hydro power, by 2050.

Their analysis used only existing technologies that had already been deployed, at least in pilot projects, by 2010. But that would mean a huge transition and would require vast investment. Mr Jacobson and Mr Delucchi suggested the world would need 3.8m new large wind turbines, for example.

The cost would be higher than fossil fuels, at least at first, and there could also be deepening conflicts between tackling climate change and other policy objectives, such as improving access to energy for the billions of people who still have inadequate supplies.

There are various examples of evidence that the menu of energy options available today is unsatisfactory: the slow penetration of electric vehicles into car markets worldwide; the repeated false dawns for advanced biofuels; the high — although falling — cost of battery storage for electricity; the dearth of carbon capture projects that are making any progress; the public resistance to onshore wind turbines.

Gernot Wagner, lead senior economist at the Environmental Defense Fund, a US campaign group, says that new technologies will be essential if the world is to bring greenhouse gas emissions under control.

“Is it theoretically possible we could do it, based on the technology that we have today and that we know how to deploy at scale? Yes, it is. Is it going to happen? No,” he says.

Of the two energy innovation plans launched in Paris, one was backed by the governments of the Group of 20 leading economies and the other by a group of billionaires including Bill Gates, founder of Microsoft, Mukesh Ambani, chairman of the Reliance group, and Amazon founder Jeff Bezos.

That initiative was particularly noteworthy because it was led by the private sector, which will have to lead the way in developing the key innovations that are needed. As President Barack Obama put it at the launch of the project: “The ambitious targets that we’ve set for ourselves can be reached in large part by the efforts of our scientists, our businesses, our workers, our investors.” Alex Trembath of the Breakthrough Institute, a think-tank that makes the case for increased investment in energy innovation, draws an analogy with the most successful technological advance in the industry over the past two decades: the US shale gas and oil revolution.

Before the shale industry emerged as a commercial proposition in the mid-2000s, there were decades of co-operation between private and public sectors, working on understanding the rocks and examining possible techniques that could unlock them.

Mr Trembath says that in a similar way, partnerships between government and the industry could also help the advance of “clean” energy technologies, including renewables and nuclear power.

There is, however, one crucial difference between gas and renewables. With gas, producers can be confident that if they can deliver it to the right place, they can sell it.

Renewable energy is still subsidised in much of the world, meaning that if the policy regime changes, the pay-offs for innovation can change, too. It creates an additional element of political risk in any investment appraisal. Mr Wagner argues that innovation cannot be a substitute for other policies to tackle climate change, in particular a tax or other price imposed on carbon, to incentivise everyone to emit less of it.

“It’s often presented as a choice between one and the other, but it’s a false choice,” he says. “It’s not either/or: it’s a price on carbon and induced innovation that we need.”

The biggest problem with pinning hopes for the climate on energy innovation is that, like other forms of technological progress, it is highly unpredictable. Twenty years ago, most people thought it would be impossible to produce gas from shale at commercially viable rates. Today, shale accounts for more than half of all US gas production.

In 1976, US government officials set out plans for nuclear fusion power that suggested the first working demonstration reactors could be starting up in 2005-10 at the latest.

The latest experimental reactor, ITER in France, is scheduled to start its first fusion reactions in 2027. When the first demonstration plants might be built is anybody’s guess.

In the mid-2000s, companies were making claims that cellulosic ethanol, produced from agricultural waste rather than foodstuffs, would soon be commercially available. A decade later, there are a few commercial-scale plants, but overall growth has been much slower than the US Government expected or hoped.

If we are relying on innovation to reduce the risk of catastrophic climate change, that is not a very comforting conclusion. Mr Trembath accepts that, but argues that with global greenhouse emissions still on a rising trend — albeit with a probable dip last year — other attempts to address the threat since the 1997 Kyoto protocol have been largely unsuccessful.

“I don’t think anyone should reassure themselves and say we should be confident we’re going to limit warming to 2 degrees,” he says. “But investing in clean energy innovation, as uncertain as it is, is basically the best that we’ve got — because I haven’t seen any other strategies working so far.”

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