The price tag of energy transition, and any version of a future Green New Deal, continues to fall. Over the past few weeks several organizations and researchers have updated their transition models by incorporating the latest cost declines in wind, solar, storage, and batteries. A Bloomberg story covering research findings from IRENA (The International Renewable Agency) reported that needed investment estimates by the year 2050 on a global basis have dropped from 125 trillion to 115 trillion. Sounding out an increasingly familiar theme, IRENA’s director, Francesco La Camera, asserted that “The global energy shift needs significant investments, but they will more than pay off in curbing emissions and in health and environmental benefits.” IRENA has attempted to quantify these investment returns. According to the report, Global Energy Transformation: A Roadmap to 2050, for “every dollar invested in transforming the global energy system, there is a payoff of at least USD 3 and potentially more than USD 7, depending on how externalities are valued.”
Saul Griffith meanwhile—the energy inventor and head of San Francisco’s Otherlab—got out his pen and paper and started working up his own cost estimate. You can read through Saul’s post on Medium here: Green New Deal: How Much does Fixing Climate Change Cost the US? Unsurprisingly, Griffith understands three key points about our current energy transition. One, the required investment and deployment timeline will not be spread over a single year, but 20 years. That simple framing alone should help advocates inoculate the energy-transition argument from bad-faith detractors who want to highlight the price-tag, but not the investment returns. Two, Griffith understands that electrification itself is the imperative. For, it’s only through electrification that we are able to harvest enormous efficiencies, and are also able to start algorithmically time-shifting supply and demand through smart devices and software. Third, he understands the thermodynamic opportunity presented by moving away from highly wasteful combustion. Like other researchers, Griffith notes that total global energy requirements would fall by half, approximately, once the transition is complete. This figure often shocks people but that’s only because most don’t understand the volume of heat waste involved in the burning of fossil fuels, whether in large coal or natural gas plants, or in individual car engines.
Just to tie these themes together, the IRENA report has a nice graph showing the effect of higher penetrations of renewable energy on total system energy consumption. The chart demands a bit of study to understand the point, but as you examine both the x and y axes you should be able to see the following relationship: the higher the renewable energy share (y axis) the lower amount of total primary energy supply is required (x axis). Yes, that’s right: as the share of renewables in the system rises, the total amount of energy required by the system falls. And the corollary is true: the higher the amount of fossil fuel combustion in the system, the greater the quantity of total primary energy supply required.
The third section of the Oil Fall series, Waste Crash, has gained less attention amidst this year’s volatility in oil prices. But the final section of Oil Fall offers a handy short course on the amount of heat waste involved in combustion, and collects nearly ten separate estimates of this systemic loss. As with Griffith’s general conclusion, if you consider the work done on this topic at Lawrence Berkeley National Laboratory, the IEA in Paris, the International Institute for Applied Systems Analysis (in Austria) and finally the work of Stanford’s Mark Jacobson, a world generally moving away from combustion and towards renewable powered electrification can expect to harvest, at minimum, about a 40% energy consumption savings. This is why transition models, to the consternation or incredulity of critics, posit that we can have higher GDP and economic growth while using less energy.
Waste Crash also devotes a chapter to energy storage in its various forms, (see chapter 4: “Flying With Storage”) and highlights the coming wave of interoperability that will unfold between our devices, and the grid. Unsurprisingly, Otherlab’s Saul Griffith also spends time in this area for the same reason: our devices—water heaters, electric vehicles, and soon battery storage incorporated into homes, and commercial and public buildings—will all be leveraged to time-shift wind and solar supply. In other words, some of the infrastructure required and investment needed to run a more electrified system is already rolling out incrementally, and is driven by private, commercial investment. Griffith estimates an entirely electrified US vehicle fleet, for example, would also act as a distributed storage repository of 20 TWh. That’s not small. But it shows that from a macroeconomic and operational standpoint, energy transition is fated to be a project funded not just publicly but privately. There will be enormous incentives for owners of buildings—whether homes, schools, transit centers, manufacturers, or office space—to invest in storage because those who can bank electricity when it’s in surplus will see a return on their investment from the savings.
Here is an excerpt from Waste Crash, the third part of the Oil Fall single title:
Modeling how much aggregate energy storage a future energy system will need is far outside the scope of the Oil Fall series. The salient point is that a network effect is now appearing in our current energy transition, in which a natural matching phenomenon is set to unfold between electric devices of all kinds, and a powergrid that’s decarbonizing with wind and solar. Storage will have outsized price impacts at the margin of the electricity market, restraining prices at peaks and supporting prices at troughs. Where storage has already been introduced, we have seen a little goes a long way, given the mechanism of automated bids and offers. In storage we will see this rule: a little will do alot.
Summing up, we now have a set of affordable tools to fight climate change, and to start running energy transition at a faster rate. If further nudges are needed from a public policy standpoint those don’t represent further costs but, rather, the simple catalytic incentives which would only result in further gains along the learning curve. There is not a single domain now, from California to the United Kingdom, from China to India, that would not see a positive return from stepped-up investment or incentives led by public policy. Indeed, now that we have the tools, attention should shift to the details of clever policy-design which uses cultural values to get past old political hurdles.
In the New York Review of Books, Bill McKibben reviewed material on the oil industry’s predicament and the end of oil demand growth. “At what point does a new technology cause an existing industry to start losing significant value? This may turn out to be the most important economic and political question of the first half of this century, and the answer might tell us much about our chances of getting through the climate crisis without completely destroying the planet,” writes McKibben.
I found this encouraging because Kingsmill Bond, subject of McKibben’s review and the author of 2020 Vision: Why You Should See the Fossil Fuel Peak Coming, offers the same thesis as the Oil Fall series: all the damage to the oil industry will arrive sooner (not later) when demand growth starts to fall towards zero. Bond’s report published in September of last year, and I’ve been happy to confer with Kingsmill by email over our shared ideas. Both in his work, and my own, we draw upon the case of the global coal industry which performed so well until it ran into the end of growth, and then promptly crashed. The end of growth can be devastating for commodity producers.
Here is an excerpt from the first section of Oil Fall, published in January of 2018:
What’s about to happen in California, and the United States, and then the world more generally with China as a foundational leader, is that electricity—long trapped behind an insurmountable wall—is going to find its way into the transportation sector. The reason to tell this story now, is that we are poised at that curious moment when, after nothing happening for a long time, everything appears to be happening at once. California is about to trigger an exceptionally powerful formula for breaking the ringfence that oil has long enjoyed over transportation: new wind and solar power constructed across the state, deployed on the back of plunging costs, is finding its way into increasingly affordable electric vehicles. The implications are exhilarating for the environment, but absolutely devastating for the oil industry, the existing car industry, and all the infrastructure that is leveraged to oil and gasoline.
But let’s not get ahead of ourselves. Oil Fall doesn’t attempt to model or forecast global oil demand declines, which may not come until the mid-point of next decade. While analysts waste their time trying to figure out, for example, when EV will ultimately take all market share of new car sales, for example, this series will concentrate on the first blow: when oil demand growth falls to zero. That single change alone will do plenty of damage— not only to the oil industry, but to the oil industry’s influence and power.
Nota bene: The Gregor Letter has published a day late this week, owing to the weekend holidays. Thanks. -GM
The Gregor Letter is a companion to TerraJoule Publishing, whose current release is Oil Fall. If you've not had a chance to read the Oil Fall series, the single title just published in December and you are strongly encouraged to read it. Just hit the picture below.