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On The hidden costs of solar power
In my view, disciplined and targeted subsidies should be provided to any emerging and still-maturing low-carbon energy technology that requires time in the market to scale-up and come down in price through incremental innovation, learning by doing, and economies of scale, in order to compete (without permanent subsidy) with fossil fuel competitors. Choices should not be driven by ideology, nor should predetermine technological winners, but should rather be provided based on technical merit to any emerging technology and should require continued price declines for that technology as it matures, or subsidies should not be maintained.
Today, our energy system effectively picks winners and losers a priori: the winners are today's entrenched and extremely mature, low-cost fossil energy technologies, and the losers are any less mature and more costly low-carbon alternative, which is snuffed out in the cradle before being given a chance to mature and compete. We have to change that system if we want to see any new winners emerge at all. What should determine winners and losers in the end is which technologies can become cost competitive over time, not which are cheaper today, despite varying states of maturity and development.
On The hidden costs of solar power
While I can't defend the optimality of today's hodge-podge of deployment incentives and subsidies and loan guarantees, there's actually strong reason to think that establishing one, uniform carbon price is not the most cost-effective way to spur renewable and other low-carbon energy technologies forward.
Each technology is at a different state of maturity and has a different price gap between it's current costs and those of very mature, entrenched fossil fuel competitors. For example, while solar PV may be 30 cents/KWh, solar thermal may be closer to 15-20 cents/KWh and wind power may be more like 10-12 cents/KWh. And beyond that, each competes against different fossil competitors, with solar PV on end-use rooftops competing against retail rates, and central station plants competing against gas peaking plants (for the most part) and wind competing more against off-peak gas-fired power from combined cycle plants with lower costs.
So one uniform carbon price as the only incentive for deployment would create an incentive too high for some technologies and too low for others, effectively stranding these techs. And since many of these emerging clean energy technologies are expensive today, yet are coming down steadily in price as incremental innovation, economies of scale, and learning effects are captured, it would be costlier in the end to strand those emerging technologies that are higher in price than the incentive created by the uniform carbon price. Targeted incentives for each class of clean technology may actually be optimal, especially if designed explicitly to reward innovation and price declines, not simply create permanently subsidized industries (see our recent Post-Partisan Power report for more on reforming our mess of existing deployment subsidies).
Furthermore, the final objective of US climate (and clean energy export policy) should be to make clean energy cheap enough to power the vast and growing demand for energy in the developing world. The IEA projects that between now and 2030, on a BAU course, developing (non-OECD) countries will be responsible for 97% of emissions growth in that period, with emissions growing enough to entirely outweigh a complete elimination of developed (OECD) nation emissions.
These developing countries are unlikely and for the most part incapable of sustaining high carbon prices or high permanent subsidies for clean energy. Remember that for 2.4 billion people in the developing world, roughly one-third of the entire global population, who still rely predominately on dung and wood and other primitive biomass for their energy needs, all modern energy is now too expensive. Promoting a shift to even more expensive clean energy is unlikely to be a winning formula. So why would we want to focus on creating an artificial market environment in the United States or other OECD nations that only supports clean energy by making fossil fuel competitors artificially expensive through carbon price, or makes clean energy artificially cheaper through permanent subsidies -- market conditions that won't be replicated in the developing world where the vast bulk of energy demand and emissions growth pressures will come from?
The only thing to do is to focus on making clean energy cheaper in real terms, through steady innovation. Smart, optimized, and disciplined incentives for deployment and scale-up of emerging clean energy sources can and must play a key role in that effort.
Cheers,
Jesse Jenkins
Breakthrough Institute
On Both Are Necessary, But Neither is Sufficient: Carbon-Pricing and Technology R&D Initiatives in a Meaningful National Climate Policy
The goal, if we aim to stabilize atmospheric CO2 and temperature rise, must be to drive global emissions towards zero as quickly as possible. Beyond that, the CO2 target changes little of substance in policy strategy today. We're debating if the car should be going 60 miles per hour or 80 or 100mph, when we're pretty much stuck in idle, rolling backwards down the hill... let's get the car in gear eh?!
On Both Are Necessary, But Neither is Sufficient: Carbon-Pricing and Technology R&D Initiatives in a Meaningful National Climate Policy
Michael Shellenberger and Ted Nordhaus of the Breakthrough Institute have responded to Professor Stavins' post via David Leonhardt's Economix blog at the New York Times here.
"A technology-first strategy is not a technology-only strategy," they write. "Cheaper and better clean energy technologies are not a substitute for pricing, regulatory, public procurement or other policies that will be necessary to make a full transition from fossil fuel based technologies to low carbon technologies."
However, asserting that cap and trade or carbon pricing is the only way to accelerate the deployment and adoption of clean and efficient technologies stands in contrast to a plethora of historic precedent, as Michael and Ted point out in their response. In many ways, the claim that "there is no other feasible approach that can provide meaningful emissions reductions" is symptomatic of how impoverished the climate debate has become, and how in need of new ideas that debate is (many new ideas are under discussion daily via the many contributors to this blog).
Furthermore, what's also absent from most of the conventional discussion of carbon pricing and cap and trade, including Dr. Stavins' above, is a focus on what we believe should be the key question for climate policy design: how can policies in the developed world successfully make clean energy cheap enough for adoption throughout the developing world.
According to the IEA, there will be enough emissions growth in non-OECD countries under BAU between now and 2030 to outweigh a complete elimination of emissions in the OECD countries.
The hard fact to wrestle with is therefore this: no matter what we do in the US, or EU, efforts to stabilize the climate will live or die in the developing world. We have to keep our eye on that ball.
So what I still find lacking in Dr. Stavins' policy formulation is a clear explanation of how making fossil fuels very expensive in the US can help to make clean energy cheap enough for widespread adoption throughout the developing world in the coming decades?
We at the Breakthrough Institute do envision a role for carbon pricing, but it's a very different one than Dr. Stavins describes: the aim being not to make fossil fuels expensive enough to make clean energy relatively affordable (but still expensive in real terms), but rather to raise the revenues necessary to invest in a comprehensive innovation-focused policy strategy to make clean energy cheaper in real terms.
On that note, I should add that this debate, both in Dr. Stavins' post above and elsewhere, continues to conflate a greater emphasis on innovation with a greater emphasis on "research." Those terms are not synonymous and distinction is important. Innovation is not solely the domain of the laboratory, as Breakthrough's policy recommendations have always made clear. Carbon pricing, procurement, regulation, deployment incentives--all could and should play roles in a smart innovation-focused strategy to make clean energy cheap enough for widespread adoption throughout the world, both developed and developing. So the question isn't really about research vs. cap and trade, as Dr. Stavins' post boils things down too.
In the end, we very much appreciate that Dr. Stavins recognizes the critical role for innovation policy, and appreciate his engagement on this critical set of questions. I look forward to more. Cheers,
Jesse Jenkins
Director of Energy and Climate Policy
Breakthrough Institute
On Chunks: A(nother) New Approach to Energy Policy?
Great post Alex.
On Starving Clean Energy to Pay the Rich: A Parable of American Decline
Thanks for the reply Geoff. I think we're pretty much on the same page. The misplaced spending priorites was exactly the thing we were trying to highlight. Obviously the post was a little tounge in cheek, and does reduce complex issues to a few hundred word post, but that was the point. You'll also certainly get support from me on any effort to redirect the wasted ethanol excise tax credit towards more productive energy innovation ends!
Jesse
On Starving Clean Energy to Pay the Rich: A Parable of American Decline
Geoff, thanks for sending the comment my way. Devon Swezey who wrote the post with us at Breakthrough may have more to add as well.
First off, I think we merely have differing interpretations as to what is a fair tax structure. The expiration of Bush-era tax cuts will leave the marginal rate for the top earners below where it was under Reagan, as far as I've read, who wasn't exactly a "populist" president with a redistributive agenda.
More importantly though, from my perspective, it's not a question of the optimal 'fair' tax structure, it's more a question of where our nation's priorities lie:
1, Do we care more about providing "tax relief" to the wealthy?
2, Or do we care more about ensuring the deficit is under control?
3, Or do we care more about ensuring critical investments in our nation's energy future are made?
I don't think we can really afford to do all three at once. Right now, Republicans in Congress tend to make a lot of noise about number 2, using deficit fears to trump efforts to make the key investments in #3 (as per the case with ARPA-E and the 2011 budget appropriation). Doing so at the same time that they call for tax relief as per #1, despite that fact that it will cost the deficit about twice as much each year as the ENTIRE federal investment in clean energy innovation and adoption (roughly $70b/year for the tax cuts and about $30-35b per year for DOE energy investment budgets I believe) just strikes me as hugely misplaced priorities. There's not much that's populist about that. It's simply smart economic priorities in my mind, which should look like this to me:
Key investments in innovation, infrastructure, education, technology (e.g. the building blocks of a growing, innovative, high-tech economy) > efforts to control the long-term structural deficit (which involve equal parts getting the economy growing, controlling entitlement budgets, and trimming defense budgets, the three major factors contributing to the debt; I've written more about this here) > tax relief for the wealthy.
Cheers,
Jesse
On A new phase in my nuclear career
Congrats Rod on the new job. Seems like the perfect fit. What will your role be within the company?
Like Rebecca, I hope your blogging doesn't stop, but I understand the pressures of a new gig on a spare-time blogging schedule all too well! Look forward to talking to you more in the future about B&W's efforts.
Cheers!
Jesse
On World’s First Utility-Scale Flywheel Power Plant Gets a Boost
That definitely counts for something! Whiz-bang factor for sure! :)
On World’s First Utility-Scale Flywheel Power Plant Gets a Boost
Any info on the cost per kWH firmed by this system? Wonder how it compares to natural gas-fired peaking generation (the main alternative to energy storage for load following and shaping/firming). Likely far more expensive today, but hopefully has the potential for cost reductions as the technology scales and improves. Just wondering what the current price gap is today...
Jesse
On Reid Says Broader Climate and Energy Bill Isn’t Dead Yet
An RES is still possible, although at one capable of securing 60 votes is likely to do little more than codify the business-as-usual path renewables are on today. That would be better than nothing though.
A carbon cap? Definitely not going to happen.
On Green Jobs Aren't Renewable Energy's Value Proposition
The idea that "green jobs can't be shipped overseas" is wrong on it's face, as you accurately point out here Geoff, and as I wrote about back in April in a column entitled, "Clean energy jobs CAN be shipped overseas (and what to do about it)." The focus shouldn't be on creating short-term jobs -- the green jobs metric that has been vastly oversold -- but on building globally competitive, innovation-fueled, export-oriented clean energy industries for the long-run.