Wind farm in Xinjiang, China
- Current technology-forcing policies imply that wind and solar power, combined with battery electric vehicles, represent our only viable energy future, observes independent researcher Schalk Cloete. Given the fundamental limitations of these technologies, this is a very dangerous notion, he argues. A shift to technology-neutral policies is needed, especially in developing nations.
It is undeniable that wind and solar power and battery electric vehicles (BEVs) will play an important role in the energy system of the future. They are, however, fundamentally limited regarding the speed and extent to which they can grow. Despite these fundamental limits, current policy frameworks imply that they are essentially our only options for a clean energy future – a very dangerous notion indeed.
This article will discuss the dangers associated with current green technology-forcing in more detail, outlining why it can easily hurt much more than it helps. A follow-up article will then detail some of the other options at our disposal together with some musings about how these options will respond in a more intelligent technology-neutral policy scenario.
Technology-neutral policies target the real issue and alter the competitive landscape in favor of any technology that can address this issue
Before we start, here is a quick clarification on what I mean by technology-forcing and technology-neutral policies. Technology-forcing promotes certain technologies over others through mechanisms like subsidies, tax-breaks, mandates, portfolio standards, low-interest financing, accelerated depreciation, guaranteed prices, etc.
Technology-neutral policies target the real issue and alter the competitive landscape in favor of any technology that can address this issue. Examples include a carbon tax to combat climate change, fuel taxes to limit congestion and oil dependence, and vehicle/plant emissions taxes to improve air quality.
Fundamental limitations
Let’s start by revisiting the fundamental limits to the growth of wind, solar and BEV technology. If these limits did not exist and there really could be a tipping point beyond which these green technologies would mercilessly sweep aside fossil fuels for good, I’d be all for it. But unfortunately, this is not the case.
Grid integration issues are already hampering wind/solar scale-up even at the current low market share
The fundamental limits that will restrict wind and solar to moderate market shares include the following:
- Their variable and non-dispatchable nature that leads to sharp value declines and a perpetual subsidy dependence.
- The poor correlation between wind/solar resource availability and population density.
- The fact that they only supply electricity, which currently accounts for only 22% of final energy demand.
Cost and value decline of wind and solar power.
As a practical illustration of the growth limitations faced by wind and solar power, the graph below compares primary energy growth in China. Clearly, despite massive technology-forcing, combined wind and solar output is increasing at about a 10x slower rate than coal grew a decade earlier.
This large difference is even more striking when considering that the productive capacity of the Chinese economy was almost 3x smaller during the coal growth period than the wind/solar growth period.
It is also noteworthy that grid integration issues are already hampering wind/solar scale-up even at the current low market share, whereas pollution concerns of coal started limiting deployment at much higher market shares.
Data (1, 2) showing China’s impressive recent wind & solar scale-up relative to coal growth from a decade earlier.
The fundamental limits that will restrict BEVs to moderate market shares include the following:
- The most suitable market segment, passenger light duty vehicles, represents only about 21% of global oil consumption and 7% of fossil fuel CO2Â emissions.
- Even within this segment, economic attractiveness fades quickly for longer-distance highway driving applications.
- Unless a new battery technology emerges, technology metal availability will pose serious scale-up constraints.
Drivetrain and fuel costs for BEVs and hybrids employing assumptions consistent with commuter cars on the left and highway cars on the right of the graph (previous article).
However, the most important issue to me is the fact that all of these green technologies are highly capital intensive. Furthermore, commitment to an energy future dominated by these technologies also demands a wide range of complex and capital-intensive supporting investments.
This complex, large upfront investment requirement makes these technologies fundamentally unsuitable for supporting rapid economic development, which is a much higher priority than sustainability for about 80% of global citizens.
Contour lines showing the welfare-optimized wind/solar market share under different discount rates (WACC) and CO2Â prices (discussed in detail earlier). Developing nations will generally fall towards the bottom-right of the graph.
What can go wrong?
So what if we continue current technology-forcing policies, but eventually have to concede that we cannot push these technologies beyond about a quarter of final energy demand. What harm would be done? Surely it is better than doing nothing. Well, not quite…
Firstly, the policy-driven growth of these technologies attracts a lot of capital and initiative that would have gone to the myriad of alternative sustainability options under a technology-neutral framework. Given the typical multi-decade development pathway from concept to fully cost optimized commercial scale deployment, putting all of our eggs in one basket is a very risky ploy.
Solar PV illustrates the time required to go from concept to commercial reality (image source).
Secondly, the enormous supporting infrastructure buildouts required by this pathway will impose a massive cost if things don’t work out as expected. For example, getting anywhere close to 20% of our final energy from wind and solar will require a total redesign of the power system with heavy investments in flexible power plants, long distance transmission lines, demand response and energy storage.
Rapid economic development directly shields people against the effects of climate change
If we eventually realize that the required deep decarbonization is not possible through this pathway, switching to an alternative pathway will be incredibly costly (both in terms of time and money).
Large value declines of solar PV in a high carbon tax scenario when changing from policies excluding nuclear and CCS (green line) to policies including all options (orange line).
Thirdly, forced deployment of these capital-intensive technologies at a scale that will actually make a difference will divert unacceptable amounts of capital away from other infrastructure investments capable of stimulating compounding economic development in the developing world.
Such development is critical to increase life expectancy and quality of life, and impeding this development can have massive humanitarian costs (below). As a quantitative illustration, I previously estimated the net cost of this effect at $750/ton of CO2Â avoided.
An important omission from the enormous cost mentioned above is that rapid economic development directly shields people against the effects of climate change. Improved housing, sanitation, utilities, medical care, international trade connections and general productivity will all greatly reduce the impacts of a more hostile climate on the lives of developing world citizens.
Rapid increases in global productivity will make it much easier to balance our carbon budget by the end of this century
Ironically therefore, CO2Â released to maximize the speed of this massive infrastructure buildout will actually lower the climate impacts experienced by the majority of global citizens.
Economic development offers excellent protection against climate change (image source).
Finally, we should acknowledge that rapid increases in global productivity will make it much easier to balance our carbon budget by the end of this century. As a simple example, it is now finally becoming more generally accepted that broad deployment of carbon negative technologies will be required to achieve our climate goals.
Let’s consider a worst-case scenario where we eventually need to extract a massive 2000 Gt of CO2 from the atmosphere via bio-CCS, direct air capture and reforestation at a high average cost of $150/ton.
Currently, the enormous total cost of $300 trillion is more than double global GDP (PPP). However, if we can bring the developing world up to developed world productivity, the total cost suddenly reduces to less than 6 months of global production (1% of output spread over 50 years) – certainly a manageable number if we consider what is at stake.
Illustration of rapidly growing emission gaps that will enforce carbon negative solutions later this century.
Thus, any economically inefficient decarbonization effort in the developing world will result in a broad range of costs totaling far more than the $750/ton CO2Â estimate given above. And yes, technology-forcing is per definition economically inefficient.
Conclusion
Technology-forcing policies promoting wind/solar power and BEVs may do much more harm than good in the long term. This is especially true for the developing world where about 90% of economic and energy growth will take place over coming decades.
It is crucial that people concerned about our great 21st century sustainability challenge stop bickering about which technology class is best. This time and initiative can be invested much more productively in advocacy for technology-neutral policies leveling the playing field for all clean energy technologies.
Such policies will unleash a broad range of creative sustainability solutions, some of which will be covered in the second part of this article. Given the urgency and magnitude of our global sustainability challenge, we can no longer afford to persist with inefficient technology-forcing of the most ideologically attractive solutions.
Editor’s Note
Schallk Cloete describes himself as “a research scientist searching for the objective reality about the longer-term sustainability of industrialized human civilization on planet Earth. Issues surrounding energy and climate are of central importance in this sustainability picture and I seek to contribute a consistently pragmatic viewpoint to the ongoing debate.”
This article was first published on The Energy Collective and is republished here with permission.
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“… electricity, which currently accounts for only 22% of final energy demand.”
Final energy is a bad measure. Because it only accounts for the output. To produce 22% final energy we have to invest much more because the thermal efficiency is mostly below 40%.
Therefore the share of primary energy is much higher than 22%.
Marginal value an “perpetual subsidies”.
Well this might be something in statistics. But in reality in Germany and France there already are Projects that do not ask for subsidies at all. So the authors of this study should check if their assumptions how the market works are correct (reality seems to disagree).
Primary energy chart: It compares input for coal power with output from solar?
The 800 Mtoe increase for coal is around 10 000 TWh thermal. Which is more than the 6 000 TWh total thermal electricity generation in China today.
Clearly the wrong measure. Why not use final energy here? Like was (wrongfully) used before.
This already gives a factor three less for coal.
On top of that: only future will tell at which point we can compare renewable growth with coal. Coal did grow in china in the decades before too. But here are only certain years compared.
While it is true that that the upfront and capital cost are high. Is this not also true for CCS and similar? And you advocate other technologies most of which are unproven. So just wait and hope it works out? And if you are considering to CCS at 150 $/t why not advocate a CO2 price now? A Price that highw would stop electricity from coal very rapidly (actually happens at around 30-50 $/t, which is 3-5 times cheaper).
One gets the impression that at least some data points are cherrypicked to support a certain narrative. And no proven alternative is provided. I hope you can change certain things to avoid that (certainly) false impression….
I think that final energy (the point where energy directly drives economic activity) is the right metric to use in that particular context. Everybody knows that electricity will provide a steadily increasing share of our final energy use. The point here was simply to illustrate how far we still have to go in this transition.
Wind/solar power in developed nations like Germany and France is economically sound, simply due to the very low discount rates in those countries (discount rate has a very large impact on the LCOE of capital intensive technologies). Take another look at the fourth figure in the article. Developed nations will be towards the top left of the contour plot (high welfare-optimized wind/solar share). Unfortunately, only a small fraction of new energy capacity is being built in such countries with stagnant/declining energy systems.
Germany actually provides a good illustration of the marginal/average value treatment of wind & solar. For example, the projects that can be built with little/no direct subsidy today will further decrease the average market value of all the wind/solar power in the system. Thus, the market premium (difference between feed-in tariff and wholesale price) will increase for all the existing wind/solar generators, thus increasing the total system subsidy. Using the marginal value is simply a way to accurately assign this increase in total system subsidy to the new capacity that actually caused it.
Also note that such “subsidy-free” systems still receive substantial indirect subsidies. For example, wind/solar generators are not penalized for the substantial extra grid and balancing costs they impose on the system. Strong policy that guarantees investment returns from such systems also create artificially low interest rates, which simply shift risk from investors to taxpayers.
About primary energy in the China graph, wind/solar output is converted to primary energy by dividing the produced electricity by 0.37 (the convention in the BP Statistical Review). This treatment strongly favours wind/solar because almost half of Chinese coal consumption is actually industrial (e.g. steel and cement – the very building blocks of developing world growth). For these applications, one unit of fuel energy is equivalent to at least one unit of electricity (probably more because the fuel is often a critical reactant in the process).
A carbon price is perhaps the most important of the technology-neutral policies advocated in this piece. I will discuss the wide range of alternative sustainable development pathways that will be activated by such technology-neutral policies in the next article, so let’s defer discussion about that for the time being.
well, there wwere recent calculations, that pure basload power generators also need significant grid extensions and balancing costs, not exactly like wind and solar, but also not that much cheaper when a high penetration of the load in the grid exists.
Also there are several factors which reduce the decrease of price when higher amounts of wind and solar are installed in a grid. The higher the difference to the wholesale price in neighbouring areas with less wind/solar becomes, the more power will be traded over ever longer distances. Once this trade is established, there is a businescase to expand the grids which leads to lower transportations costs for power, increasing this effect again.
Also it becomes economical reasonable to prepare for lower wholesale prices from time to time, e.g. by shifting production (e.g. cemet production, stone milling, aluminum smelters etc.) where power costs are high, equipment costs are reasonable, and the product can easily be stored. Or shift it e.g. in the heat market, a resistor heating is extremely cheap at places where a lot of heat is required – district heating and industrial processes. This provides a floor for the price somewhere wher the costs of large quantities especially of Gas are located.
Thank you for your reply.
Sure but discount rates affect other technologies too. Nuclear for example. An a lot of countries get 50-100% mehr kWh/m² than Germany. Hence in some countries they sell solar power for 2-3 cent/kWh. Factor two lower than in Germany. If we talk about solar (wind is another matter) this can be rooftop as well. Which made the right way does not use the grid much.
Also note that existing power generation get a lot of indirect subsidies too. Coal emitts not only CO2 but also heavy metals, NOx and fine dust. Gas power is cleaner but still CO2 and CH4. Nuclear does usually not pay enough for the long term storage (plus de taxpayer paid alle the accidents so far).
So by that point of view electricity is already in a subsidy limbo.
While it is good to adjust electricty from Solar-Wind in China by dividing by 0.37. It seems more straightforward to just compare actually prduced electrcity (I mean the data is there, so…). It is confusing for the reader if you compare electricity production of one technologie with coal consuption as a whole. There are different topics which need different solutions. To mix them doesent seem to clear up the discours.
Note that I’m certainly not saying that wind/solar power is bad. These technologies have a very important role to play and will certainly do well in a technology-neutral policy framework. My only point here is that they are highly unlikely to grow to the levels of dominance implied/expected by current policy frameworks because of the fundamental limitations mentioned.
Yes, the fossil fuel status quo does receive indirect subsidies too. This is the main reason why I omitted the grid and balancing costs of wind and solar in the linked article comparing the cost and value decline of wind/solar power. These two indirect subsidies should be of similar magnitude.
It should be noted though that eliminating the indirect fossil fuel subsidy could actually make wind & solar less competitive because they are dependent on flexible dispatchable plants with relatively low CAPEX. If the dispatchable plants backing up wind/solar need to be decarbonized, the wind/solar value decline becomes much greater (see the sixth figure in the article).
Utilizing primary energy in the China energy expansion graph illustrates my point about the fundamental limitation that wind/solar only supply electricity. Fossil fuels are directly applicable to all sectors of the economy and, if wind/solar will dominate the future global energy system, they will have to be applied to all sectors of the economy as well. And they will have to do so incredibly quickly according to the recommendations of climate science.
The amount of dispatch power ist usually greatly overestimated. One should not forgert that wind/solar capacity get extremly cheap. So it can be cheaper to install more than needed and regulate down. This increases the load factor.
For solar you can cap at 70% of peak power and lose only 5% energy production.
Load management und storage can be applied to.
Also a certain amount of waste and biomasse and water is usually there too. So no need to go 100% with wind and solar.
One should also mention that some project opt for a direct contract instead of a market approach. Which is a good way for preventing negative prices and the likes of a merit order system.
It may sound wierd but for many a steady price is very important for long term planning.
That being said we will see what the future will bring and I fore one am confident thar you are far to pessimistic.
1. What about solar-tower 24/7 (base-load)? We’ve a lot of inexpensive land on the world desserts- on each continent and subcontinent!
https://www.solarreserve.com/en
2. What about geothermal heat pumps for heating and cooling of buildings?
https://www.youtube.com/watch?v=z3YWl1F6caM
or here https://www.youtube.com/watch?v=q9DP6v0IW1k
It makes a lot of sense to combine photovoltaic, wind, solar-base -load and geothermal heat pumps. 100% renewable – enough to feed all cars and buildings.
https://www.youtube.com/watch?v=QXx02iMsDqI
A big issue is a winner takes all attitude from people like Elon Musk and many other leaders in the drive to a carbon less future.
The other major issue for me, is that there are over a billion vehicle on the planet’s roads that will need to be replaced over a number of decades, and the way second hand vehicle from the developed world end upon the roads of developing countries where emissions standards are either not in place or, if in place, enforced. To overcome these obstacles, we do need multiple technologies, fuelsolutions and public transport models.
This discussion makes an interesting points, but like Luke above I see some pitfalls. I struggle to give it much weight for a few reasons.
The idea that we will have more GDP in the future with which to deal with climate change looks a little to hopeful. Already, climate change is reducing GDP. In the future, how will countries with flooding coastal cities and agri and aquaculture manage to have a growing GDP per person. Add a major regional war somewhere and the proposition looks very unlikely.
The main idea that forced measures is very sound. Economically its defendable. But politically it’s just not the way things work. In certain times and places it’s a specific measure that will catch on. I can think of carbon fees not catching on well, but coal phase outs and renewable portfolio standards catching on. In a world were action on this grave problem is very slow, we have to take what we can get.
My overall impression? an article written to give comfort to the fossil mafia and thus an attempt to keep the fossil road show – on the road.
“RES & -BEVs……fundamentally limited regarding the speed and extent to which they can grow” and justification is given based on electricity from RES competing in electricity markets and causing prices to collapse. This ignores, for example, power to gas (H2, SNG, etc) which can act as both a store of fuel, & a buffer for times of “too much electricity” and a way to de-carb industries that have so far been resistant (the petro-chem bunch). The issue of cost? Once carbon is priced in a way that reflects its external costs we will find that P2G is indeed an interesting route. In the case of subsides, one needs to take the beam out of the fossil-mafia’s eye before attempting to take the mote out of the RES industry’s eye.
BEVs & long distance driving? – fast charging? Furthermore not so difficult to implement on major axes (e.g. Rhone valley – with its multiple 400kV lines fed by multiple nuclear reactors = green energy). “Unless a new battery technology emerges” – I suggest you visit “Green Car Congress” (it’s a web site) – you might have your eyes opened.
“all of these green technologies are highly capital intensive” indeed & the “fuel” is free, although this was not mentioned.. The article then strays into Bjorn Lomborg territory with the either/or argument: about RES vs “sustainability and the implication that countries undertaking a “complex, large upfront investment” in RES – will do so all at once & in doing so have no spare cash for “supporting rapid economic development…….. for about 80% of global citizens”. No effort is made to define “rapid economic development”. Anyway, taking Africa as an example, off-grid electricity (thanks to PV) is making significant in-roads mostly without government “assistance” particularly in East Africa where, in the first instance it is displacing kerosene lamps. Could more be done – yes, is money a limiting factor, no. Adding: I know of one company in Sub-Saharan Africa that is also doing good business – no subsidies, no gov involvement
In the case of South Africa, RES from PV and wind (circa RND 0.5 – 0.6/kWh) is cheaper than elec from coal stations (RND 0.8) and the nuclear programme was cancelled – too expensive. The WACC curves were interesting – as was the hypothesis that RES will be very expensive in risky countries. I guess that’s why PV & wind are more expensive in South Africa than coal…. or er hang on a sec.
The section titled “what could go wrong” could have been written circa 1905 by somebody working for the horse-shoe industry against cars. “Myriad of alternative sustainability options under a technology-neutral framework” & those would be? I could name one: consumerism – developed countries use and discard far too much “stuff” – that since post WW2 has been designed to fail and not designed for maintenance.
The brief history of solar was entertaining – why not start at the Iron Age or Bronze age come to that.
Assertion: “getting anywhere close to 20% of our final energy from RES will require a total redesign of the power system with heavy investments in flexible power plants, long distance transmission lines, demand response and energy storage” – most Western countries have gas networks easily able to carry the (P2G generated) gas needed for those “flexible power plants”. Of course the TSOs & DNOs would love to make lots of “investments” – but it does not follow that there are other options.
The Lomborg development vs RES argument is revisited with the claims that RES will “divert unacceptable amounts of capital” away from the developing world. This assumes a fixed pot of capital. It is also contradicted by the authors WACC arguments (higher WACC in riskier places). If WACCs are higher in say South Africa for RES, then surely the same applies to capital for “stimulating compounding economic development in the developing world why would” & thus why would capital be deployed in these risky places.
One of the links goes to an article by the author: ” The Externality of Avoiding Fossil Fuels in which he claims that fossil fuels are needed to help 80% of the world achieve European levels of development. This ignores facts such as: 1. doing that will destroy the planet ecologically. 2. Development does not have to = Shanghai (implied by the use of photos). Example: Nicaragua. the favoured form of residential construction is concrete blocks (walls) and corrugated iron (roof) = hot & noisy. Alternatives = bamboo – grows well – lasts for ages & could offer considerable employment – carbon negative/neutral. However, according to the author what Nic’ & other places need is Shanghai 2 (and using lots of fossil fuels – naturally).
The reason developing countries love renewables is precisely because it brings capital in countries which struggle to attract capital. Moreover these investors are willing to take the risk to be paid in local currency when fossils don’t want to get anything which is not tied to the value of dollar.
“when fossils don’t want to get anything which is not tied to the value of dollar.”… possibly, you would need to talk to Hitachi in South Africa to find out how they get paid. Fact is, fossil stations in locations such as SA (or even the Gulf States, or let’s try Peru, Chile etc etc) cannot compete in elec auctions with RES-based stuff.
Yep, Lomborg-ism is pretty evident in this article.
” Anyone who thinks that you can have infinite growth in a finite environment is either a madman or an economist”
Please explain how come economy and everything will rise in value by 1% yearly except the price of CCS. This is the same line of thinking that left us with hundreds of aging nuclear power plants without the resources for their decommissioning.
Sorry, the warranties and promises are too weak, we have to quit emitting CO2 ASAP, and if this means no more highway driving, then be it.
Fully agree on technology neutrality though. Just get this carbon tax in place and it’s done.
Great article Schalk, thanks for posting.
I retain it is important to develop serious arguments against the “renewables do it better. Dot. ” way of thinking. But this article is completely lacking of objectivity and is an ideologic support, also in the references used, at least as well as the way of thinking I mentioned above. Very curious the “hystory of PV” arrested when big things start to happen. And what about the comparison of the development pace of carbon vs. PV not in % but in absolute values?