Pure Market Economics and Job Creation Underpin the Rapid Migration to Clean Energy
An old school chum who happens to be ultra-conservative comments: Depend on this: everyone in America and the Western industrialized democracies WILL have non-polluting electric vehicles, re-charged with electricity produced by renewable resources, when it makes economic sense for the market as a whole and for individuals…and not one minute before.
I don’t disagree, but I have a few different responses that I hope will clarify what you’ve written here:
1) Yes, Pure Market Economics Is the Ultimate Driver. The entire premise of my most recent book (Bullish on Renewable Energy) is exactly your point: clean energy (or anything else) that doesn’t make sense economically will not survive–nor should it. Here, the power of several different aspects of pure market economics, all occurring at the same time, is rapidly bringing an end to our traditional energy generation infrastructure. I think everyone living in the developed world understands this at some level. The cost of fossil fuels can go nowhere but up over time, as resources get scarce, and extraction, transportation and refinement continue to get more pricey. Add to that the legal risks of spills, contaminated ground water, revelations of the toxicity of things we had claimed to be benign, pipelines that burst, tanker trains that become derailed, etc.
Simultaneously the cost of solar and wind continues to plummet, as do peripheral products and services. For instance, the cost of energy storage solutions is following the same downward path, bringing along with it an array of side benefits whose values are now starting to be priced in: ancillary services to stabilize the grid, the integration of more variable resources, facilitating smart grid, etc.
But enough of my observations. Royal Dutch Shell itself says that, by 2060, essentially all the energy on the planet will come from solar. OK, there we have it: 45 years. That’s too long, but at least it’s a starting point. My book presents fourteen independent reasons why I believe that this will happen far sooner than most believe–thirteen of which are routed solely in pure, unadulterated market forces. Thus, in the final analysis, we’re not arguing about whether this change-over will occur, but rather the exact date.
I’m reminded of the joke in which a man approaches a woman at a party, and asks her in a low voice, “Pardon me, this may sound like a strange question, but out of curiosity, do you think you would sleep with a total stranger if he offered you a million dollars?” The girl blushes, obviously flustered, but ponders the question for a moment, and finally responds softly, “Wow. I’ve never thought of anything like that….I guess….I mean….I suppose I would.” The man says, “By the way, I find you quite attractive. Would you sleep with me tonight if I gave you $500?” The woman, now shocked and infuriated, barks back, “Of course not! What kind of girl do you think I AM?” The man replies calmly, “Oh, we’ve already established that. Now we’re just negotiating the price.”
So what is this date in question? Well, first of all, it’s not a date in the sense of a single calendar day of a certain year. We’ve already seen that huge businesses like Walmart realize that they can make their own electricity with solar PV less expensively than they can buy it from the power utility. At the other end of the spectrum, we have heavy, long-distance aircraft; it will be a long time before something can compete in this space against the superior energy and power density, both gravimetric and volumetric that are offered by fossil fuels. Thus, we’re talking about a date range during which the consumption of fossil fuels is reduced to a small fraction of what they are now, so that the Earth’s natural carbon sinks can begin to gain ground against the current unacceptable high level of CO2.
OK, so what is this “date range?” Almost all our scientists warn that another few decades of ever-escalating emissions will cause irreversible damage to our environment. But the oil companies do, in fact, seem to be hellbent on extracting and burning fossil fuels until the very moment at which this becomes economically unfeasible, and it looks very much like they’ll get their way. You’re right, nothing on this planet changes (and especially at this scale) if that transformation isn’t driven by the marketplace. Yet again, I have a great deal of ammunition to the effect that these market forces are working far more quickly and effectively than most people understand.
2) The Way We Do the Cost Accounting Matters — And It May Change. Yes, this economic shift will happen whether or not our civilization begins to price in the externalities of fossil fuel consumption. Keep in mind, however, that we all know that there are enormous costs associated with the emissions, and that currently no one appears to be absorbing them–yet all of them wind up somewhere. The costs of immediate, direct damage to our bodies in the form of new cases of asthma, lung cancer, etc., are born by our healthcare system. Coal is by far the worst culprit, as, in addition to vast amounts of carbon, it releases many far worse pollutants, including oxides of nitrogen and sulfur, cadmium, selenium, mercury, thallium, and a whole array of different radioactive isotopes.
Almost all of the long-term environmental damage in the form of climate disruption, ocean acidification, biodiversity, etc. goes in a different direction; it’s passed straight on to our children and grandchildren. We can live with droughts and small rises in seal levels. But can they live with the devastation of the food supply, wars over potable water, and the relocation of a huge percentage of the world’s population whose homelands in and around many of the world’s great cities are now underwater?
Yet I’m betting that this passing the buck won’t continue forever. You can be the staunchest Libertarian the world has ever known, and you will still recoil at cities that look (in midday) like the one shown here.
As a result, there is a good chance that clean energy, as a competitor in the marketplace, will benefit materially by regulation. Obviously, attempts at intergovernmental agreements have to date been abject failures. Yet individual counties have made great progress here–even the U.S. In my post “Coal Industry Will Not Go Gentle Into That Goodnight,” I present the not-so-amicable conversation between the U.S. EPA and the coal industry and note that, while both parties are digging in their heels, it’s clear that the coal people will eventually lose this battle. This loss has only one cause: the common American voter who, while he was totally ignorant of the horrific facts surrounding coal until a few years ago, is now rapidly becoming aware of the issues at stake and will make a stand. More people every day are refusing to be a part of the generation of selfish slugs that knowingly ruined our planet.
Again, certain regulations will result from this that will make clean energy more competitive, by forcing the generators and consumers of fossil energy to pay its full and comprehensive costs. We can expect to see the limitation of emissions, the imposition of taxes, a shift in the beneficiaries of the subsidies, and the offering of incentives for consumers and business, all of which will accelerate the transformation to clean energy.
3) Job Creation Is a “Hot Button” Of Amazing Proportion. If you really want to get Americans riled up like a rodeo ring full of snorting bulls, wave the red cape of jobs in front of their faces. Voters are catching onto the sad fact that the U.S. is largely sitting on the sidelines when it comes to cleantech. Congress bickers with one another while the rest of the world has started to enjoy the fruits of job growth here–the industry that is destined to dominate the 21st Century. As I wrote in my article The Renewable Energy Industry Is All About JOBS just before last November’s elections:
This political campaign ad from the woman running against Mitch McConnell for a U.S. Senate seat in Kentucky reminds me of an important issue—perhaps the only important issue—driving the ultimate success of the renewable energy industry in this country: the promise of jobs.
The ad depicts an out-of-work coal miner from Eastern Kentucky, providing Ms. Grimes the opportunity to promise how she’ll put this fellow and thousands like him back to work. Never mind that he works in what is arguably the world’s deadliest (legal) profession; the quality of the work isn’t really the point here, rather, that the fossil fuel industry claims to be all about jobs.
They hope you won’t look into this too closely and see that there are 6.5 million jobs supported by renewable energy worldwide. That’s not a promise, by the way; it’s 6.5 million weekly paychecks. They also hope you don’t know that EnergyFactCheck.org hosts literally hundreds of articles that describe the huge profusion of jobs opening up every day in the U.S., as solar, wind and the rest continue to expand.
So there you have it: three reasons that you’re right: change here really does come from the forces of market economics, though this subject is not 100% straightforward.
Craig,
A couple of comments:
1. First, We agree on the concept of the “date range”… but you have not fully factored in the shifts on both sides of the market competition. Wind power is cheaper than coal, but intermittency carries a cost on providers that is represented in the marketplace by a reduction in the price of fossil-produced energy. So wind penetrated until the market shifted, and then it stalled. The market will have to shift again – through either a massive buildout in grid capacity and grid storage or an investment in Windfuels – in order for wind to resume its growth trajectory.
Right now, solar power is undergoing a massive growth cycle. But solar power hasn’t truly reached parity yet… it just has a market advantage from peak prices that are a direct result of a short period during the day when demand exceeds supply capacity – so pricing must increase until demand is reduced… But if solar continues its current buildout… until maybe it gets to 1% of the grid energy… Then much of that peak pricing will go away, and the growth in solar will stall for a while.
This isn’t pessimism. I think there will be legitimate growth in both solar and wind over the next decade. I suspect wind will gain another ~5-8% of the total grid energy, and solar may grow to as much as 2-3% of grid energy… That is FANTASTIC growth, and it should be respected as such… But it will take a very long time before we free ourselves from fossil fuels entirely.
2. Fully agree. Well done.
3. Agree for now… but this will disappear as an issue by the 2016 elections (U3 will be under 5%), and the republicans won enough seats in 2014 to block everything until the next congress convenes. So if the campaign hinges upon the promise of jobs, and almost everyone who wants a job has a job, it will be less compelling.
Anyhow, this was a great post. I hope your conservative friend comes along to respond here.
There is a certain delusion that we agree to in our economic system. We think that money is not printed as needed by a private corporation. We think that markets are “free” and not controlled. We think that markets can solve every economic problem. But the petrochemical industry is not under the same delusion. It is very politic of them to say that solar will rule the world in 45 years. It certainly sounds like we are all on the same boat and pulling in the same direction. It makes an excellent sound-bite, but the history of the petrochemical industry is all about what will sell more oil. Now giving lip service to renewable energy is putting on a good suit of clothes. However the valuation of oil companies depends in great part upon the reserves in the ground. We are told that if all the reserves in the ground are produced carbon levels in the atmosphere will be far beyond catastrophic levels. A market is not going to reconcile assets that can’t be used with a companies value. It is people who will either say we have had enough or will suffer the consequences. Oil companies are betting on suffering … and they will tell us that they have to because of their stockholder demands.
Externalities that are exploited by companies are rewarded by markets. This gives us little incentive to correct the market any more than we have an incentive to remove the subsidies for fossil fuels that Bloomburg reported were 12 times what is received by renewables. http://www.bloomberg.com/news/articles/2010-07-29/fossil-fuel-subsidies-are-12-times-support-for-renewables-study-shows We desperately. want to think that our system is working, but our failure to correct these problems is telling us that it is not. A few thinkers and writers have already recognized what we have is the very nature of a market failure which many simply don’t want to correct. http://www.econlib.org/library/Topics/College/marketfailures.html Eventually more will come to understand the scope of the problem. Saying we need to adjust our cost accounting is a bit too kind.
But people do understand work. What they understand can be quite different. In the US we think of economic possibilities. In many places of the world family and community are much larger considerations. Work there can be the pride of providing or an escape from too many compromises. Sadly we in the US thinks that the entire world shares and understands our perspectives. In this we are somewhat insular.
There is another joke that may apply. Someone jumps out of a tall building and as they pass each floor they yell out, “OK so far!” We are like that person convinced that our path is correct, and the Divine smiles upon us simply because we have not yet observed something to challenge our view.
Craig, I appreciate your positive perspective, but at what point should a corporate adviser stop telling their clients what they want to hear and attempt to widen perspectives?
Nowadays’ bioenergy for cars – both first generation (fermenting biomass to ethanol) and second generation (gasifying biomass to synthesis gas) is a hoax and not a carbon sink. On the contrary on account of modern agriculture’s and forestry’s dependence on fossil oil.
A true carbon sink would be re-energizing CO2 to fuels with the sun. I recommend you to read Ellen B Stechel & James E Miller from Sandia NRL in Journal of CO2 Utilization 1 (2013) 28-36: “Re-energizing CO2 to fuels with the sun: Issues of efficiency, scale and economics”.
Best regards
I agree.
Biofuels, ethanol in particular, have significantly increased the price of food. There may be some situations where biofuels make sense, but certainly it does not make sense here in the U.S. to add ethanol to gasoline. But now that it is being done, there is a vested interest in continuing to do it because of the profits made by the ethanol industry.
Today our focus is on carbon and “re-energizing” carbon would seem to be a solution for this problem, but I am concerned about the larger lesson to be learned here.
In the article Craig made a little observed point. Pollution from burning fuels is not just limited to carbon. While the point was being made about coal, I have doubts if going forward if “burning” anything, which assumes that the atmosphere is a valid pollution sink, (for other chemicals) is going to be a viable option. Why should we be putting time money and energy into vast solutions that are at best only a bridge.
Iceland has the lowest CO2 footprint mostly geothermal, Germany is 70% GREEN with recent wind and solar investments, Brazil is running on Moonshine almost carbon neutral. 😉 Solar is not the final answer, it’s a 25 year bridge, then replace the panels, it has been around for 35 years. Remember President Carter installed them on the White House, only to have them ripped off the next term by President Reagan? 35 years of sales and less than 2% global solar power?, we’ll need to add 2% a year globally for the next 49 years to get to 100% solar power,and replace them all at least once in 25 years. Maybe if all the people not working today got hired to make or to install solar on all our public buildings, armed forces buildings, schools and Universities etc…………..not likely, maybe by 2050 big brown energy will go green, we all can still dream, only their willing conversion may be toooooo late!
Jobs for the future are an issue for our grandchildren. Many jobs have already been eliminated by automation and more will be in the future as robotics continue to develop. The old,union jobs that really built our middle class after WWII are not coming back. Perhaps there will be some jobs in assembly and more in maintenance but our entire model of labor and economic success is going to have to change and at the same speed as you project for our conversion to solar.
At least many folks like you, Craig, are talking about developing new energy but few are addressing the future of our economy based on the value of labor.
The whole issue of jobs in the 21st Century is a tough one, especially for young people in the U.S., who, for a number of reasons, are supremely unqualified to complete in the global economy. However, some say that cleantech itself is the springboard into a robust new job market. Please see: http://2greenenergy.com/2014/12/08/third-industrial-revolution/.
Clean power from a combination of wind and solar combined with some level of storage may be capable of supplying all of the energy we need. There is a growing movement of minimalism when it comes to utilizing earths resources. The utilities and fossil fuel suppliers are banking on consumerism as identified in the past. Big cars. Big houses. Lots of energy use.
We as consumers are capable of using less. We can plan to run the dishwasher and laundry at seperate times at lower usage rates. We can better insulate our homes and install sufficient insulation and sealing to lower our requirements. We can get smarter as consumers. We can demand more for the dollars we spend.
That’s absolutely correct. I few years ago I went on a tear with several posts inside of a couple of weeks week on this exact subject, i.e., “less is more,” or, as I like to say, “living large means living small.” Here’s an example: http://2greenenergy.com/2011/12/26/energy-conservation-2/