September 3, 2013 | 7
In an article for Slate, Bjørn Lomborg calls for fewer subsidies and more R&D funding for renewable energy. Here is the crux of his article, “Green energy needs to be cheaper, so let’s invest in R&D instead of subsidies”:
The solution is to innovate the price of renewables downward. We need a dramatic increase in funding for research and development to make the next generations of wind, solar, and biomass energy cheaper and more effective.
Our own Ashutosh Jogalekar, aka The Curious Wavefunction, chimes in with “Renewables: Fewer subsidies and more R&D please”. Please read the whole piece, but in the meantime here is an important section (emphasis mine):
Heavily pushing renewables right now is like trying to push a flawed model of a new computer into the market. It might feel good at the beginning but it’s only going to be hugely inefficient, expensive and pointless for the future. Better to slow down the expansion and fire up the innovation.
While well intentioned, I think this view of renewables misses some of the biggest challenges. This is a complex and nuanced issue and the reality is that there are more factors at play than just R&D funding and a need for technological innovations.
Lomborg quotes International Energy Agency (IEA) data to make the point that the pace of renewable energy adoption has been pitifully slow despite incentives and that the outlook is not improving:
13.12 percent of the world’s energy came from renewables in 1971, the first year that the IEA reported global statistics. In 2011, renewables’ share was lower, at 12.99 percent. Yet a new survey shows that Americans believe that the share of renewables in 2035 will be 30.2 percent. In reality, it will likely be 14.5 percent.
But this ignores many things, and by looking at the global picture we lose the success stories in individual countries and regions, of which there are many, that illustrate that policy frameworks and infrastructure decisions have as much or greater influence on the success of renewables than the state of technology.
To Lomborg’s proposal to “innovate the price of renewables downward”, I would point to Texas as an example where renewables compete handily with natural gas and coal-fired generation today. Back in June of this year, I wrote about a report detailing the relationship between natural gas and renewables. In the short-run, renewables are cost competitive with thermal generation, due in large part to the conditions Texas has set up: an ISO (ERCOT) where generators bid electricity on the lowest variable cost, which almost always means wind generation (even with low natural gas prices) and transmission lines connecting the renewable energy zones in the western part of the state with markets in the east. All of this buoyed by forward thinking policy decisions by then-Texan Governor George W. Bush.
So there is clearly not a technical limitation with current renewable energy technologies. If you calculate the Levelised Cost of Electricity (LCOE) for wind and natural gas, you will see that wind already beats out natural gas (again even with low fuel prices). In the long-run, it is not out of the question to expect that the LCOE will improve for renewables (wind), and the story gets better as you factor in water and carbon constraints.
As for solar, the prices have been dropping like crazy in recent years. The Economist charted the price of solar PV over time from 1977 through 2013 and the drop in price is staggering:
Here’s the explanation from The Economist:
Swanson’s law, named after Richard Swanson, the founder of SunPower, a big American solar-cell manufacturer, suggests that the cost of the photovoltaic cells needed to generate solar power falls by 20% with each doubling of global manufacturing capacity. The upshot is that the modules used to make solar-power plants now cost less than a dollar per watt of capacity. This means that in sunny regions such as California, photovoltaic power could already compete without subsidy with the more expensive parts of the traditional power market. Moreover, technological developments that have been proved in the laboratory but have not yet moved into the factory mean Swanson’s law still has many years to run.
You’ll notice a difference of over $1 for the price per watt of a unit – and that’s because the installation price includes other soft costs such as permitting that increase the price. There is a solid overview at The Atlantic that goes into much detail than I will here, so go read that if you’re interested. If you’re looking for innovation, some less technical areas like permitting need some attention.
As a local example, the price of residential solar PV in Austin, Tex. hovers around $2/W installed. The price has dropped so much that the local municipal utility Austin Energy is reducing incentives for residential PV systems. So if anything, incentives as a policy mechanism to bring about wider adoption and thus lower per unit prices of renewable technologies is working. In general, I would agree that redirecting funds from subsidies to R&D would make sense in cases where subsidies are no longer needed.
Earlier this summer, the IEA released its Medium-term Renewable Energy Market Report that finds existing renewable projects are cost competitive in many countries:
In addition to the well-established competitiveness of hydropower, geothermal, and bioenergy, more renewables are becoming cost competitive versus fossil fuels in a wider set of circumstances. For example, wind competes well with new fossil fuel power plants in several markets, from Brazil to Turkey to New Zealand. Solar is attractive in markets with high electricity peak prices, for instance if these are set by oil-fired generation. Finally, generation costs of decentralized PV have become lower than retail electricity prices in a number of countries including Italy, Spain, Australia, but also Denmark and (southern) Germany.
Put all of this together and you see that policy mechanisms have as much if not more to do with the price and competitiveness of renewables today than just needing more R&D.
Now there is definitely a place for continued and increased R&D. Energy storage is an obvious area of study because that would address some of the intermittency issues with wind and solar, although as detailed in the the Texas example renewables will increasingly become baseload. If anything, natural gas can act as a “battery” right now. Nanomanufacturing holds promise to revolutionize how batteries store energy and could transform both the electricity and transportation sectors. New communication protocols and smart devices will change how we interact with the electric grid and consume energy. For more on energy R&D, I recommend reading Robert Fares posts here and here.
But to push off gains today in favor of innovation tomorrow ignores the non-technical challenges renewables face – we can craft smart policies that support wider adoption of renewables today while searching for the Next Big Thing.