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In this recent blog article I discuss how California and Germany are two large economies that have for decades had the biggest commitment to promoting clean energy in order to reduce CO2 emissions. The article focused on California’s experience but pointed out that Germany had followed a similar trajectory. The bottom line for California was that it had not reduced overall CO2 emissions for almost two decades as different constituencies within the clean energy coalition fought for reducing nuclear and big hydro rather than reducing CO2. This offset the gains from deploying wind and solar. The large California investment has significantly raised electricity prices but this has paid to satisfy agendas other than reducing CO2 emissions.
Michael Shellenberger (whom I have cited before) recently wrote this article on Germany’s clean energy efforts (called the energiewende) in Forbes magazine quoting extensively from this article in Der Spiegel. Der Spiegel is a center left publication generally favorable to clean energy and a believer in climate change and the threat it poses. The Der Spiegel article is highly critical of Germany’s results so far and even more critical of where they are going. CO2 emissions are stagnant and with nuclear being phased out they are more likely to rise than fall. German’s increasingly object to wind farms and electricity transmission lines. They don’t want nuclear and are having to replace it with coal. They do want clean energy but are increasingly reluctant to pay more as they already pay very highly for electricity. The rising political right are anti clean energy, much like Trump in America. The details between California and Germany differ, but the broad picture of failing to reduce CO2 emissions is the same. First, CO2 emissions reduction is not the only or even primary political agenda. Second, the reason for the stagnation in CO2 reduction going forward is simply that both economies have built as much renewables as can be sustained by current electricity networks. Germany has a higher percentage of renewables but its grid is highly integrated with its neighbours who are geographically close and can take surplus renewable energy. Further expansion of wind and solar in both economies now relies on adding large amounts of affordable energy storage. Storage deployment is in its infancy. Given time and technological development it may reduce in cost and scale sufficiently to allow renewable energy expansion. It's not a slam dunk. Batteries seem to be the leading contender. They currently are expensive and have insufficient life for daily recycling over twenty or more years. Even when they reduce in cost batteries are an ADDITIONAL cost on top of the cost of wind and solar. Given that wind and solar still need substantial government subsidy, adding storage will take more subsidy. Fundamentally, clean energy is a cost issue. At small scale the cost of renewables can be absorbed. As they become a significant percentage of energy the costs rise at an increasing rate as the grids have to add more and more costs to adapt. Renewable energy at the scale that California and Germany have achieved demonstrates the rising cost and the looming need for storage is demonstrating that costs will rise further. They are the canary in the mine. Energy costs around 8% of GDP today. There is significant resistance to the energy share of GDP rising which is what significant deployment of renewables entails. There is a lot of wishful thinking about CO2 reduction, as can be seen by all the political commitments to 100% renewable energy. These goals are aspirational. None have a plan to accomplish 100% renewable energy other than hope in technological improvement. Unfortunately wishful thinking is postponing the realization that we are failing to reduce CO2 emissions and are not on a path to succeed. Solar at current costs is already stagnating and will fall behind as storage becomes necessary. Stratosolar addresses all the cost problems of solar and can scale to be an affordable clean energy solution that reduces energy cost to less than 8% of GDP. By Edmund Kelly
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In previous blog posts I have commented on the stagnant world renewable energy investment level of around $250B since 2011 and the prospect that 2019 will be more of the same. However, while the investment level has stayed in this narrow range, the generation capacity it has purchased has continued to grow, mostly due to the falling price of PV panels from China. This pattern was a source of optimism as it was expected that prices would eventually decline to where subsidies were not needed.
Now, the latest International Energy Agency data for 2018 shows overall 2018 capacity additions flat with 2017 as China reduced its 2018 capacity additions over 2017 while trying to adjust its FIT subsidy policy. Flat investment and flat capacity combined imply flat prices. What this implies is quite negative for the renewable energy outlook going forward. As I commented previously, the lack of PV investment growth despite significant PV cost reductions was a sign that unsubsidized prices were still too high for a natural market expansion and subsidies were still required to sustain the market. The effect of China’s 2018 pull back on subsidies clearly reinforces this interpretation of dependency on subsidy. More significantly, if investment and capacity were flat in 2018 this implies that prices were stable and the era of rapid price reductions has ended, at least for now. To summarize, prices have not reduced sufficiently to sustain a normal unsubsidized market and prices have now stabilized, thus guaranteeing that subsidies are still needed and the market size will remain subsidy limited. The question is which way are subsidies heading? All the indications from China, the US and Europe are for reduced subsidies. This implies lower investment levels and declining renewable energy capacity additions going forward. CO2 levels continue to rise with growing fossil fuel usage. Renewable energy is not having an appreciable effect and based on stagnant to declining investment it will not have an effect. Wishful thinking needs to end and new options need to be considered. Nuclear is on the table but there is no political will, the cost would be enormous and the time to develop and ramp safe clean reactors is many decades. Given the limited options and their problems Stratosolar does not look like an outrageous candidate. By Edmund Kelly |
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