No matter who's running the government, America's "transition to a clean energy economy is irrevocably underway," the Natural Resources Defense Council asserted in its Accelerating into a Clean Energy Future report this week. Report co-author Ralph Cavanagh added, "The nationwide momentum for pollution-free energy is undeniable and irresistible because clean energy now costs less than dirty energy."
As if to confirm the Council's claim, the infotech giant Google announced this week by the end of next year, its global operations will be fueled 100 percent by electricity generated by renewable sources. ("The science tells us that tackling climate change is an urgent global priority," the company's press release explained.) This does not mean that Google gets its electricity directly from solar panels on the roofs of its data centers or from wind turbines churning away on its corporate campuses. The company basically makes purchasing commitments to renewable projects that offset the conventionally generated electricity that it gets from local utilities.
There is, of course, nothing wrong with a business legally adopting measures that it thinks are in the best interests of its customers and shareholders. If the company is on the wrong track, those stakeholders will let Google's executives know through their purchasing and investment choices.
But if clean energy really does cost less than dirty energy, then what is there to resist? In that case, surely the invisible hand of the marketplace will make the transition to a clean-energy economy irrevocable. So can we all put aside our worries about catastrophic climate change?
Not so fast. You see, policies are needed.
Google notes that during "the last six years, the cost of wind and solar came down 60 percent and 80 percent, respectively, proving that renewables are increasingly becoming the lowest cost option." Yet even as proponents insist that clean energy now outcompetes fossil fuels, they nevertheless want to enhance their irrevocablabilty with a little help from the government. As Google obliquely puts it, "We believe the private sector, in partnership with policy leaders, must take bold steps."
What might that "partnership" look like? Google doesn't say, but you can get a sense of what might be required by reading From Risk to Return, a new report from the Risky Business Project. This group is supported by the media mogul Michael Bloomberg, the Bush-era treasury secretary Henry Paulsen, and the hedge fund manager and prominent Democratic Party donor Thomas Steyer. Its report presents four pathways toward restructuring America's energy infrastructure, with the goal of cutting U.S. carbon dioxide emissions 80 percent by 2050.
While the paper does not favor any of those four pathways—renewables, nuclear, carbon capture, and a mix—it focuses mostly on the costs and benefits of the fourth, which reduces emissions via a combination of renewables, nuclear, carbon emissions captured from fossil fuels, and the transformation of transportation toward reliance on electricity, hydrogen, and biofuels. By 2050, the report projects, the extra expenditures for building out low-carbon energy production and consumption infrastructure would be more than offset by fuel costs. The authors argue that clean energy is unfortunately not yet ready to compete head-on with fossil fuels.
"The private sector alone cannot solve the climate change problem," the Risky Business report concludes. "We know from our collective business and investment experience that the private sector will take action at the necessary speed and scale only if it is given a clear and consistent policy and regulatory framework." What sort of policies do they think are necessary? First and more foremost, they want government to put a price on carbon emissions. From their point of view, this would level the energy playing field. In addition, they rightly want to eliminate tax incentives for fossil fuel extraction, end subsidized flood insurance in high-risk areas, and lower regulatory and financing barriers to clean energy projects. Also, they want companies to disclose material climate-related risks; presumably this would include risks related to capricious public policy.
Speaking of capricious public policy, what is the Trump administration likely to do with regard to energy policy—and, in particular, to renewable energy subsidies? As it happens, Congress passed legislation just last year that gave a three-year extension to the 30 percent tax credit for solar investment, then will ramp it down incrementally until it reaches a permanent 10 percent level in 2022. The 2.3 cents per kilowatt-hour wind power production credit remains through this year, and will subsequently begin dropping 20 percent each year through 2020. Republicans voted for these subsidies in exchange for Democratic votes in favor of lifting the 40-year ban on exports of crude oil produced in the U.S. Since these subsidies are already scheduled for a phase-out, it seems unlikely that the Trump administration will regard going after them as a high priority.
What about Ralph Cavanagh's claim that clean energy now costs less than dirty energy? Last year, the investment bank Lazard calculated that the levelized unsubsidized cost of utility-scale solar photovoltaic electricity—levelized means capital, fuel, and operation and maintenance are all taken into account—would range between $58 and $70 per megawatt-hour. For on-shore wind, it's $32 to $77. The cost of cheapest fossil fuel competitor, natural gas combined cycle generation, ranged between $52 and $78 per megawatt-hour. If Lazard is right, the clean energy transition does look irresistible. Who would want to resist cheaper energy?
On the other hand, the Energy Information Administration's somewhat higher estimates do not find that unsubsidized wind and solar will become cost competitive with cheap natural gas by 2022. Other research points out that increasing dependence on renewable energy means building back-up generation that can take over when clouds obscure the sun or wind dies down.
In any case, federal energy policy is not the only game in town. As the Natural Resources Defense Council report observes, one-fifth of Americans live in states that currently plan to get at least 50 percent of their energy from renewable sources by around 2030. It will be interesting to see how such states fare economically against states without such mandates.