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Let’s Come Clean: The Renewable Energy Transition Will Be Expensive

by Lucas Toh |October 26, 2021
wind turbines and solar panels behind a chainlink fence

Photo: Kindel Media from Pexels

The head of the International Energy Agency, Fatih Birol, has been claiming that Europe’s surging energy prices have nothing to do with the continent’s shift toward renewables. Last month, he said “It is inaccurate and unfair to explain these high energy prices as a result of clean energy transition policies.” The statement may be politically astute, especially as the IEA pushes governments to triple spending on clean energy in order to cut emissions, but it is also wrong. Much of Europe’s current energy squeeze can be traced to its rapid transition to renewables. In fact, economists at the University of Chicago recently found that higher renewable penetration drives up energy prices.

Environmentalists have been telling us that wind and solar mean cheaper, cleaner energy. They herald a future of electric vehicles quietly zipping around on electricity that created thousands of green jobs. If all of this is true, why are we suffering from a global energy crisis just months after adding record amounts of new renewable capacity?

The reality is that wind and solar are only cheap during the early stages of transition. Until now, renewables have been viable because of the massive base of fossil fuel generation that supplies most of our electricity needs and also stands in for intermittent wind and solar. But this changes as renewable penetration increases. Relying on more and more fossil fuels to shore up a growing share of intermittent renewables becomes increasingly costly and risky, as Europe is finding out. Then, moving to the next stage of the energy transition requires massive spending to get past using fossil fuels for baseload and balancing electricity. To be clear, these costs are justified, given that the costs of unabated climate change will be far higher. But continuing to push the false narrative of abundant and affordable clean energy is a huge political risk that will backfire when the public has to pony up for a bill they weren’t expecting.

On the surface, Europe’s woes are due to soaring natural gas prices as the global economy bounces back from the COVID-19 pandemic. But the underlying problem is that as countries like Germany and Britain have built out their wind and solar capacity, the energy supply becomes more unpredictable and variable, thus increasing reliance on gas to make up for when the wind doesn’t blow and the sun doesn’t shine. And gas prices are extremely volatile. After an entire summer of mild wind and gray skies, Europe has been caught on the back foot, forced to pay record prices for liquefied natural gas.

Getting past fossil fuels means finding ways of storing the excess electricity that’s generated when there’s too much wind and sun and releasing it later when there’s not enough. Right now, we can do this cheaply with pumped-storage hydro. But pumped-storage hydro only works in places with the right topography and water resources. Battery storage is often touted as another low-carbon solution that can address the intermittency problem of wind and solar. However, MIT researchers estimate that battery storage costs need to fall by 90% to replace fossil fuels, which few believe will happen in the next decade. Meanwhile, green hydrogen has also been attracting a lot of attention lately. Despite the hype, it is even further behind in development than battery storage and may only become cost-competitive in 2050. All of this means we will have to continue relying on gas while spending trillions to improve and deploy storage technologies.

To make matters worse, we are quickly using up the best locations for wind and solar. These are places near to existing transmission lines that receive strong and steady wind or sun. To build out more renewables, we will need to lay out thousands more miles of transmission lines to reach remote windy and sunny areas. Peter Fox-Penner, author of Power After Carbon, estimates that the United States’ transmission grid will need to expand by at least 50% in order to do this. This is a conservative projection, because the country will also need 90% more electricity by 2050 to electrify cars, factories, and home heating.

All of this new technology and infrastructure will have to be paid for by someone. While large companies and financiers can provide much of the upfront investment, public spending and higher energy bills will have to make up the rest. People need to be prepared for rising prices and mushrooming public debt; we already know what happens when they are caught off-guard. The Yellow Vest protests that erupted in 2018 over fuel tax hikes paralyzed France and continued for more than a year. And now, European leaders are frantically putting subsidies in place and firing up coal plants to prevent mass unrest.

Environmentalists, politicians, and regulators need to be honest about what it will take to avert the worst catastrophes of climate change: $30.3 trillion of investment in clean energy and infrastructure by 2030, according to the World Energy Outlook 2021. To move beyond fossil fuels, we cannot mislead the public about these costs. Telling them that a green future will come easy may get things going in the short-term, but will backfire as the world moves into the thornier stages of the transition. Our leaders must come clean about the challenges we face or risk pushback later when the world has even less time to lose.

Lucas Toh is an International Fellow in Columbia University’s Master of Public Administration program with a concentration in Energy and Environment. He serves on the board of the SIPA Energy Association.


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Joel
Joel
11 months ago

There are definitely some good points here, but I’m confused about the central argument. You say at the beginning that the International Energy Agency (IEA) is misleading us by saying that the energy transition will not be expensive, but then at the end you say “We need to be honest about what it will take to avert the worst catastrophes of climate change: $30.3 trillion of investment in clean energy and infrastructure by 2030, according to the World Energy Outlook 2021.” That’s published by the IEA, so that means they are being honest about it.
There is a difference between “investments” and “costs.” The investments in clean energy will end up reducing costs down the road.
It seems misleading to me to say “why are we suffering from a global energy crisis just months after adding record amounts of new renewable capacity?” because renewable energy still makes up only a tiny fraction of global electricity generation. Yes, the transition period will be difficult, but the faster the energy transition goes, the less time we’ll have to worry about fossil fuel volatility.
Would also recommend this article on the energy crisis. https://www.salon.com/2021/10/25/is-there-an-energy-crisis-not-really–fossil-fuels-are-collapsing-and-its-high-time/

Matt
Matt
9 months ago

Some problems I can see with the arguments here. The reference to renewable energy driving up prices states clearly “these estimates do not account for the possibility of future cost reductions due to RPS-induced technological progress.” In other words, if the trends of the last two decades continue and renewables get continually cheaper than the benefits could actually outweigh the costs. And this is the crux of what is wrong with this article in my mind. It’s talking only about short-term costs which could be vastly outweighed by long-term gains – even without accounting for climate damages (which could be enormous and also appear to be quite poorly valued by economists and policy admin “experts”).

Also Matt
Also Matt
Reply to  Matt
9 months ago

I think the point of the article is that the long term gains are worth it, but the short term costs of transitioning are indeed very high. And that is the big political problem that will derail the transition without a better approach by politicians to address that.

Ralph
Ralph
Reply to  Also Matt
8 months ago

I agree. A big price tag is always a tough sell; politicians glossing over the costs of the entire package is damaging to everyone. Planners on all levels need accurate data to budget accordingly. The needs/gains/justifications should be self apparent to most people, but we could use more transparency getting there.

Willy M Sierens
Willy M Sierens
Reply to  Also Matt
3 months ago

Long term gains are anybody’s guess, upfront costs are certain.

Geoman
Geoman
Reply to  Willy M Sierens
2 months ago

Exactly. You are saying pay me $1 trillion today, because tomorrow it might cost more than $1 trillion in damages.

But these are likely costs that will be incurred by our children and grandchildren. So it is a very hard sell. There is also some uncertainty about the damages – they won’t be born equally by all people in all countries. Bangladesh may flood, but Wyoming might be just fine.

Daniel Perez
Daniel Perez
7 months ago

There is only one reliable, scalable, safe, and CO2 free way to generate electricity. Nuclear.

Oskar
Oskar
Reply to  Daniel Perez
7 months ago

I believe the author of this piece is incredibly happy that you took the bait.

Daniel Perez
Daniel Perez
7 months ago

France and Germany are our two real world laboratories. France with nuclear is low CO2 and low electricity prices. Germany with its energiewende, adds more coal, more CO2 while electricity prices go up.

Bernie Cuomo
Bernie Cuomo
Reply to  Daniel Perez
7 months ago

Be careful, NUCLEAR POWER = SOLUTION! IS $ENSONED SPEACH!

Oskar
Oskar
Reply to  Daniel Perez
7 months ago

Talking to French engineers and scientists tells me they’re facing huge problems protracted in the future on how to manage an ever increasing mountain of radioactive waste. That’s just pushing the bill to future generations…

Willy M Sierens
Willy M Sierens
Reply to  Oskar
3 months ago

Exactly. There is no free lunch.

Mathew Molk
Mathew Molk
Reply to  Willy M Sierens
17 days ago

Do either one of you know what nuclear waste is?

It’s not the glowing green goo you see in the movies. Most of it is things like a pair of boots that had a particle stuck in then that the safety people couldn’t dig out.(Personal experience) Rags, gloves and Tyvak suits, A wrench that checked “hot” A shirt that brushed against a bit of dust. 90% of “Nuclear Waste” is so low that you get a bigger dose standing bare headed in the sun at lunch time. I don’t know about France but in the the threshold of what Safety will allow out the door is REALLY low. The safety precautions are that tight.

I don’t know where you guys are talking to the “engineers” but if they told you they did’t know where to get rid of “all” the nuclear waste ask them what they are going to do with the Megatons of captured fly ash and clinker form the coal plants.

Just FYI All the waste generated by the 70 odd US nuc plants since Shippingport went on line over 60 years ago is about the same volume as the amount of toxic waste generated by an coal plant in only 3 years. To put that in perspective 3 Cubic Yards of High level waste (much of which can be cycled) and ZERO gassious emissions compared to over 10,000 cubic yards of toxic solids that leach into the ground no matter where thy are dumped, to say nothing of the gasses that go up the chimney and cause acid rain.

Are you sure the French and Germans were not talking about the waste from coal plants,,,,and not the minuscule amount of nuclear waste.

Geoman
Geoman
Reply to  Oskar
2 months ago

All the nuclear waste ever made in France has been vitrified and is stored in a single building in Le Hague France. It’s not a mountain, it’s a molehill. It will eventually be stored in tunnels in Bure France.

2 kg of waste per year per person is produced. Only 200 grams of that is long lived – the rest decays to nothing in 30 years. They also recycle 96% of the spent nuclear fuel.

Oskar
Oskar
7 months ago

Energy company shareholders have made mountains of money off people’s back. Now these people must also clean up after said shareholders… Capitalism without legal accountability is theft.

raj
raj
3 months ago

This article does not address the cost of materials and cost of creating wind and solar energy and the disposal of batteries and turbine blades, including environmental costs.
GDP is closely tied to energy and that correlation is in plain sight and is being born out when energy production is constrained, physically, thru lack of investment, choking regulations and a fickle government…inflation and recession are almost here.
A very viable source is fusion power which has reached net positive power at experimental level and will take focused investment and government backing, almost war footing like, to get it to commercial level. In short all forms of energy need to be developed without demonizing fossil or nuclear, for economic development and welfare of people all over the world.