The Prospect for Alternative Energy in a Fossil-Fueled World

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In the month of July 2014 (an “average” month with peak summer electricity demand), the U.S. Energy Information Administration (EIA) estimated that the U.S. used 6.65 quadrillion BTUs of fossil fuel-generated energy (i.e., coal, gas and petroleum), 0.75 quads of nuclear, and 0.81 quads of renewables (i.e., photovoltaics, wind, geothermal, biomass and hydropower). That’s a total of 8.2 quads. That means 9.1% of the total energy consumption that month was from renewables and 80.5% was from fossil fuels. Compare this to five years ago: in July 2009, 8.3% of total energy consumption was from renewables and 81.9% was from fossil fuels.

Continued phasing-in of renewables is required as part of an overall supply mix. In spite of the fact that over the past several years, the cost of renewables has been declining faster than other fuel sources, renewables will not likely surpass fossil fuel resources until post-2050. A more plausible supply strategy goal is to strive for increases of 10% more renewables each decade coupled with the increased use of demand-side management, transmission & distribution (T&D) investment, energy efficiency and waste heat recovery. The challenges are numerous, but the rewards will be long-lasting. Here’s why.

  • We have the technology to increase renewables, but it won’t be easy, quick or cheap. An inordinate focus on supply ignores the necessary infrastructure investment required to support renewables within the current investment framework for fossil fuel development.
  • Renewables cannot replace fossil fuels in the near term because the cost of capital, rate shocks and costs to end users. Energy investment will continue to compete with similar investments in new technology, water infrastructure, urban growth in our cities, housing stock upgrades, railroads, highways and tunnels and bridges. But renewables cannot be ignored or postponed because of their lower operating costs, efficiencies, reduced emissions and sustainability benefits.
  • Increasing renewables capacity will require huge amounts of capital outlay and technical expertise which could consequently boost business development, workforce training and infrastructure upgrades. These investments will create a 21st-century power grid that is distributed, diverse and more resistant to the effects of a changing climate and/or security attacks.
  • The status quo, consisting of resource extraction, fuels, transportation infrastructure, generation, T&D, manufacturing, etc., has taken countless investment dollars and more than a century to build. It will not be radically altered but will be modernized for the future with competitive manufacturing, global trade and tax reform pressures incentivizing more accelerated decisions than regulatory fiats or mandates.
  • The sheer magnitude of energy required to be generated on a 24/7/365 basis is impossible to recreate using existing technology, land transfers, materials (i.e., rare-earth minerals) and infrastructure. New technologies such as those being developed by our colleagues at Ohio University related to algae- based fuels, waste-to-energy and electrochemical technologies are the way of the future. Bringing them to market on a commercial scale is the next order of business.
  • The intermittency, lack of storage, and relatively high up-front costs of renewables make them less attractive for energy-intensive and trade-exposed (i.e., “EITE” and internationally competitive) industries such as steel, aluminum, paper and cement. These challenges will need to be addressed with reliable solutions so that these industries—the building blocks for infrastructure, manufacturing and product development necessary for competition in future global markets—can continue to grow.
  • The resurgence of oil and gas has led to a quiet revival of manufacturing, supply and logistics, and associated industries in and around the Ohio River Valley that has become a major driver in the post-recession economic recovery. North Dakota led the nation in job retention and growth over the last five years due solely to the growth in the unconventional oil and gas from the Bakken shale play.
  • The shale resources appear driven for global export value rather than indigenous national use. Similar development and trade incentives for clean technology and renewables for export value are equally important for advancing U.S. manufacturing and export product goals.
  • Experience in coal emissions controls has shown that the costs of mitigation are so high using existing technology, that it is not currently economically feasible. If mitigation follows a scheduled phase-in over a reasonable time frame and is coupled with significant legislative action (e.g., cap and trade, carbon tax, etc.), the adoption of low-carbon strategies such as renewables, nuclear, and carbon sequestration can be incentivized.
  • Electric generation technology, policy and market factors have reduced the cost to install renewables to the point that they are at parity with the cost of installing electricity from fossil fuel sources in many applications such as rural/remote areas, military installations and microgrids. Over the next five years, grid parity will escalate and could be accelerated by a market clearing price for carbon, a fuller inclusion of the negative externalities of fossil fuels, and the game-changing issue of electricity storage.

Fossil fuels enjoy 400-500% more national benefits and incentives than renewables—better balance in this mix is required moving forward. This necessary balance is already recognized by our military, intelligence and international energy agencies. Cities and countries where 70% plus of future global populations will reside also endorse a more balanced approach. Recognition is similarly advancing in global financial communities as investments in non-fossil projects are advancing rapidly. Aside from supply, the focus on network modernization, efficiency, materials science, and energy storage will impact the timing and depth of a global market acceptance of non-fossil alternatives.

CE3 Blog by Michael J. Zimmer, Executive in Residence & Senior Fellow, Ohio University with Scott Miller, Director, CE3; Edited by Elissa E. Welch, Project Manager, CE3

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