https://www.project-syndicate.org/onpoint/green-energy-transition-economic-competitiveness-by-jules-kortenhorst-2020-10
The Key to Future Competitiveness
Oct 12, 2020JULES KORTENHORST
The winners of the future global economy will
be the countries that moved decisively to replace fossil fuels with clean,
renewable energy sources. Unlike the United States, China, most European
countries, and others clearly have gotten the message, and are capitalizing on
the rapidly falling costs of wind and solar.
DENVER – As countries around the world struggle
to recover from the COVID-19 pandemic, the main focus must be on human health
and economic wellbeing. But there is also an opportunity for the response to
create both short-term benefits and longer-term economic advantages. Those
countries that seize the moment could gain a competitive edge for decades to
come. By orienting their recovery packages around sustainable solutions, such
as those outlined in the European Green Deal, governments can chart a course
toward a future that includes improved health, better jobs, lower energy costs,
and sustained economic growth.
The direct health benefits of clean energy are
now widely recognized. As we have all seen during the pandemic, reducing
fossil-fuel use almost immediately results in cleaner air, water, and land.
Moreover, these benefits accrue disproportionately to the marginalized and
lower-income communities that have long suffered the most from fossil-fuel
pollution. To be sure, an economic downturn is not the way to reduce emissions
over the long term; that will require sustained, structural change. But the
crisis at least will have reacquainted the residents of many urban areas with
the taste of breathable air.
In addition to improving public health,
replacing fossil fuels with clean energy will create more jobs quickly, and many will be
safer than what came before. Solar, wind, and battery-storage projects can be
rapidly deployed, boosting employment in a variety of sectors and settings,
from factories and installation to maintenance and repairs. And that doesn’t
include new sustainable-infrastructure projects to build transmission lines,
electric-vehicle charging stations, and electric rail. Yet another source of
new employment will come from constructing new net-zero-emissions buildings and
retrofitting existing ones for energy efficiency.
While many world leaders now clearly understand
these direct benefits, they are only beginning to grasp the overall economic
advantages that clean energy brings. Already, new clean-energy sources are
often cheaper to build than new coal or gas plants are.
More to the point, building new clean-energy
facilities is already – or soon will be – cheaper than even operating existing coal or gas plants. With solar and wind costs having
fallen by 60-80% over the last decade, purchasing the fuel to run an existing
coal or gas plant is rapidly becoming a losing proposition. And as deployment
of clean energy continues to be scaled up, learning rates are driving cost curves down even further,
accelerating the transition.
Moreover, it is a misconception that electric
grids with a high composition of wind and solar power cannot operate reliably.
Many European economies already run their power systems with over 50%
renewables on a daily, monthly, or (in the case of Denmark) annual basis.
Simulations from the US Department of Energy,
energy utilities, and other researchers find no reliability barriers to
generating 90% of annual
power consumption from
zero-carbon sources using today’s technologies. In fact, a recent study by researchers at the
University of California, Berkeley, shows that renewables could be scaled to
deliver 90% of US electricity by 2035 “at no extra cost to consumers.”
The possibilities for clean energy don’t stop
there. The world also has an opportunity to shift away from fossil fuels in
buildings and vehicles. For buildings, the Rocky Mountain Institute has
published studies showing that technologies like
electric heat pumps produce lower emissions and are more cost-effective than
gas-powered alternatives in almost every US state. These solutions also
dramatically improve indoor air quality, because burning gas indoors can
emit even more air pollutants than what the Environmental Protection Agency
allows outdoors.
In transportation, the cost of batteries
has fallen by 87% since 2010,
underpinning electric vehicles’ rapid progress toward price competitiveness
with internal-combustion-engine vehicles. An analysis from Bloomberg New Energy Finance shows
that by the mid-2020s, the average upfront costs of EVs in the United States
and Europe will be lower than for a comparable gasoline car. This shift is also
accelerating among larger sport utility vehicles, with delivery, medium-haul,
and long-haul trucks also rapidly shifting to
zero-emission designs.
Countries that move quickly to be part of the
clean-energy transition will be amply rewarded, which is why we are already
seeing a global race to the top. For nearly a decade, China led the world in solar-panel manufacturing,
and has more recently become the largest
producer of
lithium-ion batteries. The country now boasts two-thirds of the global manufacturing
capacity for both sectors. Similarly, Europe is leading the offshore wind
industry, which could be worth $1 trillion by
2040. And hydrogen
projects are being deployed at scale in Australia, Morocco, Saudi Arabia, and the European Union. The US, meanwhile, lags behind.
As more countries fundamentally shift the
economic and industrial calculus, they are catching the laggards by surprise.
But it should not be surprising that newer, more advanced technologies would
replace older systems. Throughout modern human history, clearly superior
technologies have rapidly swept away what came before: the horse-drawn carriage
gave way to the automobile; the typewriter to the computer; the landline phone
to cellular and then smartphones.
Just as an emerging economy like India would no
longer build a network of copper wires to install phones in every house, it
would be imprudent for any country to build new fossil-fuel infrastructure.
These outdated, dirty systems will soon become stranded assets.
Political, business, and civil-society leaders
worldwide must recognize and embrace the economic benefits of green recovery
packages. These investments will yield far-reaching benefits to the health,
prosperity, and sustainability of societies everywhere.
Writing for PS since 201110 Commentaries
Jules Kortenhorst is CEO of the Rocky Mountain
Institute.
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