(Originally Published on Plan Washington Website)
“We don’t need an energy miracle” to effectively address climate change. That was the message a speaker from the Risky Business Project shared with Washington State business leaders earlier this month. Their new research identifies cost-competitive, low-carbon energy sources and technologies that already exist and will become cheaper over the coming decades.
Business leaders from across Washington State met on January 17th, 2017 to learn about the next wave of opportunities and threats associated with climate change and the transition to a clean energy economy. The gathering was part of the “Where to Next” series organized by Washington Business Alliance, Washington Business for Climate Action, and The Nature Conservancy. It’s an effort to design non-partisan, practical, and cost-efficient carbon policy solutions in Washington State. The event was centered around guest speaker Kate Gordon, Senior Advisor to the Paulson Institute.
The Risky Business Project was founded in October 2013 by former U.S. Treasury Secretary Hank Paulson, NYC Mayor Mike Bloomberg, and businessman Tom Steyer. The initiative aims to assess and publicize the economic risks to the U.S. associated with climate change. Their highly influential 2014 report made clear that climate change poses a growing risk to the U.S. economy. It provided evidence that billions of dollars of real estate, crops, and business infrastructure are at risk from rising heat, seas, and storms.
At the January 2017 event Gordon shared insights from the Risky Business Project’s new report: From Risk to Return: Investing in a Clean Energy Economy. Gordon told the audience that addressing climate change requires reducing carbon emissions at least 80 percent by 2050 in the US and across all major economies. “This goal is technically and economically achievable using commercial or near-commercial technology… [It] does not require an energy miracle or unprecedented spending.”
Gordon said she was “particularly interested in being up here in Washington” because it’s “at a really pivotal moment both on the policy side and the business development side.”
At one point, Gordon attempted to distill the latest recommendations into the most laconic wording possible. She wanted to achieve something akin to food writer Michael Pollan’s nutrition advice: “Eat food. Not too much. Mostly plants.” The result?
- Electrify (nearly) everything.
- Make most electricity low- or zero-carbon.
- Use less energy.
The new Risky Business report prescribes three basic strategies.
1. End use fuel switching to electric sources
Electric fuel currently makes up 23% of total energy usage. In a typical scenario (the “Mixed Resource Pathway”), electric fuel needs to reach 51% of total energy usage in order to achieve the required 80% reduction in carbon emissions.
2. Decarbonization of electricity
U.S. electricity currently contains 509 kilograms of CO2 per megawatt-hour. A typical pathway to 80% GHG emissions reduction requires massive decarbonization of electricity to 2 kg of CO2 per megawatt-hour.
3. Energy efficiency
To hit the required 80% reduction in GHG emissions, Gordon described a dramatic increase in energy efficiency. Energy intensity of GDP would need to be ⅓ of current levels.
The report lays out four different pathways to accomplish the needed transition, each with different mixes of technologies.
- High Renewable Pathway. Because of continuing innovation and declining costs for technologies like wind (the cost of wind energy has decreased 41 percent from 2009 to 2016) and solar (installed costs have dropped 64 percent since 2008), continued expansion of renewable energy is now both technically possible and economically feasible.
- High Nuclear Pathway requires a build rate for nuclear plants that’s roughly 80 percent higher than the 1970-1990 rate. Achieving these rates would require a much more accelerated siting, permitting, and construction process than that in use today.
- High CCS Pathway. CCS refers to carbon capture and storage. This pathway would preserve a role for fossil fuel generation, while sequestering 90 percent of the associated CO2 emissions.
- Mixed Resource Pathway relies on a balanced blend of clean electricity technologies: renewables, nuclear, and CCS.
Overall, the path forward charted by Risky Business will create 1 million additional jobs by 2030. Massive job gains in the construction sector with smaller losses for jobs related to coal, mining, oil, and gas. The report’s authors project that the prescribed clean energy transition will create 0.6% increase in GDP ($160 billion) by 2030.
Total Power Generation Mix in 2050
It “does not require an energy miracle” to address climate change. It can be achieved with existing technology. And yet “that does not mean there are not challenges,” Gordon warned. It would require substantial investments from the private sector. To achieve a clean energy economy by 2050 will require about $320 billion per year. Investments ramp up over the coming decades and then plateau in the mid-2030s. Fuel savings start small and grow steadily as clean energy substitutes for fossil fuel and fuel prices increase. By the mid-2030s, the U.S. will achieve net savings from its investments. By 2050, net change is close to zero.
None of this will be easy. Significant obstacles stand between the U.S. and the required 80% reduction in GHG emissions.
- The pace of power plant construction must increase by a factor of 2-4. “Daunting, but doable,” says Gordon.
- Renewables provides intermittent and unpredictable supplies. This increases the importance of the power grid because it requires extensive load balancing. Achieving that capacity requires significant expansion and upgrades of the power grid’s transmission and distribution system. According to Gordon, siting new transmission lines “could be a big challenge” to electrification.
- Shifting to electric vehicles will require major infrastructure build-out.
- Utilities must change their business models to integrate diverse and distributed resources. “Smart grids and smart devices need to match supply and demand,” says Gordon.
Gordon closed her presentation with the recommendations reached by the Risky Business team. First, she said “the private sector has the technical and economic capacity to accomplish – and profit from – this transformation, but that requires a clear and consistent policy and regulatory framework.
The emerging policy framework should:
- Internalize the true cost of carbon pollution through legislation or regulation.
- Avoid subsidizing activities that increase climate risk, e.g., tax incentives for fossil fuel production.
- Streamline government investment into infrastructure, R&D, education, and training.
- Assist Americans negatively affected by the clean energy transition.
She also offered recommendations for what businesses could do to enable the required transition. Examples include:
- Putting an internal price on carbon.
- Factoring climate risk into investment decisions.
- Conducting a detailed climate risk assessment.
- Setting and publicizing a company-wide emission reduction goal.
- Develop and implement a concrete action plan.
“Meeting these targets requires shifting away from ongoing spending on fossil fuels and toward up-front capital investments in clean energy technologies,” Gordon said. Many renewable technologies, such as wind and solar, have little or no fuel cost once built. “Given an appropriate policy framework,” Gordon said, “we expect these investments will be made largely by consumers and private companies… and to yield significant returns.” Addressing climate change won’t require “an energy miracle,” but substantial investment from the private sector facilitated by a clear and consistent policy and regulatory framework.
- Click here to see the new report from the Risky Business Project
- Click here to see the original 2014 report
The session ended with a showcase of new forecasting software being developed by Washington Business Alliance to simulate the effects of different state-level carbon policy scenarios. More details will emerge about this effort later in 2017.
The black line indicates the “as-spent” net cost, largely the difference between the clean energy investments and the fossil fuel savings from a simple ”cash drawer” accounting perspective.
The black line indicates the net change in total energy system cost, estimated as changes in annualized investment costs plus changes in fuel costs. It also includes small changes in other operating costs.