Change is Hard

The world has known for more than 3 decades that climate change is a serious issue that requires urgent action on a global basis. The scientific evidence for this fact became so well known by the early 1990s that a major international treaty between almost all leading nations was negotiated and signed. The "Earth Summit", in Rio de Janeiro in June 1992 created the United Nations Framework Convention on Climate Change, signed by 154 countries; an achievement of truly momentous significance - if only words were actions.

Sadly, words and actions remain different categories of things. Of the promises, pledges, and commitments made by a couple of hundred countries in Rio in 1992, in Kyoto in 1997, in Paris in 2015, and in dozens of solemn conferences in between, very few have come to pass.

The chart above is the simplest illustration of the gap between words and actions. In 1992 87% of the world's primary energy was supplied by fossil fuels, with low-carbon sources accounting for the remaining 13%. By 2023, 31 years later, the low-carbon share had grown to 16%, which is progress of a sort, but the pace is nothing like that which is required if we are to keep global warming below the 2 degrees Celsius threshold.

That pace can and must accelerate. the good news is that it is beginning to happen. Focusing on just the last 5 years, the share of wind energy is up 50% to nearly 8 % and solar has more than doubled to 5.5 percent. Although the climate is a major motivator for all countries to decarbonize their electricity infrastructure, the economics are starting to work in the right direction. Although the calculations are complex recent estimates show that the cost of onshore wind and solar generation has fallen to a level at or below the cost of fossil fuel plants.

Two major obstacles to the rapid acceleration of renewables in the mix; 1) the sunk costs of existing power plants, and 2) intermittency. Much of the lifecycle cost of thermal power plants is in the initial plant construction, so once this has already been paid, fuel itself becomes the majority of incremental cost.

Regulators are often reluctant to see the cost of electricity to customers/voters rise by idling available capacity in the short run. Of course, carbon emissions are a true cost of fossil fuels not captured in utility economics absent a carbon tax. To the extent that this true cost is included by policymakers, either explicitly through a tax, or embedded in regulators' decision processes, low-carbon sources become even more attractive.

Intermittency is a more serious obstacle and must be solved by technological progress. Customers want electric power even when the sun isn't shining or the wind is not blowing, so grid-scale energy storage investments are critical. The good news is that they are growing rapidly. In the US, for example, the fourth quarter of 2023 saw grid-scale energy storage deployment exceed 3 GW for the first time.?With 3,983 MW of new capacity additions, the quarter saw a 358% increase compared to the same period in 2022.

Much more investment in clean technologies is needed- and those investments are beginning to pay off, both for investors, and for society as a whole.