Energy Transition Needs a Transition

Climate change is real and is caused by man. We are not making enough progress, certainly not in a meaningful and coordinated way to lessen its impact. This is a crisis, and it is about to get worse. Electricity and fuel are getting more expensive and less available.?

The global climate summit in Glasgow is critical but will be taking place during a moment of inflation, shortage, economic disruption, and political discord. Impractical solutions will be met with skepticism.?

Environmental leaders aren’t generating enough followers. States and countries long thought to be “best practices” on the environment can’t demonstrate success and, as a result, there is no call for “followership.” California leads in rooftop solar but has high electricity costs and regular outages. Diesel generators are used as backup, increasing pollution. Its grid is old and inflexible. An environmentalist in Ohio would never want California’s energy policy!?

And Europe, an environmental leader for a generation, is severely challenged. In Germany, disconnected renewable incentives and an abrupt nuclear shutdown have made developers rich at the expense of small business. The UK is simply out of fuel. Europe will depend on Russia to heat its homes this winter. Australia is an environmentally focused, resource-rich country that experiences on-going power shortages. Lacking a model of environmentally led economic growth that benefits all, what is there to follow for the emerging world?

Climate change is a global problem that must be solved locally. It requires extreme coordination on policy, technology, financing, politics from every government and industry. It requires a long-term commitment but needs to start right away. It can’t be mandated, in that everyone must participate in developing unique solutions.?

Countries have a different frame of reference. Europe matters a lot, but it lacks resources of its own. Asia and Africa still value energy availability as much as cleanliness. And resource-rich countries will need decades to diversify their economies. Solutions must be different around the world. The important thing is progress in the near term.?

Here are a few ideas:

First…value speed over perfection. This means that natural gas needs to be part of the mix, and a recognition that renewables alone won’t solve the problem. Most experts know this but are afraid to say it (I know this violates dogma). Renewables have made immense progress and should continue to grow substantially. But they have limits. Driving a strategy that links gas and renewables (with storage) will reduce pollution in the short term while growing the economy. A willingness to adopt a better solution quickly…swapping dirtier fuels for cleaner ones…instead of a mythical solution slowly…100% renewables…is the first key to driving change.

Second…invest in infrastructure…particularly grid solutions. There is a simple fact…if the President’s infrastructure plan were implemented quickly and well, it would have a huge impact. Our grid cannot accommodate renewables and base load power…i.e., the minimum electric power needed to be supplied to the grid at any time.??In addition, a substantial investment should be made for electric vehicle infrastructure. Every year, millions are left without power due to severe weather or obsolete infrastructure. In every case the backup power is much dirtier. And one third of the world still lack access to electricity. We need massive investments in resiliency and flexibility. All solutions run through infrastructure.?

Third…we need to focus on a few fundamental technologies for long-term progress. Sustaining progress on batteries really matters. We need to improve performance, while insuring supply for critical materials. The electric vehicle market is poised for substantial growth, helping both transportation and electricity storage. Carbon sequestration (CCS) is necessary to dramatically clean legacy industries….by the way, which account for 90% of the installed base. We have massively underinvested in this technology and costs are high. But CCS can be a real economic growth driver; CCS clusters in local regions can help industrialized areas become green. What we do with carbon can provide a blueprint for transforming other legacy industries, such as plastics. We need to rejuvenate fusion/fission with an eye on developing a clean, baseload technology. Big investments are required to commercialize this technology by the 2030s. And hydrogen will be an important option for clean fuel. Fundamental technology is where government can help and should focus.??

Fourth…we need new sources of capital. There is infinite financing for proven technology. There is focused venture financing for innovation. What we lack is the capital required to scale invention. Historically, this has been the role of government. China will likely fund this type of innovation. But where will other markets get the capital? We need patient and smart money such as pension funds, sovereigns and strategics (big energy companies). Tax subsidies have propelled renewable projects, and that is fine. The ironic fact about clean tech investing is that financial firms earn substantially higher returns than technical and operational innovators. This is unsustainable. We need new investments that can drive real change. In this generation, ESG must finance batteries, hydrogen, sequestration, or fusion…for decades.?

Fifth…there should be a long-term climate agreement between the U.S. and China. America should realize that a lot of the environmental future will be decided in China. They have a huge need, and the next Chinese generation won’t tolerate the pollution from the past. Chinese regulators can unify a huge market with technical innovation. For instance, China is much more responsible for global growth in solar than anyone in the U.S. They will likely lead in EV, next-gen nuclear, and maybe other markets.??They are more willing to finance power and infrastructure projects in poor countries. The world needs China and the U.S. to be partners in a clean energy future.?

There are a lot of government-led solutions that could be helpful. I’d love to see a carbon tax; but that requires political unity that we currently lack. A government-led “affordable care act for energy” may slow progress. Policy should set high standards, engage all solutions, promote real innovation, and include all countries and industries. Reversing climate change is still a game for the elites. We need a sense of urgency from all citizens. Leaders need to chart practical actions for the short and long term…and bring people with them.