Stimulus Funding Should Fuel the Process to Decarbonize

The global pandemic has forced governments around the world to take a much harder look at their current economic situations and the path forward. Consistently and understandably, governments see energy as an economic driver. However, we are at a critical crossroads on how to navigate the fragile economic situation and how to effectively leverage energy to decarbonize utilities and reach renewable energy goals.

 In order to develop strategies around renewable energy, W?rtsil? developed the “Aligning Stimulus with Energy Transformation Report” and the results offer a map to reach decarbonization and makes the economic case to support the critical plan.

Since March 2020, G20 governments have announced at least $400 billion in stimulus policies to assist the recovery of the energy sector. However, 54% of the energy stimulus has been pledged to support the legacy fossil fuel industry.

The report includes the results after modelling 145 countries and regions around the world in collaboration with the Lappeenranta-Lahti University of Technology. The modelling, Atlas of 100% Renewable Energy, offers the option of allowing all renewable technologies to include solar, wind and battery storage as well as flexible gas plants running on synthetic renewable fuels, produced from renewable electricity with Power-to-X technologies in the capacity mix.

Additionally, this research combined the Atlas with the Energy Policy Tracker to gain a real-world snapshot of more than 200 individual public funding commitments in G20 countries since the COVID-19 pandemic began.

Maximizing Stimulus in the U.S.

The U.S. is a global leader in renewable energy with the second largest installed capacity in the world. Total private sector investments in renewable energy reached a record $55.5 billion in 2019 which was a 28% increase from the previous year. However, despite the private sector trends, federal government support for clean energy has been significantly reduced in recent years with a primary focus on the fossil fuel sector.

The advantages of reallocating the existing $72 billion in stimulus finding away from fossil fuels and investing that money into renewable energy instead include:

●    107 GW of new renewable energy capacity

●    6.5% rise in shares of renewable electricity generation (from 17.5% to 24% renewable electricity).

●    544 new jobs in renewable energy, 175% more jobs than if the same stimulus was used to revive the legacy energy sector.

Renewable Energy Economy

Renewables are no longer the future. They’re here, but we need to make renewable energy dispatchable to create a sustainable and flexible power system. Using the Atlas and global power system modelling expertise, we modelled an optimal capacity mix and required investment for a carbon neutral electricity system for the United States by 2035. A cost-optimal carbon neutral system could be achieved with the following investments into new technologies:

●     1,700 GW of new renewable energy capacity

●     410 GW of new battery energy storage capacity

●     116 GW of new flexible gas fired power capacity operating on renewable bio or synthetic fuels

●     131 GW of new electrolyzer capacity for Power-to-Gas fuel production to be stored and utilized inflexible gas-fired power plants for system balancing.

The system could create 8.7 million jobs in renewable energy alone and have an expected cost of $1.7 trillion.

The coming years will be critical in determining a future-proof, decarbonization path for all nations, including the United States. The clock is ticking on whether or not stimulus funding will be targeted at achieving a renewable energy future or continue to sustain the diminishing fossil fuel industry, which is steeped in the past. Government leaders can either resolve to invest in innovation that will accelerate decarbonization or make costly critical errors that will increase carbon emissions and slow economic recovery.

Hear more in the Transition Economy panel, Reuters Energy Transition North America virtual forum, on November 19 at 1:05 PM CST where I’ll be joining other experts on these pressing issues. Register here.