Economics and Clean Energy

Musings: technology readiness and economics of clean energy

I’m tremendously excited by progress in clean energy to date. The continuous pressure on market prices and its margins is rapidly forcing the market to change, as renewables’ costs are still on the decline. With the global levelized cost of solar at 5 cents a kWh, we have this ever-growing, frankly beautiful army of solar and wind projects across the globe undermining existing coal-fired plants and will continue to do so with competitive procurements and further patents and innovations.

I also believe the basic economics of renewable energy must continue to be altered, government policy must press further, by increasing the cost of fossil fuel-based energy through carbon pricing, and reducing the costs of renewable energy through subsidies.

Simultaneously, companies across the globe should be doing four things to prepare for the clean energy transition: sell dirty assets and buy clean ones (to avoid greenwashing which I consider a major concern), buy cleaner energy, invest in low carbon products (like CCUS technology), and really work to decarbonize their supply chains.

Further technological advances and increased exploitation of economies of scale are still needed, and this is a big interest area of mine. I am optimistic that the intermittency & storage barriers of solar and wind will be overcome by 2030 with support from green hydrogen storage, natural gas, small modular nuclear reactors, as well as demand-side response like EV charging infrastructure, smart grids and microgrids. According to Wood Mackenzie, the cost of green hydrogen, which is also a big interest of mine, will drop by up to 64% until 2040, while the cost of blue hydrogen will see a rise of 59% over the same period, mostly due to natural gas prices.

Speaking of natural gas, I find it an interesting- and immense- challenge that in BC, natural gas is widely seen as an ineffective stopgap, due to significant methane emissions from its production. I am in full agreement with this view. Yet in an economic context, I also believe that in places whose economies are struggling significantly due to the fall of oil, coupled with growing energy demand, natural gas can still be a viable transition strategy to 100% renewable energy. That is, as long as the gas is produced with carbon capture technology and effective strategies to mitigate methane leakage. Innovative companies like Canada Clean Energy are building net-zero natural gas power plants.

Some of my recent consulting work has been on the current state of carbon capture technology in the US and globally. The IPCC and the International Energy Agency show explicitly the below-2 degrees scenario will not be reached by 2050 without carbon capture and direct air capture– although DAC remains incredibly expensive for now. Pioneering companies like Carbon Engineering based in British Columbia, and Swiss-based ClimeWorks, are currently leading the world in Direct Air Capture technology (to dig into carbon capture and learn more about these two exciting companies, see my Carbon Capture slideshow under Consulting Projects).

So much to learn in the weird and wonderful world of clean energy!