In an effort to combat global warming, Al Gore has called on the U.S. to end its addiction to fossil fuels by transitioning to 100% clean energy within a decade. Is this our “man on the moon” moment, or an unrealistic pipe dream only made less likely by the current economic calamity?
Clean technology experts and advocates lauded Gore’s goal as “ambitious” and something to strive for, but also said it’s widely unlikely to be achieved given a wide range of obstacles, including the credit crunch, cost of renewable energy, manufacturing constraints and other headaches.
“It’s taken us 200 years of world wars, industrial revolutions and Baby Boomer generations to become a coal-dependent nation and it probably can’t be undone in 10 years,” said Eric Wesoff, a senior analyst at Greentech Media.
According to the Energy Information Administration, just 7% of the nation’s energy supply in 2007 was derived from renewable sources and 8% from nuclear power. Biomass was easily the largest contributor, representing 53% of the nation’s renewable energy, followed by hydroelectric’s 36%. Wind, which many believe has the biggest potential, made up just 5% of the renewable sources.
Aside from the aforementioned obstacles, transforming the country to 100% clean technology, which includes nuclear power, may not even have the political or popular support necessary.
“I feel that Americans don’t fully appreciate how serious the climate issue is. We have not had an event like Pearl Harbor that galvanizes the American public. That makes it difficult,” said Chuck Kutscher, a principal engineer at the National Renewable Energy Laboratory.
Even as scientists rally around the cause, just 40% of those surveyed in a 2008 Gallup poll said they view global warming as a “serious threat” to themselves or their way of life during their lifetimes, up from 25% in 1997. Republicans in particular have been hesitant to embrace the cause, as just 29% say global warming is a serious threat, compared to 50% of Democrats.
'Inevitability' of Carbon Age's Demise
But Gore never said eliminating Americans’ dependence on carbon fuels -- currently we rely heavily on coal and natural gas -- would be easy.
“Of course, there are those who will tell us that this can’t be done. But even those who reap the profits of the carbon age have to recognize the inevitability of its demise. As one OPEC oil minister observed, ‘The Stone Age didn’t end because of a shortage of stones,’” Gore said in a July 2008 speech.
Cash Waiting on the Sidelines
While it’s not the largest impediment to America’s energy transformation, the year-long recession is easily the most immediate as it has sapped credit that would otherwise be flowing to green technologies.
Take venture capital, for example. While cash poured into green tech in record fashion in 2008, doubling to $7.5 billion from $3.5 billion the year before, the credit crisis will likely cause a decrease in green investment for 2009.
“When there are no IPOs happening and no mergers and acquisitions happening, it puts a little bit of a damper on the VC party” because that’s the main way venture capitalists make money, said Wesoff. He added that while there are “billions of dollars of dry powder” waiting to go into green technology, it will “probably in smaller quantities.”
Washington to Set the Agenda
Lawmakers may also be reluctant to ask economically hurting Americans to make any additional sacrifice that could be required to meet Gore’s goal.
“Any policy options that look like it will increase electricity prices will be a difficult sell,” said Paul Komor, a professor of environmental studies at the University of Colorado who has advised Congress on energy legislation.
On the other hand, there are a few potential positive impacts of the recession on the green movement. For example, energy demand has slowed, as evidenced by the 71% plunge in crude oil prices.
The grim economic picture also adds a potential selling point for green tech as President Barack Obama and others have pointed to the industry as a potential source for job creation. The unemployment rate in the U.S. surged to 7.2% at the end of 2008, the highest level since January 1993, as employers slashed 524,000 jobs in December alone.
According to a report from the American Solar Energy Society, the renewable energy and energy efficiency industry could generate about 37 million jobs and $4.3 billion in annual revenue by 2030 if the government enacts ambitious programs now.
The new White House has called for a comprehensive New Energy for America plan that could help create five million new jobs by investing $150 billion over the next decade.
In addition to new investments, the government will play a dramatic role in shaping the country’s energy transformation through regulatory actions, headlined by a way to price carbon emissions.
While some economists are pushing for a carbon tax, the most likely scenario now appears to be an improved version of the carbon cap and trade model used in Europe, said Franklin Orr, director of the new Precourt Institute for Energy at Stanford.
Cap and trade sets an upper limit on how many emissions a company can produce and rewards those that fall under that threshold by allowing them to trade their credits. The White House has targeted an economy-wide cap-and-trade program to cut greenhouse gas emissions 80% by 2050.
“There are real costs of emitting CO2 into the atmosphere. We just choose not to charge ourselves for them,” said Orr.
Costs and Other Headaches
The government will also play a role in creating a new “smart” electrical grid that can incorporate renewable energy sources that, unlike nuclear and coal, tend to be intermittent in nature.
“Wind is good when the wind blows and it doesn’t blow all the time and solar power is effective when the sun shines and it doesn’t shine all the time,” said Wesoff.
The intermittent nature of renewable energy also poses another daunting challenge: energy storage. The green industry needs to design ways to store, for example, the excess energy from the wind so that it can be used during calm times. There are several storage mechanisms that could emerge, including compressed air, pump storage and flow batteries.
The market and to a certain degree the government will also have to decide what the composition of tomorrow’s renewable energy will look like.
“If you are going to be spending public money and political capital I think it’s smarter to spend it on wind,” said Komor, citing its relatively cheap cost and effectiveness.
Unlike wind, which is prices competitively with coal and nuclear power even without government subsidies, solar power is roughly four times more expensive.
“Although in a world where you had a cost on carbon that might change,” said Orr.
The energy transformation will also test the nation’s manufacturing capability as well as the industry’s willingness to aggressively build out technology that is still largely untested on a grand scale.
“If we are going to get a very high penetration of renewables you have to add a whole lot of capacity,” said Orr, who predicted the industry would likely be more cautious than is needed to meet Gore’s lofty goal.
Even if the U.S. is able to build out clean energy infrastructure at a rapid pace, policy makers must decide what to do with new coal and natural gas plants that are still being built today.
Prematurely closing down these relatively new plants would create a “huge financial headache” because the financing for their construction is often dependant on a long-term revenue flow once they open, explains Komor.
While there are many questions remaining in the clean technology realm, it appears the industry received a windfall when the Democrats swept the 2008 election.
“That goal looks less insurmountable now than it did a year ago. There is now more political support for more aggressive action on electricity, motivated in part by climate change,” said Komor.
Despite the daunting odds, renewable energy experts weren’t recommending that the U.S. wait on its clean-energy transformation.
“We need to work on this in as many fronts as we can with as many smart people as we can. While I question that we can pull it off in 10 years, I don’t question the need to get to work on this,” said Orr.