April 18, 2019

TO MARKET, TO MARKET:

A Market-Driven Green New Deal? We'd Be Unstoppable: Any serious energy transformation will need to harness America's powerful and creative economic engine. (Amory B. Lovins and Rushad R. Nanavatty, April 18, 2019, NY Times)

 In 2011, Reinventing Fire, an energy study by Rocky Mountain Institute, where we work, showed how a business-led transition could triple energy efficiency, quintuple renewables and sustain an American economy 2.6 times larger in 2050 than it was in 2010 with no oil, coal or nuclear energy, and one-third less natural gas. The net cost was $5 trillion less than business-as-usual -- or even more valuable if a price was put on carbon emissions. [...]

First, we should let competition and flexibility rule our electricity system. Abundant market data show that a renewably powered future would cost less than our current system. Electricity providers have gotten the memo, even if Washington hasn't. To save their customers money, utilities in Indiana, Michigan, Minnesota, Colorado and Utah are phasing out old coal and nuclear plants and replacing them with wind and solar. Clean energy portfolios -- including affordable battery storage and other flexible resources -- are starting to displace natural gas in California and New York.

Concerns about round-the-clock availability of electricity from a highly renewable grid, a common fear, are mostly misplaced. The Department of Energy has assessed that renewables "that are commercially available today," combined with a more flexible electric grid, can reliably supply up to 80 percent of our electricity in 2050 (and these technologies are advancing every year). Four European countries with modest or no hydropower get from 46 percent to 71 percent of their electricity from renewables, with grids more reliable than those in the United States.

In America, Iowa and Texas are leading the way on wind. Over 35 percent of Iowa's electricity is wind-generated. This has provided a second source of income to farmers whose lands host turbines and given Iowans among the lowest power prices in the nation. Over all, the estimated $476 billion needed to build a flexible grid that integrates renewables would yield $2 trillion in saved energy and reliability benefits.

Second, correcting our biggest market failure by putting a price on carbon by taxing it and then rebating the revenues equally to all citizens would be "the most cost-effective lever to reduce carbon emissions at the necessary scale and speed," according to a recent statement signed by more than 3,500 economists, including 27 Nobel laureates. Combining carbon pricing with border tax adjustments and rebates for citizens would ensure we didn't export our emissions or hurt working-class Americans. Clearer price signals could drive cheaper and cleaner practices if we eliminated market barriers that are obstacles to efficiency and clean energy.

For sectors with fewer market-ready substitutes and less sensitivity to fuel prices, like industry and agriculture, we need other approaches. Hence our third point:

We need to take advantage of the world's most successful research and development organization -- the federal government -- to solve our remaining technology challenges. Government R&D helped develop the internet, the Global Positioning System, fracking, many vital drugs and, more recently, breakthrough battery technologies. The government now needs to apply its early-stage investment muscle, in concert with private enterprise, to cutting greenhouse gas emissions in these harder-to-abate sectors.

Failures should outnumber successes, as in any sound early-stage investment portfolio. But just a handful of big wins can deliver potentially incalculable value to our economy and planet. Which brings us to our final point.

We should base investment decisions on net value, not cost alone.

Green New Deal critics often look at only one side of the accounting ledger. A columnist for The Wall Street Journal, for example, recently pointed to the $400 billion estimated cost of retrofitting American buildings without mentioning the $1.4 trillion net value (retrofit costs minus saved energy costs) of doing so.

Posted by at April 18, 2019 6:07 PM

  

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