Climate action: Our energy transition need not follow preset pathways

In less developed countries, solar and wind contribute just 9% to electricity with two-thirds coming from fossil fuels.
In less developed countries, solar and wind contribute just 9% to electricity with two-thirds coming from fossil fuels.

Summary

  • If developing nations are not careful in their climate policy choices, the economic development, energy security and fiscal costs of a rushed transition to renewable energy could prove detrimental to economic growth.

Abundant, reliable and cheap energy was the lifeblood that powered the Industrial Revolution and enabled the development of today’s rich nations. Most of us take it for granted, but in a world without plentiful energy, you wouldn’t be able to heat or cool your house, prepare your food, keep it fresh, get to work, use phones, computers or entertainment systems. Less obvious but even more importantly, most global systems meeting our basic needs would falter. Agriculture would falter because more than half the world is fed by synthetic fertilizers made from gas; industry creates millions of tools and wonders that sustain life, from pharmaceuticals to plastics; and as infrastructure is built with steel and cement, the globally integrated transportation network is entirely dependent on asphalt, trucks and container ships.

This is why there is such a close connection between more energy and higher incomes. No nation has ever gotten rich without a constant and immense flow of energy. Not surprisingly, the rest of the world wants that too.

Humanity has transitioned from dirty and inefficient fuels like wood to still dirty but less inefficient coal, and onward to oil and gas. These transitions took half-a-century each and were mostly driven by the reality that new fuels were more efficient and cheaper than older alternatives. Now that the world faces the challenge of climate change, many are pushing for an ultra-rapid transition over just a few decades from fossil fuels to clean energy, which is mostly seen as renewables.

Rich countries are leading this charge, which is costly. After a century (bit.ly/4bK0sLR) of price declines in electricity and gas prices, rich countries are seeing their bills rise sharply, partly because of this forced green transition. The German boss of Siemens, one of the world’s biggest wind turbine makers, points out that “energy bills will have to keep rising to pay for the green transition." (bit.ly/48qpYmx) A recent Bloomberg article (bloom.bg/3T60wyq) noted, “Affordable power is a key precondition for industrial competitiveness, and even before the end of Russian gas supplies, Germany had some of the highest electricity costs in Europe. Failure to stabilize the situation could transform a trickle of manufacturers heading elsewhere into a stampede." The article goes on to cite the OECD that “no major industrialized economy has ever had the very basis of its competitiveness and resilience so systematically challenged by changing social, environmental and regulatory pressures." In surveys, energy security and costs are cited as the major reasons for German businesses to move abroad.

It is often claimed that the shift to renewables makes countries more energy secure, but most clean energy supply chains are dominated by China (tinyurl.com/y59rke62), leaving future green energy heavily dependent on one supplier. And prioritizing renewables will have real environmental impacts. Renewables take up much more land(tinyurl.com/2c6fc9x4), which could have been used for many other purposes, including for nature. India, in particular, has the lowest land mass given its population among members of the G20. In other words, it has the highest population density in the G20. Land is a very scarce resource in India and it has to be judiciously applied. The trade-offs have to be thought out.

Solar can need 300 times as much space as nuclear, and biomass more than 8,000 times. At the same time, wind turbine blades and solar panels have to be replaced every couple of decades, resulting in potentially enormous waste problems. Currently, recycling is difficult and costly, and if these costs were added to solar calculations, it could double its overall cost.

Despite spending a lot of money on the transition, most advanced economies are only barely shifting away from fossil fuels. OECD countries got 16% of their electricity from solar and wind sources in 2022, but still got the majority of their power from fossil fuels. Moreover, electricity is the easy part. If we look across all energy—the vast majority of which is not electricity—rich countries get just 10% from renewables, including bio-energy and hydropower. After continuously increasing its consumption for centuries, the rich world’s consumption of fossil fuels has only decreased slightly in the 21st century and is today still greater than in the 1990s or any time earlier. Cutting dependence on fossil fuels is turning out to be incredibly hard for rich countries—on the current trend of a slight decline in fossil-fuel use, the rich world will only reach net zero carbon emissions 170 years from now; i.e. around the end of the next century.

If it’s difficult for rich nations, the transition is even more challenging for emerging economies. The rich world has massive fossil fuel stocks that it can use for back-up while it transitions. Emerging economies have just started to build up energy to underpin growth. In less developed countries, solar and wind contribute just 9% to electricity with two-thirds coming from fossil fuels. For all energy, it is just 5.9% from renewables, with 85% of it from fossil fuels. As the rest of the world moves to lift populations out of poverty and achieve access to power and development, its fossil fuel consumption is not receding. It has actually doubled, now dwarfing the rich world’s consumption.

(graphic:mint)
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(graphic:mint)

Apart from space and waste issues, the main challenge preventing a swift transition is that—despite claims to the contrary—solar and wind power are only cheaper than fossil fuels when the sun shines and wind blows. Industrialization and development require power and energy 24/7. Even factoring in four hours of storage makes solar and wind go from the cheapest power available to much more expensive than gas and coal power. Moreover, to provide firmly reliable power, studies (tinyurl.com/mry5fnd4) show that a 100% solar and wind system would need thousands of hours of storage (tinyurl.com/2awmxvz6), which is impossibly expensive. Whatever technologies are available, they have not been tested on scale.

India has lots of sun and solar can play an important role powering air-conditioners in the middle of the day. But, paradoxically, building more and more solar farms simply means we need a big ramp-up (tinyurl.com/bdfzxn3n) of fossil fuels for when the sun sets. If India has to pay both for solar power and its back-up (either as coal-fired power that is only used occasionally, or more batteries), the costs increase significantly. More importantly, India taxes fossil fuels heavily and rightly so. But, the more India switches to renewable energy from fossil fuel consumption, tax revenues will fall, resulting in less resources available to fund the energy transition.We need to tackle climate change, but we must do so smartly. Currently, we’re on a pathway that could be phenomenally costly compared to the benefits (tinyurl.com/3yenednx). The whole world needs greater long-term investment in renewable energy R&D to drive down costs and increase the reliability of fossil fuel alternatives. If developing nations are not careful in making pragmatic policy choices, the economic development, energy security and fiscal costs of a rushed transition to renewable energy could be significantly detrimental to economic growth and also socially destabilizing.

These are the authors’ personal views.

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