Quick thought: De-fossilizing our energy system - another reason
As preposterous as this may seem, let's leave aside for a moment the climate benefits of decarbonizing the global energy sector. There is another very powerful economic driver in play here that does not feature prominently in public discourse thus far.
Fossil fuels are natural resources. As such, they obey resource economics. This means as demand goes up, the inherent supply constraints drive up the price. This is both in the short term, as new extraction projects take time to be developed and come on line, as well as in the long term, as lower cost extraction sites are depleted and more expensive, remote sites are tapped.
One thing that seems certain, as we lift an increasing number of people out of poverty and as we continue to fail to curtail our energy usage in the OECD nations, is that global energy demand is on an upward trajectory. This is even before we contemplate the impact of increased automation and computation inherent civilizations current evolution.
Yes, there areof course efficiency gains. Take lighting as an example, from gas via Edison bulbs to LED lighting, our energy consumption per unit of illumination has decreased. However, those savings have partially been neutralized by us simply using more illumination. So to be clear, efficiency will always have to be a core component of our technological development for us to make the best use of what energy we have available. But on its own it is unlikely to lead to a net reduction of our current energy needs if we are not to deny billions of humans a path out of poverty, let alone a similar standard of living to ours.
So what gives? Under the fossil fuel paradigm, even as we become more efficient in our energy usage, growth and wealth generation are substantially impeded by the resource economics of the fossil energy system.
Enter renewables. As a product of the industrial age, solar, wind, and storage technologies obey manufacturing economics. The more solar panels we produce, the more wind turbines we install, the larger the grid storage systems we deploy, the cheaper the energy generated becomes. This is in part due to simple economies of scale as well as ongoing innovation making turbines, panels and storage more efficient and productive. As industry marches down the experience curve manufacturing competence increased and production cost fall.
At the same time, the rush of capital away from increasingly uncompetitive fossil fuel projects into the new energy sector supports increased research and development in the latter and starves the former of R&D funds and talent. This further deteriorates the competitive position of the legacy energy sector. We are seeing these things play out currently, which is helpful with regards to decarbonization goals.
That said, the other powerful and equally relevant benefit, the subject of this post, is that energy no longer represents a limiting factor to the progress of our civilization. The promise of cheap energy, which was once made and broken by nuclear power, is finally within reach.
Abundant cheap energy should help lift more people out of poverty, allow for more efficient, cleaner supply chains and better standards of living all around while enabling entirely new economic activity we haven't even thought of yet.
Of course, this promise may ring hollow as we are currently seeing projections for increasing electricity prices this winter (2021). These price increases are often opportunistically blamed on renewables by politicians and fossil fuel lobbyists. In reality it is precisely our partial reliance on methane gas based power generation that is the major driver behind the current issues, proving our initial point here.
It is now down to political and financial actors to push along the adoption and development of grid scale storage applications to obviate the need for gas peaker plants in a renewable heavy grids. Grid scale storage is the most nascent technology of the renewable troika, and while the science of flow cells is settled, the scaling of production capacity is still at its early stages. This is also the segment of the renewable market expected to see the most rapid and transformative developments in the coming years.
From our perspective, it looks like we are at an inflection point with "peak methane gas" demonstrating even more strongly why this is the next fossil fuel, after coal, to eliminate from the power sector.
We are putting our stake in the ground here, and project that as the percentage of fossil based generating capacity declines in the electricity mix, end user prices will follow along -- assuming regulators ensure electricity markets are not manipulated by legacy generators or third party actors such as in the case of Enron and the California blackouts at the turn of the millennium, for example.
Thus, the switch to renewables, once complete, will help advance wealth generation and remove possibly the most important resource constraint of the past -- that of energy availability/affordability -- while also fighting climate change.