ENERGY WATCH #3 - August 7, 2018
Here is what should be worrying you: clean energy output is falling behind demand growth
by Karel Beckman
Last month, the International Energy Agency (IEA) came out with a stark warning in its World Energy Investment 2018 report, noting that “after several years of growth, combined global investment in renewables and energy efficiency declined by 3% in 2017 and there is a risk that it will slow further this year.”
This will not come as a surprise to readers of Energy Post Weekly: we reported on this worrying trend in May already.
This is how the global investment picture looked like last year in the power sector according to the IEA:
So, despite the headline warning on lower renewable energy investment, there is some positive news here too. Investment in solar PV rose. At the same time, investment in coal power went down again. Then again the share of fossil fuels in the power sector increased. Nuclear power saw its lowest investment numbers in five years as a result of retirements. All in all a mixed bag from a climate perspective.
More bad news, as IEA notes: “despite declining global capacity additions … the global coal fleet continued to expand in 2017, mostly due to markets in Asia. And while there was a shift towards more efficient plants, 60% of currently operating capacity uses inefficient subcritical technology.”
Some hopeful news, too. Investment in energy tech startups and in clean energy R&D was up:
The IEA’s World Investment Report contains a lot more interesting information. For example, if you think that power sector investment depends above all on “the market” (private actors), well, think again. It doesn’t, as this chart shows:
But to me the most revealing and worrisome chart in the entire report is this one:
This shows a shift towards “renewables, networks and flexibility” (batteries play almost no role), but the output from these low-carbon power investments is actually going down! As the chart shows, it is falling behind demand growth.
Which is pretty bad news. Mind you, this is the electricity sector, which is supposed to be the one sector that can most easily “decarbonize”.
Looking at the whole energy sector, the picture becomes even darker. As James Temple wrote recently on MIT Technology Review: “We still have no idea how to eliminate more than a quarter of energy emissions”.
Temple cites a new paper in Science which “offers a stark reminder that there are still huge parts of the global energy system where we simply don’t have affordable ways of halting greenhouse-gas emissions.
Air travel, long-distance transportation and shipping, steel and cement manufacturing, and remaining parts of the power sector account for 27 percent of global emissions from the energy and industrial sectors. And the authors say we need much more research, innovation, and strategic coordination to clean up these sources.”
This chart shows the major bottlenecks:
The researchers – leader author Steven Davis of the University of California, Irvine plus “30 prominent coauthors” – note that, in the words of Temple, “batteries and fuel cells are still too heavy and expensive for long-distance hauling and shipping, as well as the vast majority of air travel. For these, the authors conclude, liquid fuels are likely to remain the preferred energy source, given the amount of energy that can be packed into a given weight and volume. The researchers survey a range of solutions, including hydrogen or ammonia fuels, advanced biofuels, synthetic fuels, and solar fuels produced using what are known as artificial leaves (see “The race to invent the artificial leaf”). But none of these can be generated anywhere near as inexpensively as a standard gallon of gasoline or diesel.”
The scientists conclude that what is needed are “better carbon capture systems, more flexible nuclear plants, cheaper forms of large-scale energy storage, and various tools and incentives that can encourage residents and businesses to shift their electricity usage to times of peak production.”
As to carbon capture and storage (CCS), well, as the IEA’s Investment Report shows, globally (and that certainly applies to Europe), spending on CCS is still going nowhere.
“Significant amounts of public funding have been set aside for CCUS projects in the past decade but most of this money has been reabsorbed by government budgets unspent”, notes the IEA. “Of the USD 28 billion earmarked for capital and operational support around the world, only about 15% has been spent, of which just two-thirds went to projects that are now in operation.”
The IEA notes that “the total level of funding available for CCUS over the last ten years is just 18% of that spent on subsidies for renewable power generation and 10% of that spent on fossil fuel consumption subsidies in 2016 alone (IEA, 2017d). The figures fall to 3% and 2% when considering only money actually spent.”
This chart tells the story:
Most of the CCS projects that are being undertaken are in the gas sector:
The problem is: it’s the world’s coal plants that should be retrofitted with CCS if we are really going to get serious about CO2 emissions!
This box tells the story:
Of course countries could also choose to switch from coal power to gas or renewables, but easier said than done. The countries that have renounced coal power, such as Canada, Denmark, the UK and the Netherlands, all have high share of gas power that they can use to replace it with, as this chart shows:
Nevertheless, in the U.S. there are signs that carbon capture may be finally catching on. Website Quartz reports that the mood in the carbon-capture community, until recently very down, is beginning to pick up.
Though carbon capture has been in commercial use since the 1970s, cost has limited progress on deploying it more widely, notes Quartz. “The carbon-capture community is a dispirited community,” Rich Powell, director of ClearPath, an organization that lobbies for clean energy, told Quartz this past February. There are currently 17 large-scale plants in the world, mostly in the US, that put away about 40 million metric tons of carbon dioxide—roughly 1% of global annual emissions. (Quartz published an in-depth series on the technology in 2017.)
More recently, however, notes the article, ,”the mood has changed. As part of an omnibus budget bill signed in February, US president Donald Trump passed legislation to incentivize carbon capture through so-called 45Q tax credits. Those capturing and simply burying CO2 would receive $50 per metric ton, and those that put the greenhouse gas to some use would receive $35 per metric ton.”
In addition, “a broader economic case for carbon capture is also gaining strength. A new report from ClearPath and the Carbon Utilization Research Council (CURC) suggests that if the US government continues to deploy the right policies, markets will drive the growth of carbon capture. Titled “Making Carbon a Commodity,” the report estimates that accelerated research, development, and deployment of the technology could add $190 billion to US annual GDP by 2040, and add 780,000 jobs over the same period.”
“As a conservative estimate, the report predicts an economic boost of $70 billion to US annual GDP by 2040, as well as 270,000 new jobs, 17 GW of fossil-fuel power plants with carbon capture (enough to power 1.7 million homes), and 100 million barrels additional of oil recovered each year. It’s notable the report mentions “climate change” only once and does not include the economic benefits that can be derived from avoided emissions through the use of carbon capture.”
“After years of struggling, carbon capture may finally have the favorable policies needed to scale up”, writes Quartz hopefully. Yet the article adds that “it’s too early to say if those policies are enough of an incentive. Six months since the 45Q tax credits were approved, there has been only one carbon-capture project announced. To reap all the benefits, the carbon-capture community needs to do a lot more.”
Most experts agree that to really boost CCS, the best way to go is to raise carbon prices. However, a new scientific study has warned that a global greenhouse gas emissions tax could “have a greater negative impact on global hunger than the direct impacts of climate change.” That is to say, if such a tax was implemented in isolation, without complementary measures.
As Carbon Brief reports, the new study, “published in Nature Climate Change, zooms in on how implementing a uniform tax on greenhouse gas emissions from agriculture and other types of land use, in particular, could impact food security worldwide.”
The introduction of a carbon tax could threaten food security in three main ways, the researchers say.
- First, the tax would raise the cost of food production, especially for carbon-intensive products such as meat.
- Second, the tax would raise the costs associated with agriculture expansion, which would lead to higher land rents.
- Third, the tax would incentivise the production of biofuels – which would compete with food crops for space, further driving up land rates.
All three of these consequences could drive up food prices, which would be costly for the world’s lowest earners – who spend up to 60-80% of their income on food.
The researchers do emphasize that “should not be interpreted to downplay the importance of future GHG emissions mitigation efforts, or to suggest that climate policy will cause more harm than good”.
However, “the results should highlight the need for ‘complementary policies’ alongside mitigation efforts, which could provide a ‘safety net’ to the countries most vulnerable to increases in hunger, the researchers say.”