The global energy market saw unprecedented turmoil between 2020 and 2021. As 2022 began, the crisis between Russia and Ukraine erupted, and the “weaponization” of the energy trade caught global attention. The cost of various energy sources has remained high due to supply uncertainty and supply chain disruption. The need to phase out fossil fuels as soon as possible is a necessity for both environmental climate security as well as stable energy economy development. What must we pay special attention to in order to encourage the achievement of green development goals? Let’s examine the past developments over the course of 20 years in wind energy, photovoltaics, and carbon capture and storage (CCS, also known as CCUS if carbon is employed) to gain more insight.
Fundamentals of Wind Power and Photovoltaic Development
Although the concept of harnessing wind and solar energy was not new, it wasn’t until the turn of the century that large-scale applications in the field of power generation gradually gained momentum. Since the eleventh century, windmills have been extensively used, and many still stand today as historical and cultural monuments. Similarly, technological implementations relating to solar photovoltaic electricity was first developed in the 1950s, even though the discovery of the photovoltaic effect dated back to 150 years ago. Why has it taken such a long period of time for the emergence of large-scale wind and solar power generation? Concerns about climate change are apparently one of the important impetuses. People started to pay attention to effects of climate change, thus lending more support to each stage of the technological life cycle and encouraged the use and adoption of wind and solar energy in both laboratories and industries. The price started to drop rapidly, eventually creating a market that has the potential to solve job issues (so-called “green employment”), spur the manufacturing sector’s growth, foster technology spillovers, etc., and ultimately leading to the creation of virtuous cycles.
How do wind power and photovoltaics become so affordable? Relevant factors include technological adaptations, scale effects, and distortions in costs through governments’ subsidies (for inputs such as land, exchange rates, and labor). Gregory Nemet has since 2002 been closely following this topic, meeting with more than 70 people in 18 different countries, and publishing “How Solar Got Cheap” in conjunction with his own study. The key insight of the book is that entrepreneurs in Asia play a crucial role by constructing massive plants that spread investment costs thin, while operators grow more competitive by being flexible and facilitating efficient information exchanges among supply chain partners. Additionally, unlike hydropower and nuclear power, wind turbines and solar panels are standardized technologies that are less dependent on local customization, which is beneficial to mass production and utilization.
Challenges of the CCUS Technology
In contrast, CCUS (carbon capture, utilization, and storage) technologies, which many see as highly promising, has been falling short in practice and implementation over the past 10 – 20 years, especially when it comes to geological storage after carbon capture; some even call it “the lost 10 years” or even 20 years.
In hindsight, there are numerous explanations from various perspectives.
The cost of CCUS is much higher than it was originally expected; and the potential and sustainability of CCUS have yet to be proven. From the perspective of a single project, the marginal cost increases as more units of carbon are being pumped for storage.
The general public continue to have instinctive doubts over the dependability and safety of CCUS technologies, particularly since they involve pumping gas underground. CCUS industrial and technology eco-systems are still at a formative stage. Although carbon utilization technologies are critical to the business model transformation efforts of traditional energy operators and producers, the technologies are not mature enough to bring about large-scale cost efficiency.
Without a comprehensive carbon pricing system and a developed carbon trading market, it will be challenging to incentivize the various stakeholders, including social-interest groups;
Most politicians and statesmen do not prioritize such projects that can only bring about distant benefits but incur immediate costs. As a result, policy makers are not motivated to systemically push for CCUS-related projects.
The real world is even more complicated than theories and models can hope to explain. No one can predict the future in advance, and the possibility of failure cannot be ruled out. Therefore, driving energy transformation necessarily entails accepting a certain level of uncertainty.
Discourses on energy transformation that lack a precise frame of reference are of little use in helping us comprehend and address the challenges we encounter. Such discourses can be seen in China for opposing “campaign-style emission reduction efforts”. When it is said that “[authorities] should avoid the introduction of radical carbon emission reduction measures that drastically reduce the output and consumption of coal, oil, and gas and other fossil energy, and may in turn result in energy shortage caused by over-ambitious energy transformation and inadequate investment in fossil energy.” It is difficult to ascertain the exact meaning and practical implications of abstract terms like “radical”, “drastic” and “inadequate” in the absence of a specific reference frame (for instance, by making comparison to the status-quo). While such seemingly moderating positions lack substance, it tends to accentuate conservative tendencies on the part of decision makers. As a result, assessment of the viability of an energy transformation project is inclined to change from “infeasible” to “undesirable”, just to err on the political safe side. Understanding decision-makers’ mentality and political considerations, as such, is crucial in determining if there are political wills to push for substantive CCUS development policies and programmes.
As the technologies are largely of singular applications, CCUS projects are usually short on spill-over effects and lack co-benefitors. The author believes that this is the fundamental reason why CCUS has not made significant advancement in the last 20 years, and can serve as a “touchstone” for gauging a country’s commitment to its climate policy. If a country does not embrace CCUS technologies, or minimally to keep CCUS as potential option, it will be doubtful of the chances of the said country attaining carbon neutrality.
Summary: Let History Tell the Future
Historically, there has been a definite trend toward switching from firewood to coal. Internal combustion engines quickly replaced carriages because at the time, coal was probably superior to firewood in all respects: it was clean and had a higher energy density.
What are the current carbon neutrality trends, then? The trend may be that the cheaper options tend to gain a larger market share. However, history shows us that collaborative mechanisms and policies are still of paramount importance to the future of green development. As individuals, we need to pay more attention to those additional policies and measures that go beyond corporate voluntary commitment, such as ESG, and other collective long-term goals.
With his doctorate degree in Energy Systems Analysis, Dr Zhang serves as the Chief Economist of Draworld Environmental Research (Beijing) Center and actively engages in the application research of integrated energy system and distribution, hydrogen energy economy and Power to X, renewable energy access to power grid, as well as the organization and coordination of interdisciplinary large-scale projects. He also has extensive relevant working experience in the Department of Electricity, Transportation, Renewable Energy and Germany (TSU site of IPCC Technical Support Group of the Intergovernmental Climate Change Organization), France (International Energy Agency IEA), and China (Power and Grid Planning)