Wednesday, April 2, 2014

Green Energy Needs to be Cheaper

AUG. 25 2013

So let’s invest in R&D instead of subsidies.

By Bjørn Lomborg

According to International Energy Agency data, 13.12 percent of the world’s energy came from renewables in 1971, the first year that the IEA reported global statistics. In 2011, renewables’ share was lower, at 12.99 percent. Yet a new survey shows that Americans believe that the share of renewables in 2035 will be 30.2 percent. In reality, it will likely be 14.5 percent.

Solar and wind energy account for a trivial proportion of current renewables—about one-third of one percent. The vast majority comes from biomass, or wood and plant material—humanity’s oldest energy source. While biomass is renewable, it is often neither good nor sustainable.

Burning wood in pre-industrial Western Europe caused massive deforestation, as is occurring in much of the developing world today. The indoor air pollution that biomass produces kills more than 3 million people annually. Likewise, modern energy crops increase deforestation, displace agriculture, and push up food prices.

The most renewables-intensive places in the world are also the poorest. Africa gets almost 50 percent of its energy from renewables, compared to just 8 percent for the OECD. Even the European OECD countries, at 11.8 percent, are below the global average.

The reality is that humanity has spent recent centuries getting away from renewables. In 1800, the world obtained 94 percent of its energy from renewable sources. That figure has been declining ever since.
The momentous move toward fossil fuels has done a lot of good. Compared with 250 years ago, the average person in the United Kingdom today has access to 50 times more power, travels 250 times farther, and has 37,500 times more light. Incomes have increased 20-fold.

The switch to fossil fuels has also had tremendous environmental benefits. Kerosene saved the whales (which had been hunted almost to extinction to provide supposedly “renewable” whale oil for lighting). Coal saved Europe’s forests. With electrification, indoor air pollution, which is much more dangerous than outdoor air pollution, disappeared in most of the developed world.

And there is one environmental benefit that is often overlooked: In 1910, more than 30 percent of farmland in the United States was used to produce fodder for horses and mules. Tractors and cars eradicated this huge demand on farmland (while ridding cities of manure pollution).

Of course, fossil fuels brought their own environmental problems. And, while technological innovations like scrubbers on smokestacks and catalytic converters on cars have reduced local air pollution substantially, the problem of CO₂ emissions remains. Indeed, it is the main reason for the world’s clamor for a return to renewables.

To be sure, wind and solar have increased dramatically. Since 1990, wind-generated power has grown 26 percent per year and solar a phenomenal 48 percent. But the growth has been from almost nothing to slightly more than almost nothing. In 1990, wind produced 0.0038 percent of the world’s energy; it is now producing 0.29 percent. Solar-electric power has gone from essentially zero to 0.04 percent.

Yes, Denmark gets a record 34 percent of its electricity from wind. But electricity accounts for only 18 percent of its final energy use.

 Europe now gets 1 percent of its energy from wind—less than before industrialization, when cozy windmills contributed about 2 percent (and ships’ sails provided another 1 percent). The U.K. set its record for wind power in 1804, when its share reached 2.5 percent—almost three times its level today.

Moreover, solar and wind will still contribute very little in the coming decades. In the IEA’s optimistic scenario, which assumes that the world’s governments will fulfill all of their green promises, wind will provide 1.34 percent of global energy by 2035, while solar will provide 0.42 percent. Global renewables will most likely increase by roughly 1.5 percentage points, to 14.5 percent by 2035. Under unrealistically optimistic assumptions, the share could increase five percentage points, to 17.9 percent.

So we are nowhere near switching back to renewables anytime soon. In the United States, renewables accounted for 9.3 percent of energy production in 1949. President Barack Obama’s administration expects that number, almost a century later, to increase slightly, to 10.8 percent by 2040. In China, renewables’ share in energy production dropped from 40 percent in 1971 to 11 percent today; in 2035, it will likely be just 9 percent.

Yet we are paying through the nose for these renewables. In the last 12 years, the world has invested $1.6 trillion in clean energy. By 2020, the effort to increase reliance on renewables will cost the European Union alone $250 billion annually.

Spain now pays almost 1 percent of its GDP in subsidies for renewables, which is more than it spends on higher education. At the end of the century, Spain’s massive investment will have postponed global warming by 62 hours.

Current green energy policies are failing for a simple reason: renewables are far too expensive. Sometimes people claim that renewables are actually cheaper. But if renewables were cheaper, they wouldn’t need subsidies, and we wouldn’t need climate policies.

Al Gore’s climate adviser, Jim Hansen, put it bluntly: “Suggesting that renewables will let us phase rapidly off fossil fuels in the United States, China, India, or the world as a whole is almost the equivalent of believing in the Easter Bunny and [the] Tooth Fairy.”

The solution is to innovate the price of renewables downward. We need a dramatic increase in funding for research and development to make the next generations of wind, solar, and biomass energy cheaper and more effective.

Consider China. Despite the country’s massive investment in solar and wind, it mostly sells solar panels to Western countries at subsidized prices. Wind makes up just 0.2 percent of China’s energy, and solar accounts for 0.01 percent.

Meanwhile, China has 68 percent of the world’s solar water heaters on rooftops, because it is a smart and cheap technology. It needs no subsidies, and it produces 50 times more energy than all of China’s solar panels.

When green renewables are cheaper than fossil fuels, they will take over the world. Instead of believing in the Tooth Fairy, we should start investing in green R&D.

This article was originally published by Project Syndicate. 

[A followup (actually, the above precedes the other Project Syndicate article) to this article. The article below provides a sobering and pragmatic view of the tension between environmental/climate change issues and the human costs and poverty issue.]

MAR 17, 2014

The Poverty of Renewables

MIAMI – According to UN Secretary-General Ban Ki-moon, “Climate change harms the poor first and worst.” This is true, because the poor are the most vulnerable and have the least resources with which to adapt. But we often forget that current policies to address global warming make energy much more costly, and that this harms the world’s poor much more.

Solar and wind power was subsidized by $60 billion in 2012. This means that the world spent $60 billion more on energy than was needed. And, because the total climate benefit was a paltry $1.4 billion, the subsidies essentially wasted $58.6 billion. Biofuels were subsidized by another $19 billion, with essentially no climate benefit. All of that money could have been used to improve health care, hire more teachers, build better roads, or lower taxes.

Forcing everyone to buy more expensive, less reliable energy pushes up costs throughout the economy, leaving less for other public goods. The average of macroeconomic models indicates that the total cost of the EU’s climate policy will be €209 billion ($280 billion) per year from 2020 until the end of the century.

The burden of these policies falls overwhelmingly on the world’s poor, because the rich can easily pay more for their energy. I am often taken aback by well-meaning and economically comfortable environmentalists who cavalierly suggest that gasoline prices should be doubled or electricity exclusively sourced from high-cost green sources. That may go over well in affluent Hunterdon County, New Jersey, where residents reportedly spend just 2% of their income on gasoline. But the poorest 30% of the US population spend almost 17% of their after-tax income on gasoline.

Similarly, environmentalists boast that households in the United Kingdom have reduced their electricity consumption by almost 10% since 2005. But they neglect to mention that this reflects a 50% increase in electricity prices, mostly to pay for an increase in the share of renewables from 1.8% to 4.6%.

The poor, no surprise, have reduced their consumption by much more than 10%, whereas the rich have not reduced theirs at all. Over the past five years, heating a UK home has become 63% more expensive, while real wages have declined. Some 17% of households are now energy poor – that is, they have to spend more than 10% of their income on energy; and, because elderly people are typically poorer, about a quarter of their households are energy poor. Deprived pensioners burn old books to keep warm, because they are cheaper than coal, they ride on heated buses all day, and a third leave part of their homes cold.

In Germany, where green subsidies will cost €23.6 billion this year, household electricity prices have increased by 80% since 2000, causing 6.9 million households to live in energy poverty. Wealthy homeowners in Bavaria can feel good about their inefficient solar panels, receiving lavish subsidies essentially paid by poor tenants in the Ruhr, who cannot afford their own solar panels but still have to pay higher electricity costs.

The list goes on. In Greece, where tax hikes on oil have driven up heating costs by 48%, more and more Athenians are cutting down park trees, causing air pollution from wood burning to triple.

But climate policies carry an even larger cost in the developing world, where three billion people lack access to cheap and plentiful energy, perpetuating their poverty. They cook and keep warm by burning twigs and dung, producing indoor air pollution that causes 3.5 million deaths per year – by far the world’s biggest environmental problem.

Access to electricity could solve that problem, while allowing families to read at night, own a refrigerator to keep food from spoiling, or use a computer to connect with the world. It would also allow businesses to produce more competitively, creating jobs and economic growth.

Consider Pakistan and South Africa, where a dearth of generating capacity means recurrent blackouts that wreak havoc on businesses and cost jobs. Yet the funding of new coal-fired power plants in both countries has been widely opposed by well-meaning Westerners and governments. Instead, they suggest renewables as the solution.

But this is hypocritical. The rich world gets just 1.2% of its energy from hugely expensive solar and wind technologies, and we would never accept having power only when the wind was blowing. Over the next two years, Germany will build ten new coal-fired power plants to keep the lights on.

In 1971, 40% of China’s energy came from renewables. Since then, it has powered its explosive economic growth almost exclusively with highly polluting coal, lifting 680 million people out of poverty. Today, China gets a trifling 0.23% of its energy from wind and solar. By contrast, Africa gets 50% of its energy today from renewables – and remains poor.

A new analysis from the Center for Global Development quantifies our disregard of the world’s poor. Investing in renewables, we can pull one person out of poverty for about $500. But, using gas electrification, we could pull more than four people out of poverty for the same amount. By focusing on our climate concerns, we deliberately choose to leave more than three out of four people in darkness and poverty.

Addressing global warming effectively requires long-term innovation that makes green energy affordable to all. Until then, wasting enormous sums of money at the expense of the world’s poor is no solution at all.

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