This is the second in a series of posts on a recent analysis by Google on energy innovation. The first post focused on the key takeaways: energy innovation has a significant economic payoff; and the sooner we start, the greater that payoff is. The third focused on the relationship between natural gas and clean energy.
My first post on the new Google energy innovation analysis hit on the positives. Now it’s time to look at one of the more depressing takeaways: “Coal is Very Hard to Displace on Economics Alone”. This is the case even with the very ambitious breakthroughs assumed in the analysis. As the analysis states:
Coal power is abundant and cheap, especially from older and fully depreciated plants. Major displacement of coal generation did not occur until clean energy became cheaper than the marginal cost of coal, which occurred predominately after 2030 even with breakthroughs…
…Only our breakthrough assumptions for Solar PV and Geothermal were cheap enough to replace existing coal by 2030. Thus, none of the breakthrough-only runs reduced 2030 coal generation by more than 5%.
So policy is key. But even policy alone is inadequate:
Policies alone also did not reduce much coal use by 2030. Clean Policy reduced coal use 17% and $30/ton Carbon reduced coal by 15% vs. BAU. Clean Policy’s higher impact was driven by aggressive EPA regulations, increasing compliance costs, and driving retirements of existing coal units. The highest reductions seen were from the $30/ton + Breakthrough scenario, which achieved nearly 20% reductions vs. BAU.
Take a look at the amended graphic below. The gray shade within each bar represents coal power in 2030. The left-most bar is Business-as-Usual. I’ve put a box around the scenarios that include policy. Note that they result in considerably less coal use than the breakthrough-only scenarios to the left. And, as mentioned above, the most significant coal reductions come from a combination of policy and breakthroughs.
Those of us who tend to focus on technological progress as a major source of CO2 mitigation – and I am very much in that camp – need to take this very seriously. Technology has an extremely important role to play. But policy that incents the development and deployment of clean energy and discourages the use and further deployment of fossil energy is also essential. The relationship between policy and technology will be the topic of a future post.
