May 18TH, 2022

How to manufacture a carbon-neutral energy system

By Richard Black

The transition to a zero-carbon energy system is non-negotiable if we are to halt the advance of climate change. On the face of things, the challenge looks daunting: currently fossil fuels provide 85% of primary energy, and we need to bring that close to zero within 30 years to stand a reasonable chance of keeping global warming at the 1.5 degrees Celsius guardrail.

However; in addition to being necessary, this transition is desirable, feasible, and to a certain extent inevitable.

With the exception of investors in fossil fuel companies, no-one will really experience any downsides. And for Europe especially, Russia’s invasion of Ukraine has provided a new incentive, demonstrating that fossil fuels dependency guarantees that rogue regimes can hold sovereign states to ransom. 

The secret to the zero-carbon energy system is that it involves companies manufacturing a few fairly simple devices, and doing so in large quantities in a competitive market. As we know from the history of televisions, mobile phones and LED lightbulbs, such conditions guarantee rapid innovation and price reductions. Engineers learn by doing, investors deploy capital into cutting-edge companies, the global market rewards the winners. In a virtuous circle following Wright’s Law, deployment reduces costs and falling costs stimulate deployment. 

This is why solar panels, wind turbines and batteries are now following mobile phone-like cost trajectories. By contrast, oil and gas wells, nuclear reactors, carbon capture and storage equipment and tidal barrages are not – and logic suggests they never will.

The cost of both solar power and electric car batteries has plunged by 85% in the last decade, and wind power by 55%. All are expanding exponentially. Over the last 20 years, electricity generation around the world from wind and solar combined has shown compound growth of 17-20% per year. If this continues, wind and solar will go from generating 10% of global electricity now to producing 40% within just eight years. 

That might sound incredible. But can anything stop it?

Wind and solar are now the cheapest form of new generation in virtually every country.

In some important markets such as India it is cheaper to build and operate a new solar farm than to continue operating a coal-fired power station. Where renewables once needed government support, now they are winning on price alone. Investment is following: 90% of new generation capacity built around the world is wind and solar, according to the International Energy Agency (IEA). 

Emerging markets

Growth in wind and solar generation creates markets for other components of the manufactured zero-carbon energy system. It stimulates adoption of battery storage and demand response, to even out mismatches in supply and demand. It rewards investment in vehicle-to-grid chargers that allow electric car owners to trade electricity with the grid, increasing energy security and keeping bills down. As periods with ‘spare’ electricity become more common, wind and solar create a market for green hydrogen manufacture for use in industry, or in electricity generation during the depths of winter. 

Can they really reach 40% of global electricity generation by 2030? There appear to be no real barriers other than inertia. The public loves them, and investors know they are the future. Electricity grids are handling far greater amounts than was once thought possible - Denmark produces more than half its electricity from these variably-generating renewables and has one of the most reliable electricity systems in the world. Supply chains including critical minerals are expanding quickly in anticipation of continued demand growth. 

How far can it go?

At least 60 studies show that with the right conditions in place, a system based on 100% renewable generation is perfectly feasible.

For home heating, heat pump uptake is increasing exponentially in countries such as Poland and Finland that are stimulating the technology; as manufactured pieces of equipment, both heat pumps and hydrogen electrolysers seem likely to follow wind turbines, solar panels and electric cars down the cost curve.

If you think the exponential growth rate of wind and solar generation is impressive, electric car sales appear to be expanding at closer to 50% per year compound. 

Securing a better future

So the transition from a system reliant on continued extraction of fossil fuels to one based around manufactured clean energy is feasible. Pure economics suggest its continuation is largely inevitable. Which provokes two questions: 1) will this new world be better or worse than the old one? And 2) if everything is so rosy, what else needs to be done to avert dangerous climate change?

The world driven by manufactured energy is a marked improvement in many ways. Air will be cleaner, removing a large share of the outdoor pollution that kills 4.5 million people each year and compromises the lungs, arteries and brains of far more. Energy will be cheaper, and free of the huge price volatility characteristic of the fossil fuel world. By 2030, an energy system en route to net zero will employ about 20% more people than it does currently.

Fossil fuel states will no longer be able to hold their customer countries to ransom. (Currently Russia looms large, but any of the few dominant producers can withhold supplies and/or dictate terms; the US, for example, may look very different after the next Presidential election.)

As to the second question: yes, there is absolutely a job for philanthropy to do, along with civil society, academia, think-tanks and others. 

In 2021 the IEA produced a energy sector roadmap to the Paris Agreement 1.5°C target. If current growth continues, wind, solar and batteries could well reach levels of deployment that the IEA considers necessary.

The problem is that virtually nothing else is on track.

For example, the IEA scenario envisages a doubling of hydropower generation, increases in nuclear output and adoption of CCS. All of these are dependent on substantial government intervention and appear unlikely to happen at scale. Energy and materials efficiency are also major opportunities for reducing emissions whose adoption is slow and largely dependent on government action.

So, philanthropy has a potential role in finding ways to persuade governments to invest in some or all of these things. Another option is to see if the manufactured energy system can expand even faster than ‘growth as usual’. Could we reach 60% rather than 40% of generation from wind and solar by 2030, for example? One advantage of taking this line is that all the good things like lower air pollution, cheaper energy and more jobs would come faster. Another advantage is that it does not require governments to do much more than remove obstacles to deployment and allow investors and the private sector to accelerate what they are already doing. 

The transition from a dirty extractive energy system to a clean one based on manufactured one is necessary, desirable, feasible and largely inevitable. But to deliver the Paris Agreement and prevent the most damaging impacts of climate change, it needs to go even faster. That is the challenge of our times.




Richard Black is founder of the Energy and Climate Intelligence Unit, an Honorary Research Fellow at Imperial College London, and a former BBC environment correspondent.