Eric Martinot: Ten Questions on Renewables Futures

1. In writing the REN21 Renewables Global Futures Report, you’ve talked with all these people about the future of renewables. What lessons or insights do you come away with in terms of how we are thinking about that future?

I would say, the more we really know, the more possible it all seems. Those who know about the reality of the current situation and state of technology know it can be done. But many of us are thinking 5 years, 10 years, even 20 years ago. Even people who are just a few years out of date miss the true picture. For example, solar PV prices have declined from $3/watt to $1/watt and even less in recent years, and most people don’t know that. And even fewer know what that means for the future — that we are nearing retail-price “grid parity” around the world, today in some locales, and spreading over the next five to seven years to many more locales. (See solar PV section in Chapter 6.)

2. Given economic conditions, and the capital-intensive nature of renewables, will finance continue to be available in sufficient quantity?

This is one of the most important questions. Some finance experts said that existing sources and mechanisms are getting saturated at $300 billion, they can’t go much higher. “Creaky” was the word used by one expert, referring to our current financial infrastructure for financing renewables. Chapter 3 in the report explores new sources that could come into play, as investors increasingly see renewables as low-risk (and even lowest-risk) investments. No fossil fuel price risk, for example. In my view, as government debt becomes more risky, there are trillions sloshing around that can flow to renewables. Look, we’re going to increasingly need to invest in only the things that really matter — water, food, energy, transport — not financial derivatives and theme parks. Renewables are part of that.

3. What do we do now? What has to happen to bring about the high-renewables futures described?

Four things are at the top of my list, and suggested throughout the report: policy, finance, new business and social models, and massive amounts of education and technical training. Integration is not fundamentally hindered by lack of technology – we can do it with currently available technologies, although a variety of technical issues need to be worked out. Rather, the challenges relate to practices, policies, institutions, business models, finance, aggregation, along with changes in professional practices, education, and training. For example, we need to focus on new policies for electric power markets, transmission planning, net metering, and balancing services. We need new approaches to combining electricity and transport on policy and institutional levels, down to the building codes and practices that define how easy it is to charge electric vehicles from private garages and public spaces. Also standards and practices for new building construction, and new renewables-integrated building materials. Some of this will have to be done at the local level. And much will have to be done by policy makers and government agencies not directly concerned with energy — but rather buildings, industry, and transport. It’s not exclusively an “energy” issue.

4. Don’t we still need to wait for technologies to improve and get cheaper? (i.e., offshore wind power, electric vehicles/batteries, energy storage, etc.)

Generally, no. Many experts made the point that we can do everything we need to do with existing technologies. Of course, better performance and lower costs will make things even faster, cheaper, easier. Batteries will definitely get better, but we should be focused on the cars themselves — lighter, cheaper, smaller — and more electric public transit. Offshore wind is a special case, we still need to figure out how to make it cheaper through O&M and logistics costs, there is large potential but its more expensive than onshore. Lots of breakthroughs are possible across the board, see Chapter 6 of the report.

5. How do you respond to critics that renewable energy is too expensive?

We’re not counting everything, we’re not counting properly, and most conventional thinking is years behind the reality of cost competitiveness given recent cost reductions in renewables and continued increases in fossil fuel costs. (See “Great Debate 1″ and Chapter 6 in the report.)

In the report, experts and scenarios point to future high-renewables energy systems that don’t have to cost more than fossil-fuel based systems. For example, one scenario shows an 80% renewable energy system in 2050 costs the same as a “business as usual” fossil fuel system, if comparisons are made on the basis of total system cost.

Many experts in interviews pointed to existing fossil fuel subsidies, over $500 billion annually by the IEA’s estimation, and said that its only fair that renewables receive subsidies too, or that subsidies for fossil fuels be eliminated. Even nuclear power accident insurance is a form of subsidy — as the Japanese government is now finding out, spending what will be trillions of dollars equivalent to clean up after Fukushima and compensate those impacted.

There is also the issue of fuel price risk for fossil fuels, which renewables don’t have. This could be a more significant issue in the future, as the era of stable fossil fuel energy prices is now long over. And of course environmental costs from fossil fuels are typically not counted in the cost of energy. By the European Commission’s own studies, environmental costs can double the true cost of coal power.

Traditionally, cost comparisons have been made on the basis of levelized costs, and when people say that “renewables are too expensive” that is usually what they mean. But comparisons on the basis of financial risk-return perspectives can yield very different results. A wind power plant today can be a lower-risk investment than a coal power plant, and pension funds and risk-adverse investors are waking up to that fact. In the coming years, the phrase “low risk” for energy investments is going to achieve the same venerated status that “low cost” has had in the past.

6. What could interfere with achieving a renewable energy future? What are the biggest obstacles? How long will it take?

Right now, many view major energy companies as big obstacle. Read Chapter 2, the report’s Conclusion, and also “Great Debate 6″ in the report — “Will Utilities Lead, Follow, Push-Back, or Perish?” Some utilities are leading, for example in Denmark. Others are pushing back, including in Spain now and in China. Some experts believed some coal-based utilities will soon perish, as their revenues are declining because of growing renewable generation.

Another thing that could interfere is the idea that nuclear power is “clean energy.” It is not. Yes, there are substantially no carbon emissions (even counting nuclear fuel chain), but accident risks and environmental contamination from waste storage over thousands of years are the longest-term environmental threat we have yet to devise.

Of course, if financial depression spreads around the world, then investors could become very risk-adverse, even for renewables. Or if we see high interest rates and hyperinflation, then investments will suffer, as capital-intensive investments like renewables are very sensitive to interest rates. (Although, renewables could be come to be seen as a significant inflation hedge.)

Finally, lack of education and local manufacturing in developing countries will become a serious obstacle, as markets shift to those countries. Even China is facing a serious shortage of trained personnel related to renewables.

Many of these issues might be relevant for the next 5-10 years, but beyond that, I do believe the transition won’t take more than 25-30 years, say by 2040, and certainly by 2050. Young people graduating today will certainly see this happen during their most productive years.

7. Which role do you see for major energy companies and utilities in the renewable energy future?

The role of utilities is very important. Utilities need to learn and adapt — they need to see the question not as “if” but rather just “how?” and “how much time will it take?” This is happening now in Denmark and Germany. How to make renewables and fossil fuels compliments rather than competitors? Utilities can do this, but right now many see renewables as a threat to their existing business. There really is a need for a strong policy response here to keep these companies from “pushing back.” (See Chapters 2 and the report’s Conclusion.)

8. How do you personally view the future of renewable energy?

The views in the report itself are not mine — they come from the people I interviewed and from scenarios. I tried hard to objectively balance these views into an overall mosaic–the “range of credible possibilities.” However, as the report’s “Preface” notes, my personal views, and especially my optimism for the future of renewable energy, will inevitably color the results. As an adjunct to the main part of the report, I wrote the “Epilogue: Speaking Personally” at the end of the report, to convey my personal views. Read it!

9 Why is a renewable energy future so important?

There are many answers, and really all of them are valid. A full list of motivations is included in the report’s Introduction. “Energy security” is a common political term. Many look for autonomy and resilience, whether at an individual or national level. China is an example of a country that sees renewable energy as fundamentally an industrial development strategy. Of course many are concerned about climate change. Personally, I’m also very concerned about geopolitical conflict related to control and protection of fossil fuel resources. And my biggest concern, beyond all others, is the long term impact of nuclear waste on future generations and the environment. We need to see that nuclear power is really not necessary given what renewables can do, that nuclear power is too expensive when all costs are counted (which we currently don’t do), and that management of nuclear wastes for hundreds of thousands of years is a huge burden we place on our grandchildren.

10. What’s next?

We need to see that “moderate” renewable energy futures, as discussed in Chapter 1, are no longer out of reach but perfectly reasonable, and that the “high-renewables” futures in Chapter 1 are no longer the province of fringe visionaries, but actually entirely possible. If you read the report, I think you’ll get a better sense of that. We need to directly tackle the integration challenges, as discussed in Chapter 2. We need new sources of finance (Chapter 3), and new policies and actions at local and national levels (Chapters 4 and 5). And of course technology advances and cost reductions (Chapter 6). But the problems are not fundamentally technical and economic any more. We’re past that. Rather, we need to think differently, make different choices, see the future in a different light. I hope to inspire many along those lines in the coming years.

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