Why Renewable Energy (Alone) Won’t Fully Solve the Problem

Back in 2007, the audacious RE<C project was started. The goal of RE<C was simple: make renewable energy less costly than coal and let economics do the hard work of converting the worlds energy producers to go renewable. I blogged the project in Solving World Problems With Economic Incentives summarizing the project with “the core idea is that, if renewable energy sources were cheaper the coal, economic forces would quickly make the right thing happen and we would actually stop burning coal. I love the approach but it is fiendishly difficult.”

Unfortunately, RE<C really was fiendishly difficult and the project was subsequently abandoned in 2011. But I still love it partly because it was attempting to address an incredibly important world problem and partly because I like the use of economic incentives to solve world problems. Anytime we can make it financially advantageous for companies and countries to do the right thing, it’s far more likely to happen. Economic incentives are one of the best ways to influence governments of all sorts. Democratic governments, autocratic regimes, and pretty much all forms of government in between. With economic incentives aligned, lobby groups are far less likely to successfully block progress. Admittedly, even the obvious transitions with clear benefit still take time but there are few forces more powerful at forcing global change than economics.

Moving down from the global level to that of individual companies, I’ve long advocated the use of economic incentives to drive innovative uses of computing resources inside the company while preventing costs from spiraling out of control. Most IT departments control costs by having computing resources in short supply and only buying more resources slowly and with considerable care. Effectively computing is a scarce resource so it needs to get used carefully. This effectively limits IT cost growth and controls wastage but it also limits overall corporate innovation and the gains driven by the experiments that need these additional resources.

I’m a big believer in making effectively infinite computing resources available internally and billing them back precisely to the team that used them. Of course, each internal group needs to show the customer value of their resource consumption. Asking every group to effectively be a standalone profit center is, in some ways, complex in that the “product” from some groups is hard to quantitatively measure. Giving teams the resources they need to experiment and then allowing successful experiments to progress rapidly into production encourages innovation, makes for a more exciting place to work, and the improvements brought by successful experiments help the company be more competitive and better serve its customers.

I argue that all employees should be limited only by their ability rather than an absence of resources or an inability to argue convincingly for more. This is one of the most important yet least discussed advantages of cloud computing: taking away artificial resource limitations in support light-weight experimentation and rapid innovation. Making individual engineers and teams responsible to deliver more value for more resources consumed makes it possible encourage experimentation without fear that costs will rise without sufficient value being produced. And, because cloud computing is so inexpensive and comes without a long term commitment, a single engineer to do a trial run of a 1,000 core analysis to improve supply chain logistics without appreciable financial risk. If it works, keep doing it and reap the economic gain. If it doesn’t work, little was spent and it may have been a failed experiment but it was an inexpensive failed experiment. Economic systems are very powerful at driving innovation. That’s one of the reasons why the venture funded startup community has been successful innovating faster than some even very well-funded big companies.

Returning to the RE<C project, two engineers from the project recently wrote up what was learned on the project for the IEEE Spectrum article “What It Would Really Take to Reverse Climate Change.” The article talks briefly about the project, it’s goals, but rather than digging into why it failed, they instead discuss why the project succeeding wouldn’t have achieved the overall goals of reducing climate change. The latter is surprising in that how could producing energy less expensively than coal possibly not succeed in the project goals of reversing climate change? Technically the goals of RE<C were to drive down the cost of renewable energy below the cost of coal rather than to reverse climate change (RE<C Initiative) so it actually isn’t 100% correct to speculate that it could succeed and yet simultaneously fail at that definitional goal. But, the authors of this article are arguing an important point that RE<C could actually have succeeded and yet still have failed to reverse climate change which was clearly at least a motivator for the funding of the RE<C effort.

How could renewable energy less expensive than coal possibly fail to reverse climate change? There are two primary factors in place the first of which is fairly obvious and the latter perhaps less so. Looking first at the more obvious reason, the RE<C project ended up deciding to focus on solar power and solar has the downside of not producing around the clock. Solar arrays produce far less on cloudy days, generally are poor producers in geographies with non-favorable weather patterns, and don’t produce at all during the night. Coal produces 24×7 so beating coal requires that the renewable energy either be produced on demand or that it be efficiently stored to support load through lower production periods. Getting both power storage and power production costs less than coal is an even harder problem than the simple RE<C goal. However, there is still no question in my mind that delivering on RE<C even without a high-scale storage solution would have still had a phenomenally positive impact on the world climate problem. There is already an abundance of good work going on in utility scale energy storage using a flywheels, Li-Ion batteries, compressing air, and lifting large volumes of water amongst other solutions.

The second reason why RE<C successful might not have been sufficient to reverse climate change is the core focus of the article (What It Would Really Take to Reverse Climate Change). The authors present data and argue that the limit of carbon dioxide concentration in earth’s atmosphere to avoid global warming is around 350 parts per million (ppm). We are already at around 400 ppm and steadily worsening so, to reverse climate change, not only must we stop putting more carbon dioxide into the atmosphere but we must also remove 13% of the CO2 already in the atmosphere.

I enjoyed the article and generally found the data presented credible but I don’t look at the problem with quite so binary a perspective. Delivering RE<C but not finding a way to remove CO2 from the atmosphere would be a tremendous success. I would love to only have face the carbon sequestration problem :-). I also don’t view research that drops the costs of renewable energy but fails to get it below the cost of coal as failure. The closer we get to these goals even if they are not fully met, the more likely industry is to choose the cleaner solution. Good article, great topic, and, whether alive or dead, I still love the RE<C project.

· Summary of the RE<C Project: https://www.google.org/rec.html

· IEEE Spectrum article: http://spectrum.ieee.org/energy/renewables/what-it-would-really-take-to-reverse-climate-change

–James Hamilton, http://perspectives.mvdirona.com, jrh@mvdirona.com

10 comments on “Why Renewable Energy (Alone) Won’t Fully Solve the Problem
  1. Joan says:

    Hello, May 2015 is knockin’..
    I hope you followed the latest IMF or Barclays(?) report on subsidies(*) for fossil fuels and how these compare to the ones renewables get.. RE<C succeed on all scales – reverting human induced(!) climate change can be the next goal.

    *) not all are plain straight-in-the-face subsidies, but they labeled them as such..

    • Joan, that’s sounds like a good goal to me and I would love to see us in a world where renewable entergy is less expensive than fossil fuels. If that were to happen, the free market would take it’s course and the world would move fairly rapidly to renewable energy. But my current read of the market is that fosil will remain less expensive for the short term and quite possibly the long term so we need to find other incentives. There are a wide variety of ways to get there but one I like is to charge all fuels for not just there discovery and distirbution costs but also for their environmental mitigation costs.

  2. Tim Small makes a key set of observations: most companies IT department doesn’t even see the power bill — it ends up being handled by the real-estate department or another operations group. Consequently, crazy things happen like placing portable air-conditioners in the same room as the IT equipment where both the cold air and the hot exhaust of the local air conditioner are being exhausted into the same room. It’s slightly over-generalizating but largely the truth to say the smaller the facility the greater the waste. Small facilities don’t drive much cost, aren’t that important and don’t get that much attention. Sadly there are also more of them. Perhaps the worse case example are the 100s of thousands of communications and small scale IT closets used around the world. They are generally ignored but are incredibly inefficient and, in aggregate, consume more power than the worlds biggerst consumers.

    Tim also notes that there are geographic differences in the price differences between renewable energy and carbon based sources. Yes, I agree on this one as well.

  3. Michael F observed "renewables are now cheaper than coal: http://www.nytimes.com/2014/11/24/business/energy-environment/solar-and-wind-energy-start-to-win-on-price-vs-conventional-fuels.html&quot;

    Sadly this is not strictly speaking true. When newspapers write up articles, they often overstate a position and sometimes rather than a strictly "just the facts" presentation end up editorializing even when not writing in the editorial section.

    Renewable energy is not less than coal or natural gas although we all really wish it were. Because of tax incentives and subsidies and other non-symetric taxing, there are locals where renewable can win today. This is good but we would all prefer to see renewable energy win without the incentives since these victories are more persistent and don’t get changed on the whim of the next government. However, the juristictional modifications to the open market that make renewable cheaper arguably make sense since the real cost of burning fossil fuel is much higher than the market price of the fuel.

    So, yes, there are some juristictions where government subsidies and incentives make renewable energy cheaper than carbon based fuels.

  4. Tim Small says:

    On the topic of IT department wastage – a related problem is that in most small and medium sized organisations (certainly in the UK), the cost of the IT department’s energy usage doesn’t come out of the IT department budget.

    Unsurprisingly, in such organisations desktop and server IT energy consumption often looks a lot like Venezuelan gasoline consumption.

    Internal financial policy change like Cambridge University’s Electricity Incentivisation Scheme (which rewards efficient departments) can often reap substantial benefits in such organisations.

    An article which I recently wrote for an audience of building services engineers in the UK’s CIBSE journal gave my take on reducing IT energy wastage in medium sized organisations (and pretty much any businesses where high-efficiency IT isn’t a key component of their business model).

    As has been pointed out elsewhere, the RE<C condition is interesting in that it’ll occur in some places and for some customers far earlier than others (domestic customers in Hawaii being an oft-cited early example), hopefully this will continue to drive exponential adoption of solar PV in particular, making it true elsewhere sooner. India (which is both sunny, and has some of the most carbon-intensive electricity in the world) would be a really great place for this to happen next!

    Tim Small

  5. Michael F says:

    According to the NY Times, renewables are now cheaper than coal: http://www.nytimes.com/2014/11/24/business/energy-environment/solar-and-wind-energy-start-to-win-on-price-vs-conventional-fuels.html

    The question is now "What next?"

  6. Tobi says "note electricity is only a fraction (~1/3) of the entire energy consumption." That is true and some sectors like Transport need to have vehicles age out of the fleets and be replaced by electric vehicles. Before this can happen there has to be economic vehicles, infrastructure to power them, and favorable electric prices all of which takes time.

    It’s absolutely true that, even when a decision makes excellent economic sense, the transition doesn’t happen over night. The problem is if it doesn’t yet make economic sense, the rate of change ends up somewhere between VERY slow and not at all when looking across the entire world with all the different governments with all there different priorities. The closer we get to renewable energy parity the easlier it is to force this transition.

  7. Frank Ch. Eigler says:

    (Fully agreed!)

  8. tobi says:

    Note, that electricity is only a fraction (~1/3) of the entire energy consumption: http://www.eia.gov/totalenergy/data/annual/images/pecss_btu_2011_med.jpg

    There’s a lot of inertia in converting the remaining 2/3 to also use renewable energy (probably mostly renewable electricity).

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