02 Power
02 Power

Share of global emissions (IPCC)

Good news wrapped in bad news

The coronavirus pandemic that spread across the world in 2020 resulted in massive economic dislocation, as well as the largest drop in energy demand and in greenhouse emissions ever measured.1 Calls were issued for governments to focus on green economic growth in the recovery from the pandemic, and there were hopes that a more rapid build-out of renewable energy might mean that 2018 would turn out to be the peak year for emissions from the electricity sector.

Alas, that did not happen. There was indeed a burst of renewable energy construction in 2020, but the economic recovery of 2021 was so robust that power demand soared beyond all previous records. Emissions from the sector hit an all-time high, marginally above the emissions of 2018, according to measurements from two groups that track them. Figure 2 shows the 20-year trend in greenhouse emissions from the world’s electricity sector.

Source: Ember

This continual rise of power emissions is deeply unfortunate. The first and most important task of the energy transition is to clean up the power grid. This is the key to the strategy known as “electrify everything”, in which other economic sectors that now rely on fuel-burning need to convert to running on clean electricity. Electric cars are cleaner than petrol cars under nearly all circumstances, but they will be cleaner still if they are running on a cleaned-up power grid. Likewise, to stop the burning of gas or fuel oil to heat buildings, we must convert to electrical devices called heat pumps, and they too need to draw their power from a clean grid.

Are we, as yet, cleaning up the power grid? The figure above answers the question: at the global scale, we are not.

And yet, hiding beneath this bad news is some good and hopeful news. The power grid is getting cleaned up across entire countries. In the United States, emissions from the power sector are down 22 percent since the year 2000, and in Europe, down 25 percent in the same period.2 The United Kingdom is rapidly driving coal out of its power mix.

Developed countries include those listed in Annex 1 of the Kyoto protocol. Developing countries include non-Annex 1.

Source: Ember

This progress in the highly developed economies suggests to us that the power grid can be cleaned up across the world. If it can happen in one place, it can happen everywhere. Yet at the moment, power demand is rising so fast in the developing world that increased burning of coal is swamping the efforts of countries like China and India to increase their use of renewable power. Those efforts are real: China is building wind and solar farms much faster than any other country. Yet it also continues to build more new coal-burning power plants than the rest of the world combined.

The chart shows cumulative installed capacity for each country.

The most hopeful news hiding in the data is that in places where emissions are not already falling, they are going up more slowly than in the past. This is a robust trend that has lasted for well over a decade, and it is displayed in Figure 5. The same trend can be viewed another way: as a global decline in emissions per unit of electricity produced, as displayed in Figure 6. This decline in the “emissions intensity” of power generation means that, in an important sense, we are cleaning up the global grid.

Based on Annex 1 and non-Annex 1 countries, 5-year moving average

Source: Ember

What matters for the climate, of course, is the absolute volume of greenhouse-gas emissions. The laws of physics are going to take no note of how hard we tried. Yet the falling emissions growth rate implies that we must be near a global turning point. Emissions from global electricity production are almost certainly going to peak, possibly as soon as 2025, and then begin to fall. The question then will be how fast we can drive them to zero at a global scale.

Renewables begin to shine

In the countries where power emissions are declining, how is that being achieved? The answer varies from country to country. In the United States, for example, major reductions came from shutting down coal-burning power plants in favour of gas-burning plants, as new gas production made that fuel cheaper than coal. Increasingly, though, the reason for falling emissions in many countries is the growth of wind and solar farms. Wind power in particular has played a major role. The difficult politics in the United States regarding climate change sometimes obscure how large a contribution the Americans have made to the development of onshore wind power as an industry. Some Republican-controlled states in the windy middle of the country have made astonishing progress. Of the electricity being generated in Iowa, 58 percent is coming from wind turbines. The figure is 45 percent in Kansas, 41 percent in Oklahoma and 34 percent in North Dakota. Texas, the second-largest American state by population, now gets 20 percent of its power from the wind.3 In these states, the economic logic of wind power has trumped political ideology. For the United States as a whole, more than 8 percent of electricity is now coming from wind turbines.4 The law the United States Congress just passed should drive that number up considerably in the next decade.

Solar power is playing a growing role, supplying as much as 10 or 12 percent of electricity in some countries with favourable solar insolation. Australia has the highest solar uptake in the world, with one in four homes having solar panels; coupled with utility-scale systems, they will soon supply 10 percent of the country’s electricity. That uptake has occurred despite an Australian federal government that was hostile to renewable energy, though more favourable policies were promulgated by the Australian state governments. With the recent change of national government, Australia may be poised for a real take-off of solar and wind power, though it continues to be one of the world’s major exporters of fossil fuels.

Nuclear reactors remain a major source of low-emissions electricity in much of the world, though their future role is unclear. The share of nuclear generation in the global electricity mix peaked in the 1990s and has been falling since. Public ambivalence toward nuclear power in the Western democracies led to a shutdown of new-reactor construction from the 1980s onwards. Supply chains in those countries deteriorated, critical expertise was lost, and their recent efforts to restart nuclear construction have been problematic. A project in the American state of South Carolina was abandoned after wild cost overruns; one corporate executive there has been imprisoned for lying to the public, and others have pleaded guilty or are under indictment.5 Losses exceed $8 billion. A project in the neighbouring state of Georgia is nearing completion, but only after runaway cost overruns. France, a supposed reservoir of nuclear knowledge, has had just as much difficulty building reactors in recent years, with Electricité de France involved in deeply troubled projects at Flamanville in Normandy, at Olkiluoto in Finland and at Hinkley Point in the United Kingdom. This summer, the French government decided to bail out the company and take full ownership of its shares.

China, Russia and South Korea have been more successful at building new nuclear plants, although the South Korean industry was marred by a scandal over fake certificates for nuclear-reactor parts. Not even China seems to be able to build reactors fast enough to keep up with rising power demand. Moreover, Chinese reactor designs have not really been tested by a crisis.

Renewable includes wind, solar, and hydro.

As demonstrated in Figure 7, nuclear power has remained a fairly steady source of electricity since 1990. However, as overall power demand has grown it is losing market share, as we can see from Figure 8.

As an answer to the energy transition, the biggest problem with nuclear power is cost. The main value of these plants is their ability to operate at all times, but the price is high: as much as four or five times the cost of electricity from solar panels and wind turbines. In recent periods of low wholesale power prices, some nuclear plants have been unable to operate economically, and have shut down. The new climate law in the United States launches a regime of federal subsidies for nuclear generation to stop this from happening, a stopgap measure while the country figures out if it wants to commit to a programme of new nuclear construction. Before the federal programme was adopted, some states created bespoke programmes featuring subsidies or other measures to salvage their ageing nuclear plants. In California, where consensus had been reached to shut down the state’s last operating nuclear-power station, at Diablo Canyon, the Legislature recently voted to reverse course and keep it operating.6

Range chart displaying costs per MWh of Solar ($28-41), Wind ($26-50), Gas ($45-74), Coal ($65-152) and Nuclear ($131-204)

This chart shows the average global cost of generating new electricity from various sources. It does not take into account the cost of balancing out fluctuations from renewable sources, which may become significant as their penetration of the grid rises.

Source: Lazard

Efforts are underway to develop a new generation of nuclear plants that would be easier to build, and safer and more economical, but these new designs are as yet unproven.

For the near term, we believe wind and solar farms will continue to be the backbone of plans to clean up the power grid. Once environmental approvals are granted, they can be built quickly, at a predictable cost. Within this decade, we should begin to see a major contribution to power grids from offshore wind farms. For many of these projects, the major rate-limiting step is not the cost of capital, nor is it the physical difficulty of construction; it is the pace at which the environmental permits are issued. Speeding that up needs to be a worldwide focus. However, another bottleneck has cropped up, and it is rapidly growing in importance.

New renewable-energy farms need permission to connect to the power grid and sell their electricity. In some parts of the world, lengthy queues have developed as project sponsors try to win this approval. The issue is to some extent physical: electric utilities have been caught flat-footed by the surge in renewable energy, and did not spend enough money building power lines to handle it. But the problem is also bureaucratic: utilities that are heavily invested in dirty energy still perceive clean energy as a threat to their profits, and thus have no incentive to speed the connection procedure. This problem has become most acute in the United States, where waiting times are now measured in years in some states, but it is spreading around the world. Federal regulators in Washington have signalled that they are about to take the issue on, and governments everywhere need to do the same. If the issue with environmental permits gets solved, these connection delays could become the single biggest drag on the transformation of the power sector.7

As the penetration of renewable electricity grows, so will the need to wrestle with its primary limitation: the intermittency of sunshine and wind. For now, the answer is to use fossil-fuel plants, as sparingly as possible, to fill in gaps in the supply of power. This is a role gas-fired power plants are already playing in some countries. Grid-sized batteries are also playing a growing role, particularly in helping to store solar power for nighttime use, with sunny jurisdictions like California and South Australia leading the way. At times, batteries now inject more power into the California grid than the state’s one remaining nuclear-power station. But batteries are still costly, and for years to come, their main role is likely to be smoothing out daily power fluctuations. We still need a method to cope with conditions described by the delightful German word dunkelflaute, or “dark doldrums”— meaning longer periods when little power is likely to be available from wind and solar farms. The electricity may be stored as heat in big, insulated piles of rocks or sand, or it may be stored as compressed air in underground caverns, then converted back into power. It could be converted into hydrogen, which could then be turned back into power in turbines or fuel cells. Such methods would inevitably entail round-trip efficiency losses, but they may nonetheless prove to be the cheapest ways to cope with the problem. A more intensive and serious development programme, with major investments and public policy to support it, is required on long-duration electricity storage.

Another approach may be to move power long distances, so that low wind or solar in one region or country can be made up with electricity from another. This is already happening in Europe, where a string of new undersea interconnection cables between countries is creating a more robust power market.8 Yet in many parts of the world, new power lines on land provoke intensive resistance. At least some new ones are clearly going to be needed, so the public opposition to power lines is yet another political problem that must be solved if the energy transition is to proceed at the pace required.