Renewables and efficiency would provide more GDP than fossil fuels
The attached Excel spreadsheet (PDF alternative) takes specific technologies, the known cost of implementing them, and various scenarios for responses to such implementation and technical improvements (including no technical improvement!) and calculates costs and benefits. This is intended to be an open source model. The comment section will be used to revise the spreadsheet with links to the old versions added to the bottom of this post as revisions are made (for the sake of transparency.) There is also a Word document with a narration of assumptions.
The conclusion in this 1.0 version: Unsurprisingly, the key to eliminating emissions profitably is large efficiency increases. With maximum efficiency improvements even a scenario with (completely unrealistic) zero technical progress in efficiency or renewables would make our economy as a whole richer than if we stuck to fossil fuels. If we combine aggressive efficiency improvements with aggressive (but reasonable) improvements in technology we would end up richer by more than a trillion dollars a year. Aggressive efficiency spending which yields small reductions, unsurprisingly has poor financial payback.
Warning: There is an easy misinterpretation the data does not support — that we can do nothing. The fact that eliminating most fossil fuel use is more profitable than continuing to use fossil fuels to society as a whole does not mean that elimination will happen without policy changes. Nor does it mean that is currently profitable to those who could make the technical changes. For example, transforming commercial office space into a green building raises worker productivity by a minimum of 4 percent. If a landlord makes that transformation, and somehow gets hold of the confidential data needed to document that productivity gain, how much can she increase rents based on those productivity improvements? If you guessed zero, you are right and win the no-prize. Incidentally, even if the building is 100 percent owner occupied, what do you think the odds are they will invest in improved lighting and ventilation for the sake of productivity improvements?
Also, I’m documenting paybacks compared to what we are doing now, not compared to not caring about global warming. For example, those productivity gains I mentioned in green buildings: You can gain almost all of them with inexpensive changes that will only save about 20 percent of energy consumption compared to a normal building. But I consider them as part of payback for improvements that will save 70 percent of energy compared to a normal building. Now that is valid: It still saves money compared to what we are doing now. But it is also something that is not going to happen except specifically as part of a policy to fight global warming. You are not going double the size of your energy saving investment for a 10 percent higher return except for a social goal. And since most buildings use exactly zero oil, you sure are not going to do it in the name of energy independence.
That also leads to another point: in demonstrating payback, I’m following Amory Lovins’ credo of counting all the costs and all the benefits. That is I’m taking into consideration things like productivity gains, health benefits, and also what we spend not only on fuel but on total energy including capital and O&M.
Methodology: I’m looking at savings compared to current consumption to get to the point where only 5 percent of emissions come from fossil fuel — (almost all natural gas), plus 3 quads of biomass as industrial feedstock. This projection remains valid environmentally even if the economy grows aggressively, because even modest efficiency improvements keep consumption well under 100 quads, and thus fossil fuel (mostly in the form of natural gas) consumption under 5 quads.
Applying this to world projections for energy growth yields about 10 percent of today’s emissions from fossil fuels, and one-half to one-third the consumption of biomass (~36 quads of fossil fuel, mostly as natural gas, and 22 quad of biomass world wide.). Even the poorest nations have plenty of sun and wind, and most of the big energy consumers in the global south produce less GDP per unit of energy than we do — giving them even more efficiency potential than we have. And I’m assuming that all efficiency improvements worldwide are directed into increased GDP compared to BAU scenario. If any improved efficiency results in slower than project increases in energy consumption, worldwide use of fossil fuel drops even further.
Note that both solar and wind potential are (separately) many times both current and projected future consumption. Either efficiency improvements are required to pay for these more expensive renewables or technical breakthroughs are required to lower their price. While either efficiency or technical breakthroughs are sufficient to make renewables cost effective, they are better together.
Again, this post is barely an introduction. The meat is in the Excel workbook.
I will edit the sheet in response to constructive criticism, link the old sheet(s) below and change the main links in this post to point to the modified sheet — through as many versions as seem productive.
[Update] Minor changes have been made, mainly to improve formatting and clarity.
[Update] Revisions made to correct errors, show higher potential for smart grid, and additional paybacks from reduced accident rates. This last gain is small (compared to overall transition costs) in a modest rail deployment, but would be major if rail could displace a high percent of auto traffic.
[Update] Jon Rynn added to worksheet as co-author. The same will happen for anyone else making substantial contributions(unless they prefer otherwise).