Renewables and the ‘Cheap Energy Contract’
Earlier in this series, we established that electric-driven transport can fairly rapidly substitute for petroleum in most ground transport applications and that renewable electric generators will be the most quickly deployable and functional of the available energy alternatives. However, there are challenges and barriers to overcome in order to move quickly toward the clean energy economy of the near future, as we have not yet seen a strong, spontaneous market for such a solution emerge on its own. This is where policy and the structure of our financing system for infrastructure and energy are key. The next few installments will focus there.
Much renewable energy policy has incentivized the building of renewables as a virtuous “side salad” for a basically functional, but dirty electric generation system — our main energy “meal." In fact, energy industry insiders including Dick Cheney have misrecognized renewable energy, the first power source for the first electric grid, as simply an ineffectual display of personal virtue. Despite the current administration’s lamentable record of moving America toward our energy future, somewhat more forward-looking, state-level policies have actually tended to reinforce the view of renewable energy as a personal statement or an act of corporate social responsibility for utilities or their large-scale customers. These state-level policies have often focused on rooftop photovoltaics or delivering a small fraction of wholesale energy through renewable generators, the Renewable Portfolio Standard policies or RPS.
While these often token policies have helped keep the renewable energy industry on life support, policies like the RPS will not by themselves drive the building of a largely renewable or all-renewable grid. In an era where we are now targeting closing down fossil generators and replacing them with renewable generators, policy instruments will have to change as the focus switches to building an integrated Renewable Electron Economy.
Recent political maneuvering around offshore (and Alaskan) drilling has highlighted the continuing strength of what I have called “the Cheap Energy Contract,” a social contract — particularly strong in North America — in which energy costs are supposed to contribute only negligibly to family and corporate budgets. A politician who does not throw themselves full-force into rhetoric or actions designed to depress the current price of energy at the pump or electric meter risks the ire of voters whose focus has narrowed to present-day pocketbook issues.
More than just being addicted to oil, Americans are addicted to cheap energy. Cheap energy today is supposed to be a cornerstone of our democracy, even though maintaining its low cost is extremely costly for the environment and for the future price of energy; the focus on low energy costs keeps us hostage to exhaustible and polluting fossil sources. We are seeing versions of the Cheap Energy Contract emerge in the developing world (India, Indonesia, and China) in the form of oil subsidies, which are becoming increasingly difficult for these governments to afford as the price of oil continues to climb.
Artificially cheap energy keeps energy alternatives out of the market until there are major supply disruptions or a continuing pattern of punitively sharp price spikes in existing dominant energy supplies; worldwide, 85 percent of supplied energy originates from fossil sources, mostly coal, natural gas, and petroleum. Electricity from renewable generators is still in most cases too expensive for those who adhere to the dictates of the Cheap Energy Contract, and is therefore dismissed by commentators who insist on a price for clean energy that matches that of current dirtier energy supplies. RPS laws, for instance, usually mandate that utilities bring the requisite percentage of renewable generators online at “least cost” without regard for power quality and therefore the ultimate usefulness of the renewable generator.
Even advocates of clean energy are swept up in the vortex of assumptions surrounding the Cheap Energy Contract. For instance, climate and energy analyst Joe Romm, with whom I agree on many points, often criticizes nuclear, fossil, or other energy sources he opposes by using their (high) cost as a decisive argument against their continued use or future deployment. When he does this, in my opinion, he reinforces a framework that emphasizes cheap energy now, an argument that easily can blow back in his face if he argues for most renewable energy sources to be deployed today at their current price levels.
Next: how expensive are renewables anyway?