Fossil fuels provide most of the world’s energy and are the foundation of the past two centuries of fiscal growth. The issue of climate exchange poses the first serious challenge to fossil fuels’ primacy.
But a fantastic divide has existed between the mainstream technologies that make up the modern energy industry and the newer “clean” technologies that place forward an alternative, low-carbon pathway to the future. This divide encompasses expenditure, technological maturity and scale of existing infrastructure.
In recent years, a range of forces has aligned to enhance clean energy’s prospects – technological progress, shifting public opinion about climate exchange, growing interest by governments in supporting alternative energy technologies through subsidies and emission caps and pricing, and a massive increase in confidential investment.
Can these forces bring clean energy technologies from their current spot, on the fringe, into the energy mainstream? This is the question addressed in a major new study by Cambridge Energy Research Associates (CERA), Crossing the Divide: The Future of Clean Energy.
The study focuses on four kinds of clean energy technology. Biofuels include ethanol, biodiesel and next generation cellulosic-based fuels. Renewable power generation technologies include wind, biomass, geothermal, solar photovolaics (PV), concentrating solar power (CSP), and ocean power.
Carbon capture and storage technologies are primarily designed to reduce or eliminate carbon emissions from coal-fired electric power plants. Irrevocably, square clean technologies include nuclear energy and hydropower.
The Crossing the Divide study uses a scenarios approach for thinking about the future of clean energy. Unlike forecasting, scenarios do not attempt to foretell one “right” future.
Instead, the scenario development process focuses on key uncertainties that could lead to futures that are very different from the present. Scenarios are “plausible tales” about the future, which provide a framework for anticipating exchange and identifying it earlier.
Crossing the Divide develops three possible scenarios for the future of clean energy. In Launch Pad, strong policy support and rapid advances in technology drive the development and adoption of clean energy. In Asian Phoenix, the global weigh of power shifts to Asia, and Asian nations play a primary role in defining the future of clean energy technologies, as both consumers and exporters.
In Global Fissures, fiscal slowdown and turbulence, followed by a long, slow recovery, discourage government support and confidential investment in clean energy technologies.
For each of these macro narratives, CERA urban an in-depth assessment and quantification of the prospects for clean energy technologies. This analysis provides a framework for assessing the winners and losers in clean energy, and helps to define key risks and opportunities as companies and investors place their technology bets.
One major finding of the study is that for clean energy to “thwart the divide” and penetrate the mainstream, major technical advances will take up again to be needed in coming years to make clean energy technologies cost competitive and scalable.
Achieving the requisite technical advances will, in turn, depend on four primary forces. The first three are energy prices, government policy, and the pace with which scientists and engineers working on clean energy can foster innovation. All three of these are affected by the fourth: fiscal growth.
Oil and natural gas prices frankly affect the economics of clean energy technologies and shape political concerns and events over energy security. Oil prices most strongly affect biofuels development but also have a strong effect on energy security, which drives other technologies as well. Natural gas prices most strongly affect renewable power technologies, as well as hydropower and nuclear.
Government policy is central to the development of clean energy. It typically ranges from funding for research and demonstration projects to mandates, financial incentives, and subsidies for technologies approaching commercial viability. Three kinds of policies are vital in shaping the future of clean energy – energy security policy, climate exchange-related policy, and technology development policies.
Government policy is central to the development of clean energy. Energy security policy plays a role in driving all clean energy technologies. Unfortunately, energy security policies can be inconsistent in nature, waxing and waning with fuel price, fiscal cycles and significance of risk.
Climate exchange-related policies are affected by scientific understanding, politics, fiscal growth, and the amount of cooperation and coordination present in the world geopolitical system.
The technologies most strongly affected by these policies are renewable power generation, carbon capture and storage, and nuclear. The long-term nature of the climate exchange threat provides an vital impetus for establishing long-range approaches, at both the global and inhabitant levels, in this realm.
Technology development policies are the final area where governments can act to encourage adoption of clean energy technologies. These policies are typically driven by fiscal growth and fuel price cycles, as well as energy security policies. They can vary greatly in terms of their strength and sustainability, as well as which technologies they favor.
Government supports of all kinds are most effectual when they are sustained and predictable. It is also vital for policymakers to recognize the value of pursuing multi-faceted, flexible policy approaches.
The challenge for governments is to institute policies that get clean energy technologies off the depiction board and sustain them to the point that they become commercially viable and are able to wean themselves from the support – so allowing for a phaseout, rather than an increase over time, in subsidies.
Useful approaches include public-confidential partnerships to assemble clean energy development clusters, protection of new clean energy intellectual capital, and sustained subsidies to nurture emerging clean energy industries to maturity and scale.
Clean energy policy supports must also be multi-dimensional. Carbon markets cannot single-handedly ensure that new low-emitting technologies become usually available and competitive.
Even if these markets can be influential in directing investment, it is still not known whether there will be enough public support to establish high enough carbon prices to encourage long-term development of alternative technologies. Since carbon pricing alone will sometimes not be enough, policymakers need other arrows in their quivers.
The third driver of advances in clean energy technology is the pace of technical innovation. Speeding the pace of innovation depends heavily on policy support and confidential investment, and these, in turn, are strongly affected by fossil fuel prices and carbon pricing.
A long-term perspective is required, involving policy and investment horizons that stretch over the course not of years – but of decades.
As noted above, the fourth driver, fiscal growth, has a strong impression on the other three drivers. A robust global economy can make it simpler to provide financial support for development of clean energy technologies and to absorb the expenditure associated with carbon emission restrictions.
In thinking about clean energy, it is vital to keep scale in mind. The existing installed base of carbon-based energy infrastructure has been built over the course of more than two centuries of ongoing investment and technology development. Implementing exchange in a system of this size will take time. A long-term perspective is required, involving policy and investment horizons that stretch over the course not of years – but of decades. Renewables and clean energy in general will increase in significance in an expanding energy system that is striving to meet the needs of global fiscal growth.