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From a recent Our World In Data post,

For the world to transition to low-carbon electricity, energy from these sources needs to be cheaper than electricity from fossil fuels.

Fossil fuels dominate the global power supply because until very recently electricity from fossil fuels was far cheaper than electricity from renewables. This has dramatically changed within the last decade. In most places in the world power from new renewables is now cheaper than power from new fossil fuels.

However, In 2019, around 89% of global primary energy still came from non-renewable technologies. In fairness, New electric generating capacity in 2020 will come primarily from wind and solar, but that's for the United States. My question concerns the whole world.

So here's my question: if renewable energy is actually cheaper than non-renewable energy, why are people still worried about climate change? Doesn't basic economics predict that when a product becomes cheaper than another product it can substitute for, then people will adopt it? Unless adoption trends are extremely slow, wouldn't this news mean we have essentially already solved climate change, and all that's left is simply for market forces to replace existing non-renewable energy sources with cheaper renewable sources?

I suspect one of four things must be true,

  • Adoption trends are actually extremely slow perhaps due to the large fixed cost of developing new energy plants
  • Renewable energy cannot completely substitute for non-renewable energy, due to issues with storage. In this case, is there any price such that people would switch to renewable carbon-neutral energy sources? Also, where can I find the cost estimate for renewable energy sources, when you include costs for storage?
  • The cost estimate of renewable energy given by Our World In Data is incorrect
  • The world will probably be carbon neutral by mid-century.
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  • $\begingroup$ See The Economist (2020-12-05), "Crushing it", Figure 3, which seems to suggest that coal in China is still currently cheaper than other forms of energy. $\endgroup$
    – user18
    Dec 7 '20 at 6:35
  • $\begingroup$ @KennyLJ the question is about new renewable vs new fossil generation -- that figure is for new renewable vs existing fossil generation. $\endgroup$
    – LShaver
    Dec 7 '20 at 13:32
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To some extent, your suspicions are correct (notice some of the nuance you could add to your four main concluding points):

  1. Renewable adoption trends are slow.
    • Not just slow, but there is a wide dispersion of adoption based on point of energy consumption. (e.g., Think how many gasoline vehicles there are in the world and how long it will take to replace or modify them all.)
    • Transaction costs are a big deal. (e.g., Maybe a company just built a new "clean" coal plant. This was not a 1-Click buy transaction on Amazon.)
    • Cashflow problems. (e.g., Individuals, organizations, and nations do not all have equal access to capital at low interest rates.)
    • There is the landlord-tenant split-incentive barrier. (e.g., Think of all the incandescent bulbs and inefficient oil heaters that sill exist in rental units. Landlords generally just want to spend as little as possible and renters often focus on the monthly rent, not what kind of heater is in the basement.)
    • There are regional and political pressures. (e.g., It is hard to convince all of West Virginia to abandon coal when coal mining is part of the culture.)
  2. Intermittent renewable energy is a storage challenge.
    • This is a technical problem, so it is less daunting. Though the hurdles do exist to some degree, storage does not have as many of the same social or structural hurdles to implementation.
  3. There are bound to be assumptions and approximations in every energy cost analysis.
    • But even if you assume the report's pricing analysis is 100% accurate, you should still be concerned about climate change.
  4. The world will move toward carbon neutral by economic forces.
    • This will happen at drastically different rates for developed and developing nations without significant cooperation.

Embedded in the more nuanced arguments that you could make in points 1 and 4 is the more pithy answer by @quarague. If you've just built a greenhouse gas emitting energy generator, the chances are that it will be cheaper to continue operating it than to build a new renewable energy generator (whether or not you include the decommissioning costs, and ignoring the negative environmental externalities).

However, you have yet to mention the most important cause for concern:

The dynamics of climate change are complicated by long time delays because greenhouse gas in the atmosphere is a STOCK (the greenhouse gas emissions are a FLOW). So, even if the entire world flipped a switch today to stop all greenhouse-gas emissions, climate change would still occur because the atmosphere already has elevated concentrations of greenhouse gases, and so there are many current and future climate change effects that are baked in (sorry for the pun).

Think of filling your bathtub with water. The tub is still full of water when you turn off the faucet, just as our atmosphere will still be full of greenhouse gases even if we suddenly stop emitting them.

If you'd like to simulate this and get a better intuition for the problem, you can try the online En-ROADS interactive simulation by Climate Interactive and the MIT Sloan School of Management. And, for your reference, even if you rapidly cut carbon entirely, there are still serious consequences (e.g., temperature increase and sea level rise).

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TMo's answer already covers a lot of very good points, but the single word 'new' in your quote already explains a large part of the problem.

If you want to create a new power source, renewables are often the cheapest option. However, if you already have an existing power plant it is a lot cheaper to just continue running it than to tear it down and replace it with a renewable energy source.

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