Climate of Fear XI.

The International Energy Agency (IEA) issues reports on critical energy issues. It’s “Energy Technology Perspectives” reports offer an insight into climate change issues. So, is the glass half-full or is it empty?

The power industry produces almost 40 percent of America’s carbon dioxide emissions. There have been big technological gains in reducing greenhouse gas emissions. These improvements are what allowed President Obama to order a 30 percent reduction in emissions from a 2005 baseline by coal-burning power plants by 2030. (His recent agreement with the Chinese apparently merely ratified changes already underway.)

People have stopped believing in some of the alternative energy sources touted by environmentalists. All these technologies hold promise, but they are not yet anywhere near price competitive with carbon energy generation. Funding for things like bio-energy, offshore wind,[1] and geo-thermal dropped more than twenty percent between 2011 and 2013. It can be dangerous to extrapolate from brief periods of change. The price of photovoltaic solar cells dropped sharply from 2008 to 2012 because a land-rush of producers into the market led to savage price competition. The subsequent shake-out has led to a stabilization of prices. The “levelized” costs of solar energy generation have fallen by 40 percent from their 2010 estimate. Thus, as part of the stimulus, the Obama administration heavily subsidized alternative energy generation sources. As a result, in 2010, the US added 5 gigawatts of energy generation from wind-power; in 2011 it added 7 gigawatts; and in 2012 it added a whopping 13 gigawatts. The end of the stimulus left wind-power generation becalmed: in 2013, the US added only 1 gigawatt from wind-power, and 2014 isn’t shaping up to be much of an improvement. Lesson: in the current state of technology, alternative fuels are only competitive with carbon-fueled energy generation when the government “levels the playing field” by tilting it in one direction.

What are the real possibilities?

By 2019, onshore wind generation could cost $71/megawatt, “even without subsidies.” By 2040, in exceptionally windy places (Washington, DC?) the cost might be as low as $63.40/megawatt. By 2040 nuclear-generated power might cost $80.00/megawatt. By 2040 solar might generate power at $86.50/megawatt. None of this is going to amount to much.

The IEA predicts that by 2040 only 16.5 percent of energy will be produced from renewable resources. More than 65 percent will come from the burning of coal and gas. This means that “carbon capture” technology must develop rapidly. However, “carbon capture” technologies are failing to develop at an adequate pace. Costs are high relative to the return, so no one is interested in investing. Similarly, we need a 24 percent increase in nuclear power generation by 2025 to fend off drastic climate change.[2] Instead, nuclear generating capacity is falling.

The best solution to this problem is a severe carbon tax. Today the US emits about 5.4 billion tons of carbon dioxide. If carbon emissions were taxed at $25/ton beginning in 2015, with a 5 percent/year increase (i.e. rising to about $60/ton by 2040), lots of alternative energy sources would start to look more attractive—if not attractive.

Eduardo Porter, “A Carbon Tax Could Bolster Green Energy,” NYT, 19 November 2014.

[1] Migrating birds and drunken pleasure-boaters alike are happy about this.

[2] Build a lot of nukes in Maine. No one lives there and the winds aloft will carry the fall-out from the inevitable accident across the Atlantic to Portugal and Spain. Bad for the cork oaks and cod donuts I’ll grant you.

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