Market cooperation, not competition, will achieve clean energy goals
Is it necessary for every nation to have its own solar and wind manufacturing capability?
The most direct solution to global warming is obvious: We should follow the best available science and leave fossil fuels in the ground. During 32 years of negotiations and 27 international climate conferences, countries haven’t been willing to put that reality in writing. But as COP-28 ended this week, they finally acknowledged that we must transition away from coal, oil and gas.
Diplomats are calling this historic, although it includes no timetable or plan. However, another development at COP-28 identified the most important step. More than 100 countries agreed to triple their renewable energy capacity in the next six years.
It's a daunting aspiration rather than a binding commitment, with no details on how to make it happen. But decades of COPs have taught us the parameters. Nations prefer carrots to sticks, and voluntary over mandatory measures. So, the key is to align market forces and remove the obstacles to letting them work. The prize is a robust $2 trillion renewable global energy market by 2030. As the Economist put it, "renewables must once again look like a business to bet on.”
Many of the current obstacles are self-imposed. It takes years to get bureaucratic approvals before solar and wind projects can proceed. Protectionist trade policies increase project costs. And nations are still providing trillions of dollars in annual subsidies for fossil fuels. On one hand, we want to reduce carbon pollution; on the other, we pay dearly to cause it.
Take the United States. Despite some challenges, the renewable energy industry is booming. The latest annual report shows the U.S. generates nearly 12 times as much solar power and 2.6 times as much wind power as it did a decade ago. Yet, renewables accounted for only 13 percent of the nation's energy consumption last year.
The U.S. Energy Information Administration (EIA) projects the nation's solar generating capacity in 2050 could be more than 1,000 percent higher than in 2022, while wind power could grow by 235 percent. America's energy-related carbon dioxide emissions (C02) would drop 25 percent to 38 percent below 2005 levels by 2030, but that's still below the 50 percent the U.S. promised under the Paris climate agreement. This calls for a serious program of market-barrier removal.
The Solar Energy Industries Association says one in eight U.S. homes could be equipped with solar energy by 2030. Analysts at Wood Mackenzie predict America's total operating "solar fleet" could more than quadruple by the end of this decade. But it takes four years on average to finalize permits for solar farms in the U.S. Inflation, trade tariffs, rising interest rates and supply chain bottlenecks have increased the price of solar and wind electricity in power-purchase agreements by nearly 60 percent over the last two years.
The Inflation Reduction Act (IRA) is America’s biggest-ever bundle of clean-energy carrots. One objective is to replace solar and wind hardware from China by stimulating more domestic manufacturing. This would "propel the U.S. into the lead in the global race underway to reduce reliance on Chinese imports by building an indigenous supply chain."
But is it necessary for every nation to have its own solar and wind manufacturing capability? Solar panels cost more than twice as much in the U.S. as elsewhere, primarily because of antidumping duties on Chinese technologies. A study in Nature last year found that if the United States, Germany and China insisted on entirely domestic solar production, global solar costs would be 20 percent to 30 percent higher by 2030.
The U.S. Department of Energy's target is 30 gigawatts of offshore wind power by 2030, enough to create an estimated 44,000 jobs and avoid nearly 80 million metric tons of carbon dioxide (C02) pollution. But it takes an average of six years to meet permitting requirements for onshore wind farms. Rising equipment prices and interest rates have increased the cost of offshore wind by 50 percent in the last two years, so offshore wind developers have canceled or tried to renegotiate contracts for half the projects in the U.S.
Countries must ask themselves whether domestic content requirements, intellectual property rights and other issues are more important than preventing an irreversible climate catastrophe.
In this global crisis, market collaboration is more important than market competition. To signal its willingness, the United States could renew the Science and Technology Agreement the U.S. and China signed in 1979 to promote collaboration across scientific fields. We could revive the U.S.-China Clean Energy Research Center (CERC) created by the Obama administration.
We're all in this together. Everyone benefits from reducing emissions, no matter whose technology is doing it. There must come a point when nations set aside their politics, jealousies, and paranoia for the greater good. We haven’t reached that point yet, but the best available science tells us we’d better get there soon.
William S. Becker is executive director of the Presidential Climate Action Project (PCAP), a nonpartisan initiative founded in 2007 that works with national thought leaders to develop recommendations for the White House as well as Congress on climate and energy policies. He is a former senior official at the U.S. Department of Energy.