Don't Count the Energy Transition Out Just Yet

Two years ago it seemed that the energy transition was accelerating, with the price of oil turning negative, coal in collapse, and solar and wind installations breaking records. Now it seems as if it is slowing down again, maybe even grinding to a halt, with the renewables-bashing and fossil fuel-boosting press cheerfully announcing the end of the era of renewable energy's falling prices as fossil fuels make their "comeback" and exact their "revenge."

What happened?

The answer would seem to be: an unhappy constellation of events. Among the more consequential is how the abruptness of the economic shock, and the subsequent "recovery," created an exaggerated sense of just how fast the coal industry's decline was proceeding--and produced an equally exaggerated sense of rebound when in a moment in which utilities needed more power right away the spare power-generating capacity it had (as a result of the long decline in its competitiveness) meant takers for its electricity. This was all the more the case given that natural gas, use of which has been expanding so greatly, meant that, given the tightness of supply, it was more susceptible than those little utilized coal plants to inflationary shock. That same inflationary shock, and the greater susceptibility to it of those sectors which are running full steam ahead rather than those providing something no one wants (like what, in normal times, is more expensive and more polluting coal-fired electricity), in raising the price of everything else inflation, also raised the price of photovoltaic panels and wind turbines and batteries--a shock to the surprising number of people who do not realize these things are made of stuff that passes through global supply chains and not "magic."

As if all that were not enough Britain had a summer that somehow managed to be both exceptionally windless and sunless, providing grist to the mill of renewables-bashers who fancy themselves engineers rather than "Git a hoss!"-yelling hecklers when they use words like "baseload" and "scalability." Meanwhile the Biden administration, whose "Build Back Better" bill joins the now four decade long list of Democratic Party initiatives of similar type that, running up against the prevailing political winds fell far, far short of the promises initially made, or simply never went anywhere (Clinton's stimulus package and climate action plan, Obama's undersized and short-lived stimulus and quick shift from green energy to the fossil fuel-boosting "All of the Above" policy) was a source of additional disappointment for renewables-watchers.

Especially for those who pinned their hopes of the too long delayed transition from fossil fuels to alternatives, and amid an otherwise wretched 2020 hoped it would all be onward and upward, all of this is deeply dispiriting--the saga gone from a New Hope to the Empire Strikes Back. Yet these developments would seem less fundamental that those cheering for renewables' being defeated yet again would have us believe. Coal's comeback, certainly, seems likely to be short-lived. The commodity price shock affecting renewables affects everything else, with the result that, especially given the long-term trend to the cheapening of solar, wind and battery storage the long-term fall in price is likely to continue (the more obviously and quickly should, as governments and central banks promise, they get a handle on inflation), reinforcing their position as the winners on price as well as sustainability. Britain had a tough summer, and the renewables-bashers have made the most of it, but there is an argument to be made that Britain's problem was not having too much wind and solar in the mix, but too little. Meanwhile it is worth remembering that if helpful government support is not forthcoming renewables have already come a long way in a market where, contrary to the endless complaints of the business press about government favoring them with subsidies, they have been competing with fossil fuels getting government backing far exceeding any help they may have got (in Europe as well as the U.S.), such that--it bears repeating--in spite of everything that has been done to stop it from happening, photovoltaic solar is the cheapest source of electricity provision around, with wind coming in right after it, while the prospects for progress here seem brighter than for any of the old rivals.

The result is that despair is no more appropriate or helpful than complacency. Still, if the long-term trend remains in favor of renewables the speed of the transition does matter greatly, given the economic and ecological stakes--and concern for maximizing that speed would seem the appropriate object of concern for those wanting to see this change happen.