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What sort of green stimulus does the world need? Technologies that reduce carbon emissions are one of the most effective targets for the trillions of dollars of spending tied to coronavirus relief programs, more than 200 central bankers, Group of 20 finance ministers and top academics concluded in a study.
There are three sets of clean power technologies that policymakers can focus on, each at varying stages of development. Most advanced are wind and solar, which are already cheaper to build than conventional energy almost everywhere in the world and in many places are even cheaper than operating existing fossil-fired generators.
The best way for governments to increase the share of wind and solar generation is probably to encourage the build-out of transmission networks and reform power markets to reduce the advantages of fossil fuels, while leaving actual financing and construction to private investors.
Next there are lithium-ion batteries. These are at an earlier stage of development and not quite competitive with existing technologies. In most places it still costs more to provide peaking power to the electricity grid with a back-up battery than with a gas turbine, and the cost of an electric car is substantially more than a gasoline-driven equivalent.
Even there, though, they’re making inroads: Electric vehicles are far cheaper to operate than conventional ones, and batteries big enough to capture peak evening power demand can already compete with gas when integrated with wind and solar generators. As a result, batteries are well on the way to undercutting conventional technologies by the middle of this decade.
It’s tempting to conclude that the fundamentals for clean energy are so positive that it barely needs support. That overlooks the fact that power generation and passenger cars are a surprisingly small share of the world’s emissions.
If both sectors were fully switched to zero-carbon power tomorrow, we’d still have eliminated only about 40% to 50% of our carbon output. Another 25% comes from land use and agriculture — but the place where governments could make the biggest difference is the 20% of emissions that come from industrial activities.
It’s the third technology that has the most potential here. Green hydrogen — produced by splitting water molecules apart with a renewable-powered electric current — is at a similar stage of development to wind and solar in the
mid-2000s.
Hydrogen has potential in an array of industrial uses where traditional renewables are unsuitable, such as steelmaking, cement and heavy trucking. If stored underground, it could even provide back-up power for electricity grids.
BloombergNEF estimates that hydrogen could meet 24% of the world’s energy needs by 2050, with annual sales of $200 billion to $700 billion. At the higher end, that’s almost half the size of the current oil market, where turnover is typically in the region of $1.5 trillion or more a year. There’s just one problem: the vast amount of power needed to produce it.
—Bloomberg