The tripartite paradigm of technology, finance and policy remains the foundation for the clean energy sector. Driven by dramatic price decreases and national policies, and despite a generally low-cost energy environment in much of the world, clean energy deployment is booming. This expanding global clean energy deployment has been enabled by robust clean energy investment – $350 billion in 2015 – most of which came from the private sector and more than half of which went into Asia. Most investment was in the form of asset financing, using various forms of debt and tax equity, though green bonds are gaining traction in clean energy as well.
Continuing innovation in finance, policy, and technology will be needed for clean energy to play its needed role in stabilizing atmospheric carbon dioxide concentrations at a level that can keep global temperatures at a manageable level. But the pathway to long-term global climate targets is complex. The global framework agreed to in Paris in late 2015 pulled together plans from countries representing the vast majority of the greenhouse gases in the world and set a long-term target of decarbonization by midcentury. The plans put forward by countries do not put the world on a 2°C path, much less a 1.5°C path, but they are robust and clearly a step in the right direction.
Meeting the pace of Paris will require spurring clean energy innovation, as embodied in the goals of the Mission Innovation initiative launched at the beginning of the Paris meeting. Experts believe that we will need an increase in research and development of new, cheaper, more efficient clean technologies at a rate of $500b a year for the next 25 years. It will also require greatly accelerated clean energy deployment, though harnessing low-grade, dispersed renewables (e.g., solar, wind) at scale may well require increased investments in transmission. Policy support – ideally technology-neutral and perhaps including a price on carbon will be essential to scale clean energy to meet global climate objectives economically.
While renewable energy has been the tip of the spear in the move toward a clean energy future, other zero-carbon energy solutions will be needed as well if global climate goals are to be achieved. Fossil fuels are not going away of their own accord globally, given the increasing dependence on natural gas in the West and the inevitable use of fossil resources in India, China, Africa, and elsewhere. Carbon capture and storage (CCS) technology for coal and for gas is needed to allow fossil fuel use without jeopardizing the climate and we must continue to address the impacts of methane from natural gas production and distribution.
Nuclear power, meanwhile, is already a vital source of zero-carbon energy around the world, but its fortunes are flagging in some developed countries, particularly the US, where some plants have closed and others are scheduled to close in the near future. Federal and state policy support will be needed to safely and economically keep existing nuclear plants alive for at least another decade or two, stand up new ones, and advance next-generation nuclear. Other zero-carbon solutions similarly require greater attention, including hydropower and geothermal power, and should not be ignored – all such options including nuclear should be considered in any new clean energy standards. That being said, some renewable energy advocates are not open to zero-carbon solutions other than wind, solar, and energy efficiency. There is a need for leadership highlighting the importance of deploying all zero-carbon solutions.
The traditional grid characterized by centralized generation, one-way power flows, and energy provided as an undifferentiated commodity appears to be transitioning to one characterized by distributed generation, two-way power flows, greater clean energy optionality, and energy provided as services. A consumer-facing package of integrated solutions – including rooftop solar, energy storage, electric vehicles, and demand response – could represent a breakthrough opportunity. There are hurdles to a distributed future, however, and it may be premature to write off the centralized generation system – it is likely that a hybrid system will emerge with elements of both. Although rooftop solar gets a lot of attention and subsidy, more than 2/3 of solar generation in the last two years has been from utility scale solar, with only 1/3 from roof top distributed solar. Technologies growing in the marketplace can also increasingly enable the matching of demand to the available supply (instead of ramping generation to match demand). There is a need for major rate reform, though, regarding how utilities are compensated, how customers can monetize services provided to the grid, how utilities can actively participate in solutions, and how customers are incentivized to take action.
Within the context of this evolving grid, we should recognize and praise the fact that the nearly century-old social compact of providing universal access to reliable, safe, and affordable electricity has largely been achieved. Going forward, we as a country should set our sights toward a new 21st Century social compact for an electricity grid that promises additional attributes, such as sustainability and robust resilience. This evolution is raising challenging questions regarding equity and equal access, the attributes that should have primacy, and whether change can occur incrementally. Evolving demands, including by large corporations that have made clean energy consumption a core business strategy, and the growing consensus around environmental priorities such as addressing climate change, suggest that the time is right for Social Compact 2.0. To some extent, the attributes of resilient and clean are already being reflected in policy changes and efforts to restructure energy markets. The role of the conventional utility is a pressing question if we are to embark on this new level of social ambition.
Major takeaways and recommendations from the 2016 Aspen Institute Clean Energy Innovation Forum included the following:
- The trend toward a more distributed, two-way grid with more consumer choices, clean energy options and new energy service providers is well underway – but regulatory structures must continue to evolve to increase the pace of change.
- Utility scale renewable energy has largely achieved cost-competitiveness although pricing and contracting mechanisms must be such that projects are not only bid at competitive prices but can be successfully financed and brought online.
- While our immediate challenge is to greatly accelerate the deployment of existing clean energy and demand side technologies, meeting worldwide decarbonization goals will require a significant increase in research and development at a rate of $500b a year for the next 25 years, and will likely require governments around the world to put a price on carbon to most efficiently redirect investment toward reducing emissions.
- The future of a modernized electrical grid will require major public and private investment in our energy system infrastructure as well as greater demand side efficiency and use optimization. The near future energy system will require that we preserve and enhance nuclear energy’s contribution and that we seek to decarbonize ongoing fossil energy generation through carbon capture, use and storage.
- In the US, we have largely fulfilled the 20th Century social compact of providing affordable, reliable and accessible electrification and the economic benefits resulting from that achievement. It is time to consider the next social compact (Social Compact 2.0) to provide affordable, reliable, accessible and clean energy, as well as advanced energy services and products, to all consumers.