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FT Investing in a Sustainable Future March 24, 2010, New York

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Energy at the Tipping Point

By Christopher Flavin / Worldwatch Institute

Moving beyond fossil fuels into a low-carbon future can protect the climate while jumpstarting the economy

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The world is entering uncharted territory. Fossil fuels have made the modern economy and all its material accomplishments possible. But building a low-carbon economy is the central challenge of our age. Meeting that challenge will require restructuring the global energy industry through technological, economic and policy innovations that are as unprecedented as the climate change it must address. If those changes are made, we will unleash billions of dollars of investment and create millions of new jobs around the globe.

Driven by the perfect storm of high energy prices and concern about climate change, companies around the world have been investing tens of billions of dollars in a wide array of clean-energy technologies with the potential to reduce dependence on fossil fuels. Solar energy, wind power, green buildings and electric cars are among the pivotal technologies now entering the global marketplace on a grand scale.

Building a low-carbon economy is the central challenge of our age.

The global financial crisis that swept the world in the fall of 2008 presents challenges for the energy revolution now underway. National leaders from French President Nicholas Sarkozy to U.S. President-Elect Barack Obama are now arguing that investing in clean energy may be the best way to jumpstart the languishing global economy.

Around the world, it’s a combination of private sector innovation and proactive government policies that are making this new energy revolution possible. From the Federal Republic of Germany to the state of Texas and the People’s Republic of China, government policies are being implemented that allow new energy technologies to overcome the dominance that a century of public support has provided for fossil fuels.

The sheer magnitude of the transformation ahead requires bold action. Across the political spectrum–from former Vice President Al Gore to oil billionaire T. Boone Pickens–respected voices are calling for the United States to undertake a national commitment to reduce dependence on oil and coal, replacing it with indigenous energy sources such as solar, wind and bioenergy. As Pickens and Gore both acknowledge, real change hinges on government policies that stimulate production, increase efficiency and reward investment in renewable energy.

Many energy industry executives argue that reducing carbon emissions as rapidly as scientists urge would risk an economic collapse. A thorough review of studies that assess the potential contribution of new energy options, as well as the rapid pace of technological and policy innovation now underway, points to the opposite conclusion.

Improved energy productivity and renewable energy are both available in abundance, and new policies and technologies are rapidly making them more economically competitive with fossil fuels. In combination, these energy options represent the most robust alternative to the current energy system, capable of providing the diverse array of energy services that a modern economy requires. Given the urgency of the climate problem, this is indeed convenient.

The first step in establishing the viability of a climate-safe energy strategy is assessing available resources and the potential role they might play. Surveys show that the resource base is indeed ample; the main factors limiting the pace of change are the economic challenge of accelerating investment in new energy options and the political challenge of overcoming the institutional barriers to change.

Energy productivity measures an economy’s ability to extract useful services from the energy that’s harnessed. From the earliest stages of the Industrial Revolution, energy productivity has steadily advanced. In the United States, the economy has grown 160 percent since 1973, while energy usage has increased 31 percent, allowing the nation’s energy productivity to double during the period. Germany and Japan, starting with higher productivity levels, have achieved comparable increases. Even today, well over half the energy harnessed is converted to waste heat rather than being used to meet energy needs.

This suggests enormous potential to improve energy productivity in the decades ahead. Light bulbs, electric motors, air conditioners, automobiles, power plants, computers, aircraft and buildings are among the hundreds of systems and technologies that can be made far more efficient–in many cases, just by using already available technologies more widely, such as compact fluorescent light bulbs and hybrid electric vehicles. Further gains can be made by altering the design of cities: increasing the role of public transport, walking and cycling, and reducing dependence on automobiles.

The sunlight alone that strikes Earth's land surface in two hours is equivalent to total human energy use in a year.

The greatest potential turns out to lie in the most basic element of the energy economy–buildings–which could be improved with better insulation, more efficient lighting and better appliances, at costs that would be more than paid for by lower energy bills. With technologies available today, such as ground-source heat pumps that reduce energy needed for heating and cooling by 70 percent, zero-net-energy buildings are possible that do not require any fossil fuels. All countries have untapped potential to increase energy productivity. But the largest opportunities are found in developing nations, where energy productivity tends to be lower.

Replacing fossil fuels with renewable sources of energy such as wind, solar and geothermal power is the other key to building a sustainable energy economy. Technologies to harness these energy sources are advancing rapidly, and costs are falling, offering the prospect of providing clean, economical energy in the near future. Markets for wind and solar power are already advancing at 30 to 50 percent per year. In the United States, wind alone accounted for 40 percent of new generating capacity added in 2007, exceeding the amount of coal capacity added.

The sunlight alone that strikes Earth’s land surface in two hours is equivalent to total human energy use in a year. While much of that sunlight becomes heat, solar energy is also responsible for the energy embodied in wind, hydro, wave and biomass, each with the potential to be harnessed for human use. Only a small portion of that enormous daily renewable flux of energy will ever be needed by humanity.

A study by the U.S. National Renewable Energy Laboratory concluded that solar thermal power plants built in seven states in the Southwest could provide nearly seven times the nation’s existing electric capacity from all sources. Mounting solar electric generators on just half the suitable rooftop areas could provide 25 percent of U.S. electricity. Wind farms spread across the states of Kansas, North Dakota and Texas could meet all the nation’s electricity needs, even with large areas excluded for environmental reasons. With improved technologies, greater efficiency and lower costs, renewable energy could one day replace virtually all carbon-based fuels so vital to today’s economy.
There are good reasons to think the world may be on the verge of a major transformation of energy markets. The powerful interaction of advancing technology, private investment and policy reform has led to a pace of change unseen since Thomas Edison and Henry Ford created the last great energy revolution a century ago. And the new energy economy has already become a powerful economic engine, responsible for over $100 billion of capital flows and 2.3 million jobs by 2007.

But is it enough? Will the coming years bring the accelerated change and trillions of dollars of investment that Nicholas Stern estimates is needed to reverse the tide of climate change? The answer will likely be found not in the messy world of economics, but in the even messier world of politics. Can the enormous power of today’s industries be set aside in favor of the common good?

This is the challenge facing Barack Obama and fellow world leaders over the next years. The early signs are encouraging: In October 2008, the U.S. Congress included renewable-energy tax credits in the $700 billion financial rescue legislation it approved. And the new administration has indicated it will seek to accelerate clean-energy investments as it considers additional economic measures in the months ahead.

Tipping points are easier to decipher in retrospect than in advance. No one can say for sure whether the substantial shifts in energy markets and energy policies over the past few years are the precursors to a revolution. Just as the events of the past few years have surprised us, so will those ahead. And the financial crisis now breaking over the global economy will likely have profound impacts on energy markets.

Even with those caveats, there are many reasons to believe that when historians look back on 2008, they will conclude that a twenty-first-century energy revolution was well underway. Whether they will also be able to say that the world was able to avert catastrophic climate change will be determined by the decisions we make in the decade ahead.

Adapted from Chapter 6 of State of the World 2008: Innovations for a Sustainable Economy. For more information visit www.worldwatch.org.

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