What the Energy Transition Needs Now is a Good Plumber
Cleantech investment is ready to flow… but the pipes of progress are clogged.
2022 was a watershed year for federal climate change legislation. The Inflation Reduction Act (IRA) directed $369 billion toward clean energy technology, infrastructure, and climate mitigation. The energy-related parts of the Infrastructure Investment and Jobs Act add another $75 billion. This feels like progress.
This level of federal investment has the potential to be transformative. Widely cited modeling exercises (see here, here, and here) project that IRA incentives will induce *major* increases in technology deployment. For example, the REPEAT project estimates over 590 installed GW of utility solar and over 470 GW of onshore wind by 2030 (compared to 97 GW and 136 GW today) and incredible accelerations in the adoption of EVs, heat pumps, etc. This all adds up to large projected reductions in US GHG emissions (~40% below 2005 levels by 2035).
If you’re climate-concerned like I am, it’s easy to get excited about these big numbers. But it’s important to remember that the models behind these projections make some big assumptions. For example, it’s assumed that the main barriers standing between us and a clean energy future are high technology investment costs. Households and firms are, implicitly or explicitly, assumed to operate like perfectly-informed cost-minimizers. When government incentives make renewable energy cheaper to build and EVs cheaper to buy, the model quite sensibly builds/buys more.
Largely missing from these models are other “non-cost” barriers such as permitting gridlock, NIMBY challenges, behavioral biases, land use restrictions, skilled labor shortages, supply chain issues, information problems, culture wars, to name but a few. We have seen repeatedly how these kinds of obstacles can delay or defeat clean tech deployment in the real world.
Riffing on my bad plumbing metaphor, these obstacles are like hairballs in the pipes of decarbonization progress. They are idiosyncratic and messy and hard to build into our models. But a failure to account for them means that our modeling projections will almost surely overstate the real-world climate impacts of new federal legislation.
If we want to bring clean tech deployment anywhere close to these optimistic modeling projections, we’ll need to figure out how to replumb or remove the hairball obstacles. In other words, we need some industrious “policy plumbers” who understand how the system works, why it’s getting clogged, and how we can get things moving.
Where are the policy plumbers?
The federal government is uniquely positioned to direct many billions of dollars toward clean energy investments. But it is not in a great position to engage in the weedy trouble-shooting that will be required to clear a path for clean tech deployment across localities with different zoning restrictions, permitting requirements, local building codes, and political nuances. States and local governments are arguably in a better position to act as creative policy plumbers.
With many billions of federal dollars ready to flow, state and local governments should be looking for ways to direct this flow into their energy systems and their economies. And if any state should be working to clear the way for decarbonization investments, it’s California.
California’s recently adopted Scoping Plan charts an ambitious path to significant GHG emissions reductions by 2030. The plan calls for a rapid scale-up of building electrification, a four-fold increase in wind and solar investment, a doubling of electricity generation, and the list goes on. There are mounting concerns about how this plan will be implemented, what this will cost, and who will pay the price.
In the past, California has relied to a significant extent on retail electricity rate increases to pay for power sector decarbonization costs. We’ve blogged before about the inequities and inefficiencies baked into this approach. Federal incentives for clean technology and infrastructure deployment under the IRA are more progressive distributionally because they are funded by increasing the corporate income tax. If California can attract these federal dollars, this will shift some of the decarbonization cost burdens off of California utility customers and onto a more progressive base.
California has situated itself on the bleeding edge of decarbonization efforts. So we are hitting the hairballs before other jurisdictions. This has spurred some notable, and often controversial, plumbing efforts in the Golden State. Here are a few that I’m following:
- Land use/local permitting: California recently issued “emergency regulations” (AB 205) that delegate blanket authority to bypass local permitting for siting of solar, wind, and certain battery backup projects.
- Grid integration of renewables: Last week, the California Independent System Operator (CAISO) approved the Extended Day-Ahead Market (EDAM) proposal. Western grid integration/coordination will help support higher levels of renewable penetration.
- Utility rate reform efforts are exploring ways to address affordability concerns and leverage demand response.
- Building code restrictions: Some California cities have started requiring homeowners to install electric appliances when they replace gas equipment or undertake renovations.
- Information campaigns are trying to convince grandpa Max that a heat pump will keep him just as warm and an electric range will crisp his schnitzel just as nice.
That’s my list. I would be interested to hear from blog readers about the initiatives you’re tracking. And the hairballs you’ve spotted before the rest of us.
Learning by plumbing?
New federal climate initiative will go a long way toward removing the investment cost barriers to decarbonization. But there are other obstacles to reckon with. In the past, green states have provided an important laboratory for experimenting with climate policies like renewable portfolio standards, tax credits, consumer subsidies, and carbon pricing. It seems the next frontier in this experimentation should be more focused on non-cost barriers. These obstacles will manifest differently across states and localities. But there are generalizable lessons to be learned from state and local-level trial and error. Let’s get plumbing.
Keep up with Energy Institute blog posts, research, and events on Twitter @energyathaas.
Suggested citation: Fowlie, Meredith, “What the Energy Transition Needs Now is a Good Plumber”, Energy Institute Blog, UC Berkeley, February 6, 2023, https://energyathaas.wordpress.com/2023/02/06/what-the-energy-transition-needs-now-is-a-good-plumber/
Instead of ‘plumbers’ to unclog the pipeline you’ve highlighted there will actually be a need for garbage and waste collectors to clean up the debris from all of the wasted and misguided government funded technology. Flooding the market with subsidies that push current technology and appliances distracts efforts for research to develop more efficient and appropriate alternatives and creates a major long term hurdle for future better replacements. Even more significant, accelerating the implementation of more solar and electrical appliances without addressing the grid, power quality and reliability issues accentuates existing electric supply problems. Finally, if your goal is to more quickly reduce carbon the focus should be on the supply side with more nuclear, hydro, and other carbon-free resources which are more directly under government control, not residential and commercial markets.
It’s going to take more than rearranging the deck chairs (i.e., rate design reform) to solve the rising affordability problem. Trying to fund low income supports through increased fixed charges on higher income customers will likely lead to customer flight. They have the technologies already available and under the current rate regime it’s becoming cost effective to exit. The hard fact is that we’re going to need change how utility shareholders are compensated to head this off.
Here in New Mexico, PNM is doing everything it can to block any initiative that does nor result in a stockholder payout. The latest attempt is to block community solar. There is also a major attempt by other energy stakeholders to push blue hydrogen without capture, worse than burning the methane. The latter has the support of our governor (somebody should investigate why).
Though California’s modeling exercises may be widely cited, they’re either rife with conflicts of interest, or created by people who don’t really know what they’re doing. The first was the product of a $43 million grant from Chevron and BP; the second was a research-for-hire brochure assembled on behalf of Bloomberg Philanthropies, with $20 billion in natural gas holdings; the third was written by general-studies environmental science graduates without a single electrical engineer in the bunch (Energy Innovations’ Electricity Director is an attorney).
California energy policy going forward will focus on electrification. It requires people with experience in the field – not communications specialists, policy analysts, operations managers, etc. Once all the renewable pieces are put together it’s gotta work, or we end up falling back on natural gas – again. No doubt that makes the Western States Petroleum Association happy, but I tend to think Chevron and Shell don’t need the support right now.
Dr. Gene Preston, an electrical engineer with a lifetime of experience working with ERCOT in Texas, learned the consequences of over-dependence on renewables the hard way two years ago. He says the impacts of a winter storm on a grid unprepared for them “literally wrecked our economy.” Re: computer models, he notes that they’re only as competent as the people who write them, and that there aren’t enough inexperienced, well-meaning grad students in the world to keep a poorly-designed grid from going down.
Grid Expert: Replacing Diablo Canyon Nuclear Plant with Renewables “Can’t Be Done”
Renewables performed as expected in Texas. Numerous studies, of which this is one summary, show that it was natural gas shortages that caused the crisis: https://www.asme.org/topics-resources/content/the-texas-power-crisis-didn-t-have-to-happen
“Renewables performed as expected in Texas.”
No, Texas did not expect half of its 13,000 wind turbines to freeze in place. And winterizing them, at a cost of $400,000 each, only makes sense if customers are forced to pay $9/KWh whenever blade heaters are used.
Makes electricity from South Texas Project and Comanche Peak look like a bargain, doesn’t it? I’d be amazed winterizing the feedwater systems of all four Texas reactors cost as much as winterizing one wind turbine.