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Where the Energy Transition is Now – The Penny is beginning to Drop

By Stephen Arbogast

Winston Churchill famously observed: “Americans will always do the right thing, after exhausting all alternatives.”  While the U.S. may not have tried ‘everything’ on the Energy Transition, it is very possible that at last we may be headed towards doing more right things.

The sure sign of things finally heading in the right direction is when major opinion ‘influencers’ start to write about unpleasant truths.  This has finally started to happen.  One example is that the full costs of renewables are starting to be recognized.  The September 23rd U.S. edition of The Economist contained a ‘Free Exchange’ column on “Green Dollars, Why Renewable Energy has Hidden Costs.’  It is worth quoting at some length:

…if there is one thing that everyone knows about renewable energy, it is that it is getting cheaper.  Each year, or so the story goes, the costs of wind and solar power fall as the world improves its ability to harness natural resources.  In 2014 the levelized cost of offshore wind, a measure for comparing different methods of generating electricity, was about $200 per MWH, according to America’s Energy Information Administration (EIA), an official agency; by 2023 it had fallen to $127, excluding subsidies.  Yet the industry is struggling.  Six state governors recently begged Joe Biden to intervene to keep producers alive, according to Bloomberg, a news service.  In Britain the latest annual offshore wind auction attracted no bids whatsoever.”

 The article goes on to serve up some interesting economics built around the idea that wind and solar only produce when nature cooperates and that tends to be when the then prevailing price of electricity is below the average price for that period (called the capture rate).  Thus, solar’s low cost of say, $23 per MWH doesn’t look so good when the value of the electricity it’s producing is only $20 per MWH.  The column concludes: “The true costs of renewable energy are greater than they appear.

This amounts to constructive recognition of some difficult facts, and the hint that offshore wind has turned out to be much less economic than advertised is especially welcome.  That said, this discussion of renewables true costs remains incomplete.  Left out are the costs of backup generation, storage or power purchases to fill the considerable gaps when wind/solar are not available at all.  There is also the higher costs of grid resiliency measures to deal with renewable’s power fluctuations, the forced early retirements of plants with remaining economic life and the fact that quoted renewables costs by EIA and others reflect ‘the best of renewables,’ i.e., Texas wind and Arizona solar, not Minnesota solar and North Carolina wind.

Further evidence of progress comes in the form of the Inflation Reduction Act’s (IRA) approach.  It is not a ‘Green New Deal.’  Rather, it adopts an ‘All of the Above’ approach to Transition.  The legislation does extend the wind and solar tax credits for 10 years.  However, it also provides nuclear with a choice of a $25/MWH production tax credit or a 30% investment tax credit.  The existing carbon capture credits were increased substantially, and new credits are provided for transmission, storage, and electric vehicles.  Funding for research in areas as diverse as advanced nuclear, hydrogen, geothermal, and biofuels is also in the legislation.  Underpinning this legislation’s breadth is a crucial realization -that ‘clean energy,’ as in wind, solar, and battery storage, is not going to be enough to get the job done.

Unfortunately, this realization has yet to sink in as regards enabling necessary infrastructure to get built.  It will accomplish little to offer tax credits for low carbon projects if the infrastructure necessary to bring them into existence is stalled repeatedly or blocked permanently.  A subsection of the environmental movement is playing a crucial role in erecting these barriers.  Clinging to a fantasy that renewables alone can decarbonize a complex economy, they undermine the Feasible Transition with the obstructionist tactics that were forged to oppose earlier fossil fuel projects.

A stark example of this reality appeared in the form of a September 30 Wall Street Journal article entitled “A New Nimbyism Blocks Carbon Pipelines.”  The article details how Summit Carbon Solutions (SCS) has a $5.5 billion plan to capture tons of CO2 from 30 ethanol plans and construct a 2000-mile pipeline network to send the gas into North Dakota underground storage.  Ethanol plants should be high on environmentalists’ lists for decarbonization as they emit a pure CO2 waste stream.  Yet, both North and South Dakota regulators just denied SCS necessary permits after vociferous opposition from local populations fostered by regional environmental groups.  Various comments quoted in the article give a flavor of this opposition:

Environmental groups fighting the projects acknowledge that piping carbon for underground storage sounds good in theory, but argue the process is energy- and water-intensive and would only delay conversion to green energy sources such as wind and solar…

 “When you look at it more closely, you realize it’s really giving a lifeline to the fossil fuel industry,” said Pam Richart, co-founder of the Illinois-based Coalition to Stop CO2 Pipelines…

 Mark Bertolino, 62, a farmer who lives in Witt, Ill., amid gently rolling hills four hours south of Chicago, said he turned down the roughly $150,000 offered…to lease right of way through his land, mostly out of fear that the pipeline could rupture and blanket the surrounding area with CO2, which can be deadly…

 Sabrina Jones, a special-education program coordinator in Nokomis, Ill., and her husband, Ralph Jones, who farms and installs drainage systems, have a big sign in their front yard that reads, “Protect Illinois Aquifer—No CO2 Pipeline.” 

These quotes provide a good example of how ‘legacy environmentalism’ and a mistaken belief in the adequacy of wind/solar are delaying essential Energy Transition progress.  The first thing that jumps out is the belief that even a decarbonized fossil fuel industry is to be opposed because wind and solar can do the job.  This position flies in the face of serious work by pro-climate groups like the International Energy Agency (IEA), who regularly assert the need for carbon capture to decarbonize natural gas and heavy industrial plants.  It also turns a blind eye to the fact that oil & gas are going to power economies for decades, especially in the coal plant intensive Eastern Hemisphere.  If those places are going to cut emissions, carbon capture will be essential to their efforts.

As for the legacy environmentalism, what can one say about a protest based on the idea that CO2 pipelines are a danger to aquifers or that a rupture can be deadly?  Here we are not talking about hydrogen, fuel oil or natural gas in a pipeline.  We are talking about CO2 a non-flammable gas imbibed every day by millions in the form of carbonated sodas.

The fact that episodes like these are finding their way into national reporting is a hopeful sign.  There is a struggle underway within the environmental community, the resolution of which will be important to realizing a serious decarbonization agenda.  On one level that community needs to decide if climate risk truly is the preeminent environmental concern.  If it is, then feasible solutions that require some tradeoffs should be enabled if they serve the most important goal, emissions reduction.  On another, the community needs to give up its reflexive opposition to certain projects like natural gas/CO2 pipelines or nuclear, accept that only-renewables does not constitute a serious climate agenda, and that critical contributions are urgently needed from these other ready-to-scale projects.

A renewed national focus on infrastructure will be helpful.  The energy space does not consist only of plants which create fuels and electricity.  It also consists of the infrastructure that delivers raw materials to such plants and then delivers their output to customers.  Said differently, connecting infrastructure is required on both sides of energy generating facilities.  If this infrastructure is blocked or rendered uneconomic, new, low carbon facilities cannot be economically created.  Again, the IRA was a helpful sign in this regard – it led to a renewed discussion of permitting and possible reforms of the 1970’s National Environmental Policy Act (NEPA).  This law, which requires federal agencies to assess environmental impacts before taking actions (such as the Corp of Engineers granting a right of way), has been repeatedly used by the environmental community to delay and kill infrastructure projects.

Once upon a time that could be accepted as the necessary price of assuring there would be clean air and water.  Today it’s preventing urgent progress on decarbonization projects and technologies.  It’s time to recognize that protecting the air and water does not require killing every pipeline, CO2 storage or transmission project – our regulations and safety practices have advanced enough such that we can enable these vital projects to proceed with more than acceptable environmental impacts.

To promote this re-think, the Kenan-Flagler Energy Center will organize and moderate a panel on Energy Transition infrastructure at the March 21-22, 2024, UNC Clean Tech Summit.