Sustainable Energy: Debunking a Popular Worry

By Earvin Poon

Introduction

The more that society relies on sustainable energy, the better the quality of life. Traditional forms of energy, such as fossil fuels, produce large amounts of air particulates which cause a variety of symptoms: asthma, lung cancer, heart disease, stroke, chronic obstructive pulmonary disorder, and premature death.[1]

Unfortunately, there is seemingly a widespread, pessimistic view in regard to sustainable energy in the U.S. A simple search online shows that many Americans believe that the industry is regressing. I disagree. The industry is stronger than ever. Not only is switching to sustainable energy a profitable investment, the U.S., and the world for that matter, is making great strides in developing technology in the industry.

Fossil Fuel’s Financial Crisis

Besides air particulates, there is a financial risk associated with fossil fuels: the carbon bubble.[2] Society continues to use fossil fuel because it has value. That value depends on investments. Those investments assume that the companies can continue extracting reserves.[3] That assumption further depends on another assumption: international inaction.[4] At the 24th Conference of the Parties to the United Nations Framework Convention on Climate Change (“COP24”), the world’s governments agreed to restrict global temperatures from rising two degrees Celsius above pre-industrial level, or 3.6 degrees Fahrenheit.[5] A temperature above that level would cause more extreme natural phenomena: rising sea levels, heatwaves, droughts, devastation of ecosystems, and more extreme weather.[6] Yet not all governments have agreed, such as the U.S.[7] And just because a government has signed does not mean it will uphold the agreement.[8] Investors remain confident that fossil fuels have value because they believe that the COP24 agreement will fail.[9] But this is a dangerous game to play. If governments do uphold their promise, then any unextracted fossil fuel must remain untouched.[10] That is why the concept is referred to as a bubble; if governments uphold their end of the agreement, then trillions of dollars of fossil fuel investment will become worthless.[11]

Why Investors May Have a Problem with Investing in Sustainable Energy

Unlike many popular opinions, I do not think that corporations and investors dislike sustainable energy, or are ignorant of the harms associated with fossil fuels. An investor’s livelihood depends on making good investments. Their investments must be profitable. Investors do not hate the environment. They hate losing money.

A longstanding problem associated with investing in sustainable energy is that the industry is young when compared to fossil fuel. As with any young industry, there have higher associated risks. For someone that is not investing, they do not experience the adverse effects of another’s poor investment. Afterall, it is not their money. And so when societies demand investors to place their money in sustainable energy, they ask others to take a risk that they themselves will not. So why should investors risk their livelihoods on something yet unproven over investments that have historically been safe, such as coal or oil?

A suggestion to balance fossil fuel usage with sustainability is carbon capture and storage (“CCS”). CCS involves taking carbon dioxide exhaust and burying it underground before it can enter the atmosphere.[12] Theoretically, CCS would allow society to run on fossil fuels without increasing the carbon emission levels. But CCS is far from being a technology that can be widely deployed.[13] And even if investments in CCS meet the idealized scenario, it would not reduce carbon emission levels necessary to meet COP24’s goal.[14]

Switching to Sustainable Energy

Debunking the Traditional View: Investing in Wind Power

A longstanding issue between the U.S. and wind turbine farms is that states do not want them in the ocean. As such, only one offshore wind farm exists in the U.S.[15] Why do states avoid having them? Because people think they are ugly. When beachfront owners look out into their ocean view, the last thing they want to see are wind turbines protruding out.[16] Therefore, to avoid being an eyesore, a wind turbine must be between 12-18 miles offshore.[17] 18 miles being the furthest distance necessary.[18] This leads to a second issue: building costs. The farther offshore, the deeper the waters. The deeper the waters, the higher the costs to erect wind turbines.[19] As such, in the U.S., the associated costs are prohibitively expensive.[20]

These problems are now history. Enter Equinor, a petroleum company, that built and operates the world’s first floating offshore wind farm (Hywind) 15.5 miles off the coast of Peterhead, Scotland.[21] Rather than extending a shaft to a fixed-base on the ocean floor, Equinor uses anchors and suctions to fix its floating wind turbines.[22] Besides reducing the cost to build, Equinor can lift the anchors and move wind turbines in order to take advantage of wind direction and strength.[23] As such, Hywind generates nearly twice as much electricity than if it were on land: 65% capacity factor for Hywind versus an average of 36.7% for U.S.’s onshore wind turbines.[24] Though relatively expensive now, Hywind is the world’s first floating offshore wind farm. As with anything new, as Equinor wins more contracts and builds more floating wind turbines, the associated costs will decrease.

Although sustainable energy remains relatively young, it has made other tremendous strides in the recent years. For example, the energy company Xcel Energy can build and operate new wind turbines and solar energy power plants for less than the cost to run its old, coal-burning plants.[25] And given that wind turbine and solar panel technology will only improve, the costs to build and operate sustainable energy power plants will only decrease further. Lower transactional costs to produce sustainable energy will further lead to lower costs for green energy to consumers.

Debunking Worries over Environmental Trend in the U.S.

Given the dramatic decrease in cost for wind and solar energy today, experts have begun debating whether to end subsidies for sustainable energies. For example, Michael Skelly, founder and president of Clean Line Energy, believes that wind and solar energy could cost as little as three cents per kilowatt hour in the U.S.[26] In comparison, wholesale prices for electricity is between 2.9 and 5.6 cents.[27] Again, since the sustainable energy industry is young, further research and development will only further drive down costs. If sustainable energy experts have begun debating whether to end subsidies (to invest in other environmental fields) and fossil fuel companies are switching to sustainable energy, then that is evidence of the industry progressing, not regressing.

What About Jobs?

An unfortunate effect of companies switching to sustainable energy is that many workers at fossil fuel plants may lose their jobs. But their curse might also be their salvation.

In general, switching to sustainable energy willcreate more jobs. On average, a fossil fuel plant generates more energy than a wind and solar plant combined.[28] For example, in 2017, sustainable electric plants (excluding hydroelectric) produced 386,277 gigawatt-hours of energy whereas coal plants alone produced 1,205,835 gigawatt-hours.[29] According to the U.S. Department of Energy, in 2016, wind and solar electric plants employed 475,545 workers, whereas coal plants employed 86,035.[30] In the same year, the total employment of fossil fuel plants was only 187,117 workers.[31] If companies switch to sustainable energy, they will necessarily have to employ more people. Therefore, the industry willcreate many more jobs.

If the concern is for those that will lose their jobs at fossil fuel plants, companies can simultaneously transition to sustainable energy and retain its employees from fossil fuel plants. According to Joshua Pearce, whose work has been published in the journal Energy Economics, many jobs at a sustainable energy plant offer seamless employment transition from a fossil fuel plant.[32] In fact, if an employee makes the transition to a job position with similarly required skilled sets, they are likely to experience a salary increase.[33] And though many variables factor into the analysis, this article highlights that employees at fossil fuel plants should not fear being bereft of employment opportunities.

Conclusion

Although briefly touching upon many subjects, this article’s purpose is to emphasize the opportunities and progress of the sustainable energy industry. From capital risk in fossil fuels to new technology, the industry’s outlook is stronger than ever.

 

[1] Jen Christensen, Which cities face most, least air pollution according to new WHO data, CNN (May 1, 2018, 6:03 PM ET), https://www.cnn.com/2018/05/01/health/air-pollution-cities-who-study/index.html.

[2] Damian Carrington, Carbon bubble will plunge the world into another financial crisis – report, The Guardian (Apr. 18, 2013, 19.07 EDT), https://www.theguardian.com/environment/2013/apr/19/carbon-bubble-financial-crash-crisis.

[3] Id.

[4] Id.

[5] Id.

[6] Intergovernmental Panel on Climate Change, Global Warming of 1.5°C9 (2018), https://report.ipcc.ch/sr15/pdf/sr15_spm_final.pdf.

[7] List of Leaders and Parties endorsing the Solidarity and Just Transition Silesia Declaration, COP24 (last visited Mar. 1, 2019), https://cop24.gov.pl/presidency/initiatives/just-transition-declaration/.

[8] Fiona Harvey, What was agreed at COP24 in Poland and why did it take so long?, The Guardian (Dec. 16, 2018, 12.04 GMT),https://www.theguardian.com/environment/2018/dec/16/what-was-agreed-at-cop24-in-poland-and-why-did-it-take-so-long.

[9] Carrington, supranote 2.

[10] Carbon Tracker, Unburnable Carbon 2013: Wasted Capital and Stranded Assets15 (2013).

[11] Carrington, supranote 2.

[12] Damian Carrington, Q&A: carbon capture and storage, The Guardian (May 10, 2012, 15.44 BST), https://www.theguardian.com/environment/2012/may/10/carbon-capture-storage; see alsoWhat Is EOR, and How Does It Work?, Rigzone(last visited Dec. 19, 2018), https://www.rigzone.com/training/insight.asp?insight_id=313&c_id=.

[13] Carbon Tracker, supranote 10.

[14] Id.

[15] David Roberts, Offshore wind finally gets blowing in the US, Vox (June 14, 2018, 8:48 AM EDT), https://www.vox.com/energy-and-environment/2018/5/25/17393156/offshore-wind-us-massachusetts-rhode-island-zinke.

[16] Jeremy Shere, Why People Hate Wind Turbines, Reuters(March 24, 2011, 1:01 PM), https://www.reuters.com/article/idUS229764732520110323.

[17] Sanja Lutzeyer et al., The Amenity Costs of Offshore Windfarms: Evidence from a Choice Experiment26 (2017).

[18] See Id.

[19] Ivan Penn & Stanley Reed, Something New May Be Rising Off California Coast: Wind Farms, New York Times (Oct. 19, 2018), https://www.nytimes.com/2018/10/19/business/energy-environment/california-coast-wind-farms.html.

[20] Megan Geuss, Scotland’s floating wind farm is showing how powerful offshore wind can be, Ars Technica (Mar. 4, 2018, 7:00 AM), https://arstechnica.com/information-technology/2018/03/first-floating-wind-farm-has-performed-better-than-expected/.

[21] Megan Geuss, First floating wind farm, built by offshore oil company, delivers electricity, Ars Technica (Oct. 18, 2018, 11:13 AM),

https://arstechnica.com/science/2017/10/first-floating-wind-farm-built-by-offshore-oil-company-delivers-electricity/.

[22] Id.

[23] Id.

[24] Geuss, supranote 20.

[25] Justin Gillis and Hal Harvey, Why a Big Utility Is Embracing Wind and Solar, New York Times(Feb. 6, 2018), https://www.nytimes.com/2018/02/06/opinion/utility-embracing-wind-solar.html.

[26] Bill Maloney, Renewable Energy Subsidies — Yes Or No?, Forbes(Mar. 23, 2018, 2:29 PM), https://www.forbes.com/sites/uhenergy/2018/03/23/renewable-energy-subsidies-yes-or-no/#c71e5c76e232.

[27] Id.

[28] Power Plants, Excel Energy (last visited Dec. 18, 2019), https://www.xcelenergy.com/energy_portfolio/electricity/power_plants.

[29] U.S. Energy Info. Adm’r, Table 1.1. Net Generation by Energy Source: Total (All Sectors), 2008-December 2018(2019), https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_1_01.

[30] U.S. Dep’t of Energy, U.S. Energy and Employment Report28, 29 (2017).

[31] Id.at 28.

[32] Joshua M. Pearce, What If All U.S. Coal Workers Were Retrained to Work in Solar?, Harvard Business Review(Aug. 8, 2016), https://hbr.org/2016/08/what-if-all-u-s-coal-workers-were-retrained-to-work-in-solar.

[33] Id.

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