As solar and wind power costs continue to fall and deployment grows, please join our panelists as they analyze the outlook for renewable energy globally and renewable energy policies in the United States, China, and countries around the world.
SANDALOW: Greetings, everyone. My name is David Sandalow. I am the inaugural fellow at the Center on Global Energy Policy at Columbia University. It’s great to see some old friends and others in this—in this great group. We are here today to talk about renewable energy. Thank you very much to the Council on Foreign Relations for convening this session.
So, in the past 10 years the cost of solar power has declined by at least 85 percent, and the cost of wind power has declined by roughly half in the same period. In India last year the power minister, Piyush Goyal, said that solar power is cheaper than coal in his country. And the statistics bear him out. More than half of the power contracts between coal generators and the DISCOMs, the bulk utilities in India, are now at prices that are higher than the price in the latest solar auctions in India.
That type of price decline is driving some dramatic increases in capacity. Solar capacity grew 25 percent last year to almost 400 gigawatts globally. Wind capacity grew 10 percent. And renewable energy is emerging as an important topic in diplomacy and foreign relations. When Premier Li Keqiang visited Berlin a year or two ago and met with Chancellor Merkel there, solar tariffs and solar power was at the top of the agenda. It got the headlines. When President Trump said that he wanted tariffs, tariffs, tariffs, the first tariffs that were bring to him were tariffs on solar power, which were announced earlier this year.
More than 100 countries have identified renewable power as one of their prime ways of meeting their commitments under the Paris climate agreement. And there’s increasing discussion of the geopolitics of renewable energy as well. I did a report on this last year and we looked at a number of issues, including the role of critical materials like cobalt, and lithium, and rare earth metals and renewable supply chains, and whether there’s opportunities for cartelization associated with that. We’ve looked at transnational transmission networks, that reduced revenues potentially from oil and gas suppliers, and others.
So there’s a transition underway. But energy transitions take time. We’ve seen energy transitions in the past. In the 19th century we saw a transition from coal to—from biomass to coal. In the 20th century, from coal to oil in many sectors. And we see that these transitions take decades. And so although there’s enormous growth in renewable power, it’s still pretty small. Renewable electricity transmission is around 22 percent globally, and most of that is hydropower. About 17 percent of it is hydropower. Only about 5 or 6 is wind, and 1 or 2 percent is solar. And about 20 years ago the share of fossil energy in the global energy mix was about 80 percent. And today it remains around 80 percent.
So this raises lots of issues for discussion. Where is this all going? What technologies are going to be important? How are different countries approaching this issue of renewable power? What’s the impact between nations? And we couldn’t have a better panel to talk about this. We have joining us from New York Amy Jaffe. Thank you for joining us, Amy. Amy is the senior fellow for energy and environment, and director of the program of energy security and climate change at the Council on Foreign Relations. So thank you to Amy and the Council for joining us and for convening this. To my immediate right we have Joanna Lewis, professor of science, technology and international affairs at Georgetown School of Foreign Service. And I hope I won’t embarrass Joanna by saying she is also a new mother. So any—Joanna, anything you—any cogent sentence that you string together in the next hour we’ll be grateful for. But congratulations on that. And we have Jonathan Coony, who’s the global lead for green competitiveness at the World Bank.
This session is on the record. And, Amy, let me start with a question to you. You are—we’re here in the United States. We’re sitting in Washington and we’ve been thinking about policy and renewable energy here in the United States. Could you just talk about what’s happening with renewable energy in this country, broadly, to get us started?
JAFFE: Well, I think, you know, one of the most interesting trendlines in this country is the fact that when you look at the department—the U.S. Department of Energy’s projections for how the mix in the electricity sector is going to change over time in what we call the high-resource case—so that would be the case where U.S. oil and gas production is booming, which is kind of where we are today with the current oil prices and market conditions—that actually the amount of emissions reductions that will come from the electricity sector by 2025 in the United States will be millions of metric tons of CO2 higher than what the Obama administration originally pledged for the Clean Power Plan. So I think the administration was originally thinking back in the day that they might be able to eliminate 670-something million tons of carbon equivalent. Under the DOE high-resource forecast, they are projecting 774 million tons of carbon will be able to be removed just from the market trends that you described, that solar is very competitive now in the United States in different parts of the country. Natural gas prices are going to be much lower than people anticipated, with such a backlog of supply.
So those are sort of a positive trendline in terms of the market. From the point of view of policy, it’s kind of a mixed bag. And I think the interesting thing about the policies coming out of the Trump administration is that clean tech, and tech in general, is major feature. You mentioned the solar tariffs. But if you look at what’s coming out of the trade rep’s office and the big report on Section 301, you know, a lot of focus on China 2025 and making sure that trade policy in terms of forced tech transfer and other kinds of acquisition and CIFIUS rules, and all the different tools we have in trade are aligned to make sure that China does not take unfair advantage in markets in the areas of infotech, robotics, new energy, vehicles, batteries, satellites, drones. So, you know, sort of in the green energy world more broadly, you’re seeing it being a big emphasis in this administration for trade.
But ironically then when you look into the plans for EPA and DOE, DOE is saying they’re going to focus on other things. They feel that sort of green energy is on its own and succeeding. And so they’re more focused on making the United States more competitive again in nuclear power—in advanced nuclear power, and also in hydrogen and grid integration. Their three—sort of checking the box. They say they’re, you know, very serious about batteries. But it’s not quite clear what they think the role of, you know, public funding is on that. And then—but if you look at budget cuts, budget cuts for science, and also the policies of EPA, especially when it comes to advanced vehicles, they seem to be growing in the wrong direction. It’s almost like, you know, the whole country, all the strategy coming out of the White House is going in one direct. And then for the domestic political scene, you’re almost having, like, a drag on that policy coming out of EPA.
SANDALOW: There’s a lot to follow up on there. I’m going to resist the temptation. And you mentioned China. I want to ask Joanna about China. Joanna, as people here may know, is an expert in China and China’s energy sector. And we started with the United States, because—probably because we’re here in the United States and we’re Americas. But if we were going to start with the country that’s having the most impact on renewable energy, we probably would have started with China. So I guess one question is, Joanna, do you agree with that, do you think that’s right? And then what’s going on with China and renewable energy today?
LEWIS: Yeah. Well, China had a banner year last year in terms of renewable energy development, investing about $126 billion into clean energy, which is its largest on record. You know, this the highest it’s ever invested. And this was about half the global total. So this is really where you see a lot of activity in the clean energy space. And as David mentioned earlier, the—now that we see prices falling, particularly in solar, this investment has an even bigger impact than it did a few years ago. So you see, for example, about 50 gigawatts of new solar installed in China. Again, that’s about half the global total and the largest ever. You know, even just a few years ago, that was sort of where we were globally—(laughs)—you know, that China installed in one year about the global total for solar in, I think, around 2014. So this is—this is very large-scale installations.
Wind continues. You know, for a long time, wind energy development led solar development in China, but that market has slowed a bit, partly due to real growing pains, I think, in the industry. You may have heard about challenges related to integrating wind power in the grid, widespread curtailments. And so this still is a challenge, although I think about 20 gigawatts still added last year, which is out of 50 gigawatts globally. So still a very large share of the market. I think actually offshore wind is an interesting area to watch in China. You know, this has been market that has been relatively slow to get going in the U.S., but China has at least 13 projects that are ongoing in the offshore space.
And, you know, I would just mention that China’s clean energy ambitions really are going to continue, I think despite what’s happening politically in Washington, and really is driving what’s happening globally. And, you know, despite what’s happening even regardless of what happens in Paris or in the international climate negotiations, because a lot of this is motivated not just by concern about climate change, but by local environmental pollution, as well as part of a broader industrial strategy, which we can talk about. I think there are a few uncertainties, just briefly, going forward.
One thing to watch in China is a new ministerial reshuffling of the government agencies that actually control renewable energy development and climate change policy there. So you may know that China has a very powerful super-ministry, the national development and reform commission, which for many years was really the champion for climate and energy policy, and now these—the jurisdiction over this is being moved into a new environmental ministry that will sort of take the role that the ministry of environmental protection has played—sort of China’s EPA—and expand it a bit.
There’s a saying in China: Nine dragons rule the waters. And so sort of looking at these nine—there were nine ministries that were in charge of pollution in China, air and water pollution. And so it was very decentralized, disaggregated. Made it very challenging, actually, to deal with the serious pollution problems we know China has. So I think there’s a real hope that bringing pollution—you know, both CO2 and criteria pollutants, air and water pollution—all under one ministry could actually make it easier to regulate pollution in China. On the flipside of that, you’re moving the authority for climate policy out of a very powerful ministry that oversees economic development strategy and putting it into an environment ministry which historically has been somewhat less politically powerful. So I think that’s an interesting move to maybe watch in the coming years that could affect where this all goes.
SANDALOW: Jonathan, could you broaden our scope and talk about developing countries more broadly? What impact do you see renewable energy having in developing countries around the world?
COONY: Well, thank you, David. And my thanks to the Council on Foreign Relations for calling this very interesting meeting. I would like to address how the state of renewable energy, as has been described here, and we all know will impact the developing countries, because, remember, the energy needs are the greatest in the developing countries. And the energy infrastructure put in place in related investments will capture the lion’s share of global activity going forward. And it’s also true that because the clean tech revolution or the renewable energy revolution, with the dramatic price drops that David mentioned, coincides with this great investment boom that’s going to come, they can leapfrog technologies. They can go from more or less pre-industrial, in some cases, to a 21st century model of clean energy. So it’s a very exciting time.
However, none of this is going to happen unless the capacity of the developing countries to implement these large amount of newish technology, new renewable energy technology is put in place. I’m reluctant to use the word capacity building, or capacity—we’re going to build the capacity, because it means everything, and it means nothing. But let me give you a sense of exactly what I’m talking about, and what the World Bank is doing to try to make this happen. I think you can think about the renewable energy sector as a stool with three legs to it. The first leg being technology development—leading-edge technology development, which still resides in the industrialized country. The second leg being manufacturing. And we heard from Joanna the role that China’s playing, is very important. The third leg, which is equally important, is implementation of these technologies. And, again, I’ll focus on developing countries, particularly Africa.
People say that if you build a better mousetrap the world will beat a path to your door. That’s not true. That’s not true, because we’ve got great renewable energy mousetraps, and deploying them is still very challenging. So here’s some—just some examples. And I can go into detail or others. Plenty of examples of what the Bank is doing—the World Bank Group is doing to support developing countries, to implement this new wave of renewable energy.
One is an offering jointly within the World Bank and the International Finance Corporation called Scaling Solar, where we work with developing country governments to run an auction for grid-connected solar power plants. It’s not rocket science exactly, but it is a complex process to do an auction well, bringing together a number of different skill sets. So we support developing countries in Africa to do that. And the results have been very positive. Just a couple weeks ago, in fact, Senegal, who was aided by Scaling Solar, announced that in a recent auction they got bids—a couple of bids less than 4 cents per kilowatt hour for grid-connected solar, which is very, very attractive, very, very beneficial.
Another program we have to build the capacity of the developing countries to implement more renewables is a network of climate innovation centers. And these are physical centers located in developing countries to build the entrepreneurial capacity of the local startup community, to build the innovation ecosystem to get new local companies into climate sectors—growing climate sectors, including but not limited to renewable energy. As I say, we have seven of them. And it’s worth noting that while some of them are in slightly more advanced countries—Morocco, for example—others are in quite a bit less developed countries.
And one, for example, is operating in Ethiopia, which I think just shows very well how every country can get involved in this. You don’t need be a United States or Germany with the technical expertise. You don’t need to be China, with the manufacturing might, or India also very strong in this area. There is a requirement for the local private sector and government to proactively get involved in implementation of this great opportunity of technology advancement.
SANDALOW: Amy, let’s come back to the United States. You were, I think, critical—or at least, unenthusiastic, about the policies in Washington right now. How big of an impact do you think those policies are having? Do you think they’re going to slow down the transition to renewables in the United States, or not?
JAFFE: Well, you know, I think we have this sort of bifurcated playing field that’s, you know, similar to our political playing field. So you have certain states—you actually had some states that originally sued the Obama administration under the proposed Clean Power Plan that are now joining some of the, you know, carbon policy trading alliances—New Jersey, notably. But you have these regional approaches. And I think most of the governors in different states have found that trying to scroll back renewable portfolio standards is a politically dangerous program.
So I really do feel that the political, at the local level, and at the, you know, municipality level, you’re seeing a lot of support for renewable energy. And really the challenge is, I think, you know, what’s the United States’ long-term plan going forward? You know, given the fact—what—David, what you said in your opening remarks, and what the other panelists are talking about, the international picture—given the fact that China sees this area as a major feature of its export policies, right—and that’s both its geopolitical policies and its actual commercial policies. You have all this interest in renewable energy, advanced infrastructure, you know, both in mobility and in electricity. And China’s positioning itself to be able to be, you know, sort of the superpower of exporting renewable energy, which we’ve kind of seen.
And when people say, well, you know, they’re having trouble in their wind industry and it’s having some hiccups, and that’s certainly right, I think you can just look at what the Chinese have accomplished in being the manufacturer of choice for solar panels. And then imagine that in batteries. So you know, for the United States to stay on a competitive footing, I think we’re probably going to take us—it’s not just about TTP (ph). It’s going to be about reconsidering how we could meet the Paris pledge and stay in Paris, so that we’re on the committees, and in the leadership role, and looking at global renewables and global specifications for automobiles and trucking, right?
And it affects even the president’s and Secretary Perry’s pronouncements, whatever you want to call it, U.S. energy dominance, because, you know, if we say, for example, we dismantle the methane leakage rules. Well, of course, Colorado and some of the states have those rules and they’re not looking to remove those anytime soon. But the companies have come up with some pretty innovative technologies to comply with that rule, having to do with optimal lasers and other kinds of monitoring devices that are pretty sophisticated. And that could be an export product. And it could also ensure that if we are going to export natural gas, that countries that are going to have carbon pricing and carbon restrictions are not going to put restrictions on U.S. imports of U.S. energy.
So it’s actually very important to look at this in an integrated fashion. And I fear that with this administration that you have these different agencies going out and doing things that they think they have a mandate to do, but that the coordination of the overall strategy between our trade policy, between our trade policy and energy, and between our environmental rulemaking here in the United States, you know, there are these discontinuities that could really come back to haunt the United States as it moves forward, even in the things the president has set as priorities.
SANDALOW: Joanna, could you picture up on what Amy was saying about China’s foreign policy in particular, and talk about Belt and Road initiative, maybe you could talk briefly about what that is, and then the role of renewable energy, as you see it, in China’s foreign policy?
LEWIS: Yeah. I mean, I think it’s interesting to compare what’s happening domestically in China with how China operates abroad, right? So, I mean, within China we’ve seen some real shifts in terms of not only a decrease in coal use but, you know, the coal plants that are being built in China are state of the art, you know, very efficient—much more efficient than the ones we have here. When you look at what China’s doing abroad, they are exporting coal technology—of which they are now a world leader, not just in exporting clean technology but also in exporting, you know, fossil technology. They tend to be selling the lower efficiency plants. So we have a project, for example, looking at Southeast Asia, and where their coal technology is coming from. A lot of it comes from China. And a lot of this is not the ultra-super critical or super critical high-efficiency plants, but the more outdated technology.
So I think, you know, when you look at these broader foreign policies, like One Belt, One Road, which is, you know, basically China’s kind of grand scheme to move to, you know, really expand its influence over land, over sea, in a lot of the former silk road regions, but really even much more broader than that. And energy is an important infrastructure I think component of this. A lot of questions about what is the type of infrastructure that these types of initiatives are going to bring? Is it green or is it brown? And where does—what kind of pathway then do you set these countries on that are, you know, in many ways very reliant on technology from China.
You know, I think that it’s interesting, again, to look at the two sides of this coin. I mean, with the changes in China launched the largest carbon market in the world this year. But then, what influence does that have on the region? You know, are you putting Chinese firms in a situation where now they’re cleaning up, they will have increasingly rigorous constraints on their ability to emit carbon and to burn coal. So do these industries maybe look to other countries to—(laughs)—you know, export and offshore their manufacturing? You know, it’s very similar to the conversation we’re having in this country. Actually, China is having as well, right? So I think it’s important to look at these sort of global trends and the role that China plays as a responsible stakeholder, not just in terms of being a leader domestically in climate energy policy, but increasingly in terms of its investments abroad as well.
SANDALOW: Jonathan, two questions. First, just to pick up on this China discussion, I wonder if in your work in developing countries around the world you see China selling renewable power, and whether China is a factor in those markets. But then, second, I want to pick up on your question about leapfrogging. There’s been almost complete leapfrogging of telephone networks in many developing countries, where the landline system just wasn’t built, and we jumped directly to cellphones. Do you think the same thing is going to happen with solar power? Are we just going to see distributed solar, in particular, in villages in Africa and India, for example, with the transmission network never being built?
COONY: Yeah. Two good questions and two good points. In terms of the influence of China with renewables in Africa, it’s profound—is probably an understatement. The PV cells, of course, as the biggest thing. I’ll talk about that in relation to your second point. And it’s interesting from many points of view, but certainly one point of view is political because China is very active in Africa. We know this. It’s made a deal with the African government which you could simplify by saying: Look, we’ll give you money and political support, you give us your resources. Which often doesn’t sit well with some of the Africans. And you can understand their point of view. But now China’s playing, well, look at this great technology that we’re giving to you, or selling to you—often at very low prices. So it definitely figures into the larger profile that China has in Africa, and a way for them to improve it.
In regard to leapfrogging, I mean, this analogy with the cellular telephones is OK, up to a point. But you scratch the surface, and you realize that the sectors are different, the technologies are different, and you’re never going to get quite the transition that you saw in Africa with leapfrogging—said, forget about the landlines. It doesn’t work for us. Now everyone, of course, has a cellphone, to great effect, to great development impact. It’s not going to happen as much with the energy sector. It’s not even going to happen as much or as quickly or at such a scale with the closest comparator in the energy sector, which is off-grid solar. Now, that said, it is nonetheless true that the off-grid solar sector and the business models that are being developed and the companies that are pursing that are really onto something.
There’s a lot of hype in this area where the combination of reduced equipment pricing, the cells, with innovative business models using mobile money to address the financing constraints, has created a whole new paradigm. And excuse the cliché, but it’s really true here. And there are many companies pursuing it. There are many people without access to electricity that how have it. It’s a very important tool in addressing the energy access question. So I’m muddling a bit—or muddying a bit my response because nothing’s going to be what we saw in the mobile telephony. It’s historic. If we can ramp down, whatever the word is for historic but slightly less historic, that is what we’re seeing in off-grid solar markets through these new technologies and business models. So it’s very important.
SANDALOW: Amy, I want to ask you about geopolitics, because you’ve written very thoughtfully on that topic broadly, and you know a lot about oil and gas markets in particular. And one thing I hear people talk about sometimes is now solar and wind power is going to lead to a loss of revenue from oil and gas producers. And they wonder, will that have an impact on geopolitics? I wonder, do you think that that type of trendline is happening, or is going to happen? And more broadly, what impact do you see this whole renewable revolution having on geopolitics?
JAFFE: You know, I have to disagree a little bit on China’s strategy. So, it could be there are some incumbent players in China that are going around Southeast Asia now and selling some coal technology because there’s a buyer. But I believe that the country has really formulated an actual strategic policy. China’s investments in oil and gas, whether that was even—you know, even their investments in Canada have not turned out well. But certainly, their investments in Venezuela have not turned out well. You know, the foray into Sudan was a disaster. So they have spent $150 billion to get something like 2 billion barrels a day of supply—of equity supply. If you compare that to where we think their demand’s going to, which is somewhere around 15 million barrels a day, that’s a pretty paltry level.
And they have to do something about that. And advanced vehicles that run on, whether their trucks are going to run on natural gas or biogas or biofuels, and whether they’re going to have—try to push these electric cars into the marketplace, which they’re committed to, you know, this is part of a geopolitical, strategic response to the fact that the United States has its own oil and gas and China does not have its own oil and gas, that they’re having difficulty. And you saw, you know, just this week announcements about whether there’s something they can do to fix the fact that they cannot move their shale gas forward at the pace that they had hoped. So this is a major strategic concern for China.
And I liken their solar panels to really U.S. LNG, because whereas the United States is going to be completing with Russia in these major markets, trying to sell natural gas, the competition choice is going to be will countries be able to use less natural gas or less oil because they’re going to go to renewable energy, buying this equipment from China, whether it’ the batteries—you know, utility-scale solar with batteries is, you know, a partial solution to some of the hiccups that countries have experienced in switching to a higher lane for renewables. But, you know, we’re coming on control technologies that are going to make this easier over time. And, you know, you can kind of see the trendline.
So looking at what China did this year or next year or the year after that is not really the right metric, because U.S. exports of oil and gas, geopolitically, are going to hit their highest range between 2020 and 2030. You know, it’s just a trickle now. And so the geopolitical impact of, you know, what does that mean for Russia, what does that mean for Saudi Arabia, who are we competing for, how does Qatar hold their markets, you know, in the face of the combination of Chinese solar panels and U.S. natural gas, you know, the geopolitics of all of that is going to come to bear. And you’re seeing some forward indicators. You know, having Saudi Arabia say they need to, you know, finally reform and get their economy moving and sell, you know, IPO their assets now so that they can invest in things like Uber for the future, you know, that’s a portending of things to come.
SANDALOW: Anybody want to talk about Saudi Arabia’s solar announcement? You want to talk about that Amy? So Saudi Arabia’s announced 100 gigawatts of solar, is the plan anyway. Would be kind of a solar plant twice the size of Manhattan, I think, or something like that, was the—is the idea. And it’s just an idea at this point, but it’s a big idea.
We’re going to go to the members in a minute. We have tremendous expertise here among the members. But before I do that, I just want to give you a chance, Joanna, to say anything about China, following up on Amy, or any follow up thoughts?
LEWIS: No, I’ll leave it. Yeah.
SANDALOW: OK. Please raise your hand if you’d like to ask a question or make a comment. A reminder, this is on the record. Please identify yourself. Any thoughts, or questions, comments, complaints? (Laughter.) Well, while people think about that, then let me ask Jonathan to elaborate some on what the World Bank is doing in this area. I know you’ve got—you spoke a little bit about this in the beginning, but World Bank has some very interesting programs in this area. Could you talk about those?
COONY: Yeah. We do. And obviously the World Bank lends money. It is a bank. And that can be instrumental in getting some of this renewable energy deployed at scale. But I harken back to my original point that another essential component of what we do is build the capacity. And let me give you an example of a project that I happen to be working on, so it’s fresh in my mind, but I think it’s really relevant. I talked a bit about the off-grid solar market, what an opportunity it is from a business point of view, from an energy access point of view, from a climate point of view.
One of the things that impeding the scale-up of large deployments of off-grid solar is lack of adequate and appropriate financing for the companies that are doing this. And it’s not the larger companies. It’s not GE. It’s not Schneider Electric. They’re smaller companies. Some of them are growing beyond SME stage, but a lot of them are still local SMEs. And the traditional funders of energy projects can’t get their mind around it. They want to deal with big investments—power plants, transmission lines. Here you’re talking about distributed generation serving some of the poorest and most remote people in the world. So we’re doing a project to analyze some of the finance innovations that have been used in other sectors similar to the off-grid solar sector, and see if it can be applied to off-grid solar to address this financing—the barriers to financing.
We’re looking at cryptocurrencies and distributed ledger, or blockchain, how can that be applied for these companies in Africa? Crowdsource—or, I’m sorry—crowdfunding has shown some success. Is that a way to address the financing barrier? Securitization of receivables that these companies have is also something we’re looking into. So the current structure of financing in the developing countries for energy just does not fit this new paradigm that’s been formed. So our role is to help the developing countries understand what the other options are, and then, you know, start to put in place the capacity so that financing can flow, in addition to sort of global knowledge, sort of best-practice analysis. We’re going to be piloting it initially in Nigeria, where the off-grid solar market is growing and nascent, but with a great deal of potential.
SANDALOW: We have a question in the back.
Q: Hi, Jonathan. Michael Bagley (sp), Bagley Energy Advisory Services (sp).
Could you also elaborate—you had mentioned the network of climate innovation centers. You mentioned seven of them, and you actually—you said there were seven. You mentioned Morocco and Ethiopia. Could you elaborate on the other five or just that topic in general, please?
COONY: Yes. This is a project we started about five years ago. And just to answer your questions, Morocco, Ethiopia, South Africa, Kenya, the Caribbean, Ghana, and Vietnam. And this was started quite a few years ago—well, five years ago, which in this world is quite a few. So much change taking place. And it’s really to help startups and entrepreneurs in clean tech sectors. And there’s been a lot of successes in the companies that have been supported. Some of the companies haven’t worked. That’s the nature of startups. That’s the nature of innovation. But we’ve really learned a lot of lessons on how you create an innovation ecosystem for clean tech.
A lot of people have looked—when they think of innovation ecosystems, they think IT and Silicon Valley. They have expectations similar to those, which are completely unfounded because it’s a different sector. And the circumstances in Silicon Valley were once in a generation. Everyone says that. But then when you try and implement something and replicate it, you really have to adjust that model. So there’s been a lot of lessons on what works and what doesn’t work to spur this kind of innovation in developing countries, which is very different, and in clean tech sectors, which are extremely different than IT.
Q: Hi. I’m Scott Moore from—sorry—Scott Moore from the World Bank.
I think this question would be primarily for Amy, though of course welcome any other thoughts. Amy, you mentioned the administration’s kind of recent focus on nuclear, which I thought was interesting because I, at least, haven’t been following that. And I was just curious if you could expand on that and what, if any, impact you think it’ll have on, you know, what seems to me to be a pretty bleak picture for the industry.
JAFFE: Well, it is a pretty bleak picture. I think in the United States, you know, financing a project—and everybody’s, like, well, if we go micro—you know, maybe that’s not the term that’s used anymore—you know, maybe that would be more commercial. And I don’t know, you know, typically for baseload, you know, economies of scale is really the way to go. So but I think there’s this appreciation—which you see—you know, if you look at, you know, Perry’s presentation of the DOE budget, which was, you know, painful, the only thing that really saw an increase was nuclear. And I think there is an understanding—again, which is somewhat China focused, which is that, you know, China’s made a push in advanced nuclear. They’re one of the places that is adding nuclear capacity which, you know, is somewhat obvious because of the challenges they face in providing electricity across the country.
But then, again, in the context of Belt and Road and export plans. You know, if you’re the United States and you’re a country that’s committed to nonproliferation, and you are going to have countries leading in advanced nuclear power, that might not be—I mean, the question is, are they as committed to nonproliferation? And what kinds of problems can come forward? And you can see, you know, just in sort of the—I agree with you. It’s not really at the front of the headline in the news. But if you go slightly down to page two, you know, there’s this whole discussion about whether the United States will or won’t relax its controls to win the bid for tender for facilities in Saudi Arabia. And so, you know, there is this whole question of, you know, what is the United States going to do going forward in nuclear? How do we maintain our own capacity and our own abilities in this field in terms of advancements?
And I read an interesting blog the other day, where someone—and I think this applies across the entire energy spectrum—which is, you know, if we are competing and we have spent the money, and we have the stimulus, and we are where we need to be in VCR technology, and we’re not understanding that, you know, a couple years from now everything’s going to be streaming and we’re not doing R&D in streaming, you know, that’s a problem, right? You know, so you can’t take a snapshot in this field. And I think that that’s—now we can see clearly, I think, moving forward, that the lack of spending in nuclear, you know, might come back to haunt us going forward. And I think there’s some, you know, discussion on that.
And then, you know, the other thing none of us have mentioned—which I think China and the United States—this was one area where China and the United States could collaborate well—and, you know, the question is, will that breakdown under the current politics—geopolitics, is in carbon sequestration and storage. So you have the Congress, you know, sort of move forward a little bit on that and try to offer some funding and some tax breaks and incentives to try to get the industry here moving. And there is some discussion of possible projects. But, you know, that’s also under-funded, under-utilized technology that China’s very focused on.
SANDALOW: I’ll just—I’ll pick up on some of that, because I spent a lot of time working on the nuclear issues in particular at the U.S. Department of Energy. And I think we have big problems with low-carbon development in this country as our nuclear fleet gets old and begins to phase out. And it’s a huge problem. And there’s really two pieces of this issue. One of them is life extensions for existing plants. And that involves a certain set of technologies and issues. And then a second is new nuclear. And the new nuclear is hugely challenged by two issues—cost and public acceptance. And the cost issue’s particularly a problem in the United States because of our cheap natural gas. And there’s essentially, you know, no new nuclear being built in this country, other than some—you know, legacy of some—with some deep government subsidies, precisely because of the cost issue.
Today, a third of the nuclear plants in the world under construction are in China. And so China will be shaping the future of the world nuclear industry. And it’s particularly a problem here in the United States, because our engineers now aren’t going into this field because the opportunities aren’t there. And I think there has been money allocated and appropriated in the latest omnibus budget bill for nuclear R&D. And I hope it gets spent well. But there’s—there is a tension between begin pro-nuclear and anti-government. And I think the Trump administration is confronting that. It is—it is hard to see a future for the nuclear industry that doesn’t involve very, very central and deep role for government. And I think those forces are colliding in Washington today.
LEWIS: Can I just pick up on Amy’s point about bilateral cooperation? You mentioned in U.S.-China that had been happening on CCS and other advanced coal technologies. And I think this is one area where, you know, unfortunately our—the U.S. lack of focus right now on climate technologies and on the international diplomacy side of this—you know, the U.S.-China bilateral work that had been being done over the last eight years and before in this space is, I think, something that actually—people don’t recognize the benefits that many U.S. companies were experiencing from being a part of this work. I mean, you mentioned how you build an innovation ecosystem for clean tech. I think one of the most innovative programs that came out of the last administration was the U.S.-China Clean Energy Research Center, which David worked very closely on.
And, you know, this is actually about thinking about how innovation ecosystems span borders, how you can have a technology that, you know, a U.S. startup has sitting in the lab or in—you know, they haven’t been able to really demonstrate this in the field, to be able to bring in financing to then maybe sell it back to the U.S., or sell it to Africa, or sell it, you know, elsewhere. And you’ve seen several actual technologies that came out of these bilateral initiatives that I think wouldn’t have happened if you had been able to span this demonstration space between China and the U.S., you know, really bring technologies down the innovation pathway, using resources, you know, that the U.S. has, and that China has.
Because China, you know, they’re spending less money on R&D in the basic research space in the clean tech, but more on the demonstration side. And so that’s actually something that I think these bilateral initiatives, you know, have been a benefit to U.S. companies in particular. So, you know, it’s not just in coal. It’s in a whole variety of clean energy technologies. So I would hope that this is something—I know some of these initiatives are still continuing in sort of barebones ways, or trying to scrape together budgets to continue, including with money from the Chinese government. But, you know, I hope that these are initiatives—many of which are out of DOE—you know, are able to continue to some extent over the next few years.
COONY: David, I might just—
JAFFE: And let me—let me add to that for a minute. Sorry. You know, in the end, especially when you’re going to go through difficult trade negotiations, like we’re doing right now, and you have other issues that are complex like the North Korean issue, where you’re going to have a complicated relationship with a country like China, you know, it’s important to have some areas where you’re having a successful collaboration and that’s depoliticized. And I think that some of these initiatives—you know, making a distinction between some technologies where there’s no national security at risk, you know, like CCS or some other technologies where, you know, power to you if you bring together scientists to work on a project together, and companies to work on commercialization together.
You know, doesn’t mean that the administration’s focus on thinking about AI and the future of artificial intelligence and, you know, how do we ensure that, you know, the Pentagon’s equipment 10 years from now and, you know, your personal cellphone 10 years from now is not going to be weaponized against the American public. You know, that all needs to take place, but it could take place in the context of a—of a mixed relationship, of a relationship that has positive aspects. I think the president signaled his ability to think about China in that way. And we need to really be thinking about, especially in the energy space, where are the natural lines for cooperation, and really tap those to ameliorate the places where we’re not going to be able to collaborate.
And, you know, we want our companies to be aligned and to be the most advanced companies in the world. A lot of jobs depend on that. And so, you know, we have to align what we do in the EPA on automobiles. We can’t just take a political position because, you know, California’s way out there. Maybe they’re way out there on some other domestic political issue that, you know, the White House could stump on. But, you know, in car technology, we’re talking about a serious economic issue. And we want our companies to be pushed to be advanced. And sometimes that means having technology-forcing regulations.
SANDALOW: Jonathan, do you want to give a comment? And then—
COONY: Yeah. Just to further complicate the complications we’re talking about when you try to coordinate efforts between countries on clean tech innovation, I’ll remind everyone that there’s 1 billion people out there without access to modern or reliable energy services. The technologies they need are different than the technologies that we need—period. But the process of technology innovation really doesn’t keep them in mind. As we were discussing, it’s hard enough to develop something that we want to use here, the next CCS or nuclear.
How can we take the needs of the poorest of the poor and introduce them at the beginning of the technology development chain, so that the research focuses on them, and then all the process of R&D and D, and D and so forth? It’s really tricky to do, but it’s really, really important because with the exception of off-grid solar—which sort of happened by accident, it did help the people without energy access—the majority of the efforts—substantial efforts, and largely successful efforts, perhaps historically successful efforts—are not considering the poorest of the poor. So we need to do more on that.
SANDALOW: Yes, sir.
Q: Hi. Adam Pearlman, former of DOD.
I think Amy anticipated, and maybe headed off my question about national security concerns if China does become the global leader in battery technology, in particular. So on a totally unrelated note, Cape Verde in Africa has tried to put—well, has put out a goal of 100 percent renewable by, I believe, 2025. Are they going to do it? If so, is it a model that can be used by others, either in the region or globally? I know they’re somewhat uniquely positioned. But if they don’t do it, what do we learn from it?
COONY: I don’t know much about Cape Verde. Is that for me?
SANDALOW: Yeah, for you, Jonathan. Anything on Cape Verde?
COONY: I don’t know much about Cape Verde. So I hope they make it. (Laughter.) But I’m not going to place a bet on it. You know, a lot of these 100 percent goals are political goals, intended to get action happening, and perhaps that’s the case here. Island states have a unique set of circumstances that disadvantage traditional fossil fuels and that advantage renewable energy, presumably of solar and some wind. So, you know, more power to them. I just don’t know the circumstances there.
SANDALOW: Other questions? Monica.
Q: Hi. Hi, David, it’s nice to see you. Joanna, it’s nice to see you too. I am Monica Medina. I run a small daily environmental newsletter called Our Daily Planet. And I’m also an adjunct professor. I work for Joanna at Georgetown. So it’s nice to see you both.
My question is, David, you started out with some pessimistic statistics about the amount of renewable that’s sort of in the global—in global use now. And that does seem to be consistent with what people are predicting to be our ability to reach the targets globally for the Paris accord. But then, you know, the whole conversation has really been about how hopeful and optimistic, and how much it’s growing in places like China, or even in the developing world where they’re going to leapfrog us with technology because it’s actually better and cheaper and all that. So how does that square with the Paris targets? And, you know, are you more optimistic? I know, Amy, you talked about us making us in the U.S., even though, you know, that we have this drag on our ability to do it from the federal government. But, you know, local governments and businesses are stepping up. It sounds like maybe the same thing is happening globally. And so I’m just going to keep my fingers crossed, and hope that you’re all optimistic about that.
SANDALOW: OK, since you asked me I’ll start, and then other panelists can jump in. No, I am fundamentally optimistic. The current percentage of renewable generation in the electricity mix is quite small. But as I started off by saying, the price declines have been dramatic. And the projections are for price declines to continue. And it’s actually remarkable to see the data on how wrong some of the projections have been over the course of the past 10 or 20 years, with the mainstream forecasters consistently underestimating the amount of renewable penetration—renewable generation that would be in the mix. And so I think these things have a snowball effect in many ways. And I think there’s going to be tremendous growth in the renewable energy sector. In fact, I think the major challenge for places like Cape Verde getting to 100 percent renewable energy is not going to be the cost of renewable energy. It’s going to be integrating it into electric grids, and then storage.
And in particular not hour to hour or even day to day storage, but seasonable storage. And in some—in India, for example, there are some wind farms that have enormous wind during some parts of the year and no wind during the other parts of the year. You know, 50, 60-plus capacity factors in some parts of the year, and 5 percent in others. And so it’s very hard to have 100 percent renewable energy grid with that type of variability. There are ways to address it, but there are challenges. So I think that’s going to be the big challenge going forward. But, no, I’m fundamentally optimistic about this. But I don’t know, what do other panelists think? Joanna, what do you think?
LEWIS: I mean, I would just add, I think the Paris regime that we’re in, I mean, as you know, is based on these nationally determined contributions, right? And so countries have put together these pledges that are comprised of a variety of policies and programs. And, I mean, to your point about Cape Verde—which I’m not an expert on—but if you look at what most of the developing countries, particularly islands and small nations, have put in as part of their NDC, it is very aggressive renewables targets, because it doesn’t really make sense for a small, developing country to put a carbon cap or, you know, some kind of carbon target, when they emit very low amounts of carbon anyway, and they need to grow, right?
But they can put in place these very aggressive renewables targets, which sends a signal to investors, sends a signal to, you know, the development banks and others that are trying to help get—bring power to the people there, that this is what they would actually prefer, right, in terms of a technology strategy. And then it lays out the roadmap and then it can bring in people to really start to think strategically about how to get there. So I think this has been a very valuable part of the sort of bottom-up, you know, Paris model, is that it has these countries that hadn’t really ever thought about this before, but, you know, doing very thoughtful work about, OK, so this is our demand, this is where we want to be, you know, these are the technologies that make the most sense for us, and here’s how to get there.
And, you know, I think if you add up all the NDCs now, you know, are we at 2 degrees yet? Maybe not. (Laughs.) You know, but I think we have the framework in place where, you know, if you can actually bring these countries in, you can actually really change, you know, the technologies that are being built. And, I mean, we built more solar energy—or more—you know, by far more renewables this year than we did fossil, in terms of just installed capacity, right? So this is—this is a trend that is already there, right? We are building more wind and solar than we are building coal, oil, and gas globally, right? And so I think that’s a very positive sign.
SANDALOW: We have only about seven minutes—we have about—
JAFFE: Well, let me add—
SANDALOW: Amy, we have only about seven minutes left, and I want to make sure—there were a number of hands. So I’m just going to see who else is—want to make sure to bring people in.
JAFFE: David, can I just intercede for a minute on transportation? Let me just intercede for one minute on transportation.
SANDALOW: OK. Quick one. Yeah.
JAFFE: The real challenge for Paris—and everybody’s talking about, you know, the electricity sector. The real challenge is coming from the transportation sector. And that’s where we’re not really making very much progress. China is, you know, trying to hit that. But the interesting thing is—and, again, from a U.S. policy perspective, is you have countries that have willingness to put a ban on the combustion engine, right? And as you—if that trend accelerates, you know, that’s going to be a much more powerful tool than even some of this renewable energy, which is going to happen naturally anyway, you know, because I think eventually it’s going to offer in some locations superior service. And, as David mentioned, in some locations for seasonality reasons, it can’t offer superior service.
LEWIS: Well, it’s linked, because if we have electric vehicles and they’re running on coal, then we’re not any better off, right? Yeah.
JAFFE: Yeah, no, I understand.
SANDALOW: Key point, Amy. Thank you. Yes.
Q: Yes. Michael Davidson, the Harvard Kennedy School.
I wanted to add just one thing to this renewables optimism/pessimism argument, because I feel like the—if we talk about bringing in—you know, increasing electricity access, increasing the amount of supply on the system, the vast majority of that is going to come from grid extensions, because that’s where the economic—that’s where the economic lie and prefer, and increasing reliability of existing grids. And the World Bank and others support creating more integrated power systems, particularly markets. Now, the low cost of solar is based on a levelized basis. And as you build more renewables into the system—and you mentioned about the integration—but the fundamental thing is the investors, you build more renewables in the system, they have decreasing value of that investment.
Now, we’re not hitting that now because the penetrations are so low, as you pointed out. But given that we’re supporting markets and we’re building lots of these technologies which may not generate power when there’s high value for it, how are we going to address that? I mean, it’s not a problem now, but it’s going to be a huge problem in 10, 20 years, particularly if we want to reach the Paris agreement. Like what is—what is the thinking around how to address that?
SANDALOW: There is a great book by a Council on Foreign Relations fellow named Varun Sivaram who answers this exact question. And I recommend anybody to take a look at that. Anybody else want to jump in on that? Is that an answer, Mack, or is that another question? It’s another question. OK, so I’ll—we’re all friends. I will say in my view, the quick answer has got to be developments in storage, it’s got to be other types of tools for good integration, including predictive analytics and demand response technologies and other sophisticated internet-based computer tools. And I think that takes you a certain distance in managing variable renewables. But—
LEWIS: And market reform, and changing pricing structures for, you know, how we value peak renewables and things.
SANDALOW: Thank you. Absolutely. Yeah.
COONY: Everything is set up for dispatchable, centralized power plants. And now we don’t have that, for very good reasons, it’s going to take a while for the system to adjust. But all the things you’re talking about, I think can be done. Maybe not 100 percent, or if you have 100 percent it will be a lot of battery that you’re paying for. But I think it can be done. Also with the reforms on the market as well.
SANDALOW: We’re almost out of time, so let me get Mack and then—did you want to? We’ve got another comment. So wanted to get two comments and questions in, and then we’ll have closing comments from our panelists.
Q: Great. I’ll be quick. And also along the vein of optimism/pessimism. I wanted to ask about a point you raised at the outset, David, with regard to critical materials and security of supply, and also geopolitical relations and implications of countries that are either rich or poor in these materials. How does the panel see the outlook for the future of renewable energy and access to materials?
SANDALOW: Great. Key point. Yes. Tao (ph). Tao (ph).
Q: Thank you. Tao Long (ph) from the Economic Works Foundation (sp).
I just wanted to have a quick note also on this renewables issues, and also what Jonathan just mentioned about the leapfrog. I think we didn’t talk a little bit enough about what could be the future of demand, especially because if you’re looking at the patterns of the developing countries for the past three decades, most of them has gone through certain level of having industrialization before they become rich and kind of like jumping to the developed countries. But we have started to see this departing.
So with all these technologies, and reduced costs of electricity, you may not need to have as heavy level of industrializations before you actually become a rich country. And that actually changes the demand of electricity. So you don’t really need—(inaudible)—at that time was the cheapest options for most developing countries, China, India. But that could be not the case for Africa countries. So maybe they will be just—be able to leap frogging with the renewables, with the solar PVs, meeting their demand of household transportations, but not necessarily to meeting this constant demand, and a huge demand, of the industries. And that actually makes this possible.
And another quick note on Amy’s point about the geopolitics of the oil supply is I think China is also experiencing some very interesting thinking at this moment about oil supply security. And that is actually playing a very important role to promoting heavily on the electric vehicles. Just quick note on that, is actually, just as you mentioned, Beijing is probably already thinking about—to announce in a few years’ time to stop the selling of the conventional vehicles. So it’s going to be a very strong signals to that industries.
SANDALOW: Well, unfortunately, we are almost out of time. So I’m going to—I’m going to give 60 second response on these two points and then turn to Joanna and Jonathan. And Amy, you’re our host, you’re going to get the last word to wrap it all up. First, I think Tao (sp) makes a really critical point, particularly about the role in developing countries. And I think this is key for China’s Belt and Road initiative, and making sure that power-sector development under the Belt and Road initiative looks at solar energy and wind power is going to be really important for the future of the planet.
And Mack’s (sp) question about critical materials, there’s been a lot of work going into this, looking at whether lithium in particular, and cobalt, and rare-earth metals are going to be stressed by the development of renewable power. My own reading of the literature is that there might be stresses in the short term—like temporary supply gaps that spike up prices—but that over the medium and long term technologies adapt, supply comes back into the market, and the markets work and will bring these materials into the renewable energy supply chain in sufficient amount. There are people who—experts who disagree with that, by the way, but that’s my view.
So I’ll leave there. And, Joanna, 60 seconds.
LEWIS: Yeah, 60 seconds.
I mean, so one thing we haven’t talked about is demand and the sort of energy efficiency side of the equation, which you mentioned. You know, I think it’s a lot easier to get to high shares of renewables if your overall pie is smaller, right, and you’re using less energy. And it’s—as you mentioned, the industrial structure is important as well.
So, you know, we’ve done some high-penetration renewables studies in China, and it’s much easier to get to these, you know, very high levels of renewables on the grid if you’re bringing the overall demand down. We’ve been very wrong before about sort of trying to project future demand in China as well as in the U.S. And, you know, I think we’ve seen some really interesting shifts, particularly in sort of, you know, unexpected declines in coal use in China, which, however, are expected to potentially rebound because of industrial demand.
So, you know, I think this is certainly an important piece to be watching as well, you know, really pushing the efficiency side, because that’s the only way to make renewables work in a large way.
COONY: Great, 60 seconds.
Optimistic. I am optimistic. (Laughter.) I think all of the forces are coming together. I love the stats you used earlier, 20 percent 40 years ago of renewables, now it’s still 20 percent. Got to be aware that this is an industry that’s so glacial, there’s so much inertia, so many vested interests. People invest in their assets for 40 to 60-plus years. All the regulation, all the financing mechanisms are designed for and will support the old system. So it’s going to take time, but all the indicators are that it’s positive.
And my final point is that, again, we are a development institute, and we try never to forget that the goal of energy is to help people live their lives better. If it helps solve climate change, great. I don’t mean to be glib there. But, again, I hearken back to the billion-plus people who don’t have energy access at all, and I really hope and believe that this clean-tech revolution can help them get reliable energy so they can live their lives better.
SANDALOW: Amy, thank you again for hosting us, and particularly doing it remotely. You can’t see the rapt attention and fascination of everybody in the crowd, but they’re hanging on your every word. So please close it up for us, and thank you again.
JAFFE: Well, I really want to thank everybody for coming. I had hoped to come to Washington, but with the unreliability of the shuttle—because I have a distinguished lecture I was committed to this evening, so couldn’t come in person. But I thank everybody for coming.
I, too, am optimistic. Part of that comes from time spent in California working on policy; and just saying that even in this country, you know, where we seem like we’re not, you know, full behind the pivot the way maybe China is, that many states in the United States argued about whether they could—whether having a 10 percent renewable portfolio standard was too high. And then people said, oh, those people who want to go to 20 percent, they’re crazy, we’re going to completely destabilize the grid. And what we found is in states as far diverse of a political perspective as Texas and California have gone way beyond the targets that they’ve set, that when you—when you set ambitious targets sometimes technology has a tendency to follow those targets. There is money to be made in energy peaking saving software, you know, in Alexa and all those different programs. (Laughter.) So I really feel very optimistic.
And I think for the billion people who are without services, if a centralized coal plant running a wire was going to work for those populations, they would have electricity today and they would have fuel. And so, obviously, the conventional system is not going to change that. If you look at the International Energy Agency modeling, it just shows the same—actually, a higher number of people without services if we do a business as usual. So I think it’s going to really take a very innovative format, and I hope that this administration and at the state level our leaders will understand the opportunity to bring those billion people services and the importance that’s going to have on not straining societies. When you think about people needing to get out of the heat or needing to desalinate water, you know, having cheap and available energy is going to be a big part of that.
So thank you all for coming.
SANDALOW: Well, thank you, Amy. Thank you, Joanna. Thank you, Jonathan. Please join me in giving them a big hand. (Applause.)