I. Cleaning up Electricity

Let’s start with cleaning up electricity – that is, generating it in a way that does not produce CO₂. How can we do that? The answer for the next decade or so is very straightforward: around the world, we need to deploy massive amounts of wind and solar generation (both distributed solar, on the rooftops of homes and businesses, and huge, “utility scale” solar plants), supplemented by lithium ion batteries, which can economically store a few hours of power, and by long-distance, high voltage transmission lines connecting areas with the best wind and solar resources (in the US, that’s the Great Plains and the Southwest), to areas with the greatest demand for power (in the US, that’s mostly coastal cities). This is a huge undertaking. To do it at the speed required, we will need to deploy renewables several times faster than we have ever done, year after year. It will require massive investment in new factories to produce solar panels, wind turbines, and other equipment, and in new mines to produce the raw materials (including copper for wires) required – an estimated two to three trillion dollars globally per year by 2025, and four trillion dollars per year by 2030. By contrast, we invested about $750 billion on these changes in 2021. It will also mean overcoming non-economic obstacles, from attempts by incumbent industries to use their political power to slow the transition down, to outdated building codes and permitting processes that make it unnecessarily expensive to put solar panels on roofs or to build new transmission lines. (See the Politics and Policy entries under Climate Careers.)

The good news is that while the upfront costs of the energy transition are high, if we overcome the political and other obstacles, the transition will more than pay for itself: it will save us money. There was already a case to be made that this was true ten years ago, if one counted the economic costs of climate change and the health costs of the air pollution that renewables will allow us to avoid. But the costs of wind and solar have fallen so quickly over the last decade that installing them now will save us money, even if we ignore the societal costs of climate change and air pollution. Today, the electricity we can get from a new-built solar or wind plant is cheaper than the electricity we can get from a new-built coal or gas plant in most parts of the world. Even more importantly, in many places the electricity from a new-built solar or wind plant is cheaper than the electricity from existing (already paid-for) coal and gas plants. The graph below shows how the prices of electricity from new power plants changed from 2010-2019.

It is important to understand how this change has occurred, so that we know what to expect in the future. Solar panels and wind turbines are relatively small, and they are produced in factories quickly, in large numbers and to consistent specifications. (They are very different, in these ways, from today’s nuclear power plants, which are large, designed differently for different sites, and built on-site over many years.) That means that manufacturers of solar and wind, unlike builders of nuclear plants, have ample opportunity to learn by doing. They can make incremental, small improvements to the design of their products (for instance, by using a bit less of an expensive material), as well as to the processes by which their products are manufactured; and then they can get quick feedback as to how the changes work out (both in testing, and then when deployed in the field). Then, they can quickly go back, iterate, and make further, incremental improvements. Because many manufacturers all over the world are competing to build almost identical products, each manufacturer has incentives to find clever ways to improve the technology and reduce costs, even if only by a fraction of a percent. This is the way most of the cost declines in wind and solar have happened. There has been no large technological breakthrough, but there have been hundreds and hundreds of small improvements. And because the cost savings from each improvement compounds on the ones before, the decline in cost is exponential. This effect is explained at greater length in this article from Our World In Data, and in chapter 10 of Electrify.

A “learning curve” for a technology shows the rate at which the cost of that technology declines as total “experience” with that technology (measured by the quantity of that technology that has been produced) increases. In the case of solar, every doubling of installed capacity has brought an astonishing 36% decline in the cost per watt of electricity produced. This is called the learning rate.

(The exponential declines show up on the chart as straight lines, because the X-axis is logarithmic: each increment on that axis represents a doubling of total installed capacity.) As you can see on the chart, not all technologies are on learning curves at all, and among those that are, different technologies have very different learning rates. But extensive research has shown that the learning rate for any given technology, whether airplanes, cars, semiconductors, or solar panels, tends to remain constant for many decades.

This has very important implications for wind and solar power. It means that the more wind and solar power we install, the cheaper new wind and solar will become. And it means that the more quickly we install wind and solar, the more quickly it will become very cheap. Moreover, there’s good reason to expect this effect to accelerate, due to a snowball effect: as wind and solar become cheaper, they become economical to use in more circumstances, and so demand for them increases; this means that greater quantities of wind and solar are produced to meet the increased demand, thus lowering prices further and restarting the cycle.

The snowball also works through the mechanism of public policy. Ten years ago, no US state was aiming for 100% clean electricity, because it appeared much too expensive. Now that the price of renewables has fallen enough to make it affordable, eleven states have legally binding targets of 100% clean electricity (and ten others have adopted policies with similar aims). Those laws and policies will increase deployment of renewables, thus driving costs down further, and making it easier for more states, cities, and countries to adopt similar targets. The US government’s “Inflation Reduction Act,” signed by President Biden in August, 2022, is expected to supercharge this process.

⇒ Read this terrific article by Robinson Meyer to understand how this snowball effect, which he calls “The Green Vortex,” has already changed the political and policy landscape.
⇒ Listen to this great Volts podcast laying out all of the ways that the Inflation Reduction Act of 2022 will accelerate the energy transition snowball.

We can already see this snowball picking up speed in the graph below. As prices have fallen, deployment of wind, solar, and batteries around the world have begun to increase exponentially.

This is why we can be confident that electricity from new renewables will soon be cheaper than electricity from existing fossil fuel plants almost everywhere in the world.

⇒ For a great discussion of how underappreciated this fact is by most policy-makers, and what it will mean, read or listen to this amazing, optimistic interview with energy analyst Kingsmill Bond.

Even if we go all-out deploying wind and solar (together with lithium-ion batteries and new transmission lines), it will probably take a decade until electricity generation is 80% decarbonized. To keep decarbonizing the grid beyond about 80% in an economical way, many experts think that we will need to turn to other energy sources, and perhaps to novel technologies. This is because wind and solar power are intermittent (the wind does not always blow, and the sun does not shine at night) and they vary with the seasons, and because demand for electricity is seasonal, too (we need much more of it for cooling and heating when it is very hot or very cold). So, as we deploy wind and solar over the next decade, we need to continue developing technologies that can provide “firm” (consistently-on) or “dispatchable” (on-whenever-you-want-it) carbon-free power, to allow us to decarbonize the final 20% of the grid. Fortunately, many of these technologies are quite far along already. While we don’t know yet exactly what mix of technologies will be most cost-effective for this last mile, we have good reason to be confident that some combination of the technologies we are already working on will be up the task by the time we need them, and that we’ll be able to use them to achieve a fully decarbonized electricity system. Click here to explore the technologies we will need to fully decarbonize the grid.