Just last month, The Institute for New Economic Thinking at the Oxford Martin School released a study on the speed of the energy transition, and in the great tradition of Oxford thinking, it has the power to change the world.
Although couched in detailed, technical and mathematical terms, its conclusions are revolutionary. Most analysis on the future of energy thinks in linear terms and ends up by just tweaking the current system. Artificial constraints are placed upon the growth of renewable technologies, all of which have proven to be incorrect for decades.
This paper however goes to the issue at the heart of the energy transition – the rapid fall in the costs of new energy technologies on learning curves. Specifically: solar, wind, batteries, and electrolyzers. The authors Rupert Way, Matthew Ives, Penny Mealy, & Doyne Farmer explain that the best way to predict future costs is to assume that learning curves continue. It then thinks through what that means for the costs of key renewable technologies. And the answers are spectacular – renewables are already cheaper than fossils and they will continue to get even cheaper. There is simply no contest.
So what does this mean? It means there is an entire transformation of our energy system from fossil fuels to renewables. Human beings are very good at figuring out ways to deploy cheap energy, and at much lower cost than maintaining business as usual. They calculate a saving of $12 trillion, but the numbers are in fact un-forecastable. The key point is that change is cheaper than carrying on with fossil fuels.
To maintain the status quo with fossils, therefore, not only places the planet at risk of catastrophic global warming, but also kills millions through pollution and channels vast rents to irresponsible dictators in petro-states. It also turns out to be more expensive for all of us than getting on with the deployment of renewables.
The implications of Oxford’s findings are profound, especially at this time of energy crisis:
1. There is no green premium. There is a green prize.
2. The current core models for the future of the energy system are profoundly misleading and need to be rethought. All the IAMs, all the work being used by the NGFS and all the fossil fuel-based thinking on the future. We need a whole new cadre of modellers and energy system designers.
3. All decisions on energy technologies are bets, but there are good bets and bad ones. There are choices which have never worked and are unlikely to work, like more fossil fuels, CCS, and nuclear (the bad bets). And choices that have been working for decades and are highly likely to continue to get cheaper, like solar, wind, batteries, and electrolyzers (the good bets).
So the implications for politicians is clear. They should make good bets not bad ones. They should jettison the pedestrian linear thinking on energy that characterises most energy models. They should build green with enthusiasm and develop the energy technologies of the future.
This article is also published on the author's blog. Illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.
Kingsmill Bond is an Energy Strategist and Senior Principal at RMI. He has served as a strategist and analyst at companies including Deutsche Bank, Sberbank and Citibank.