Neil Auerbach is Managing Partner of Hudson Clean Energy Partners, a group with over $1 billion under management. He made a number of points in his presentation at the American Council on Renewable Energy conference in Washington this afternoon that I found interesting.
He began by noting that “99.9% of people who have studied global warming believe in the overall theory. But this doesn’t take root in Washington. Why not? Because it implies sacrifice,” suggesting the obvious — that the concept of sacrifice has only negative value politically.
“But how about growth? How about profit?” he asked. Auerbach then went on to look at the trajectories for huge profit in low-carbon production energy, which is projected to grow to $2.2 trillion annually by 2020.
This will not happen primarily in nuclear or CCS (carbon capture and sequestration), but in renewables. Why? The answer is simple: cost. Auerbach took the audience through a brief presentation about the history of introducing new fuels, pointing out that generally, it takes a while for a new fuel to become achieve scale and thus become cheap. Coal, for instance, used to be only 5% efficient – thus hugely expensive. When natural gas was introduced in the 1950s, it was horribly expensive, but became less expensive when economies of scale were achieves decades later. But nuclear doesn’t tell the same tale. There, the costs have risen steadily as it the industry has matured since its inception in the 1970s.
On the other hand, free-fuel forms of power generation have this cost reduction phenomenon going on in spades. Wind is the second most successful power source in terms of bringing down costs as it was introduced to the power mix, and the trend is likely to continue as China redoubles its commitment to wind development. But the clear all-time winner is solar. For every doubling of product volume, there has consistently been a 20% reduction in the price per Watt.
So it appers that we don’t need belt-tightening, which is fortunate, since Americans just don’t do sacrifice. And we don’t fear catastrophic environmental collapse, as we, for some reason I don’t claim to understand, are unique in the world for our tendency to laugh off the passionate entreaties of the scientific community.
We may need a bit of patience for another few years, however, as wind, solar, and the others become less expensive and take us to the point of grid parity (at which energy from clean and fossil fuel sources will be available at the same price). Or, if we want to make this really interesting, we could remove the subsidies for the oil and coal companies that come out of tax-payers’ pockets and give us artificially cheap energy from fossil fuels — at which point we can stand back and behold the explosion of renewable energy.
