Energy systems are large, techno-economic systems. We are lucky to witness the transition of one of these systems, or should we say three? Electric, natural gas, and oil systems will change forever, as forecasted by some experts in a few decades. A clean and more renewable energy system is good for everyone. But we have an engineering problem, and this may lead to the replay of the late 70s.
The simplistic logic for energy transition is straightforward. More renewables, end coal, more efficiency, more grids, and hydrogen, then you achieve the energy transition in one sentence. The story is like one of these too good to be true stories. Then you have to dig down for details. And details are not that positive.
Whenever we talk about the “coming hydrogen future” with well-known experts, they say “cross your fingers.” One other expert claimed, “when I entered this business, hydrogen was the fuel of the future, after many years, hydrogen is still the fuel of the future.” Michael Liebreich also points to failed attempts about hydrogen in his article “Separating Hype from Hydrogen” at BNEF.
What if hydrogen fails again? Then we still have solar but no inter-seasonal storage. Storage solutions are promising, and scaling these solutions in a timely manner may happen. Emerging solar technologies are also well in the pipeline. But last week, during a web conference at CFR, Daniel Yergin claims all these (solar, wind, storage) technologies are like 50 years old, and the newest energy disrupter is shale technology like 30 years or so.
Therefore we have to think about the innovation cycle of new technologies. We are focusing more on the supply side, but energy transition requires a change in the demand side technologies as well. We have one demonstration plant for green steel. And this is just one plant and production. Then we have to think about all the steel manufacturers, then cement and other industrial materials. Can electrification solve these problems efficiently? Not sure either.
You can find new plans to accelerate innovation. As more money will pour into targeted innovations, new technologies will pop up. This is likely, but commercializing these technologies may take a long time. After the commercialization, widespread usage will take more time.
My primary concern is cost. What if too ambitious policies push for the wrong technologies. Then the result will be massive failures and backlash. We have seen US synthetic liquid fuels program in various periods to be failed. As the cost of new technologies is understood to be too high, more oil drilling continued. This time the world is going towards a climate apocalypse, but during that time, it was an oil apocalypse. Most probably, alerts do not work.
So what should be done? The first step is to create a nimble market for these technologies in blend with existing technologies. Therefore hydrogen blending is an excellent option for the transition. But then we have to make ready the standards and workforce with training. This will take at least a generation. But the biggest problem is on the demand side. How to change all burning technologies to hydrogen, or are we ready for electrification of heat?
There is also one more problem regarding energy transition. To replace other resources, you have to install much more solar and wind. But they age like different types of equipment and may need to be replaced every 15-20 years. It creates a perpetual investment cycle. So it needs credit. Credit is cheaper in developed countries than in developing countries. Renewable credit rates should be fixed worldwide.
The single biggest step to achieve this mission is to start today. One step at a time will produce better results than ambitious targets. Cost controls will cement the rise of new energy technologies. Alarmism never helps. Tesla, solar cost reductions are not happening because of alarmism but cool, calculated steps forward. We need more of these now. Otherwise, we may be left alone with geoengineering.