The Green Energy Revolution is Here
Technology leads the charge in creating a sustainable economy
With war, politics, and chaotic supply chains dominating the news, it’s easy to feel pessimistic. Throw climate change into the mix and it’s just plain dismal. But there are some silver linings, and dramatic progress has been made in transitioning to a green economy, without major government investment.
When the economics of green energy are better than fossil fuels, it’s inevitable in a free-market economy that capitalism becomes the environment’s best friend. And that is exactly what’s happening. The numbers tell the story: prices for electric vehicle batteries and solar panels continue to plunge, and adoption of these technologies is increasing dramatically.
According to Bloomberg, the world, including the government and private sector, spent half a trillion dollars on green technology in 2020, including clean energy and electric vehicles. As the expanding market enables economies of scale, prices will continue to fall, and renewable energy adoption will increase. This will also accelerate the move to electric and hybrid vehicles, as is already occurring in China, Europe, and the United States.
In Germany, the share of vehicles that use electricity (hybrids, plug-in hybrids, and fully electric vehicles) soared from less than 3 percent in 2016 to nearly 25 percent in 2020. To be sure, this exponential adoption is still driven by generous government subsidies, but as the market continues to expand, soon that will not be necessary.
Electric vehicle prices are falling by other means, too. Tesla, for instance, says it is planning to integrate battery cells into its vehicles, dispensing with the weight and cost of battery packs. As for the batteries themselves, there is additional good news. The average cost of lithium-ion batteries, critical to electric vehicles, plunged from more than $1,100 per kilowatt-hour a decade ago to below $140 in 2020. Overall, lithium-ion battery prices are dropping at an inflation-adjusted rate of roughly 13 percent per year, meaning they are cut in half roughly every four years.
What are the implications of the increasing adoption of green energy to power electric grids and lower costs of the electric vehicle supply chain?
First, the shift to electric vehicles will bring us cleaner air. Fossil fuel-burning engines are some of the primary emitters of harmful chemicals, beyond just greenhouse gases. A 2020 report by the American Lung Association found that a complete switchover to electric vehicles by 2040 would, in the next decade, contribute to “$72 billion in avoided health harms, saving approximately 6,300 lives and avoiding more than 93,000 asthma attacks and 416,000 lost work days annually due to significant reductions in transportation-related pollution” in the United States alone.
Basically, we should want to transition from fossil-fuel powered vehicles for reasons of public and personal health, not just to arrest large-scale trends such as global warming.
But the transition to electric vehicles will obviously help reduce carbon emissions. Not only would there be no carbon emissions from tailpipes, but we would also switch a tremendous portion of our energy consumption to a power grid that is run on increasingly renewable energy sources.
Solar and wind power are the lion’s share of these sources. Even oil-rich Texas has a grid powered in large part by wind energy, now more than a quarter. Both of these energy modes now undercut fossil fuels. The cost of solar energy has declined by 99 percent over the past four decades. Solar panels with their semiconductors mostly follow Moore’s law on their price curve, meaning the amount of energy we can get from a unit area of solar panel roughly doubles every 18 months. The end state of the solar energy price decline will be energy so cheap that its major cost will be that of transmitting it over wires to our homes and businesses.
Combining cheaper renewables and cheaper batteries is leading to other breakthroughs. Until recently, power generation from natural gas and other fossil fuels had an edge because it was more reliable and consistent than intermittent sunlight and wind. However, the rapid price decline of batteries makes the combination of renewable energy and battery storage cheap and efficient enough to provide a cost-effective alternative to baseload generation using fossil fuels. Companies such as Tesla are already selling utility-scale battery arrays for exactly this purpose.
Once this happens, many power-intensive industries will be disrupted due to plummeting operation and production costs. Supply chains in industries you may not even think of will be affected. For example, the production of construction materials like glass, concrete, and steel mostly relies on high-temperature fossil-fuel furnaces. As electricity prices fall and those industries make the switch to electrically-powered furnaces, the cost of the required equipment and industrial plants should fall, and production will become environmentally far cleaner. Concrete production, for example, is responsible for roughly 8 percent of all carbon emissions, so running that process alone on renewable energy would be a game-changer
The ubiquity of solar-generated electricity will also allow for consistent water supplies around the world. Water purification projects would be viable even in tiny communities far from any power grid. Desalination of seawater would also become much cheaper. This will be a powerful technological improvement for developing countries struggling to supply enough clean water for a rapidly growing population. Costs associated with buildings, such as industrial facilities, commercial facilities, and even residential will decrease dramatically. Those savings will be passed down to consumers.
In short, we could see dramatic improvements in public health and living standards globally.
The green energy revolution has only just begun, and more dramatic economic and infrastructure upheavals may be on the horizon. The only question is how to incentivize the build-out of infrastructure for an energy source that will dramatically drop in price. One answer is using Bitcoin: despite attacks on its energy usage, it has incentivized the build-out of renewable energy capacity. Government is also another answer. Texas is seeking to build a state-funded system of charging stations, with the goal of public highways having a station every fifty miles, and a wirelessly charging road is being tested in Detroit.
As for electrical generation infrastructure, larger states or countries could distribute energy generation and storage into multiple smaller installations with independent operators to increase the resiliency of the grid in the face of large transmission distances and inconvenient geography. Additionally, massive solar energy farms could be constructed in sparsely populated desert regions that experience long periods of uninterrupted sunlight, possibly funded by the private sector and multiple governments working together. Because storage and generation needn’t coincide geographically, these farms could supply battery facilities that require more regular maintenance closer to population centers over long-distance transmission lines. This concept will be tested soon with the completion of a wind-power farm in Wyoming that will supply Los Angeles with electricity, over 700 miles away.
In our lifetimes, gas-powered vehicles will become extinct, and the industrial-scale production of electricity using fossil fuels may very well come to an end. Hopefully, after this decade, we can tell future generations how we flipped the switch and transitioned to a green energy future for their sake and for the climate.