A Massive Global Shift And Economic Opportunity Is Just Beginning: We are in the midst of a global energy revolution, whose implications we are now beginning to clearly discern. In the past five years or so, wind and solar resources have grown enormously across the planet, especially in the three key geographic areas of the emerging global energy economy: North America, Europe, and China. Renewable costs are plummeting and will continue to fall. Batteries will be the next big emerging technology that will sweep across the planet, as costs come down and use cases proliferate.
Then will come the stitching together of the global digital networks that will connect all of these disparate pieces and make them smarter, more responsive, and more efficient. Smart municipalities are beginning to emerge already, as (U.S.-based) companies like Silver Spring Networks and Itron win contracts to connect power grids and transform emerging smart cities themselves, such as Singapore.
The die is already cast here: we will build cleaner and often smaller and more flexible generating assets. We will develop and adopt ever more efficient energy-producing, consuming, and storage technologies. And these assets will all ‘talk’ to each other to optimize performance in a connected central nervous system. This future is inevitable because the vision is there, the economic logic makes sense, and the technology is close at hand – if it doesn’t exist already.
The driving forces will be economics, global competition, carbon, and the ubiquity of information technology. Within this emerging framework, today’s technologies will continue to improve. Solar panels will become increasingly efficient at converting the sun’s energy and cheaper (low-cost contracts in Chile and Abu Dhabi already have solar electrons to be delivered at below 3 cents per kilowatt-hour – kWh). Wind turbines will be taller, and longer blades will pull more energy from the sky, delivering wind at between 2 to 3 cents per kWh. Batteries will continue to become more powerful and durable and help balance the power grid. Conventional generating plants will become increasingly instrumented, smarter, and more capable of backing up intermittent renewable resources. And new technologies, such as modular nuclear reactors, may emerge on the scene as well.
There is – in fact – a multi-trillion dollar global opportunity lying just in front of us. The critical question for us: will the U.S. win its fair share? The fact is, that with a dominant position in research, and both historically strong state and federal support for this emerging energy economy, the U.S. has enjoyed a solid head start. As a consequence, according to the U.S. Department of Energy, in just a few short years we have created a national jobs machine that has created over 360,000 jobs (260,000 in solar – of which an estimated 8% are returning veterans – and over 100,000 in wind. Another 260,000 individuals work in the alternative vehicles sector, and millions work in energy efficiency.
A the same time, our national labs – aided by some of the best researchers and most powerful computers in the world – continue to buttress the future of the U.S. energy economy in the development of cutting edge technologies. We are still the world leaders in this area. But that may be about to change.
Driven By Ideology, We May Be About To Squander One Of This Century’s Biggest Opportunities: However, with the Trump Adminstration’s policies and budget in the offing, we look likely to squander one of our best and brightest opportunities to remain a global energy powerhouse. This, just when the rest of the world is headed in the other direction. And this means we will stand to lose out on an enormous global economic opportunity that will cost us economic growth and hundreds of thousands of jobs in the long run.
China Sees The Opportunity Clearly: We have already seen how China has taken over into the solar panel manufacturing business, to the point that of the top ten global module manufacturers – which comprise over 50% of the world’s output – eight are from China (the exceptions being Korea’s Hanwha-QCells and America’s First Solar). That loss hurts, as this was an industry with estimated shipments in excess of $40 billion in 2016.
Next, China will likely emerge as a top player in chemical batteries, as the government supports the EV industry, manufacturers gear up, and research intensifies. Early signs point to China establishing a dominant position here as it has done with solar modules.
For example, late last year, for example, Swiss battery firm Leclanche’ announced an alliance with Chinese battery firm Narada for technology transfer of advanced battery technology, focusing on China’s $4 billion electric bus market. One single company, Contemporary Amperex Technology (with an $11bn market cap) tripled its battery output in 2016 to 8,000 megawatthours (MWh) and plans to expand to 50 gWh by 2020. For comparison’s sake, Tesla’s giga-factory is shooting for 35 MWh. Perhaps more critical is the fact that the Chinese company reportedly employs 1,000 researchers with advanced degrees. They are investing in the necessary research to power the future. And spending money on plants as well. In a single month, (May 2016), $400 million was invested in the country’s lithium ion sector. And in the first half of last year, Chinese companies announced an added 120 GWh of new manufacturing capability.
Finally, China announced in January of 2017 that it plans to pour an astonishing $361 billion into renewable power generation in the next five years, at almost the same time that it heralded the scrapping of 103 future coal fired plants either planned or under construction. Put in perspective, this 120,000 megawatts of new capacity represents about 10% of total U.S. generating capacity.
And China is not just putting its muscle into manufacturing. A 2015 study on R&D showed the Chinese Academy of Sciences to be the number one R&D player in green energy, with the country as a whole assuming the lead role in sustainable R&D.
The knee-jerk reaction by the current Administration will likely be to completely miss the point and assess more tariffs on imports fro China and elsewhere. However, the real lesson here is that we must spend more time figuring out how to be innovative and competitive, and how an integrated government-private sector strategy can help strengthen our businesses and national economy in a true and productive partnership. Because if it’s not China, it will be Malaysia, Vietnam, Thailand, or a host of other countries looking to make good on this opportunity as the global energy economy transforms. But that is not where President Trump’s proposed budget looks to be headed, with massive cuts proposed to the DOE’s initiatives to promote R&D and bring new technologies into the private sector.
Shifting Into Reverse? The Next Few years Will Be Critical: Here in this country, today, we stand at a pivotal point. The good news is that we have some highly innovative companies, with poster child Tesla pushing the envelope on innovation in everything from solar shingles to electric vehicles and batteries.
Publicly traded solar companies such as FirstSolar and SunPower continue to innovate as well, as they simply have no choice in a cut-throat world. GE’s Predix platform stands out as another example of U.S technological prowess – enabling an emerging and powerful Industrial Internet of Things that makes power plants (and other industries) far more intelligent and efficient. Predix-enabled power plants can more intelligently and flexibly respond to the need to integrate wind and solar into power grids. AT&T, IBM, Google, and countless others are surging forward as well. And there are countless other U.S, companies also forging ahead across multiple areas in the energy space.
The bad news is that – faced with the inevitable transition to a more advanced and technologically sophisticated energy economy – we stand to potentially cripple or throw away the many competitive advantages we have spent years and decades acquiring. Our national laboratories are indeed national gems: to take just one example, the advanced research coming out of our supercomputers in areas such as materials science heralds new opportunities for U.S. companies in a brutally competitive global market.
Meanwhile, federal tax supports such as the Investment Tax Credit for solar and the Production Tax Credit for wind have helped created efficient supply chains and economies of scale in U.S. markets. Other entities such as ARPA E have supported companies with emerging technologies to the point that they have received well over $1 bn in private funding.
And yet, there is a serious concern that the Trump Administration is looking at significantly cutting financial support for federal labs and renewables, while weakening DOE programs and tax credits that support the growing sustainable energy industries. This would be an egregious and costly error which may take decades to recover from.
The Art of the Deal versus the Art of the Long View: Let there be no mistake. Compassion for those left behind in the transition to a new energy economy is important. It is absolutely critical that we support individuals and industries that get the short end of the stick as technologies advance and the global energy economy coalesces. Laid off coal miners – and other sectors that lose out – should not merely be abandoned to their own devices. Retraining and other efforts should be made to assist in every way possible.
At the same time, turning our back on critical research and policies to develop the global smart energy economy while moving back towards coal and other conventional hydrocarbon resources is an unimaginative recipe for long-term economic failure for this country. At a global level, the smart grid and sustainable energy train has left the station. Whether or not the U.S. stays in or leaves the Paris accords will not change the fundamental global economic equation. China, in particular, recognizes this and it aims to fully reap the rewards.
What the Trump Administration needs to do – urgently – is step back and look at global trends and map a strategic path to the future that assures U.S. industry and its labor force a dominant position at the table. This is far less about the art of the near-term deal and much more about leadership for the long-term, well beyond the headlines of today and into the decades of the future.
More R&D investment and government support for these technologies and industries, not less, is critically important at this juncture. Otherwise we stand to lose out on one of the most significant economic transformations in the history of our planet.
The presidents and administrations of the past whose legacies endure are those who have been willing and able to look beyond the passing sentiments of the day and see clearly what is at stake tomorrow and for future generations. Those are the leaders we remember with gratitude. Those are the ones who dedicated themselves and inspired their citizens to the great tasks before them, leaving behind a legacy for tomorrow.
Few tasks are more significant, urgent, or indeed lucrative than continuing to architect and support this multi-trillion dollar new global energy economy. The future is ours to create, but we will fail miserably if we move backwards, guided not by a hopeful and compelling vision of the future, but by the shiny allure of objects in our rear view mirror.