What is the value of clean energy innovation?
Google, a leader of innovation in the digital economy, says that without a private and public focus on innovation in renewables, storage and electric vehicles, the cost of delaying the clean energy economy could be in the trillions of dollars to the U.S.
How much could cheaper clean energy technologies contribute to our economy and energy security? How much could they reduce carbon emissions to mitigate climate change? Can we simultaneously meet society’s goals of economic growth, security, and de-carbonization?
To attempt to answer these questions, we modeled the impact of breakthroughs in key energy sectors: clean power, energy storage, electric vehicles, and natural gas, along with combinations of clean energy policies.
Energy Innovation Benefits Jobs, GDP, Emissions, and Security
Clean Energy Innovation could accelerate economic growth and improve energy security while significantly reducing greenhouse gas emissions. All the breakthrough technology and policy scenarios examined here created substantial economic and net job growth across the country by 2030. Breakthrough innovations in clean energy added $155 billion per year in GDP, creating 1.1 million net jobs, while reducing household energy costs by $942 per year, oil consumption by 1.1 billion barrels per year, and carbon emissions 13% by 2030 vs. Business as Usual (BAU). explore data
Reaching Tipping Points in Electric Vehicle (EV) Batteries Could be Transformative
Breakthroughs in battery technology could push EVs over cost-performance tipping points, enabling mass adoption. In our model, rapid decreases in battery costs and increases in energy density by 2030 enable the production of electric vehicles with 300 mile range and a total cost of ownership lower than that of internal combustion vehicles. This leads to EVs, Hybrid Electric Vehicles (HEV) and Plug-In Electric Vehicles (PHEV) achieving 90% market share for light duty vehicle sales, reducing oil consumption by 1.1 billion barrels per year by 2030 — or more than Canada’s entire 2009 oil production. explore data
Cheap Grid-Storage: Significant Opportunity and Unintended Consequences
In the long run, cheap grid-scale electricity storage can create large economic and environmental benefits for the US. It improves power quality and reliability, lowers power prices by allowing more efficient dispatch, and enables much higher penetrations of intermittent solar and wind than would otherwise be possible. Our modeling indicates that grid storage, when combined with breakthroughs in solar and wind could increase renewables deployment by up to 35% by 2050.
In the short term, much cheaper storage, absent innovations in wind and solar that reduce their cost to below coal, could actually drive an increase in coal consumption. Cheaper storage would enable already cheap coal units to run at peak efficiency 24 hours/day, store energy at night and dispatch it during the day — reducing the demand for load-following natural gas capacity and ultimately resulting in a slight (0.3%) increase in greenhouse gas (GHG) emissions. explore data
Delaying Innovation = Delaying Benefits
Breakthroughs in clean energy can provide enormous benefits to the economy, security, environment, and jobs. But the longer we delay achieving those breakthroughs, the greater benefits we stand to give up.
In our model, a mere five year delay in starting aggressive cost curves could cost the economy an aggregate $2.3-3.2 trillion in unrealized GDP gains, 1.2-1.4 million net jobs, and 8-28 gigatons in avoided greenhouse gas emissions by 2050. explore data
Technologies that Innovate Fastest Win
The technologies that become cheaper than coal and oil fastest will dominate our clean energy future. An “innovation arms race” between clean technologies will encourage healthy competition, while benefiting consumers.
For example, in transportation, we explored EV and PHEV competition against Compressed Natural Gas (CNG) vehicles. In the EV Breakthough scenario, EVs rapidly became cost competitive against CNG, leading to dominant market share for EVs, PHEVs, and HEVs. However, if natural gas extraction breakthroughs result in a sustained era of very cheap gas ($3/MMBTU), and EV breakthroughs do not happen as modeled, CNGs could dominate the market, making it much harder for EVs to reach scale.
Innovation and Policy Enhance Each Other
Breakthroughs in clean energy technology can reduce the cost associated with implementing clean energy policies, effectively growing the economy while decarbonizing our energy use. Policies can also amplify the economic, security, and pollution benefits of breakthroughs by creating markets, disincentivizing the highest-emitting technologies, and leveling the playing field for clean energy, leading to increased adoption of clean energy.
Reaching 80% Reductions in GHG Emissions by 2050 Will Require Multiple Solutions
We set very optimistic rates of innovation, pushing technologies hard on cost and performance. Even with aggressive breakthroughs, we achieved only a 49% reduction vs. 2005 emissions by 2050 in the All Tech Breakthrough scenario, well short of the standard, IPCC-inspired reduction targets of 80% by 2050.
While our optimistic scenarios did not reach 80%, they did make substantial headway. Since innovations in biofuels, agricultural practices, or industrial energy efficiency were not modeled in detail, it is possible that a more comprehensive mix of energy innovation could achieve 80% reductions.
Reaching 80% reductions by 2050 will be difficult and likely require much more aggressive innovation and policy than we currently have today. This analysis points to the need a multi-pronged strategy, combining both innovation and policy to mitigate climate change while growing the economy. explore data
Coal is Very Hard to Displace on Economics Alone
Coal power is abundant and cheap in the United States, especially from older and fully depreciated plants. Major displacement of coal generation did not occur until clean energy became cheaper than the marginal cost of coal, which occurred predominately after 2030 even with clean power breakthroughs.
Post-2030, breakthroughs in generation became cost advantaged vs. coal and start to pay off significantly. As clean power reached its lowest price points, displacement of coal accelerated rapidly from 2030 to 2050. By 2050, the All Tech Breakthrough scenario reduced coal 66%, and the $30/ton Carbon Price + Breakthrough scenario reduced coal use 87% vs. BAU. explore data
Cheap Natural Gas Could Reduce GHG Emissions in the Short Term, but Slow Clean Energy Deployment in the Long Term
Initially in our hypothetical cheap gas scenario ($3/MMBTU), the improved economics of natural gas generation led to coal-to-gas switching and made coal plant retirements more economical. In the long term, if gas prices stay cheap, gas could out-compete carbon-free energy technologies.
In our Cheap Gas scenario, total gas generation surged by 86%, overall emissions were reduced slightly by 6% from coal displacement, and households saved an average of $555 through switching to CNG vehicles by 2030. But cheap gas reduced total 2030 renewables, CCS and nuclear capacity by 47% vs. All Tech Breakthrough and 57% vs. Clean Policy + Breakthrough. explore data
About the Analysis
We conducted this analysis to evaluate, at a basic economic level, the benefits of breakthrough rates of innovation in clean technology using McKinsey and Company’s US Low Carbon Economics Tool.
The model estimates potential changes in energy and the economy from different technology and policy inputs. It doesn’t predict what will happen, but rather offers perspective on potential outcomes from different inputs, such as energy prices.
Google’s energy team developed aggressive “breakthrough” cost/performance levels for solar photovoltaics (PV), concentrated solar power (CSP), on-shore and off-shore wind, geothermal including Enhanced Geothermal Systems, carbon capture and sequestration (CCS), nuclear, Plug-In Hybrid Electric Vehicles (PHEV), Hybrid Electric Vehicles (HEV), Battery Electric Vehicles (EV), rapid and long discharge grid-storage, and natural gas.
These breakthroughs were then modeled in 14 different technology, policy, and fuel price scenarios.
Download the full analysis to learn more about the potential impact of clean energy innovation.
Business as Usual
Continuation of Status Quo Innovation Rates, Energy Prices (Defined by US Energy Information Administration’s Annual Energy Outlook 2011), and State and Federal Energy Policies.
Clean Power Breakthrough
This scenario modeled major clean energy technologies including nuclear, solar PV (Utility and Rooftop), solar CSP, on-shore & off-shore wind, geothermal including Enhanced Geothermal Systems (EGS), and new & retrofit CCS. In each case, we selected an extremely aggressive breakthrough LCOE level for 2020 and 2030. These rates were set by our own aspirational estimates of each technology’s potential, informed by technical cost models and industry experts. State and federal policies remained the same as BAU.
Storage helps integrate intermittent renewables like wind and solar, shape demand, and prevent service interruptions. Two basic types of breakthroughs in grid-storage were modeled: short duration storage capable of discharging loads for less than 1 hour; and larger scale storage capable of discharging for over 1 hour. We then modeled five business cases for storage: 1) Frequency Regulation; 2) Load Following; 3) Price Arbitraging; 4) Capacity Deferment; and 5) Grid Reliability. State and federal policies remained the same as BAU.
Power, Storage, and EV Breakthroughs.
Electric Vehicle Breakthrough
This scenario modeled the impacts of battery breakthroughs on PHEV, HEV, and EV vehicles. Vehicle adoption was driven by a consumer choice model which was triggered by total cost of ownership (TCO) and vehicle range, in competition with Compressed Natural Gas (CNG) and conventional Internal Combustion Engine vehicles (ICE). Impacts were modeled for both the light duty and medium duty vehicle segments. Breakthrough energy densities were not high enough to displace long-haul heavy trucks, so they were not covered by this model. State and federal policies remained the same as BAU.
$30/Ton Carbon Price
This scenario models a power sector-only carbon price used to fund a cut in corporate and individual income tax rates. The $30/ton price was chose for its ability to cause natural-gas generation to be dispatched ahead of coal, since the carbon intensity of coal generation can be more than double that of combined cycle gas turbines. Absent very aggressive cost reductions in clean energy, much higher natural gas prices, or regulation on natural gas, a price on carbon below $30/ton may not sufficiently incentivize cleaner sources.
$30/Ton Carbon Price + Breakthrough
$30/ton Power Sector Only Price on Carbon with Power, Storage, and EV Breakthroughs.
The Clean Policy scenario models a package of mandates, standards, and incentives. It includes: a national CES of 15% by 2020 and 25% by 2030; national EERS of 5% by 2020 and 10% by 2030 (roughly 20% capture of total energy efficiency potential); extension of PTC and ITC through 2030 capped at $10 billion annually along with loan guarantees for all clean technologies capitalized at $15 billion; CAFE standards are increased by 4%/year from 2016 to 2025, 1%/year thereafter for LDVs; and coal retirements of roughly 55GW by 2020 based on strict EPA regulations along with tightening of SOx/NOx caps, MACT/HAPs, transport rule 316b (cooling towers), and CCR (ash disposal).
Clean Policy + Breakthrough
This scenario uses the same policies as “Clean Policy” but integrates breakthroughs in Power, Storage, and EVs.
$3 Natural Gas
Natural Gas has undergone a revolution in just the last few years driven by the advent of shale technology. What if innovation in gas technology continues, bringing additional low-cost resources online? To model gas innovation (and assuming shale gas is not heavily regulated), gas prices were held at the arbitrarily low level of $3/MMBTU and assumed to have sufficient supply to meet all demand.
$3 Natural Gas + Breakthrough
$3/MMBTU Natural Gas Price Through 2030 with Power, Storage, and EV Breakthroughs.
This scenario models breakthroughs in Power, Storage, and EVs. Except instead of starting breakthrough learning curves in 2010, they start in 2015 from the 2015 BAU level.
Commodity prices for oil and natural gas were were pegged at 50% above those from the US Energy Information Administration’s AEO 2011 projections.
High Commodities + Breakthrough
High commodity prices plus breakthroughs in Power, Storage, and EVs. Commodity prices for oil and natural gas were were pegged at 50% above those from the US Energy Information Administration’s AEO 2011 projections.