Full transition to clean energy is still a tall order

Momentum continues to grow across the globe for energy transition to attain net zero emission goal by 2050. Hopes are high, though many countries are not on track, as we prepare for the crucial climate talk to take place in less than 100 days in Glasgow.

The reasons for optimism, most advocates of the energy transition see, are the ever-increasing competitiveness of renewable energies and other potentials such as job creation that renewable energies may unleash. In tandem, countries may realise the untapped benefits of energy efficiency, which is termed as the first fuel by the International Energy Agency (IEA).

The desired energy transition, to build a cleaner future and to reach net zero emissions, however, is hard to come by.

Delving deeper into the situation, on the basis of the progress made by different countries in the last several decades, we can find some paradoxes that impede the energy transition we all aspire to.

The "intermittency" paradox

In spite of the economic calculus that evidently favours solar and wind energies over all forms of fossil fuels, there is still a lack of pace in the clean energy transition.

The paradox is that both solar and wind are of intermittent nature, causing other forms of electricity generation to be kept in place, or in the storage system, to be used to ensure electricity supply remains uninterrupted. 100% electricity from renewable energies, therefore, requires storage facilities to deliver electricity to the consumers, end when we do not have solar energy at night and/or enough wind speed.

The other option is to buoy on hybrid mechanism – harnessing solar during the day and generating wind power at night – to make the contribution of renewable energies to the grid as close as possible to 100%.

Well, a storage system can solve the intermittency paradox but renewable energy with grid scale storage facilities is still very expensive. Designing a solar-wind hybrid may not be feasible in all countries.

Additionally, the solar-wind hybrid may still require fossil fuel-based power generation to meet our 24/7 electricity demand.

The utility-demand side management paradox

Demand side management is essential for enhancing energy efficiency and conservation. In fact, demand side management programmes not only promote efficient appliances but also help induce behavioral changes among the energy consumers, leading to significant reduction in energy consumption.

The result is highly expedient to energy consumers, i.e. the demand side, and policymakers. Energy consumers are happy when they can minimise their utility bills. Policymakers also feel good due to varying reasons, be it the possibility of reducing energy import or the likelihood of delaying investment in new power plants.

Utilities all over the world are, however, designed to generate electricity, irrespective of energy sources, and/or sell electricity as much as possible to the energy consumers and thereby, making profits. As such, conflict arises when the utility's main business is to sell electricity and a utility is also entrusted to pursue demand side management programmes.

Utilities further have obligations to absorb shocks in the event of crisis – for example, the dip in energy demand attributable to Covid-19. In view of these, a significant decrease in energy consumption from demand side management programmes supported by utilities is extremely difficult to achieve.

The Jevons paradox

This is the phenomenon under which the purchase of energy efficient appliances/equipment in different applications cannot deliver energy savings. It rather increases the total energy consumption due to soaring demand.

Economist William Stanley Jevons first observed this in UK industries that adopted efficient steam engines only to see their overall coal consumption overshoot. Jevons Paradox is a popular term in environmental economics and is known as rebound effect, which shows that technological development and policy measures may not necessarily reduce energy and/or other resource demand as efficiency gain.

As benefits of energy efficiency are being felt by consumers through reduced energy bills, consumers in many cases overuse the efficient appliance. Examples include the overuse of an energy efficient car or installing efficient lights, say LEDs, of higher wattage or more in number than what deems necessary.

The policy paradox

The broader energy, climate and related fiscal policies help to shape the energy mix of the power generation in a country. On the other hand, energy pricing also influences the promotion of renewable energy and energy efficiency.

The policy paradox here appears at least from two channels – first, renewable energies may be cheaper but may not be prioritised in energy and climate policies and secondly, energy pricing may include a subsidy component, which rather favours fossil fuels.

Under such circumstances, the likelihood of increasing the contribution of renewable energy to a country's energy mix is slim. Moreover, price distortion, resulting from subsidies, provides a perverse incentive to the consumers to not think too much about saving energy – either by taking conservation measures or by installing energy efficient appliances. 

Perhaps, nobody thought that the path of clean energy transition would be this bumpy when few countries embarked on it. Nevertheless, as time ticks away and the impacts of climate change are becoming diabolical, we must fix the challenges.

The possible way-out to make energy storage cost competitive is to use policy instruments, which, for example, helped to bring the cost of solar and wind energies down during the last decade.

Policies are, furthermore, necessary to address the presence of energy price distortion or anomaly to support renewable energy and energy efficiency. Energy service companies (ESCOs), backed by the utilities, can potentially solve the problems associated with demand side management. And there is no alternative to awareness raising on energy efficiency and conservation.

While there is much discussion on the theoretical possibility of transitioning to clean electricity grids, 100% share of renewables to most of the grids across the globe will not happen anytime soon.

The value of existing fossil fuel-based power generating units diminishing within a few years is also unlikely.

Experiences from different countries illustrate that policies, rules and regulations will be crucial to consider the realities on the ground in operating clean energy grids reliably, effectively and efficiently.

The longstanding challenge still prevails as to whether all countries have sufficient capacity to move ahead with the clean energy transition that is necessary to avert our existential crisis. In the COP26, different countries will have the opportunities to share their plans for clean energy transition.

Shafiqul Alam is an environmental economist.

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions and views of The Business Standard.