Big Question on Climate Crisis: How to Inspire Innovation

Source: By JUSTIN GILLIS, New York Times • Posted: Friday, November 4, 2016

A rising share of electrical power in Europe comes from renewable sources, like the Riffgat wind farm off the coast of Germany, but experts say innovation is needed to further reduce fossil-fuel emissions. One idea being tested by Siemens is to store excess energy in heated rocks for use later. Gordon Welters for The New York Times 

HAMBURG, Germany — On the edge of this northern German port city, the industrial giant Siemens is testing a way to offset the erratic nature of renewable power, by storing energy in hot rocks.

Off the coast of Scotland, an oil company will soon install the first commercial wind turbines that float in deep water, a potential clean-energy breakthrough that could be adopted around the globe.

And in Texas, an American company is about to test a new type of power plant that may generate electricity while cheaply capturing the emissions, allowing the climate-altering pollution to be pumped safely underground.

Around the world, energy innovation seems to be speeding up. Large historical forces are converging to create unprecedented turmoil and opportunity in what had long been one of the most hidebound industries.

The changes are coming just as governments have finally resolved, after two decades of failed efforts, to tackle the global climate crisis. The emissions that cause global warming have already fallen in some of the biggest countries, including the United States.

Yet none of it is happening fast enough.

Experts say that to forestall the worst effects of global warming, emissions need to drop by 80 percent or more globally by 2050, a mere 34 years from now. But at a global scale they are not falling at all, and the promises countries have made about the energy transition, even if kept, would get the world nowhere close to where it needs to be.

That means, experts say, that innovation in the field of energy will have to accelerate if governments hope to stave off catastrophe.

While the cost of renewable energy sources has plunged, it is still not low enough in most places to drive dirty energy out of the market. And while renewables have shown that they can replace large amounts of fossil fuels, many experts say they believe they cannot do the whole job and new technologies will be needed in coming decades to get greenhouse emissions to zero.

Progress on those new approaches has been halting, at best. So the future habitability of the Earth might depend on the answer to this question: How can innovation in the energy business be pushed into overdrive?

Not at All Like Your iPhone

Many people have a pretty clear idea about how innovation works — or at least they think they do.

After all, millions of people have one of the most dazzling fruits of modern technology, the smartphone, in their pockets. At the root of innovations like the smartphone and the flat-screen television are microchips that get ever faster, reducing the cost of gadgets even as their capabilities mushroom.

Now that almost everyone accepts that dirty energy is a problem, could it not be fixed with that same kind of innovation? It is a rational question, and only a few years ago some of the brightest minds in Silicon Valley were asking it, too.

“Some of these venture capitalists had the mind-set that we’ll get this stuff invented in the garage, and then we’re just going to disrupt the whole sector,” said Teryn Norris, a director at the PIRA Energy Group, a consultancy in New York.

Till Barmeier, left, a Siemens project manager, and Maike Enders, a development engineer, checking equipment at the hot rocks test site near Hamburg. CreditGordon Welters for The New York Times 

Billions of dollars poured into “clean-tech” investments. Most of them failed, and within a few years, investors were acknowledging they had misjudged the difficulty of the problem.

“They ran up against the hard realities of the energy sector,” which does not remotely work the same way as most of the technologies emerging from Silicon Valley, Mr. Norris said.

To understand why, start with this: Though energy may appear to be a free market, with prices rising and falling as traders buy and sell oil and electricity, appearances are deceiving.

“The energy markets are among the most unfree markets you could find anywhere in the world,” said Samuel Thernstrom, who served in the George W. Bush administration and now heads a think tank in Washington, the Energy Innovation Reform Project. “They are totally distorted at many, many levels.”

The most obvious example is electricity. Because the delivery of electricity is a natural monopoly — multiple sets of wires would be a chaotic mess — state governments essentially took control of the electricity business a century ago.

They dictated what companies were allowed to build and set the prices they were allowed to charge, usually by lumbering, bureaucratic procedures that took years. The focus was on forcing the utilities to keep prices low while eking out modest returns on their investments.

Not surprisingly, electric utilities were among the least innovative businesses in the entire economy, spending next to nothing on research and development. Some aspects of the business have been reformed in recent years, but progress has been halting.

In less obvious ways, the market for oil and the fuels made from it has also been distorted. Much of the world’s oil is controlled by government-owned national oil companies, some of them linked into a huge cartel, and even in the West a large fraction comes from public lands.

That means governments exercise a huge influence over supply; they can and do manipulate it for reasons having nothing to do with business principles.

On top of that, the oil industry benefited for decades from government favoritism, including big tax breaks in the United States and big consumer subsidies in other countries, that helped lock in a global dependency on oil.

As it became clear late in the 20th century that the emissions from coal, oil and natural gas threatened the world’s climate, a cry for change arose.

But the tight linkages between energy companies and governments meant that if change was to come, it would only come as a result of strong public policies.


New stones at a Siemens site near Hamburg, Germany, where engineers are testing a method of storing excess energy in hot rocks for use at another time. CreditGordon Welters for The New York Times 

That, in turn, set off a debate that is still underway: What, exactly, should those policies be?

For two decades, Europe has been the world’s hothouse of experimentation in energy policy. Along the way, European governments have learned painful, expensive lessons.

The governments saw promise in technologies like wind turbines and solar panels, but realized these would never be able to compete with entrenched utilities unless the market for them grew large enough that manufacturers could benefit from economies of scale. They tackled that head-on, creating subsidies funded from the pockets of electricity consumers.

It worked, driving down the cost of renewables at a precipitous pace in recent years. Germany has pushed hardest among the large European countries and now gets a third of its power from various forms of renewable energy.

Adopting Renewable Targets

State governments in the United States also adopted renewable targets, though the United States is behind Germany, with about 13 percent renewable electricity, counting power from dams.

Despite their success in building the market, European governments were slow to adjust their subsidies, even as renewable power grew cheaper. Over time, the cost ballooned. The average German family is paying close to $300 a year on its electricity bill to support the green-energy push.

Among environmental groups, the subsidies and mandates are largely seen as a success.

That view is supported by a powerful argument: Economists have recognized that the falling cost of green energy is directly related to the size of the market. Every time the market for solar panels doubles, for instance, their cost falls by nearly 20 percent, according to research from a consultancy, Bloomberg New Energy Finance.


An employee monitoring the system at a Siemens site near Hamburg. The company will begin a larger test next year. CreditGordon Welters for The New York Times 

So the preferred energy policy of the green groups is basically a more ambitious version of this established approach. If governments keep using subsidies and mandates to push for scale, they say they believe green energy will eventually be able to compete on economic grounds, giving society the tools it needs to reach low emissions by the middle of this century.

But many energy experts say they believe this will not be enough, and see an urgent need to speed the pace of research and development. Their concerns center on the limitations of renewable power. Because the sun does not always shine and the wind does not always blow, solar panels and wind turbines are not entirely reliable sources of electricity.

Wind turbines in the sea are one answer. The strong, steady ocean breezes mean that far more power can be produced than from turbines on land. But putting huge machinery into the ocean is expensive, and for years European governments have had to offer high subsidies to get that industry off the ground.

Now, they are finding a better way.

Recently, instead of handing out fixed subsidies, they have been running “reverse auctions” for new wind projects. The company that asks for the lowest subsidy on a particular project gets the deal, and the subsidy.

The results have been startling, awakening fierce price competition among the developers of wind projects.

“We owe it to the people that are paying for this electricity to show that the industry is focused on getting the cost to them down,” said Gunnar Groebler, who heads offshore wind development for Vattenfall, a huge European utility.

The European wind industry set price targets for the 2020s that it is already beating. Some of the companies have also set their sights on the United States, which has just built its first offshore wind farm, a tiny one off Rhode Island, but with some states planning far larger projects.

Offshore wind farms have been installed only in shallow water, but Statoil, the Norwegian oil company, and other companies are pursuing floating turbines that could work in many parts of the world where the sea floor drops off steeply. Statoil will soon start building the first commercial project of this type, a pilot off the coast of Scotland.

The growth of renewables is prompting a search for complementary technologies that could balance out the power fluctuations. The cost of large batteries is falling, and they are likely to play a role. But Siemens, the German giant that supplies gear for power projects all over the world, is looking for a cheaper approach.

On the outskirts of this city, it is testing a method in which surplus electricity would be used to heat up rocks, with the heat recovered later and used to generate power when renewable output is low. The energy could potentially be stored for days or weeks. The company will begin a much larger test next year.

“We already know it works,” said Till Barmeier, the Siemens project manager, as he offered a tour of the hot rocks one recent afternoon. “The question is, does it work well enough?”

Limited Options

Even with all the recent progress, it is still unclear just how far renewable energy can go.

A few experts argue that the electricity system could go 100 percent renewable. But others reject that because of the intermittency problem, arguing that in the 2030s and beyond, society will need new huge power plants that can run most of the time without generating greenhouse emissions.


Workers aboard a vessel at the Riffgat wind farm. Experts say that while the cost of renewable energy sources has plunged, it is still not low enough in most places to drive dirty energy out of the market.CreditGordon Welters for The New York Times 

If they are correct, only a handful of options are on the horizon.

They could include new types of nuclear power plants, designed so that it is physically impossible for them to explode or leak radiation. Another possibility is to burn fossil fuels, but to capture the emissions.

That is the approach that NET Power, a start-up that is being closely watched by leading experts, will test in Texas beginning next year. It has designed a power plant that may be able to generate electricity from natural gas, capture the carbon dioxide at low cost and allow it to be pumped underground, instead of into the atmosphere.

With big ideas like this, the basic problem is that building a large prototype plant can easily cost $1 billion or more, and private financiers are often reluctant to take the risk on unproven technology.

One solution, of course, is for governments to spend money to subsidize big demonstration projects. Many Americans probably imagine that quite a bit is being spent already. But the numbers are actually low. The federal budgetdevoted to new energy technology is on the order of $6 billion a year, less money than American consumers spend on potato chips.

Bill Gates, the Microsoft entrepreneur and philanthropist, has for years been prodding the government to step up these efforts. Last year, as the Paris climate deal was about to be completed, the Obama administration joined other countries in a pledge to double their spending on research and development by 2020, and Mr. Gates corralled private investors to support the effort.

It is not yet clear, though, whether Congress will honor President Obama’s pledge.

Speaking recently in New York, the secretary of energy, Ernest J. Moniz, sounded optimistic. He said he believed the political parties could find common ground by focusing on energy innovation, and if they did so, “the American approach” would prevail.

What is that approach?

“We’ve got a problem,” Dr. Moniz explained. “We recognize it. We solve it.”