Three Trends Threaten Renewable Energy: Why Marty McFly demonstrates the opposite

There are three worrying trends emerging in the renewable energy sector identified in three separate reports on the energy sector: 1) “at the global level, investments and productivity growth rates are still historically low;”[1] 2) A decline of business investing into green energy R&D activities;[2] and 3) Stagnation and decline of investments into electricity networks, generation and storage. [3] Jointly, these could drive a reduction in investments and our ability to transition to a sustainable energy system.

The scale of the technological change is vast and this two-part post uncovers the tremendous opportunities and tech that is driving an effective diffusion of green energy tech. While the three trends point to a broad based decline or stagnation, it is important to understand instability in emerging industries – whether electric cars signified by Elon Musk melt downs or a drop in green patents, are short term set-backs, they do not portend the dominance of the fossil fuel industry. Here, I outline why we are actually set for a global growth in effective green technology while old fossil technologies die off and become dinosaurs once again (hint, they become zombies first).

First, we need to assess where we are on this transition timeline to determine whether: a) there is a green energy transition, and b) when do we cross the Rubicon for green tech. To do this we look at scenarios then define what diffusion and investment mean. And second, we assess the opportunities and motivations for making a sustainable energy transition. In the second part we’ll explore the stagnation of fossil fuels and the competitive edge that propels green tech forward – regardless of short term instabilities.

Future scenarios: Lazy and Ambitious

There are two basic future scenarios the International Energy Agency outlines for power generation. Figure 1. This ‘New Policies Scenario’ (NPS), is current or announced policies that impact the generation mix. Essentially, there’s an expansion of renewable energy technologies, but not a sufficient amount to displace current fossil fuels of coal and gas. Here, the technology trend is ‘opportunity focused’: the technology status quo is maintained with additional investments going towards renewables.

Figure 1: (Source: https://www.iea.org/weo/)

In Figure 2, in the ‘Sustainable Development Scenario (SDS), coal drops down and becomes marginal while natural gas stays consistent.  Importantly, because of policies, markets and sustained efforts, there is a ‘problem & opportunity’ focused effort to replace old tech with new tech. Essential to this is business drives change because fossil fuel is either overtly punished or constrained by government policies and markets. Firms feel profit pressures from both activities shareholders and in realized profits or lost opportunity costs in fossil fuels, (e.g. more money is made from renewables than fossil fuels). For a wide range of private firms, it’s more profitable to allocate resource to new tech, rather than old tech.

Figure 2: Source: https://www.iea.org/weo/

The pressures from governments, society and markets is now driving the shift towards the SDS image of more renewables and less fossil fuels in the power sector. This assumption runs counter to a number of recent indicators that demonstrate a lessening in R&D into renewables and investments into the power sector. In three 2018 studies there are similar trends in a drop-off or stagnation of investment and R&D in renewable energy and efforts to build an environmentally sustainable energy system. These three trends are:

  • A decline of business investing into R&D activities. From a growth of 8.1 % in 2006 to a reduction of growth to 4.2 % in 2016 [4] (Figure 3)
  • A decline of green energy patent filings.[5] That mirrors the R&D activities decline (Figure 4)
  • Stagnation and decline in the electricity sector in generation, networks and storage (Figure 5).[6]
Figure 3: Global R&D expenditures growth, 2006 – 2016, Business R&D expenditure (source: GII 2018, 5)
Figure 4: (Source: GII 2018, 13)
Figure 5: (Source: International Energy Agency. “World Energy Investment 2018,” 2018. https://webstore.iea.org/download/direct/1242?filename=wei2018.pdf. p 24

Overall, it looks like there’s stagnation and an emerging depression into the energy system that should be running high with new patents and investments to roll out new technologies to tackle climate change. However, this trend may not represent a decline or roll-back in efforts to build a more sustainable energy system. Rather, they could represent just the start – the tipping point – or even the pause – before the great transformation happens. And here’s why: Don’t confuse fiddling in the lab with deploying new tech.

The Marty McFly equation

Watch the video before proceeding. Because the answer lies in Back to the Future.

1.21 GW!! How is Doc Brown going to generate that much power?! Equally important for our theoretical discussion, is this demonstrates the ‘problem-opportunity’ nexus, or rather, what could be re-labeled as the ‘Back-to-the-Future Opportunity’. The problem: Get Marty back to the future so he can be with his girlfriend (if there’s ever a better reason to build a 1.2 GW power plant, “this is it,” as Doc Brown says).

The opportunity: By working to develop the technology to harness the power, you also develop usable technology to travel to the future or back to the future. Translating that to today’s problems: To ensure we even have a future, we need to break from our past and accelerate our deployment of technology to build a sustainable future. We do this through the motivation for love or for profits. Love and profits are now fueling the creation and deployment of sustainable energy technology. There’s a reason Elon Musk is leading this charge just through his vision and charisma, and it is working to push his own and other business leaders to deploy (not just develop) new technology.

An example is displayed in the movie, Revenge of the Electric Car. The movie charts the shutting of GMs electric car program to the rise of Silicon Valley and Musk taking over and pushing electric cars, with GM and Nissan also attempting to get (back) in the game. The motivation needs to exist to push-out electric cars (or other more sustainable tech) to enable a comprehensive energy transition. This positive motivation pushes out, rather than attempting to hold back – a technology.

Thus, drawing on our car analogies, in both Back to the Future and Tesla, the equation for launching a sustainable energy transition is:

Problem + Opportunity + Motivation+ Deployment = Solution

Deploying the flux capacitor in electric cars

The technology transitions literature, as the academic literature goes, describes decades for a change to happen (discussed more in part 2). If we consider our Back to the Future problem (for those that remember the movie), Marty will dead if 1.2 GW is not put into the car before him and his siblings disappear from the photograph, because Marty’s parents won’t get together. In a similar vein, the planet will be in very bad shape if technologies are not deployed. The speed of the transition, then must occur more rapidly than the languid transition from steam locomotives to diesel, this was an ‘opportunity’ transition, where profits were realized through the transition, rather than shifting because of an identified problem and looming market and regulatory disruptions (discussed in the second part).[7]

This ‘Back-to-the-Future Opportunity’, means the looming death of the planet – while not a sufficient encouragement for innovation for some – is fostering a technological push for innovation of new energy technologies. Just as electric cars and Doc Brown teach us, is not so much innovation in the lab, but deployment of the technology.

Fortunately, there’s a well of academic literature on the topic of deployment and diffusion of technology. There’s an important warning from Karshenas and Stoneman, regarding the R&D figures above. It may be a common fallacy, “to associate technological change with research and development or the generation of new technology. However, it is only as new technologies are introduced into the economy” that benefits are realized.”[8] Diffusion of technologies is essential and the measurement of technological change, not what technologies are sitting in labs. Separating R&D of firms from the diffusion of technology is important to keep in mind as we assess whether our present efforts for saving the world will impact our current technology shift towards a clean energy system – or embracing a languid energy transition.

While the decline in R&D appears to be across the energy sector, for both renewables and traditional fossil fuels, there continues to be a substantial growth in renewable energy generation. There is a steady growth in deployed RES projects, 2017 broke previous years’ growth in the capacity of RES projects. With solar leading deployed wind in terms of GW capacity added in 2017 (Figure 6).[9]

Figure 6: Source: International Renewable Energy Agency. “Renewable Capacity Highlights,” 2018 2018. http://www.irena.org/newsroom/pressreleases/2018/Apr/Global-Renewable-Generation-Continues-its-Strong-Growth-New-IRENA-Capacity-Data-Shows.

By comparing the information above (stagnation and decline of invested money into new ideas and projects), with RES capacity growth, the truth in the statement by Karshenas and Stoneman of decoupling R&D activity with diffusion activity becomes a reality. The good news is that RES is really being deployed globally and making a huge difference. Just as emerging market countries were able to leapfrog to mobile phone devices, they are avoiding the fixed fossil fuel infrastructure and embracing renewable energy.

Another picture provides a projected future trend. By removing all the fossil fuels and nuclear (from figure 2, above) we can see the compounded growth of RES in the electricity mix (Figure 7, below), with the amount doubling between the mid-2020s and 2040s. It’s almost an explosion of RES propelled by the problem of fossil fuels (which stagnates), positive opportunities in RES and the motivation to realize the benefits (profits, love or both) from contributing to a sustainable future. In short, we’ve built the flux capacitor, now it is time to deploy the technology. Fossil fuels decline because they can’t compete against, both the economic and the environmental benefits of RES. The same reason we no longer use steam locomotives with wagons of coal, instead diesel and electrified locomotives dominate. The technology is superior.

Figure 7: SDS edited Green scenario (Source: https://www.iea.org/weo/)

Conclusion:

So, can love save the world? In one sense, yes. Optimism, opportunities and options propel new energy tech towards global deployment. There are now options besides fossil fuels, and the technology is ripe for deployment. This technology, is not sitting in laboratories, but is being deployed. The short-term trends of lower R&D and patent filings could reflect either short-term declines or an acknowledgement that we have what we need to substantially push out – or at least reduce – fossil fuels.

There are still lingering questions that I have not addressed in this article. How do we know a decline in coal fired power plants will happen? How do we know we’ve reached a tipping point when the transition accelerates and decline of fossil fuels is happening? Some of the answers lie in zombie power plants with the solution foreseen in the movie Shaun of the Dead and in a fruit fight between energy transition academics. The answers will be found in the second article to be posted next week.

Figure 8: All energy pioneers (source: https://www.youtube.com/watch?v=f-77xulkB_U)

Finally, I think it is important to reflect on ‘Back-to-the-Future Opportunity’ equation. Each person pictured (Figure 8) transformed the entire fields of electricity production and distribution. The optimism that once dominated electrification of the world can assist – but not determine – the future energy system. Just as Elon Musk has gone a bit crazy on Twitter and in public, getting to the future isn’t without some craziness and false starts. Regardless, the broad-based field of energy requires a holistic transformation of the economy, politics, society and perceptions of the environment. Part two will begin to address how to assess our efforts in moving from optimistic projects to real action to reach a tipping point in a sustainable energy transition.

References:

[1] Soumitra Dutta, Bruno Lanvin, and Sacha Wunsch-Vincent, eds., “Global Innovation Report 2014 | The” (World Intellectual Property Organization, 2014), 4, http://www.globalinnovationindex.org/content.aspx?page=gii-full-report-2014.

[2] Deloitte, “Deloitte Insights: Global Renewable Energy Trends, Solar and Wind Move from Mainstream to Preferred” (Deloitte, 2018), https://www2.deloitte.com/insights/us/en/industry/power-and-utilities/global-renewable-energy-trends.html?id=gx%3A2el%3A3dc%3A4direnenergy%3A5awa%3A6di%3A09132018.

[3] International Energy Agency, “World Energy Investment 2018,” 2018, 24, https://webstore.iea.org/download/direct/1242?filename=wei2018.pdf.

[4] Deloitte, “Deloitte Insights: Global Renewable Energy Trends, Solar and Wind Move from Mainstream to Preferred” (Deloitte, 2018), https://www2.deloitte.com/insights/us/en/industry/power-and-utilities/global-renewable-energy-trends.html?id=gx%3A2el%3A3dc%3A4direnenergy%3A5awa%3A6di%3A09132018.

[5] Dutta, Lanvin, and Wunsch-Vincent, “Global Innovation Report 2014 | The,” XXXIV.

[6] International Energy Agency, “World Energy Investment 2018,” 2018, 24, https://webstore.iea.org/download/direct/1242?filename=wei2018.pdf.

[7] see Benjamin K Sovacool and Frank W. Geels, “Further Reflections on the Temporality of Energy Transitions: A Response to Critics,” Energy Research & Social Science 22 (December 2016): 232–37, https://doi.org/10.1016/j.erss.2016.08.013.

[8] Massoud Karshenas and Paul Stoneman, “Technoloigcal Diffusion,” in Handbook of the Economics of Innovation and Technological Change, ed. Paul Stoneman, second (London: Basil Blackwell, 1995), 265.

[9] International Renewable Energy Agency, “Renewable Capacity Highlights,” 2018 2018, http://www.irena.org/newsroom/pressreleases/2018/Apr/Global-Renewable-Generation-Continues-its-Strong-Growth-New-IRENA-Capacity-Data-Shows.

Author: Michael LaBelle

Dr. Michael LaBelle is an associate professor and the Jean Monnet Chair in Energy and Innovation Strategies at Central European University. He holds a joint appointment between the Department of Environmental Sciences and Policy and the Department of Economics and Business. His research is centered on energy governance, innovation strategies, and energy justice.