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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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The True Cost Of The Global Energy Transition

$15 trillion: this is the amount of money to be invested in new power capacity globally over the next three decades. Most of this—80 percent—will be poured into renewables. This certainly makes the energy transition far from cheap, but no one—at least no one reputable—ever said going green would be cheap. Yet the amount of investments to be directed towards expanding wind, solar, and associated systems will not be the only costs to be borne during the transition. There may well be steep environmental costs as well.

BloombergnNEF, which conducted the analysis that resulted in the investment estimate for the next 30 years in energy, also said that between 2020 and 2050, another $14 trillion will be invested in the grid, likely to adapt it for a surge in solar and renewable power deployments, which, according to the analysis, will constitute 56 percent of total global generation capacity by 2050. And it will have spurred a mini golden age in mining.

Wind power, like solar power, requires a lot of metals and other minerals to produce essential components for the installations. Therefore, as the demand for wind turbines and blades jumps, so will the demand for the metals they are made of. It’s the same with the metals and minerals necessary for the production of a solar panel.

Here’s just one example that could perhaps illustrate the trend: according to a 2017 report by the World Bank, demand for silver could soar from the then-current 24,000 tons annually to more than 400,000 tons. And that’s under a best-case scenario that features a greater penetration of silver-free thin-film PV panels in the energy mix, at the expense of crystalline silicon panels that use silver. Under a worst-case scenario, demand for silver could top 700,000 tons.

This is quite an increase that will require a major expansion in mining and mining is an energy-intensive, not particularly environmentally friendly way of getting finite resources out of the ground, as investor Sam Kovacs writes in an article for Seeking Alpha addressing the challenges of the energy transition from fossil fuels to renewables. Now add to silver a host of other metals used in renewable energy installations, and the mining expansion becomes even more substantial, adding economic, social, and environmental costs to the transition.

Related: How China Is Racing To Expand Its Global Energy Influence

Then there is energy storage. Without it, the transition will simply not happen. In fact, some are questioning whether it could happen given the current stage of development of energy storage technology. Two years ago, an article by James Temple for the Massachusetts Technology Review questioned the viability of the energy transition precisely because of energy storage, which, Temple argued, was still prohibitively expensive in light of the scale, to which such storage would need to be developed.

The World Bank estimated in 2017 that grid-scale storage capacity would need to rise from 100 GW in 2015 to up to 305 GW. A 2014 IEA report made an even higher estimate, for up to 500 GW in storage to be necessary by 2050. As of 2015, almost all—99.3 percent—of the available grid-scale storage was pumped-hydro. The percentage cannot keep, however, because pumped-hydro has limitations. Batteries appear to be the alternative, at a cost.

Tesla and Neoen, a French company, last week announced they would build a 300 MW/450 MWh battery in Victoria, Australia. The battery would be twice as large as their previous record, also set in Australia with 100 MW/129 MWh of capacity. Capacity on its own, however, tells little to the layperson. For context, the 300-MW facility would be capable of storing enough renewable energy to power half a million homes—for one hour.

The project will cost $84 million.

There are batteries that could supply power to households for more than an hour, and more are being developed. But their capacity remains limited to a few hours, which has made some observers compare them to the so-called peaker plants used during power demand surges. For a consistent power supply relying predominantly on renewable energy, battery storage is not yet feasible.

Last month, Wood Mackenzie estimated the energy transition will require $1 trillion in investments in several key metals. In other words, the world will need nearly twice as much investment in critical energy-transition minerals over the next 15 years as it has invested over the past 15 years. And then, 20 to 25 years later, many of the installations made from these metals would need to be retired. This means going into landfills because not all solar and wind equipment can be recycled.

Wind blades, for one thing, cannot be recycled. They are made of fiberglass and are therefore either dumped in landfills, sent to so-called wind blade graveyards, or in some cases, burned in metallurgical kilns, resulting in emissions. The good news is that 85 percent of windmills can be recycled, and the blades are harmless, even in landfills.

Solar panels are also mostly recyclable, but the business is not particularly profitable, which is a deterrent for businesses: it is a fact often overlooked that recycling is a business like any other business, and if it doesn’t make a profit, it will switch to something else. As a result, many panels are headed toward landfills, adding to the environmental costs of the energy transition as they contain toxic materials.

The energy transition, as urgent as it may be, according to some sources, will not be cheap. But in addition to the obvious costs of expanding solar and wind generation capacity, storage, and adapting the grid to their increased participation in the energy mix, there appear to be other, half-hidden costs that are not just financial but also social and environmental.

By Irina Slav for Oilprice.com 

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  • Pekka Lehtikoski on November 09 2020 said:
    A good and balanced text, solid reasoning. I think we would do better if we would aim first for something like 50% CO2 reduction. If we set the bar very high, like global zero emissions/carbon neutrality, and calculate it using today's technology, we will come out with a prohibitively high cost and drastic changes to people's lives. I think aiming for a 50% reduction might be a start, and that it could be accomplished by a fraction of the cost from the 100% goal. Goals can be bumped up if and when the technology gets there. I assume speculated global $15 + $14 trillion investment is in these lines, aiming for 56% global electricity generation (~28% of energy).
    My take on 305GW/500GW power in storage is that it is a little better than nothing. Just US energy (not electricity) consumption is 68917 GWh per day. But hard to tell from number 305GW/500GW: To express the amount of energy stored, the number should be in GWh or J. The GW used describes just peak output (W = current x voltage, no time).
  • Brett A on November 11 2020 said:
    Id like the author to include the costs of not transitioning, the costs that is already are being incurred due to climate change and how these are growing for every year we fail to act.

    LCAs for different renewables and their environmental impacts are well understood and it is dishonest to talk about "half-hidden" costs. Also to not compare this vs the costs of existing carbon based energy generation is dishonest. This piece can unfortunately be interpreted as trying to further create a an atmosphere of FUD.
  • independence01776 d on November 13 2020 said:
    Didn't realize the transition cost would be so little. Since we will spend 2 to 3 times this amount on fossil fuels, refining, transportation, over the next 30 years, it's a no brainer to make the shift now. Especially since the cost estimates are based on flat cost for renewables when they price is declining and will be half what it is today in another decade. And this doesn't even take into account the cost to health and environment which adds trillions to the cost of fossil fuels over 3 decades of time. It's a no brainer to go green and it will provide for great economic growth for the next half century.

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