Dan Arvizu, the head of the National Renewable Energy Laboratory in the US, the world’s largest renewable energy research facility, has some simple points to make when he says that the energy system of today is unsustainable.
The first point is on cost, as renewables become a cheaper option than coal or gas; the other is on environmental impacts, as the world finally absorbs the impact of dirty coal generation; and the third is the arrival of new disruptive (and mostly renewable) technologies, such as rooftop solar and storage.
But the most stunning piece of evidence is this: the industry spends only 0.3 per cent of its phenomenal revenues (in the trillions of dollars) on R&D. And even that money is spent by new players looking to bring new technologies to the market.
In an interview with RenewEconomy on the sidelines of the 2XEP energy efficiency conference in Sydney this week, Arvizu says he knows of no other incumbent industry that has spent so little on securing its future and on innovation, and was relying so much on the models of the past.
“The energy sector has the highest level of conservatism and the lowest level of risk taking,” Arvizu says. Change, via disruptive technologies such as solar and storage and other renewables, along with smart devices, is now upon it. But it will be fighting hard to resist change.
“We need to change the business model. We need new infrastructure, and brick by brick we will dismantle the old system and make a new one,” he says.
“100 years ago we looked at hydrogen and electric vehicles, and we made assumptions that fossil fuels were limitless, and we didn’t fully appreciate the environmental consequences.
“There’s no doubt that those technologies served the economy well. But now we have energy security issues, and carbon issues, and now economic issues. We’re not meeting any of those challenges with the system that we created a century ago.”
The NREL is the centerpiece of the US Department of Energy’s commitment to renewables. It is a massive organisation, based in Colorado, with more than 1700 researchers.
Earlier this year it released a study that looked at a bunch of renewable scenarios for the US – ranging from 30 per cent to 90 per cent – but ultimately focused on a scenario where the world’s biggest economy met 80 per cent of its overall energy needs (including transport) through renewables by 2050.
The conclusion was that it could be done – and that it could be done on a very modest cost.
“The future is much more promising than a lot of people expect,” Arvizu says, adding that even he is surprised at the pace of technological change and cost reduction.
He dismisses the protests of people who say that renewables are too expensive – in particular those like Bjorn Lomborg who insist that more research should take place (ironic given the industry’s low R&D commitment so far). “That’s just kicking the can down the road,” Arvizu says.
“If we are just talking about incremental changes to the existing system, we will never fully utilise the potential.”
It is, he says, a scary prospect for the incumbent utilities, who have enjoyed decades – nearly a century – of uninterrupted growth and extraordinary market power. And they are protected by layers and layers or regulation.
“We created this monster,” Arvizu says. “You often hear the words, ‘let the market decide’, but this is such a disingenuous argument in such a highly regulated market.
“The classic supply and demand equations do not work …. because what we’ve allowed the incumbents to create a set of highly regulated markets where they have tremendous market share, and there has been an alliance between public policy markets and incumbents, where reliable power supply has been exchanged for a high return on investment.
“But now we have other options in the market place, and in order to break into that market, they need to mature and they need an ecosystem around them.”
The key to change, he says, will come in power for the consumers, and the key to that will come in storage.
“If we had storage that was cost effective – you would very quickly be able to encourage the utilities to get on to the program. Once you have got the opportunity to say, I don’t need your electrons any more, that is when consumers will have the (market) power.”
Arvizu says that storage costs may still be too high by a factor of two or three, but he points to the likes of Tesla, and its proposed Gigawatt factory, as key to bring down those costs quicker than most expect.
“The game will change so that people will have a choice. Those costs (or renewables and storage) will continue to come down, and they are happening at a rate that surprises even me, and I have been at it for 35 years.”
The next step, he suggests, is to scale up. In the US, this is not happening at a federal level, but it is happening at state level. 29 states now have renewable energy targets, and all are meeting them easily.
In the US, like in Australia, industry lobby groups are trying to force the state governments to back down on their renewable energy targets. So far, the legislators have told them to take a walk.
Indeed, Australia may be the only country in the world that is seriously considering diluting or even removing its renewable energy target, just like it is the only one that is looking to remove its carbon price, or pull apart its energy efficiency programs.
Arvizu says higher renewable targets can be achieved – it requires innovation and access to capital (something the Australian government is also seeking to remove by dismantling the Clean Energy Finance Corp and starving the Australian Renewable Energy Agency of funds), but most of all vision.
“We can invent the future we desire,” he says.
The most ambitious state, California, is set to easily surpass its 33 per cent target by 2020, and his own state Colorado, will surpass its 30 per cent target by the same date.
In Colorado, he says, there was a cost cap of 2 per cent of electricity bills on its renewable target, but it looks like it will be able to achieve this at a cost of just 1.5 per cent.
“The genie is out of the bottle,” Arvizu says.
“I started out in the AT&T Bell labs. When they said they would dismantle the monopoly of the mother Bell, we thought it was going to be the end of the world. But the regulators allocated the bandwidth and got out of the way. The phone calls of today are not cheaper than they were, but there is a lot more choice and opportunity.
“In the energy arena, the principal is the same. If you open up that market to broad competition, and open it up to choice, then it will be very different to a market where people are just trying to sell electrons.
But, he notes, it is important that the new model be integrated with the old, in other words, the best of distributed generation must be merged with the best bits of the old centralized model.
This will be difficult, considering the regulatory hurdles, but it is important. And in the same way he dismissed the idea of “energy independence” for a country (focusing more on energy security), he’s also not sure why individuals would want to do the same.
“I don’t think we need to go to 100 per cent renewables, although I think we can,” he says. “And I don’t know why you would want to pay to be autonomous (off grid). The extra cost that it entails … to be isolated as an act of bravado is absurd, it is an interconnected world.”
Giles Parkinson is founder and editor of RenewEconomy.com.au, and is also the founder of OneStepOffTheGrid.com.au and founder/editor of www.TheDriven.io. Giles has been a journalist for 35 years and is a former business and deputy editor of the Australian Financial Review.