The Costs of Renewable Energy
Climate, the environment, and degrowth - Part 1
This article is the first of many in a series about renewable energy.
What would be the financial cost to build a renewable energy infrastructure to replace our current use of fossil fuels entirely (“100% renewable energy”)—or at least to eliminate net positive CO2 emissions (“net zero”)?
There are countless issues to discuss when it comes to climate change in the context of degrowth. But replacing fossil fuels with renewables is the “dominant aspirational pathway” for the climate-aware activists. So let’s start there. How much would such a “Green New Deal” cost?
Experts are really far apart on what such a world-wide renewable infrastructure would cost. I will cite three:
Mark Jacobson and his colleagues believe that getting to 100% renewable energy will be relatively easy— a mere $62 trillion, which, prorated over 30 years, would represent an annual cost of about 2% of the world’s GDP.
McKinsey & Company estimated the cost for “net zero” carbon emissions to be “about $275 trillion, or $9.2 trillion per year on average [for 30 years], an annual increase of as much as $3.5 trillion from today.” This comes to roughly 9% of world GDP.
Energy scientist Vaclav Smil says that the goals we’ve set for ourselves to reduce carbon emissions are “delusional.” He critiques McKinsey & Company’s estimate as “almost certainly highly conservative,” and suggests a figure of 20-25% of the GDP of the “high-income” countries.
We may be able to make “degrowth adjustments” to all of these estimates. In a degrowth scenario, we might not need as much energy — we might dispense with luxuries for the super-rich, or with AI data centers, for example. But the technology, presumably, would be the same, so figuring the costs for making the current output renewable is a good place to start. Once we have an idea as to what’s possible, then we can figure out how much we need.
Jacobson, et al. (2022)
Jacobson et al.’s conclusions have been embedded in various papers since 2009, and were first solidified into a proposal for “100% clean and renewable” energy in 2015. This is the only cost estimate that can easily be easily translated into a practical political demand. The 2019 resolution in the US Congress for a “Green New Deal” exemplifies this general line of thought. It even allows the possibility of continued “economic growth.” Many American non-scientist climate leaders (e. g., Bill McKibben, Alexandria Ocasio-Cortez) tend to rely on this line of thought. But this approach has attracted considerable criticism in some scientific circles, for example:
In 2011, James Hansen said that, “suggesting that renewables will let us phase rapidly off fossil fuels . . . is almost the equivalent of believing in the Easter Bunny and Tooth Fairy.”
In 2017, a group of Australian scientists said that “efforts to date [e.g., Jacobson et al.] seem to have substantially underestimated the challenge.”
In 2017, Christopher Clack et al. raised a number of issues, concluding that Jacobson et al.’s approach “used invalid modeling tools, contained modeling errors, and made implausible and inadequately supported assumptions.”
In 2021, Megan Seibert and William Rees argued that “Not only is the GND [Green New Deal] technically flawed, but it fails to situate climate disruption within the broader context of ecological overshoot.”
There have been numerous barbed exchanges between the supporters of Jacobson et al. and these critics, including a lawsuit claiming defamation against Christopher Clack (later dropped). These exchanges are difficult to follow, and the only sure conclusion here is that these people aren’t speaking to each other.
The McKinsey report (2022)
The McKinsey report gives a substantially higher estimate than Jacobson: $275 trillion (~7.5% of world GDP). The costs would be front-loaded: about 9% of GDP at the start, but declining somewhat later.
But they ominously warn that even their higher estimate fails to account for a number of things (Box E1, p. 3):
The availability of key materials used in current renewable technology, such as neodymium and lithium.
The cost of accommodating the social impacts. (E.g., if we stop burning coal, won’t there be a lot of unemployed coal miners?)
The merits of various decarbonization strategies. (What about nuclear power? What about massive reforestation?)
Who is going to pay for all this?
Vaclav Smil (2024)
Vaclav Smil, in turn, critiques even McKinsey & Company’s estimate as “almost certainly highly conservative,” citing these factors (p. 25, 26):
Not all countries will want (or be able) to pay. The McKinsey report already made this point, but Smil uses this to pin a cost increase onto those countries who are most responsible. Basically, the high-income countries of the world — the leading CO2 emitters — will likely bear almost the entire burden of this transition (as well they should!). We need to assume that the cost will be more like 15% or 20% of the GDP of the global north (the “affluent economies” or “the high-income countries” in Smil’s terminology).
Cost overruns are likely. Over 90% of large projects (those over $1 billion) run over budget, with the typical overrun being about 60% (How Big Things Get Done, p. 192). And this project is already estimated to cost trillions of dollars, for decades! Realistically, argues Smil, we need to tack on another 60%, reaching 20 to 25% of the GDP of the global north.
Political aspects of these estimates
We are left with three wildly different estimates of the costs, and no assurance that any of them is accurate. What’s our strategy here? If we low-ball the cost, people will feel betrayed if (or when) the costs turn out to be much higher. The public may then decide that they can’t trust “scientists” and accept some climate destruction rather than taking action.
We do not need to assume any dishonesty here in these estimates. Obviously, the lower the cost of the transition, the easier it is to “sell” climate action to legislators, business leaders, and the public. The impacts of unconscious bias on science testing has been well-known since the 19th century. That’s why “double-blind” experiments (neither the test subjects nor the experimenters know precisely what’s being tested) are now standard scientific procedure.
A massive 30-year project is unlikely to be repeatable. If we had aggressively started addressing climate change in 1988, after James Hansen warned Congress in unequivocal terms that climate change was real, we might have had the opportunity for a false start or two. Decades later, we no longer have that option.
Questions to be asked
Most of the climate-aware (including even some degrowth advocates) seem to buy into some version of Jacobson’s defense of a relatively optimistic Green New Deal policy. But there is a strong and well-informed minority, including many scientists, who question this. We need to look further. That means (at least) asking these further questions, which I will explore in future articles:
Technical issues with renewables. Financial cost may not be the best indicator of the feasibility of renewables. What about technical issues such as energy cost, intermittency, materials requirements, and land use?
The scientific context of the renewables debate. Why can’t scientists agree on the technical and costs aspects? While there is a scientific consensus that human-caused climate change is real, there is no agreement on what to do about it.
Other climate problems. What about climate issues other than CO2 emissions, such as methane and land use?
Other environmental issues. Climate is only one of numerous environmental problems. What about other non-climate issues, like soil erosion, groundwater depletion, or biodiversity collapse?
What are we now going to about climate? (Hint: it will have something to do with degrowth.)
All of these questions require thought and research; each subsequent article in this series will focus on one of these areas in turn.
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