Publications

- June 1, 2021: Vol. 8, Number 6

Rebuttal: America cannot afford to sit out the renewable energy transition

by David Sher

The following commentary is a rebuttal to the May 2021 edition article titled “Is the renewable energy transition really all it’s being advertised to be?” by Leigh Goehring and Adam Rozencwajg from Goehring & Rozencwajg Associates, a firm that invests in commodities and natural resources. That article expressed misgivings about the cost and benefits of a transition to renewable energy. This rebuttal is written by David Sher, Co-CEO of Greenbacker Capital, which manages money for investors in the sustainable infrastructure sector.

Fossil fuel proponents often ask if the transition to renewable energy is really worth the cost and use selective mathematics to show the benefits of renewables don’t offer enough bang for the buck. But these oil and natural gas champions rarely consider the whole picture.

When you tally up the not-so-hidden costs of fossil fuels and nuclear power — including expensive repairs to crumbling infrastructure, contaminated local water systems, rising healthcare premiums from air pollution, and the massive lead time and cost involved in building new facilities to meet America’s growing energy needs — the clear answer is: Yes, it’s worth it. In fact, we can’t afford not to switch to renewables.

Setting aside the total cost of renewables versus other power sources, it’s widely agreed the U.S. power grid requires a significant investment. The nation’s infrastructure is in dire need of modernization to ensure safe and reliable electricity distribution throughout the country.

Here again, fossil fuel aficionados try to misdirect the public’s attention. America’s electrical grid doesn’t need to be updated to accommodate renewables; it needs to be updated because it is old and failing. The fact that a modernized energy system can generate power using cheaper and safer renewable energy is a happy benefit.

Coal-loving critics of renewable energy also fail to account for the enormous healthcare costs incurred from burning fossil fuels. Black lung disease, for example, still afflicts coal miners today, while there is no evidence that wind turbines cause cancer.

Also, while medical costs from air pollution particulates are certainly significant, they pale in comparison to the millions of lives lost each year from premature, emissions-related deaths. To say nothing of the enormous toll that fossil fuel–related environmental damage and climate change will continue to exact on humanity unless something changes, starting with a more efficient power grid.

GRID REPLACEMENT

The aging U.S. electrical grid needs to be overhauled. Breakdowns, leaks and power failures are becoming increasingly commonplace, with increasingly disastrous consequences. As time goes on, the system will only become less reliable, more inefficient and costlier to maintain.

To see the real-world consequences of an outmoded grid, one need only look at Texas this past winter. An unusually harsh storm knocked much of the state’s power offline for days, leaving millions without heat and electricity in below freezing temperatures. To survive, some risked fire and carbon monoxide poisoning by using grills and gas ovens to heat their homes, while others spent nights in their cars with their families to keep warm. Before power was restored, dozens of people froze to death. Even those consumers lucky enough to keep the heat on were then faced with massive power bills, as wholesale energy prices had skyrocketed amid unprecedented demand and minimal supply. A modernized grid with integrated infrastructure that allows power to be sent between states (even across the country) can help ensure disasters like this never happen again.

As the current energy infrastructure continues to degrade and lose efficiency, many existing thermal power plants have already been decommissioned across the country. Coal-fired plants are being taken offline on an almost monthly basis, and U.S. utilities have stopped building them, as coal has become much pricier than other power sources, particularly renewables. In fact, nationwide, it costs less to build new wind and solar energy facilities than it does to operate existing coal facilities.

Nuclear power sites are facing similar fates due to aging, expensive infrastructure that needs to be torn down and replaced or taken permanently offline. Currently, the U.S. Nuclear Regulatory Commission is decommissioning 21 reactors that power companies have opted to close.

The question is: What’s the best way to replace this lost power-generating capacity? The answer is, resoundingly, renewables.

RELYING ON NUCLEAR POWER IS NOT REALISTIC

Energy diversification will play an important role in America’s transition to clean energy, and nuclear power will factor into that diversification. However, public sentiment would preclude an all-out nuclear strategy, even if the government was willing to go that route. (The American public’s obsession with films about the perils of nuclear energy should tell you all you need to know about our country’s latent fears.)

The potential and historical dangers of atomic power have colored many voters’ perceptions of nuclear energy. The catastrophic failure at the Chernobyl nuclear plant in Ukraine, and closer to home at Pennsylvania’s Three Mile Island facility, loom large in many Americans’ minds. It would be politically infeasible for the government to try to change the country’s nuclear strategy. Mandating that states rely more on nuclear power, or forcing municipalities to issue permits for nuclear plants, would be met with vigorous public opposition.

Furthermore, bringing a new nuclear facility online is neither a swift nor an inexpensive process. It takes a minimum of around 10 years to get a nuclear plant up and running, and nuclear power generation is no longer cheap enough to make such an investment worthwhile on a widespread basis.

The lack of public support, political will, or compelling economics therefore make a large-scale move to nuclear power untenable.

FOSSIL FUELS ARE NEITHER CHEAP NOR SAFE

Comparable dynamics are at play with other fossil fuel sources. Building a new natural gas plant is a very expensive and extensive enterprise, one that a lot of local governments are not likely to undertake. Aside from the facility itself, a huge amount of pipeline is required to transport the liquid natural gas before it can be converted into usable power. And fossil fuel pipelines have become unpopular in many areas of the country due to the frequency of oil and gas leaks — disasters that inflict an enormous toll on society and the environment.

Just this past year, a leak in the Colonial Pipeline dumped 1.2 million gallons of gasoline into North Carolina’s Oehler Nature Preserve, and a ship explosion off the shore of Corpus Christi, Texas killed four crew members when the vessel struck a submerged liquid natural gas pipeline. Catastrophes such as these make negative public sentiment entirely understandable, especially when combined with the image that springs to mind when you hear the words “Keystone pipeline oil spill.”

Underestimating public concern over pipeline safety has backfired for utilities in the past. Several years ago, ISO New England (the Regional Transmission Organization that oversees electrical operations in six northeastern states) launched an initiative to build new natural gas plants throughout the region. However, it didn’t expect local residents to fight against the installation of the pipelines, which led many municipalities to refuse to issue permits for them.

Due to the supply constraints caused by too few pipelines, natural gas has become a more expensive and less reliable power source for the region, making it even more uncompetitive with renewables. In fact, renewable energy is now among the cheapest power sources in the world, and its cost continues to fall.

A NEW GRID WOULD SOLVE THE ISSUE OF INTERMITTENCY

It’s clear that expanding and upgrading the current electrical grid is imperative for delivering reliable and affordable power. This modernization would also address the issue that detractors of renewable energy most often cite: that it can’t meet baseload demand. Wind and solar, as critics point out, are intermittent resources that can’t generate power at all times (i.e., the wind is not always blowing to turn a given turbine, nor is the sun always shining at a particular solar plant).

An updated nationwide grid can alleviate that concern by making it possible to transfer low-cost power from one region of the country to another, as we touched on earlier. For instance, wind farms in Iowa can provide energy to Georgia. And if it’s been cloudy in Arkansas for a week, the state can still run on power from the sun shining on solar panels in Oregon.

A new grid with energy storage capabilities would also help mitigate the intermittency issue. Batteries, whether standalone or attached to renewable power facilities, can store wind and solar energy for future on-demand and/or nighttime use. Stored power can also help lower energy costs during times of peak demand, or be saved for emergencies.

An updated power infrastructure won’t just solve the intermittency problem, it can also help prevent power outages caused by extreme weather and natural disasters that seem to be popping up more frequently around the country. Similar to the Texas tragedy, this would also mitigate the impact of other recent catastrophes, like the power outages that hindered evacuation warnings during the 2020 California wildfires or Hurricane Sandy, which left New Yorkers without power for weeks in 2012.

HUMAN COST OF FOSSIL FUEL EMISSIONS

Many cost analyses of fossil fuel power generation often ignore an important line item: The cost of healthcare and premature deaths related to pollution from fossil fuel emissions.

The World Health Organization estimates that air pollution kills 7 million people worldwide every year. A 2018 Harvard University study put the number of deaths from fossil fuel pollution closer to 8 million, including about 350,000 deaths in the United States. That doesn’t even take into account the cost of medical treatment for heart disease, stroke, pneumonia, asthma and other chronic respiratory conditions related to carbon emissions.

That’s a gigantic human toll, and those who aren’t directly affected also pay a price in the form of higher healthcare costs and insurance premiums. Those costs are passed on to taxpayers, whose tax dollars help fund public health-insurance programs like Medicare and Medicaid.

And these are only the first-order effects of particle pollution. A 2021 assessment by the United Nations reports that reducing methane pollution (more than one-third of which is attributable to fossil fuels) by 45 percent would save 73 billion hours of lost labor due to extreme heat and 26 million metric tons of crop losses annually worldwide.

In short, the massive cost of carbon emissions that is being borne by society has rarely been properly attributed to fossil fuel production.

THE MARKET DOESN’T PRODUCE STUPID OUTCOMES

The aging U.S. electrical infrastructure will only worsen as more time passes. It requires a large investment to modernize it. We’re failing the moment if we don’t take this opportunity to transition away from emissions-heavy power sources toward cheaper, safer sustainable energy.

The cost of renewables is already lower than fossil fuels, and innovation continues to drive it steadily lower. This is especially true regarding energy storage, a technology that is already helping resolve the issue of intermittency. Plus, wind and sunshine are both abundant and free.

The significant health and safety benefits of renewable energy can’t be understated. These benefits apply to everything from construction (neither wind nor solar require miles of pipelines or dangerous operating facilities) to maintenance and operations (renewable infrastructure failures don’t result in meltdowns or hazardous seepage into local water systems) to global health (renewable energy doesn’t rely on burning fossil fuels that release harmful emissions).

Even without taking into consideration how renewable energy can help combat the most dire consequence of fossil fuels (i.e., climate change) the way forward is clear.

Many fossil-fuel companies have seen the writing on the wall and begun expanding their offerings to renewables. Savvy investors are also harnessing opportunities in renewable energy — opportunities that have been growing and gaining market share faster than most people ever expected.

As BloombergNEF’s head of solar analysis, Jenny Chase, puts it: “When I got this job in 2005, I thought maybe one day solar will supply 1 percent of the world’s electricity. Now it’s 3 percent. Our official forecast is that it will be 23 percent by 2050, but that’s completely underestimated.”

In other words, clean energy investors can see the market headed in a smart direction, and they’re ready to follow it toward a greener future.

 

David Sher is Co-CEO of Greenbacker Capital.

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