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The world has 12 years to limit greenhouse gas emissions or face severe impacts from global warming.
So proclaimed the Intergovernmental Panel on Climate Change in its updated report on climate change in October 2018, setting off alarm bells around the world. A growing list of countries, states, local communities and global businesses has heeded the call to action and adopted more aggressive measures to limit their carbon footprints.
The sense of urgency is palpable, including in the United States, where climate change is emerging as a central issue amongst Democratic presidential contenders. Primary frontrunners are proposing multi-trillion-dollar investments in support of their “Green New Deal” initiatives.
We estimate the cost of full decarbonisation of the US power grid at US$4.5 trillion, given the current state of technology.
Evolve or perish
Elsewhere, in one of her final acts as Prime Minster, Theresa May has brought forward legislation to upgrade the UK’s existing 2050 emissions reduction target from 80% to 100%.
We estimate the cost of full decarbonisation of the US power grid at US$4.5 trillion, given the current state of technology. That's nearly as much as what the country has spent, since 2001, on the war on terror. From a budgetary perspective, the cost is staggering at US$35,000 per household – nearly US$2,000 per year if assuming a 20-year plan.
The price tag may not be the highest hurdle to overcome. Eliminating fossil fuels represents a transformative investment opportunity for stakeholders of the new energy economy. But for legacy participants in the energy industry, it also creates an existential crisis. Companies – and in some cases, whole industries – must evolve or perish.
Although decarbonisation timelines differ, it is increasingly clear that utilities, the oil and gas industry and other energy market participants must account for the implications of these impending policy decisions in their current strategic planning activities.
Consequently, difficult choices must be made by political leaders, regulators, CEOs and energy consumers alike. For any country to embrace a nationwide transition to 100% renewable energy (RE100) or zero carbon (ZC100) emissions constitutes a massive disruption with far-flung economic and social repercussions. Nimbyism – a not-in-my-back-yard attitude – is inevitable and forecasted increases in
consumer energy costs may result in public backlash against aggressive climate change policies.
RE100 goals remain largely aspirational, but attainable.
The world is facing an unprecedented challenge
The scale of the challenge is unprecedented, requiring an upending of fossil fuel industries and a complete redesign of the power sector. Recent growth in renewable electricity is a clear example of change already delivered.
Full decarbonisation of power must be regarded as a prerequisite of any meaningful progress towards deep decarbonisation of the overall energy system. The requirements to be placed on the global renewable energy supply chain are also noteworthy, and include substantial R&D spend to address shortcomings in energy storage and distribution technology.
We conclude that RE100 goals remain largely aspirational, but attainable given a reasonable time horizon to allow for technology development, regulatory realignment and socio-economic reforms. Further, adoption of ZC100 or even ZC80 goals increases the likelihood of success, incentivising the development of next-generation nuclear and carbon-capture technologies.
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