Google’s boldest energy move was an effort known as RE<C, which aimed to develop renewable energy sources that would generate electricity more cheaply than coal-fired power plants do. The company announced that Google would help promising technologies mature by investing in start-ups and conducting its own internal R&D. Its aspirational goal: to produce a gigawatt of renewable power more cheaply than a coal-fired plant could, and to achieve this in years, not decades.
Unfortunately, not every Google moon shot leaves Earth orbit. In 2011, the company decided that RE<C was not on track to meet its target and shut down the initiative. The two of us, who worked as engineers on the internal RE<C projects, were then forced to reexamine our assumptions.
That realization prompted us to reconsider the economics of energy. What’s needed, we concluded, are reliable zero-carbon energy sources so cheap that the operators of power plants and industrial facilities alike have an economic rationale for switching over soon—say, within the next 40 years. Let’s face it, businesses won’t make sacrifices and pay more for clean energy based on altruism alone. Instead, we need solutions that appeal to their profit motives. RE
Consider an average U.S. coal or natural gas plant that has been in service for decades; its cost of electricity generation is about 4 to 6 U.S. cents per kilowatt-hour. Now imagine what it would take for the utility company that owns that plant to decide to shutter it and build a replacement plant using a zero-carbon energy source. The owner would have to factor in the capital investment for construction and continued costs of operation and maintenance—and still make a profit while generating electricity for less than $0.04/kWh to $0.06/kWh.
That’s a tough target to meet. But that’s not the whole story. Although the electricity from a giant coal plant is physically indistinguishable from the electricity from a rooftop solar panel, the value of generated electricity varies. In the marketplace, utility companies pay different prices for electricity, depending on how easily it can be supplied to reliably meet local demand.
“Dispatchable” power, which can be ramped up and down quickly, fetches the highest market price. Distributed power, generated close to the electricity meter, can also be worth more, as it avoids the costs and losses associated with transmission and distribution. Residential customers in the contiguous United States pay from $0.09/kWh to $0.20/kWh, a significant portion of which pays for transmission and distribution costs. And here we see an opportunity for change. A distributed, dispatchable power source could prompt a switchover if it could undercut those end-user prices, selling electricity for less than $0.09/kWh to $0.20/kWh in local marketplaces. At such prices, the zero-carbon system would simply be the thrifty choice.
Unfortunately, most of today’s clean generation sources can’t provide power that is both distributed and dispatchable. Solar panels, for example, can be put on every rooftop but can’t provide power if the sun isn’t shining. Yet if we invented a distributed, dispatchable power technology, it could transform the energy marketplace and the roles played by utilities and their customers. Smaller players could generate not only electricity but also profit, buying and selling energy locally from one another at real-time prices. Small operators, with far less infrastructure than a utility company and far more derring-do, might experiment more freely and come up with valuable innovations more quickly.
Similarly, we need competitive energy sources to power industrial facilities, such as fertilizer plants and cement manufacturers. A cement company simply won’t try some new technology to heat its kilns unless it’s going to save money and boost profits. Across the board, we need solutions that don’t require subsidies or government regulations that penalize fossil fuel usage. Of course, anything that makes fossil fuels more expensive, whether it’s pollution limits or an outright tax on carbon emissions, helps competing energy technologies locally. But industry can simply move manufacturing (and emissions) somewhere else. So rather than depend on politicians’ high ideals to drive change, it’s a safer bet to rely on businesses’ self interest: in other words, the bottom line.
In the electricity sector, that bottom line comes down to the difference between the cost of generating electricity and its price. In the United States alone, we’re aiming to replace about 1 terawatt of generation infrastructure over the next 40 years. This won’t happen without a breakthrough energy technology that has a high profit margin. Subsidies may help at first, but only private sector involvement, with eager money-making investors, will lead to rapid adoption of a new technology. Each year’s profits must be sufficient to keep investors happy while also financing the next year’s capital investments. With exponential growth in deployment, businesses could be replacing 30 gigawatts of installed capacity annually by 2040.
