Undercover Economist

Switch to renewable energy? If only it were that simple

A confession: I have been too complacent about technological fixes for the twin problems of climate change and finite oil and gas reserves. Without looking very closely at the numbers, I figured that if politicians would finally get their act together, and if we avoided some of the more unlucky possibilities (such as the release of methane ice from the oceans), cheap, clean energy would be within our grasp, given suitable research incentives and some technological brilliance.

Looking at progress in computer chips, I dreamt about how cheap photovoltaic solar panels might become over the next 50 years. Solar wallpaper, solar paint – who needs fossil fuels? Most climate-change scenarios look at a 100-year time scale. Surely, in that time, we should have figured out a way to take greenhouse gases out of the atmosphere again.

I still wouldn’t rule out such techno-fantasies, but having read a remarkable book by David J.C. MacKay, a Cambridge physicist (you can download it at www.withouthotair.com) I am far more pessimistic about the potential of technology to help us out. In Sustainable Energy – Without the Hot Air, Professor MacKay makes this point very simply by sidestepping the economics altogether. Technological progress and economic growth loosen the corset of cost-benefit analysis, but not the laws of physics. No matter how cheap and efficient solar collectors become, there is only so much solar power available per square metre of land. Hydroelectric energy is constrained by the quantity of rainfall and the height of reservoirs above sea level. The most perfectly designed windmill is limited by the energy of the wind. It would barely be possible to make the numbers add up even if renewable energy generators were free.

To power a modern country through renewable energy requires country-scale facilities – hundreds of miles of wave turbines, solar panels on every roof, and windmills blanketing highlands and coastal waters. Nuclear fission is more promising, but nuclear fuel is also finite. Technological progress will be essential but, barring a breakthrough in nuclear fusion, it will not set us on a path to an energy system purged of fossil fuels.

MacKay defies glib summaries, but it is fair to say that he sees considerable potential in energy-efficiency measures such as light electric cars and better-insulated homes. This is a different kind of issue because it is a decentralised problem.

The challenge is to encourage the right behaviour. Centrally mandated efforts will not do the trick, in part because “the right behaviour” is not a universal constant. Take, for example, the intermittency of wind power. A nation equipped with battery-powered cars could charge up when the wind is blowing and scale back during lulls. Yet on any given day one individual might desperately need a reliable charge for her car. To a central planner this is simply unknowable. Yet a discount for those relying only on intermittent power would encourage people to fit in with the scheme whenever they could.

Governments also have an inglorious history of getting even the basics right. The British still subsidise fossil fuels by charging a bargain rate of tax on domestic fuel. European subsidies for offshore wind power, a technology of little interest to Mexico or China, are likely to do little to transform the world’s energy system.

Dealing with climate change will need many small decisions to be made differently. The government cannot micromanage these. This is why a carbon price, whether set through taxes or emissions permits, is needed. It is not so much a nudge as a shove in the right direction.

Also published at ft.com.