Energy use continues to grow globally, and the climate crisis will be with us for another generation, but the transition to renewable energy is well underway. Decarbonizing the energy system must be undertaken carefully to ensure that the global economy is not damaged. The pace of change may not be what we’d like to see, but it is steady, and it is happening. In an article in last week’s Wall Street Journal, H. Claire Brown reported the results of a study of renewable energy conducted by Bloomberg/NEF. According to Brown:
“Zero-carbon technologies comprised more than 40% of global electricity generation for the first time in 2023, according to a report released Tuesday from BloombergNEF. Renewable energy sources like wind and solar made up 17% of total electricity generation, and hydroelectric and nuclear power contributed 24%. Fossil fuels including coal and natural gas produced 57% of global electricity last year…One such milestone: Solar and wind represented more than 90% of global energy capacity additions last year, a step up from 2022. Global wind capacity also crossed the one-terawatt threshold…Mainland China accounted for almost a third of total renewable energy output last year. The country recently reached its 2030 target for wind and solar energy six years early, according to a statement from its National Energy Administration, and it has pulled back on permits for new coal-fired power plants.”
I am struck by both the progress underway and the sheer complexity of this transition. Energy is at the heart of modern technology, and technology is at the center of economic life. The forms of technology we rely on are not always wedded to a particular source of energy, especially if the energy being utilized is electricity. But, a great deal of electricity is generated by burning fossil fuels, and the transition away from it cannot be instantaneous. Invested capital must first be amortized, and that is part of why the transition to renewable energy will be gradual. Fortunately, the lower price of renewable energy and government subsidies can provide incentives to accelerate the transition to renewable energy. Renewable energy is displacing fossil fuels because it is less expensive, cleaner, and, with adequate battery technology, more reliable.
Underlying the changes now underway is a cultural shift in the private sector as management starts to understand the climate crisis and seeks creative methods to reduce greenhouse gas pollution. This includes enhanced energy efficiency as well as a wide variety of methods to reduce greenhouse gas emissions. These trends are seen widely in industries across the global economy. Additionally, many investors see the business opportunities presented by the emerging green economy. News media frequently report setbacks in this transition—windmills that collapse and auto manufacturers slowing the place of manufacturing electric vehicles and batteries. But these setbacks require context, and the big picture is that the renewable energy transition is well underway.
The energy system’s extreme vertical integration and centralization distinguishes it from many elements of the modern economy. The rest of the economy is characterized by complex supply chains and just-in-time inventory controls. It is management by network. The energy system is characterized by centralized drilling and mining operations and large-scale, centralized power generation. It is one of the last of the old-fashioned command-and-control, vertically integrated operations. Decentralized or distributed generation of energy holds the potential for local control and rapid adoption of new technologies. A nimbler energy system will provide cost savings and greater redundancy and reliability than the current energy system. The growing number of extreme weather events accelerated by climate change requires a more durable and resilient energy system than the century-old, breakdown-prone system America now has. As Ivan Penn and Peter Eavis reported in the New York Times back in May 2023:
“As climate change increases the severity of heat waves, cold spells and other extreme weather, blackouts are becoming more common. In the 11 years to 2021, there were 986 weather-related power outages in the United States, nearly twice as many as in the previous 11 years, according to government data analyzed by Climate Central, a nonprofit group of scientists. The average U.S. electric utility customer lost power for nearly eight hours in 2021, according to the Energy Information Administration, more than twice as long as in 2013, the earliest year for which that data is available.”
Penn and Eavis reported on the expense of backup electricity and the fact that poor people faced increasing and even life-threatening hardship during blackouts. Despite the expense and resultant inequities, the backup power industry is growing in the United States. In a study updated on August 12, 2024, Fortune Business Insights reported that:
“The U.S. generator sales market size was valued at USD 6.10 billion in 2023. The market is projected to be worth USD 6.43 billion in 2024 and reach USD 10.26 billion by 2032…The remarkable development in generator technologies have led to significant growth in the market. Rapid industrialization and urbanization have surged the demand for constant electric supply, making power backups a vital element of development. The increasing utilization of generators and the growing technological advancements have further increased the demand for generators. The requirement for uninterrupted, unbroken peak power demand has made generators crucial equipment in industry, commerce sector, and residential. The U.S. has been one of the major participants in the global generator sales market and is expected to witness significant growth…”
Of course, homes and buildings with solar arrays and batteries do not require fossil-fuel-powered backup generators. Many sources of non-fossil fuel energy are centralized such as nuclear, wind, hydropower, and massive centralized solar farms. However, local, small-scale solar arrays and batteries hold out the promise of a distributed or decentralized form of energy. It is likely that we will see both centralized and decentralized sources of renewable energy, hopefully, managed by systems of microgrids integrated into smart grids but able to also decouple and act independently of the centralized system when needed. Household and location-specific solar arrays and batteries and the storage capacity of electric vehicle batteries can be used to provide agility to the otherwise rigid and centralized energy system.
A modern, high-tech energy system is a necessity if we are to adapt to the current level of climate change and mitigate the sources of greenhouse gas pollution. While the green economy remains a political issue for some elected leaders, for business leaders and many young people, it is simply the wave of the future. The data on increased energy disruptions is real, and the economic and cultural impact of energy blackouts continue to grow in both reality and perception. Spend a week with a teenager when their smartphone is disabled and backup sources of electricity start to look quite attractive.
Although the politics of renewable energy may be intensely ideological, for private sector managers and investors, it’s simply a growing business. Last week on The Hill website, Zack Budryk reported that:
“Jobs in the renewable energy sector grew at twice the rate of overall U.S. jobs last year, the Energy Department said Wednesday in its annual U.S. Energy and Employment Report (USEER). Employment in the clean energy sector grew by 142,000 jobs in 2023, according to DOE data, comprising the majority of the 250,000 jobs added in the energy sector overall…Translated to growth rate, clean energy jobs grew 4.2 percent compared to the 2 percent growth of the economy as a whole.”
In the final analysis, the transition to renewable energy must be built on a business case. Politics and public policy have a role to play, particularly in accelerating the transition, but the real action is in the private sector as businesses see the financial benefits of a modernized energy system.
Views and opinions expressed here are those of the authors, and do not necessarily reflect the official position of Columbia School of Professional Studies or Columbia University.
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The Columbia University M.S. in Sustainability Management program offered by the School of Professional Studies in partnership with the Climate School provides students cutting-edge policy and management tools they can use to help public and private organizations and governments address environmental impacts and risks, pollution control, and remediation to achieve sustainability. The program is customized for working professionals and is offered as both a full- and part-time course of study.
