What Tradeoffs?

Some of the difficult tradeoffs associated with a transition to a cleaner energy mix are products of the structure of our energy system, including tradeoffs between affordability, reliability and environmental performance. Others are political, arising from the fact that any transition will produce winners and losers.  

The following questions are meant to illustrate a few of the ways in which debate about the green transition sometimes misses important elements of the tradeoffs challenge. EnergyTradeoffs.com will feature scholarship addressing these issues and many more.

Won’t the transition to a cleaner energy mix actually save money by reducing pollution and other externalities that currently cost us dearly?

Yes, but …

There is a distinction to be made between the total costs of a transition and the out-of-pocket costs. Both are important, and both matter in any serious discussion of the green transition. Fossil fuel combustion, and particularly coal combustion, imposes enormous costs on society in the form of premature deaths and other harms to human health and the environment. We have experience valuing those costs, and they are indeed huge. Many analyses conclude that the total costs (including social costs) of a zero emission energy system will be lower than those associated with the current energy mix.

Nevertheless, someone must pay for the construction of new infrastructure necessary to make the transition a reality. A greener energy system will impose more out-of-pocket costs than the current system does.  Acknowledging that fact, and making decisions about how those costs should be distributed, are important elements of a green transition. “We will pay for it the same way we paid for World War II” might be the beginning of a conversation about who pays, but it certainly isn’t the end of one.

Can’t we simply price the things we care about and let the market manage these tradeoffs?

Theoretically yes, but as it happens this task is extremely difficult, both technically and politically. Most people don’t believe that the market prices environmental costs (or reliability) well enough, which means that government must intervene to ensure that any transition to a greener energy mix gives us the balance we want between reliability, affordability, and environmental performance. How to intervene, and how much to intervene, remain open questions, and some of the scholarship featured here discusses those questions.

How can it be that high penetration of renewables poses reliability tradeoffs if so many cities are already going "100% renewable"?

It is true that an increasing number of cities, other political jurisdictions and companies have pledged to consumer only renewable energy now or in the future.  For most of those jurisdictions and companies, what that means in practice is that they contract to purchase electricity from renewable generators (or renewable energy credits) in amounts that represent all of their annual consumption.  However, the electricity generated by a renewable power plant cannot be directed to specific consumers; nor is there sufficient grid-connected renewable power to serve demand at all times (say, on still nights).  Since most of these 100% renewable consumers continue to take energy from the grid, they effectively rely in part on non-renewable power. 

A small number of political jurisdictions and firms have access to sufficient amounts of dispatchable renewable resources — like geothermal power or hydroelectric power operated in storage mode — that do not depend upon short term weather conditions.  Iceland, for example, has ample geothermal and hydroelectric power that is generally dispatchable when needed.  In the United States, where wind and solar are the dominant renewable resources, some sort of more traditionally-dispatchable source of power (or electricity storage) is needed to fill in when the wind isn’t blowing and the sun isn’t shining.

How can it be that out-of-pocket costs will increase if utility-scale renewable power is now cheaper than other alternatives?

It is true that on a per-kilowatt hour basis wind and solar generators now produce power less expensively than fossil-fueled alternatives in many parts of the country. However, there are two important caveats to that statement. 

First, right now buyers in electricity markets usually purchase all the power that wind and solar generators can produce.  In the future, when there are many more wind and solar farms, there will be times when some of their power isn’t needed.  If generators can’t sell as many kilowatt-hours of power, they will have to recover their fixed and variable costs through higher per-kwh prices. 

Second, because those generators produce power only when the wind is blowing or the sun is shining, a system that relies very heavily on those kinds of generators must be a much bigger system. In order to ensure that we have electricity on calm nights, we will sometimes have to rely on large amounts of stored energy from otherwise superfluous renewable generation; or we must maintain other, more traditional generators to produce power when renewables cannot. This means that the transition to a greener energy mix will increase the total out-of-pocket costs of the system.

won't some of these tradeoff problems be solved by relying less on the electric grid, and by generating energy and using it more efficiently at home, or in local microgrids?

Perhaps, if technology improves and becomes less costly. Micogrids and home devices can add resiiency to parts of a system, but right now going completely off the grid means more expensive, less reliable energy in most places.  For example, the average cost of generating electricity from rooftop solar units is several times higher than the cost of generating it at utility-scale solar farms and sending it to customers. On the other hand, there are important legal and political obstacles to building the transmission system we need to support the green grid.  So a more decentralized system may avoid some difficult political tradeoffs.

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