The following is a rough transcript which has not been revised by The Jim Rutt Show or by Jessika Trancik. Please check with us before using any quotations from this transcript. Thank you.
Jim: Howdy. This is Jim Rutt and this is The Jim Rutt Show. Listeners have asked us to provide pointers to some of the resources we talked about on the show. We now have links to books and articles referenced in recent podcasts that are available on our website. We also offer full transcripts go to jimruttshow.com. That’s jimruttshow.com. Today’s guest is Jessika Trancik, MIT Associate Professor in the Institute for Data Systems and Society.
Jessika: Hi, Jim. It’s great to be here.
Jim: Hey, it’s great to have you here. This should be very, very interesting. Jessika has a PhD in material science from the University of Oxford as a Rhodes Scholar. She was a fellow of Columbia University’s legendary Earth Institute and she is external faculty at the Santa Fe Institute. We’re doing something a little different here on the Jim Rutt show with this episode in the next couple episodes.
Jim: This is the first of a three episode arc this month focusing on climate change. We’re going to talk mostly about climate related things but in addition to her work on climate issues, Jessika also does great work on the nature and history of innovation. We posted the link to that work on the episode page at jimruttshow.com. If you’re interested in those topics, I recommend you check it out. Now to technology and the fight against climate change. Let’s start with some basics. What is EROEI or energy return on energy invested and why is it so important?
Jessika: Well, so the EROI or the energy return on investment is just a simple measure of the energy you get back from building some energy conversion technology. So building any technology requires, especially hardware requires some amount of energy for production and manufacturing. Then you get a certain amount of energy back when you’re using that technology and the ratio of those two is the energy return on investment.
Jim: Okay, and why is that so important?
Jessika: Well, it’s important, I would say, especially today, when we’re using fossil fuels primarily, to manufacture many of the low carbon energy technologies that people may have heard of, like solar energy and energy panels and wind turbines. So we use typically fossil fuels to manufacture those, but then when they’re put into operation, they generate a certain amount of electricity and we’d like to make sure that that amount of electricity is more than the energy put in,
Jim: And the more the better, right?
Jessika: Yeah, the more the better but I will say that, of course, if we get to a regime where we’re using renewable energy to manufacture these technologies, then we won’t be quite as concerned about the energy return on investment because you’re putting basically clean energy into manufacturing the hardware. Then you’re using it to produce clean electricity in the case of solar and wind energy. So that’s something that’s important to keep in mind but certainly in this transition period, you want to make sure that the solar panels and the wind turbines you’re building that you’re going to get more clean energy out than the fossil fuel energy you put in
Jim: Very good foundation, which we’ll talk about in more detail later. Second foundational idea, which will reference several times in the discussion coming is what is a learning curve and could you give us an example from something outside of the energy field?
Jessika: Yeah, sure. So the learning curve was first observed in airplane manufacturing where it was seen that the labor hours or the labor productivity increased with the number of units produced. So this was named the learning curve. It was later applied to many different technologies outside of airplanes and the basic idea in terms of the mathematics of the learning curve is that if you’re following the typical learning curve, for each 1% increase in cumulative production, you get a fixed percentage improvement in performance.
Jessika: So that could be improvement in cost intensity of the technology or it could be improvement in some other measure of performance. These are simple curves and it’s a simple model, but it’s quite useful for comparing the rate of improvement across different technologies and we see that solar cells for example, and solar panels have followed a learning curve, wind turbines have as well, and many technologies within energy systems and outside of energy systems have followed these learning curves.
Jessika: One of the interesting aspects of this is to try to understand where this kind of behavior comes from. So there have been many interesting questions and we’re starting to get answers to them on why we see these kinds of trends and technologies and also getting some insights on why some technologies improved faster than others, which obviously is really important for making good investments in climate saving technology, because we really want to invest in those technologies that are going to improve quickly, that are going to reach cost competitiveness, that their performance will increase and so that they’ll be widely affordable and can be adopted around the world.
Jim: Yeah, very good. Now, one well known statement of a learning curve is Moore’s Law, right? That’s stated in terms of time and then there’s also, I forget the name of the guy. There’s somebody else’s law where the [crosstalk 00:05:58] stated in terms of units. Could you talk a little bit about that? And the difference between the two?
Jessika: Yeah. So there’s something called Wright’s curve or Wright’s Law and Moore’s curve or Moore’s Law. Moore’s Law, which many people may be familiar with is an exponential trend. So we see exponentially improving performance with time. In the case of solar panels, we see that the drop in cost was about 10% per year, over the last 40 years, and overall, we’ve seen a 99%, roughly a 99% decline in costs over the last 40 years. So that’s Moore’s Law.
Jessika: Then if we look at Wright’s curve or Wright’s Law, this is the functional form that describes what I was mentioning before, the learning curve. So this is a power law relationship where we’re looking at improvement along in metrics such as cost with increasing effort, and that’s usually measured as a cumulative production. So in that case, what we see is that with each 1% increase in cumulative production, you see a 6% decline in costs, that if technology follows that kind of behavior, then it’s following what we would expect from Wright’s Law.
Jessika: Now, the interesting thing is that when we look at solar panels, which I mentioned before, they actually follow both Moore’s Law and Wright’s Law. So on the face of it, Moore’s Law implies something pretty different from Wright’s Law, if we want to use this to inform our decisions. Because of course, with Moore’s Law, you’re looking at the improvement as a function of time. So is there any way in which you can speed things up? If we say that cost intensity or cost to make it concrete, a solar panel is falling with time.
Jessika: If you just look at that, on the face of it, it looks like there’s nothing we can do to speed it up. On the other hand, Wright’s Law tells us something very different and that is that if we produce more things will improve more quickly. So which one of these is correct? Well, as I mentioned a minute ago, we see that both holds for the case of solar panels and for a number of different technologies. Why is that? Well, when we dug into this, what we found was that there was another type of behavior, another trend that we had to pay attention to.
Jessika: That was the trend describing how cumulative production of solar panels is increasing with time and we see that that production has grown roughly exponentially over the last 40 years. So that means that we take those two observations we see that costs are coming down exponentially with time following Moore’s Law, and we see that production is growing exponentially with time. If we take those two things together, and we plot cost intensity against cumulative production, we would in fact expect to get Wright’s curve out or Wright’s Law out.
Jessika: So that’s the reason why both describe the behavior in solar panels and in fact, when we look across many different technologies, technologies that start out with rapidly growing production tend to continue to grow rapidly and technologies that start out with more slowly growing production tend to continue to grow more slowly. Now, that’s not to say that we can’t speed things up and based on a lot of the research that I’ve done over the years, my expectation and we see this in a couple of cases where we see that technologies, their production has grown at different rates over different periods of time.
Jessika: Then we see a departure from Moore’s Law, and we see some of these technologies still following Wright’s Law. So I guess the bottom line is that we can use Moore’s Law to describe many technologies and if we just kind of leave things alone, then technologies will tend to grow exponentially with time. There are certain kinds of government policy interventions that can speed things up. Then you can depart from this time based trend, and you can actually make improvements faster. That’s really, again, really important for climate policy, because it’s important to make investments to drive innovation and technologies that can help us solve the climate problem.
Jim: We’re going to talk about those policy settings a little bit later, but good setting of the groundwork. Now, from your work and also other work I’ve looked at, it seems like implicitly, most people who have looked seriously at the technology curves and how to really do this, are assuming that something close to an all electrical society is where we’re headed. Do you see that as feasible?
Jessika: I would say yes, we can get close to that. There are still some energy services were using electricity is difficult. So, we see that in steel manufacturing or cement production. Some of these energy services and industrial applications may require other kinds of fuels, or we may use electricity to split water, for example, or create other kinds of fuels that can be used in some of these applications, but yeah, on the whole, we are seeing this happening already. So you do see more energy services becoming electrified, more heating is being produced using electricity.
Jessika: This is important, and the reason is that we do have ways, we have pretty good ways now to produce electricity using low carbon technologies, to basically move away from using fossil fuels for electricity production. So if we can use that electricity not only for lighting and all the applications that we’ve traditionally used electricity for, but also for transportation and also for heating and for industrial processes, the more we can do that, the better.
Jessika: I do think that we shouldn’t assume that we can get 100% of the way there with electrification. So one really important research area is to think about how we can combine electrification using more electricity with low carbon sources, with the production of new kinds of fuels, that can serve some of those heavy energy, those high temperature applications, or for example, what’s called long distance long haul transportation.
Jessika: That just means a vehicle is covering a large distance and maybe carrying a large mass, then we may need to turn to other sorts of options other than using the electricity directly, but yeah, certainly electrification is a really important step toward addressing the climate problem.
Jim: Okay, I think we’re going to focus mostly on electricity, though I’d also point out that fairly recently, there was a lot of interest in biofuels. Also one of my favorites, in fact, I actually did some experimental manufacture of thermo solar, where you can heat your house and hot water directly with thermal energy at much higher levels of efficiency than you get out of PV and I hope people don’t forget those as well. Let’s mostly focus on electricity because if we’re going to truly reform our whole society, that’s probably going to be the main road. So one more fundamental before we start getting into some of the details. If you could talk to our audience a bit about the difference in the electricity range between baseload and intermittent sources, and maybe even the concept of dispatch ability.
Jessika: Yeah, sure. So, if we Look at the ways in which different power plants are operating today to meet our demand for electricity. So our demand for electricity and, for example, the Northeast where I am right now, you see that some of these plants are operating all of the time, and those are baseload plants. Some of them are operating a good fraction of the time, maybe 50% of the time, and others are operating only for 10% of the time or much less.
Jessika: Those would be peaker plants. So we have the baseload plants, we have the intermediate plants, and we have the peaker plants. So the basic point is that many of these power plants are turning on and off. That’s because our demand peaks at different times of the day. So it rises and falls depending on human activities. We have the diurnal cycle, most people wake up in the morning and they may go to work, they may pursue other activities that consume energy and then at some point they’re sleeping. So our energy Consumption tends to go down, although there are some processes of course that run through the night.
Jessika: Anyway, we have this fluctuating demand for electricity and these power plants turning on and off. So in a sense many power plants are intermittent in how they’re operated but when we bring in what’s called variable renewable energy, which is solar and wind energy, there, there’s a difference. There’s kind of a qualitative difference between those plants and some of the fossil fuel fire plants that we rely on today, as well as nuclear, which is that we are not in control of when the sun’s shining and the winds blowing.
Jessika: So they turn on and off, but not in a way that’s under our control. However, there are different approaches to dealing with that. So I’ll highlight three main approaches. One is to use this variable renewable energy, solar and wind energy with energy storage devices like batteries to store the energy when we have too much of it and then use it later. Another approach to dealing with this variability is to draw your resources from a large geographical area that tends to smooth out at least some of these fluctuations.
Jessika: Then a third approach is to use what’s called demand side management, or create a flexible demand where you’re matching the demand to the supply. So you can imagine that there are many appliances and industrial processes that where there’s some flexibility, you don’t have to run them at exactly the point in time at which you turn on the dishwasher, for example. So if you need the clean dishes maybe the next morning, there is some flexibility there and the dishwasher could turn on when there’s an excess of electricity.
Jessika: Of course, if it’s overnight that wouldn’t help for solar and wind but that’s just an example we can have, heating and cooling that can go up and down by a few degrees, that’s imperceptible to people. People can’t perceive those differences but it could save large amounts of energy. So that would be an example of demand side management.
Jim: Yes, those are all excellent big picture ideas. I did a bit of a dive into mass electrical storage, which is a topic we’re going to go into next. My first takeaway is kind of the aha, why is electricity different than any other product and that is, if you ignore storage, it has a useful life of one microsecond. [inaudible 00:17:33]. So the supply and demand has to be intricately balanced and a surprising amount of electricity is actually discharged into the ground, more or less like a local lightning bolt, but frankly, most all the time, the balance isn’t perfect.
Jim: The dance of the grid is to keep it as close as possible. So when one’s thinking about electricity, it’s really different than almost anything else we deal with conceptually in the economy, in that it has this microsecond useful life, which is a good jump into one of my favorite topics, one I spent six months working on back in 2004, which is mass storage of electricity.
Jim: I know you’ve written on this and why it’s important, particularly when it’s coupled to these variable sources. Because you talk a little bit about that, and how it fundamentally if you have enough of it, changes the whole nature of what variable production could mean.
Jessika: Yeah, sure. So, just to start out, I guess one way we can think about this, if every time we build a solar power plant or a wind power plant, we have some means of storing that energy. So we convert it to electricity, and then we store it in some form, and then we use it later as electricity. If we can do that, then these plants can be turned on and off at will. So that’s really the idea behind energy storage for that application, for the power sector. There are a number of different ways in which you can store energy and I sometimes say that the technologies that we have available for storing energy are as diverse, or even more so than the technologies that we have available for converting energy, to produce electricity, for example, because you can imagine that you can store energy in all sorts of different forms.
Jessika: So we can use pumped hydro storage, we could use compressed air energy storage, we can use various, what are called electrochemical devices. So those are the batteries that we’re familiar with, like lithium ion batteries, and other kinds of batteries. So there are many different ways in which we can store energy and I would say that we’re just starting to really explore what’s called stationary energy storage technologies in a serious way. You might ask, okay, so why have we not explored these previously?
Jessika: Well, there hasn’t really been a market for it because fossil fuels are pretty cheap and they’re pretty easy to store. So there hasn’t been a real incentive to develop alternatives. Now we have, of course, develop batteries for mobile applications. So those are batteries that could be used in our computers or our cell phones but once we start looking at these power plant applications, we need to be able to store many more kilowatt hours. We need a much larger energy capacity to be able to shift things around in time.
Jessika: So that’s something that there hasn’t been as much of a demand for but now as the use of solar and wind energy is growing, and as concerns about climate change are growing, there’s a real need for this. So I expect that we’ll see a lot of developments in this area. Of course, the outcome of those is still uncertain, but it’s an area that has a lot of potential I’d say.
Jim: When I looked into it back in 2004, the tech I focused on was vanadium redox flow batteries, which are these big sulfuric acid filled tanks with vanadium, et cetera. That point in time it looked like it cost about $200 a kilowatt hour for mass storage, eight hour deep storage, 20 hour deep storage, really deep storage and my analysis said that was not nearly good enough even for a very specialized case I was looking at, as a possible business venture.
Jim: I actually consulted with one of the best electro chemical engineers in the world who unfortunately has since passed away. He said, young man, he was like 90, he wasn’t quite that old but he was old. Young man, you’re used to the technology, IT world where things double every two or three years. In electrochemistry, it doubles about every 20 years if we’re lucky. Interestingly, he was damn close to right, on his $200 per kilowatt hour to where around $100 per kilowatt hour 16 years later. I think you actually wrote in a paper that you did recently that something around $20 per kilowatt hour is what we need to really be able to make intermittent sources competitive with baseload sources. Is that the right range?
Jessika: Yeah. So, that was one target but actually, there’s another way to solve the intermittency problem, which I can talk about as well. But yeah, what we did was to look at combining solar and wind and using solar and wind to reliably meet energy demand over a period of 20 years. So we wanted to meet demand every hour, over a period of 20 years. Then we asked how much storage would be needed for that and we developed an optimization model so that we’re using only as much storage as we need. Then we asked at what cost would these plants, these solar and wind plants that are optimally combined with each other, with this optimally sized energy storage, at what point does that technology become competitive with other sources of electricity.
Jessika: So the rough target that we arrived at was $20 per kilowatt hour energy capacity cost. So for your listeners, just a quick note, this is not to be confused with the cost of electricity. This is instead, the cost of building the capacity to store energy. So this is the upfront cost, what you would put into building your storage facility as compared to the electricity cost, which is per unit electricity produced.
Jessika: So anyway, but that estimate that we arrived at was $20 per kilowatt hour. This was to meet demand 100% of the time. If instead we relax that requirement, and we say that we’re going to use something else for just 5% of the time, then what we see is that the target rises to $150 per kilowatt hour.
Jim: Yeah, we’re there.
Jessika: Well, yes and no. So those numbers that we see published for lithium ion batteries are not taking into account, we think, the full cost of installing a stationary energy storage facility but you’re right, we’re close to there. Then that scenario is also not that necessarily that easy to implement, because we have to then find the other thing that we can use for five to 10% of the time. So that I think is a really important research area. It’s one that we’re looking at and essentially, I see us as we should certainly continue to try to drive down the cost of energy storage, but we should be looking for these other solutions.
Jessika: It could be producing low carbon fuels with the excess solar and wind energy that you have, because we see that when we optimize the whole system, you’re creating a lot of excess solar and wind energy. So you could create other revenue with that. There are ways to, and this is something I’m working on, developing technology for a different kind of demand side management that could help to serve that five to 10% of additional demand. So it’s a scenario that I call the energy storage plus scenario.
Jessika: So it’s the hardware for energy storage, but it’s also using software and developing approaches and algorithms, as well as maybe producing some low carbon fuels that can fill in that additional five to 10% of energy demand. So the reason why you see that big jump from $20 per kilowatt hour to $250 per kilowatt hour is that what we uncovered when we looked at 20 years of data on the solar and wind energy resource in a bunch of different locations is that in all of these locations, you have a small number of very large resource shortage events.
Jessika: So, overall, over the 20 year period, we have these fluctuations in the solar and wind energy resource, but maybe a handful of times, maybe five times over 20 years, you have larger fluctuations where the amount of solar energy available dropped significantly, or the amount of wind energy available dropped significantly. So these rare but rather extreme events are ones that we need to be able to deal with, with energy storage and batteries and other kinds of energy storage technologies, as well as some of the other approaches that I mentioned.
Jessika: So that’s kind of a big focus of mine and I think it’s becoming an area that people are looking into to look for solutions to that problem. Of course, with a new problem requiring new technology or new approaches, there’s an opportunity there and I think there’s a big opportunity in that area.
Jim: Now, I’m going to throw one out just a radical idea of just thinking out loud, probably bullshit but whatever, right? Suppose we made a major social change, which said that we’re going to have 15 floating holidays on average, which is going to be on days where energy production isn’t real high. Everybody, just stay home, read books, play games. We could do a social operating system change. We say, all right, here we got 48 hours notice this is probably going to be a day where it’s way better for everybody to stay home. On average, it’s 5% of the time, that’s 15, 16 days a year. The world would not end if people stay at home 16 days a year.
Jessika: No, exactly. I think those are the kinds of creative ideas that we need to be thinking about and in all of this work, when I’m thinking about technology, I’m using a very broad definition, and it’s inspired by the philosopher Lewis Mumford. That definition covers not just hardware, but also software institutional design. Really, any codified knowledge that can be used to produce some sort of service. So this definition of technology that I use is anything that transforms raw materials that we have here on earth, including biological and geological materials into some more useful form.
Jessika: So, those biological materials include the information processing capabilities of the human brain, and we can use software and computers to augment that and to do new things. So that definition of technology is very broad and to solve this problem we’re talking about, I think we want to be thinking about how to combine hardware, and software and other what I call soft technologies, that’s non hardware technology, to solving this problem. So social innovations, like the one that you talked about, would fall under that category.
Jessika: Of course, we’d have to test out these ideas, we’d have to see what people might accept, but I think that there’s so much we can do in this area, and especially with the growth of artificial intelligence, which is a very broad term but in fact, the practice already in place of accessing data, and understanding preferences and behaviors, I think we can put that to work to solving these kinds of problems.
Jim: Yeah, and for like social hacks, we can use agent based modeling to get at least a rough idea whether it’s feasible or not.
Jessika: Yeah, sure. Of course, with those models, we always want to make sure that the decision rules and the agent behavior where modeling is somehow accurate but yeah, we can run surveys, we can figure out what people are willing to do. I think we could get quite far with that.
Jim: All right, now let’s ratchet in a little bit, a little bit more detailed. I’m going to run across a number of technologies, basically solar, wind storage, nukes and hydrolysis and get your take on where we’re at in terms of innovation, learning curves, et cetera, on each of those technologies. That sound okay?
Jessika: Sounds good.
Jim: All right. Let’s start off with solar. Where are we and what do the prospects look like for the next decade or two?
Jessika: Yeah, so costs have fallen by about 99% over the last 40 years for solar energy and here I’m talking about photovoltaic solar energy specifically, and costs have come down significantly. We’re at a point now, where in many places, solar energy is cost competitive with other sources of electricity. Now, that is for a case where you’re using small amounts of solar energy. So the challenge going forward is to continue to bring those costs down, because if you want to bring in, what I call augmenting technologies, like energy storage, in order to balance the intermittency and the variability of solar energy, then you’re going to need to invest more in these plants.
Jessika: So there’s still a need for further cost reduction and part just to be able to bring in energy storage other similar technologies to deal with the variability of solar. Now, in many places, solar energy is just providing a few percent at most of electricity. So there’s still room for growth and that solar energy will be cost competitive. It’s just that when you start to get to larger amounts of electricity coming from solar, that’s when you start to need storage and that’s where we’re going to need to see continued cost declines.
Jim: What’s the science driving the PV improvement?
Jessika: Yeah, so we looked at this and published a paper in 2018 and a number of others have looked also at some of these factors, like my colleagues, Greg Nimet, and Kelly Gallagher. Our approach and the paper that we published in 2018, was to start with the devices themselves and say what has changed since 1980 with a photovoltaic module. Physically with the actual device itself, what has changed and then how did that lead to cost reductions and then from there we can say how much of the cost reduction came from research and development, how much from economies of scale, how much from learning by doing and then from there, we can see what kinds of government policies were important.
Jessika: So just to step back for a second and say something about these government policies, we know that solar energy globally would not have grown without some government policy support, because it started out very much more expensive, about 100 times more expensive than the alternative sources that were used at the time when solar energy started to grow. So it was more expensive and government policy in various forms, it could be subsidies, we saw guaranteed prices, we saw regulations, these policies around the world incentivize people to adopt solar energy.
Jessika: This is often held up as a success story in climate policy but before we publish this paper would often ask audiences and frankly still I asked audiences and I’m still trying to get these results out there. So they haven’t necessarily read the paper but I ask audiences, what do you think what policies were important for that cost decline, that 99% cost decline? I give them options of different amounts of the cost decline coming from government funding for research and development or government funding for those market stimulating policies and the answers are all over the place.
Jessika: Some people will guess that only 10% came from government funding for research and 90% came from the market stimulated stimulating policies and the opposite end of the spectrum too, people will guess that 90% came from government funding for research and 10% of the cost decline came from policies to stimulate market growth. So it’s interesting to me that despite this being held as probably the most significant success story in clean energy policy and climate policy, when asked many experts the answers are all over the place.
Jessika: So this was one of the motivations for looking at, okay, what can we pin down what some of the reasons were for the cost decline? So yeah, so we started with the low level mechanisms, the changes to the device itself and then we looked at the high level mechanisms and the policy drivers and at the level of the device, we see that the single largest contributor to the cost decline was an increase in the conversion efficiency of the panel’s themselves.
Jessika: We also see that many other changes at the level of the device were important, like changes to the amount of silicon used, changes to the wafer size and other kinds of changes at that level. So that may be actually one of the reasons why this technology showed this steady and rapid cost decline over time was that there were many different mechanisms that could kick in over that 40 year period I was talking about.
Jessika: Then we go up to the high level mechanisms. I can talk about that if you’re interested but then just to jump up to the policies, we estimate that 30% of the cost decline came from government funding for research, and 60% from market stimulating policies and then 10% from other sources. So this is important, because there’s been a debate for a long time about whether government should be involved in the market, or if instead, some would argue government should focus on funding research and then we wait until the technologies are ready and then they’ll grow on the market.
Jessika: What we see when we look under the hood at this technology and what actually changed and who did what, is that those markets stimulating policies played a really important role in this case, and my takeaway from this is that we probably wouldn’t be where we are today, if we hadn’t had these market stimulating policies.
Jim: That makes a lot of sense in the context of something like Wright’s Law, right? As you pointed out, you get caught in this trap. If its market only in the early days, when it’s 100 times more expensive, no one’s going to use it but if we have some reason to be confident that Wright’s Law will work, then it makes sense to do things like portfolio mandates or giant subsidies even though they’re not economic in the short term, to drive us up the learning curve to the point where it does make sense.
Jessika: Yeah, and so this is where like something like Wright’s Law it may seem like a very academic kind of niche concept to many people, maybe some of your listeners, but it’s actually I would say, pretty important to consider for informing many different kinds of technology decisions that people may have, whether they’re private investors or government policymakers or even engineers. We can start with Wright’s Law to say, okay, there’s this relationship between production and as I produce more I tend to see costs come down following this power Law.
Jessika: That’s a good place to start but then of course, if we want to look at the underlying mechanisms and the different kinds of efforts that lead to improvement, that’s where you’d want to go into applying the approaches that I mentioned earlier. So there, we’re not just looking at production and how costs come down with production but we’re going deeper into what are all the different efforts that went into working on this technology.
Jessika: So it’s actual repeated processes and learning by doing, but it’s also research and development, both publicly funded research and development and also privately funded research and development and economies of scale, which is more of like an emergent property. So we can kind of dig into that more and come up with more mechanistic explanation, which then can inform other kinds of decisions. Like I have a portfolio of investments as a government and I want to decide how much do I want to mandate that electricity should come from these five different sources.
Jessika: You might apply Wright’s curve but if you’re somebody that is deciding on the allocation of research and development funding versus expanding production, either a government policy maker or a private investor or someone running a company, then you might want to apply that more mechanistic approach that I mentioned.
Jim: It’s going to be a mix of them. It’s a multi optimization problem and then it’s also depends on the time frame you’re looking at. Right?
Jessika: Yeah.
Jim: So you’ve talked mostly about the past. Do you have a perspective on the future of photovoltaic? What are we likely to expect over the next say, 10 to 20 years in terms of improvements?
Jessika: Yeah, so I think we’ll continue to see improvements over the next 10 to 20 years. One of the areas that is really important to focus on though are what are called soft costs. So I can’t explain what that means but if we take the solar energy system or the photovoltaic system, we can break it up into the module and what’s called the balance of systems. So that’s everything else that includes the inverter and includes the construction costs, et cetera and that gives us the total cost.
Jessika: So looking forward, I do expect that we can see some improvements in photovoltaic module costs, including in silicon based photovoltaic modules, but there are also some new exciting developments like perovskite solar cells. The future there is uncertain but it’s an interesting and potentially promising area to look at. Then let me focus on those other costs, the balance of systems and then specifically on what I mentioned are the soft costs. So that would include the construction costs.
Jessika: So it’s the cost of labor, it would include the cost of permitting and what’s called the cost of interconnection. So connecting to the grid, and that’s a really interesting and important area, because what we see is that those costs are coming to dominate the total cost. So while the module costs have come down and inverter costs have come down, those soft costs have not come down.
Jessika: We do see that in some countries, they’re much lower than others. So in Germany, it’s estimated that those costs are about 50% what they are in the US, so they’re half what they are in the US. We also see that within individual countries, we’re not seeing as much science of changes in those costs as we’d like to see. So I think that’s a really important and potentially very rewarding area to work on. It’s again, one that I’m working on, and I know many others that including the US Department of Energy is interested in this.
Jessika: One of the things that I think could work there is actually, again in this area of soft technology and basically finding ways to codify knowledge of what works to bring permitting costs down, to bring labor costs down and our connection costs down, collecting data and making sure the incentives are in place for those costs to drop. That could really be very impactful for solar energy.
Jim: Okay. Quick aside. It wasn’t long ago, there was a fair amount of investment including Google, not dumb people, in thermo solar with liquid salt storage. Whatever became of that technology?
Jessika: Yeah, so thermal solar or otherwise known as concentrating solar power is one that hasn’t taken off as much as people might like. The concept is different from photovoltaics and one of the big differences is that you’re using direct solar radiation. So you no longer benefit from indirect solar radiation and that’s because the way it works is you use a system of mirrors to concentrate sunlight, and to heat some medium. So that could be molten salt, for example, as you mentioned, and you bring that to a very high temperature, and then you use that to operate something that’s similar to a conventional thermal power plant.
Jessika: So those mirrors are set up to capture direct sunlight. We’re not able to capture in direct sunlight in those systems. So that means that they’re really best applied in very sunny climates and I think there’s still a lot of potential for concentrating solar power and when we look back at the history of technologies, it’s interesting because sometimes you see things coming into favor, expectations maybe being a little bit too high.
Jessika: The technology or industry is unable to meet those expectations and then interest drops, but then it kind of has a resurgence. So I wouldn’t rule out concentrating solar power yet but it’s tricky to say what’s going to happen with that technology going forward.
Jim: Yeah, I was kind of surprised that people as smart as Google would have spent big dollars on that and come up with a goose egg but that’s what happens sometimes, but as you say, maybe in the future, something will come back. Let’s move on to the next big one, which is wind. What is the learning curve look like on wind both looking back a little bit? And then looking forward?
Jessika: Yeah. So we’ve seen again, major reductions in cost in wind electricity. So actually, let me pause for a minute, Jim. So part of the reason it’s tricky to make that forecast that you wanted with time for solar, and also for wind, it’s the same is that it really depends on what happens on the policy side as well. So we wrote a report ahead of the Paris climate negotiations and looked at the different commitments that countries had made to the Paris Agreement and asked how much might solar and wind electricity costs fall between now and 2030.
Jessika: We estimated that cost could fall by 50% for solar energy and they could fall by 25% for wind energy. I will say that so far since we did that study ahead of the Paris climate negotiations, costs have continued to come down for both of these technologies. Now, that’s one estimate and assumes a certain amount of effort goes into these technologies. If we increase that effort, then things could improve more quickly, or if we decrease we fall back on that effort, then things could be slower.
Jim: So assuming that Wright’s Law is the main one in operation, it makes perfect sense. The more we build, the cheaper it gets, right?
Jessika: Yeah, exactly. I think it’s fair to assume Wright’s Law given what we know so far. I’m not saying it’s the best forecasting method and certainly with any forecast, you want to also forecast your expected error. So, that’s something that we typically do. So there would be ranges around those estimates that I just mentioned. That’s really important, because then you can figure out how to diversify your portfolio, to deal with those uncertainties. But yeah, a lot of the research we’ve been doing does provide some support for Wright’s Law.
Jessika: Now, if you’re a small player, and you’re someone that doesn’t have agency, you can’t make a decision about global production or large amounts of production then you may want to apply Moore’s Law instead, to make your forecasts. So that’s something, that’s ways in which these theories can be implemented and used by decision makers but yeah, to come back to your question you asked about wind electricity and there we see that wind electricity costs have fallen and showing a pretty impressive trend, and there’s room for further improvement and one area that I want to highlight that looks very promising is offshore wind.
Jessika: This is a market that’s growing and one of the benefits of offshore wind is that you’re able to access more predictable, more sustained, less variable wind speeds and wind patterns by putting your systems offshore. So that’s one of the benefits, you’re also able to access a better wind energy resource in many cases. So that’s an area that many are working on. There still some innovation challenges and a need for research and development investment in that technology but there’s a lot of potential there.
Jessika: Currently, if we look at the costs of wind electricity, again, you see that it’s cost competitive in many locations but it has the challenge that I mentioned before with solar, which is one of the reasons why you would want to bring the costs down further because if you need to install energy storage alongside these technologies, that’s an additional investment that would have to be made. As you start using more and more wind energy, you’ll need either supplemental generation from other sources or energy storage in order to reliably meet demand.
Jim: Got you That’s a perfect transition to the next technology, which is distribution. You made a very good and important point that geographic, what’s the hell’s the damn word I’m looking for here?
Jessika: Diversification.
Jim: Diversification. The only free lunch in finance is diversification, right? While it’s not quite free in energy, you can get a lot of free lunch with geographic diversification. To do that, you need an upgrade of our distribution network. Sometimes I talk about building these high voltage DC long haul cables as the interstate highway system for the 21st century. If you could tell us a little bit about what’s going on in distribution and what needs to go on and distribution.
Jessika: Yeah, so in improving and expanding the transmission and distribution infrastructure for electricity is absolutely critical, especially if we rely on increasing amounts of variable solar and wind energy. It’s important to improve and continue to expand the transmission and distribution infrastructure. So there’s a lot of interest in that and the costs should be manageable, at least the engineering cost estimates. The challenges come in, in terms of other factors like whether people in the areas that would be affected if you’re building a new long distance, high voltage transmission line, whether people in those areas will be willing to allow those projects and also whether investors are willing to take on the risks of those projects.
Jessika: Also, coordination across different geographical areas within the US can be a challenge. Some of the institutional design issues have to be worked out, but there’s a lot of interest in that and I think whether or not this really takes off will have to do with what kind of climate policy we have. Also, from a bottom up perspective, it has to do with whether people are able to get together and coordinate and make decisions to go forward with some of these projects or whether that coordination proves too difficult.
Jessika: So, again, I think about this problem in terms of what is the right portfolio approach, and certainly, we need to keep pushing on transmission and distribution, infrastructure improvement and expansion. I do think that in some places, it’s going to have a very big impact but it’s probably going to be more applicable in some places than in others. So if you have, obviously small islands, that becomes more difficult in those cases, or if you have areas that are separated by large mountain ranges or national parks or other pristine wildlife areas that are protected and that people understandably don’t want to go into and build on, then you’re going to have some limitations there.
Jessika: So really for transmission and distribution infrastructure expansion, we need to look at the specifics of the continents, the countries, the states that we’re considering and see whether this is a practical option in those locations and in places where it is, then it’s a great idea.
Jim: You mentioned the coordination problem or what I tend to call the collective action problem, right? It makes sense to do it but get people to agree for local interest reasons, self interest, et cetera. That’s why I put the framing on it. Maybe we should think of it as the interstate highway system of the 21st century, where we just decide at the top, it’s worth spending the money to make it happen. The interstate highway system for those kids today who don’t remember was Built in the 50s, 60s, 70s, and the federal government paid 90% of the cost as a way to incentivize and override local objections and it worked.
Jessika: Yeah, certainly those top down approaches can work and we do see that in some nations today. We see more top down decisions happening and in some places that seems to work better than others. We’ve seen strong climate policy in the Scandinavian countries. If we look at the case of China, in that area, in terms of planning for energy infrastructure, they take a top down approach as well. In some other places, these top down policies don’t seem to be really the way in which things are moving.
Jessika: So in the US, for example, the current administration isn’t focusing on climate policy or climate changes in issue and what you’re seeing is more bottom ups, what are called sub national actors, basically mayors and governors of states and other local policymakers stepping in to work on these issues and adopt policies. Of course, those policymakers are covering a smaller area, they have jurisdiction, they’re represented representing smaller populations.
Jessika: So then you have a bit more of a coordination challenge but I don’t think that all is lost. I do think that there are ways in which we could think about and again, be creative about finding ways to move forward with coordination, to incentivize coordination. Again, we can potentially use software for this. I think we can be thinking creatively about how to solve the collective action problem that you talked about. Many people individually would like to make a difference.
Jessika: We see that based on mass surveys, you see that if you go around and talk to people, I was just saying sabbatical and I was in various parts of the country and I would talk to people with all sorts of different backgrounds and about this issue. You do see that there are some common views, even though people may be skeptical of climate change, when we start talking about things that affect them personally, there is a desire to protect the environment. So anyway, I think there’s a desire among many people to do something about this problem, but each person can feel powerless, because their decision alone can’t bring about a large change.
Jessika: So, again, I think we should be thinking about technology and new creative ways to bring people together to allow for this bottom up action and bottom up coordination that could accelerate this transition to low carbon energy systems.
Jim: We’ll talk about the policy tools a little bit later. I don’t have to be politically correct. I don’t have a job. I’m retired. I don’t give a fuck. So what I would say is we got to vote out politicians who have their heads up their ass on this issue. We need both bottom up and top down and currently with the idiotic political leadership we have, we’re not getting any guidance on the top down side. So that’s got to change. You don’t need to agree or disagree but if you want to, you can.
Jessika: No, I was just going to say that policy is really important. Government policies really important and national level government policy can be very impactful, international agreements can be super impactful. So it is, I think, important to highlight for people that their votes matter and when they’re voting for and demanding climate policy, the reason for that isn’t just to bring about emissions reduction, but it’s, also alongside that you have technological innovation.
Jessika: Anytime things are changing, especially in such an important sector, like these energy service, energy sectors that I’ve been talking about, if technology is changing, there’s opportunities, there’s opportunity for job creation, of course, there will be winners and losers. For society as a whole, there’s great opportunity there, there’s opportunity to address inequities, to address all sorts of environmental and social justice issues. So I do often try to make this point that voting is really important and that if you vote for options, if you vote for climate policy, what you’ll get are options that will allow you to act and make decisions and take action along your values.
Jessika: So it’s important to vote for a climate policy, for all of those above reasons. It’s a huge opportunity, I guess. I worry that people feel like all is lost and feel very down and think my vote can’t matter but when we look at some of these trends in the past, like we talked about for solar energy, you see that we saw this really rapid improvement in this technology that came about because of efforts all around the world, by many different kinds of people and different countries kicked in support at different points in time and it was kind of this emergent trend that we saw that is really pretty impressive. So I think people, I like to share that story because I think it can lead to more optimism around this problem.
Jim: We will talk about optimism and how to get rid of despair at the end but we need to move on here. We’re getting into the weeds a little bit more than I’d, actually I like the way. The truth is I like the weeds but we’re using up our time. So let’s hit learning curve, what’s going on in storage and nukes quickly. We’ll drop hydrolysis and then we’ll move on. So storage, what’s has happened and where are we are the trend on storage.
Jessika: Yeah, so we’ve seen significant declines in the cost of lithium ion batteries, for example. So now, there are estimates of costs around $200 per kilowatt hour. As I mentioned before, once you use these as stationary storage devices and installations, there are other costs that are incurred, but costs have come down significantly. The other important trend to know it is that people are working on many different kinds of storage technologies. You mentioned before that you had worked on vanadium redox flow batteries, that’s one kind of flow battery.
Jessika: There are many other kinds of flow batteries that various researchers are working on. Some of them here at my institution at MIT and these are batteries where you’re basically replacing the electrolyte and this opens up some design opportunities to really bring down those energy capacity costs. That’s important and so basically because you don’t have to be able to carry these stationary storage devices around, you don’t care about the mass and the volume. So there’s all sorts of interesting ways in which these technologies are being developed.
Jessika: Another important energy storage technology is pumped hydro storage. Now that really only makes sense in places where you have enough water and where you have the right topographical features, where you have some reservoir of water elevated that can be used for this pumped storage site and the way it works is you pump water uphill, and then later you let it run downhill to generate electricity. So where this makes sense, where you have the right conditions, water and topography, this is an important technology to adopt.
Jessika: Of course I want to make sure to highlight that there are many concerns in many places about building a hydro facility and a hydro reservoir. So we really want to take those into account as well. There can be ecosystem impacts and impacts on local populations. So, it only really makes sense where you have the right conditions and people and ecosystems aren’t negatively impacted. So the future development potential there is somewhat restricted by those factors. So those are some of the electro chemical storage devices, the batteries, and so batteries and pumped hydro storage are some of the important storage technologies to keep an eye on and as to where things are going to go in the future, there’s certainly a lot of room for development.
Jessika: As I mentioned before, we’re just starting to get working on stationary storage devices in earnest and there’s more enthusiasm in this area. There are many different directions these technologies could go in, different forms of energy. We can store the energy in different forms and so I think there’s a lot of potential but the future is uncertain. So there, in terms of our portfolio again, we’d want to diversify our investments across a number of different options. I should mention lithium ion batteries, again, come back to that. There’s probably a significant room for cost reduction and lithium ion batteries too. So that’s another technology to keep an eye on.
Jim: Okay, how about nukes? Nuclear power? Again, people often forget about that we’re talking about greenhouse gas free power sources but hey, there’s one that emits almost nothing in terms of greenhouse gas. They have a fair, big upfront cost but if you look at the energy return on investment, the things about 100 to one. So it gets a very good return on energy invested. Where are we today with nuclear power and what do you see coming down the pike?
Jessika: Yeah, so nuclear fission reactors are an important option to look at as well. So what we’ve seen in the US is that the development of new reactors really slowed and essentially stopped in recent decades, and there are a couple possible reasons for that but what we see over time with nuclear fission reactors, we’re actually working on a paper on this right now, is that the cost actually rose over time.
Jessika: So it didn’t follow the kind of learning curve we were talking about earlier, and we think that one of the reasons for that rise is the increase in soft costs. So that’s basically all of the onsite construction costs, the permitting, the quality control. Some of this was in response to safety regulations, but in many cases, we think there could be opportunities to respond in a different way to safety regulations, and that this cost increase could potentially be reversed if we rethink how we’re developing and constructing these nuclear fission reactors.
Jessika: So basically, costs have come up in the US. In other places costs have not followed the same trends and development has continued. So France, as many people may know, realize a good deal on nuclear fission for electricity. In the US, we haven’t seen growth trends in recent years. So it’s a big question as to what’s going to happen in the future and my thoughts on what could happen or the following.
Jessika: I think there is potential to find ways to reduce the costs of nuclear fission and to reduce those soft costs that I talked about. One of the ways to do that is to possibly to transition to small modular reactors, where much of the construction is done off site and the on site construction requirements are much more straightforward and that could help drive costs down.
Jessika: The other big question with nuclear fission of course, is what is the public acceptance of it. In some places like in Germany and Japan, you see that the public acceptance is low, in other places it’s higher. So, this may be a technology that works in some places, is a good option in some places and not such a good option in other places. I think we should be bringing people into those decisions and having conversations about that. In places where it makes sense, then this can be a contributor to a low carbon electricity.
Jessika: There are a couple of other issues that we need to think about as well, like long term storage of nuclear waste and of course, there’s always the question of nuclear weapons proliferation, and certainly continuing to focus on preventing nuclear weapons proliferation. So those are some of the challenges but also some of the opportunities with nuclear fission technology.
Jim: I think about the algebra it’s a multi factor equation and if we were to say triple the amount of nuclear we had in the world, that would provide a pretty good sized baseload, which makes a lot of the other problems much less pressing.
Jessika: That’s right. That’s right. So nuclear fission could be used as a baseload technology and the question is really about those three factors that I mentioned, or let’s say for actually. The answer to that question will be determined by those four factors. One is the social acceptance. The other is the costs and if we can bring those soft costs down, the other is what we do with long term waste management. Then finally, the question of nuclear weapons proliferation. So those are four important factors to keep an eye on.
Jim: Yep, that sounds good. One last technology before we move on, what about carbon atmospheric removal? Is that a thing? Is that going to really happen? Is there a chance for it? Where does that stand?
Jessika: Yeah. Again, this is a technology that I think we should be investing a some amount in. There some challenge having to do with coordination, again, and public acceptance and some of these challenges that we talked about, regarding these not in my backyard kinds of challenges. Now, I’m not saying, it’s too early to see if that will really be the determining factor for carbon capture and storage but these coordination challenges and public acceptance challenges are ones that could certainly be important factors. What we’ve seen so far limiting investment in this technology, which may have to do with investors’ perception of those two factors that I just mentioned, is that there hasn’t been as much appetite to take on the risk of investing in these large projects.
Jessika: There have been successful demonstration projects, but the technology really hasn’t taken off. There are a couple of other challenges that still have to be addressed. So one is in looking at what are the possible storage sites and in what form do you storing the carbon dioxide. Ideally, we’d like to be able to convert it to a solid form and one of the reasons for that is that even a very small leakage rate for carbon dioxide could lead to a huge problem down the road because carbon dioxide, once it’s in the atmosphere sticks around for hundreds of years.
Jessika: So even if you have very small leaks over time, you get to a very big climate problem. So that’s something that we’d like to avoid. So researchers are looking at turning carbon dioxide into a solid form. It’s not an easy thing to do. What you’re doing there is trying to drive a mineralization reaction, which isn’t all that easy. So I guess the bottom line is carbon capture and storage is certainly something we should be looking at. It may end up being more of a niche technology for certain niche applications like industrial emissions. That’s something that could turn out to be how this technology is used. I think we should keep it in the portfolio of technologies that we’re investing and trying to improve.
Jim: Okay, that’s a good thought. Now, we’ll skip over my last few nerdy topics, because I think it’s particularly relevant for this carbon removal and sequestration issue into the policy space. We have a whole lot of different knobs that, as a social operating system we could set to help us move towards carbon neutrality before we melt down. Some of the ones we’ve talked about before are things like portfolio mandates, where just by regulation, we say that utilities must convert x percentage of their capacity to renewables. Cap and trade where there’s a complicated market based system in greenhouse gas emissions, and then things like carbon taxes. What do you think about those policy things and what else do we have in the policy space?
Jessika: Yeah. So there are a handful of different policy instruments that we have to choose from. Some of the major ones are government funding for research and development and for really all of the technologies that we’ve talked about, there is a need for further basic research and publicly funded research that could really go a long way in addressing some of the specific problems and challenges that still remain for those technologies we talked about.
Jessika: So that’s one set of policies, that’s really important and then the other policies are ones that we can put all of them into one large bucket, which has the label market stimulating policies for low carbon technologies. So these are things like various kinds of incentives. So subsidies for low carbon energy, feed in tariffs are guaranteed prices or regulations that mandate a certain amount of renewable energy for example.
Jessika: One example is the renewable portfolio standard that you see in some US states. So those are all markets stimulating policies, but also carbon taxes and a cap and trade system could also fall under those markets stimulating policies. Those are a little different in that you’re not picking individual technologies to target but rather targeting the carbon emissions coming from those technologies but those can also fall under that category. So we have a range of different instruments that we can use and they’ve been shown to be successful.
Jim: Yeah, though it’s funny, we don’t seem to have much will to do it. Various people try in cap and trade and truthfully, I’ve got a fairly strong economics background. When I first heard about cap and trade, I said, this is obviously the right answer, because you take out the most cost effective carbon first. The idea is that a bunch of people have rights to emit carbon, those rights go down hill every year. People trade them amongst themselves. So carbon that’s easy to get rid of gets rid of early, et cetera but unfortunately, there’s lots of problems with it. Like who gets those credits.
Jim: You can imagine any society that has even a little corruption, it’s going to be driven by political corruption to a large degree. So we saw in Europe, they set the caps too high and basically didn’t do jack shit, price dropped to almost zero, so it had no effect, et cetera. So I’ve come around to believe very strongly that this is the right economic stimulus for carbon reduction, which is a carbon tax which is set relatively high, say 30, or $40, a carbon ton equivalent today, and is set statutorily to increase linearly to $200 per ton in 20 years, and continue thereafter.
Jim: Further, this carbon tax will be refunded to the populace per capita after a small amount and maybe later, a larger amount is used to pay for carbon sequestration. So first, what use of the tax is to actually pay people the exact reverse of the tax for taking carbon solidly out of the atmosphere and no bullshit but the real deal. I hear the bricks, I can count them. Then the rest goes back per capita to each individual. Now the beauty of this is you don’t have the political kickback because the average use of greenhouse gases is quite a bit higher than the median use.
Jim: What does that mean? It means that the majority and a significant majority of people in a country like the United States will actually be economically ahead if they got a per capita redistribution of carbon tax. Yet every decision they make at the micro economic level is fully informed by the weight of the carbon tax. So their gas still cost twice as much. So they’re going to use less gas, even though in the aggregate, they’re going to get all that money back again at the end of the month. So I’ve been thinking about this for a while, and I can see no better, powerful stimulus to our innovators, to our own conservation instincts, to everything by a strong and rapidly increasing carbon tax that’s refunded per capita on a monthly basis.
Jessika: Yeah, I think one of the important issues that your proposal will deal with is the otherwise regressive nature of a carbon tax or the inequitable impacts of a carbon tax. That’s one of the concerns is that if you have a carbon tax, it’ll affect lower income households and people more. So with the plan that you’re talking about, you could begin to deal with some of those issues. I think certainly a carbon tax could work.
Jessika: A couple thoughts on that, it’s really important and you touched on this. It’s important what the actual value is. So whenever anyone says they’re supporting a carbon tax, I always come back and ask, okay, what is the tax? What’s the value? What value does it start at, what happens to it over time, and once we start to get up to $100 a ton, that’s when you really can start to see significant changes.
Jessika: We know this because you can simply look at the cost of energy and the carbon intensity of energy of different options out there and you could see how they change relative to one another with different levels of a carbon tax. We know that, we can see those changes. And I’ve done this analysis and $100 a ton is, you’ll start you’ll see things change, even at a lower level but $100 a ton is when you can start to see these shifts in the energy supply technologies and really, that’s what’s needed.
Jessika: You have to get fossil fuels out of the energy system or to the extent they remain, capture the carbon dioxide and ideally turn this to a solid form. That’s still a technology that needs some development. So, I think a significant, sizable carbon tax could be a good way to go. Of course, the question is, will people accept it, will they support it? Some of my political science colleagues have looked into this in detail. One colleague of mine, she’s actually a former student of mine, Leah Stokes, University of California, Santa Barbara, is doing some great work in this area.
Jessika: Anyway, it’s important to look at what do people want. I’m not saying that that can’t change over time, but we want to pay attention to what is acceptable to people, what are they going to support, and some of the studies out there are suggesting that people like to, they don’t really like a tax. So maybe we could reframe your policy in such a way that it’s an environmental rebate because they’re getting something back, but that idea of paying something is less popular than the idea of investing in something and getting something back.
Jessika: So when we talk about investing in solar and wind, these can be more popular policies actually than taxing carbon emissions and that perhaps is rooted in human psychology. At the end of the day, I guess what I would say is that we have these energy supply technologies, they have a certain amount of carbon emissions associated with them, they cost a certain amount, they have a certain amount of scalability. We can use a collection of instruments, a carbon tax would work, a carbon cap would work, it would lead to a price on carbon.
Jessika: Different technologies, specific instruments would work applied to the handful of different technologies we have. We can use a combination of all of these but the idea is to, all of these essentially put a price on carbon. They bring in that external cost of carbon emissions and climate change, and bring that into the price that consumers see.
Jessika: It’s getting a little bit kind of technical, and I don’t know how much we want to go into these details but one of the challenges with setting the right carbon price is actually to address some of the questions we’ve been covering with is how our technology is changing with time, because at the end of the day, if what you want to do is to reach a certain emissions target, all of these policies need to be informed by an understanding of the dynamics of technological change.
Jessika: If you have a technology changing in cost by an order of magnitude over 10 years, that’s something you really want to take into account in your models and use that to inform policy. So I guess I would tweak your proposal a little bit. I think a carbon tax where it makes sense where it’s socially acceptable, and by the way, we have a significant carbon tax in Sweden. I think that makes sense to go forward with that but we’re probably also going to need a number of these other policy instruments for investing in government funded R & D, but also these market stimulating policies that target options that look like they could be very, we’re all the evidence suggests that they could be very important for addressing climate change going forward.
Jim: I got probably the right answer. There is no one answer. We’re all looking for the silver bullet but it’s a question of coordination. You mentioned several times through the day that our research priorities are real important and I saw that you’d recently co-authored a paper on that. What are the four research priorities for making progress on climate? Could you give us your thoughts on where our research priorities ought to be?
Jessika: Yeah, sure. So there are a number of really important areas. I guess I’ll start with technology specific priorities and which technologies I think we could focus on and then I’ll go into some other priorities. So in terms of the technologies, certainly bringing down energy storage costs is really important and there I’m referring to not just batteries, but also other kinds of energy storage like technologies.
Jessika: Figuring out how to draw from a more diverse and wider geographical area through transmission infrastructure expansion, how to draw solar and wind energy from a wider area, a larger area, along with new approaches to demand side management and also integrating energy demand and supply across different [inaudible 01:18:23] sectors electricity, transportation, heating and industry to electrify those services, those energy services as much as possible, but then also to find ways to maybe generate and produce low carbon fuels to meet the portion of the demand that can’t be met through electrification.
Jessika: So I kind of lumped these under energy storage plus, so the physical batteries and then all of these other ways of managing and matching supply and demand. I think that’s a huge research area and really important. So that’s one, certainly bringing down the cost of solar energy, and specifically, the soft costs of solar energy is important. Focusing on reducing the soft costs of nuclear fission alongside being creative about ways to deal with the waste storage and the waste management problem, as well as the risks of weapons proliferation, that’s really important.
Jessika: Offshore wind has a lot of potential, and then continuing to invest a bit in carbon capture and storage and converting carbon dioxide to a solid form. I think that’s important as well, we should keep an eye on that and keep pushing on that. Now, if I were to make allocations across those areas, I’d use a portfolio model and different ones would receive more research funding than others, but those are some important ones. Oh, and also continuing to work on electric vehicles.
Jessika: So that includes battery electric vehicles, as well as fuel cell vehicles, and then also transportation technology and software that allows us to match vehicles to the kinds of trips and the features needed for a particular transportation service. Then finally, developing technology that allows us to seamlessly provide transportation services to people combining electric vehicles with public transit, and other low carbon forms of transportation. So those are some technology areas that I think are really important.
Jessika: In terms of general themes, I guess I’ll highlight a few. One is this issue of soft technology and soft costs and just in general, finding ways to match a low carbon supply to energy demand and to shape the energy demand. So that goes beyond the specific example that I gave before in managing variable renewable energy and matching that to demand to looking at the example from transportation, matching transportation services to people’s needs.
Jessika: I think we can use this as a concept more generally to look at industrial energy services and heating and cooling energy services. So kind of looking at using soft technology to match supply to demand. Then also, across the, couple of the technology examples I gave, I mentioned soft costs specifically. So that’s the cost of labor, installation, maintenance and this is a category of costs that hasn’t seen as much improvement as it could across many different low carbon technology. So that’s specifically something that I think would be important to look at.
Jessika: One other area I want to highlight is artificial intelligence. I’ll just give one trivial example, which is self driving cars. The algorithms that are being developed for self driving cars aren’t focusing as much as they could on energy efficiency, reducing energy demand per trip. Then also we should be thinking about how do we use automation of vehicles and other automation to make our resource use more efficient. So in transportation, there’s a concern that automation could double or greatly increase transportation energy demand.
Jessika: It could also cause the trend to go in the opposite direction and my point is, we need to be deliberately researching these different options and try to, if we care about climate change, which I obviously do, try to understand how we can use automation for benefit in order to bring about emissions reduction and de-carbonization of transportation. So those are a couple of general themes.
Jim: Well, when I become president, are you going to be available to be my Secretary of Energy?
Jessika: Sure.
Jim: All right.
Jessika: Actually, there’s one more, can I say one more?
Jim: Sure.
Jessika: Okay, so another theme, that’s really important and this is actually one that I’m going to be working on with some colleagues at the Santa Fe Institute in a small working group next month. That’s on thinking about how the decisions we make today will or will not allow us to reach deep de-carbonization path targets. One of the problems that I mentioned earlier is a problem that came out of some research we did and this was published recently in the journal, Jewel on the energy storage requirements of relying almost entirely on solar and wind energy.
Jessika: What we see there is that basically, if we go down this path, we need to be thinking about ways to be able to address these large unexpected shortage events in solar and wind energy and be developing the technologies for that ultimate goal now, even though we’re far from using 80%, renewable energy or more, we need to be working on that now. Then we also need to be giving ourselves retaining the option to reach deep de-carbonization targets in different ways.
Jessika: So basically what I’m saying is we should be researching and understanding now, what kinds of policies are needed to allow us to retain different options. So if we think of this as a decision tree, we retain certain branches of the decision tree through our investment decisions and our policies and we want to make sure that we can get to these deep de-carbonization targets and be deliberate about that already now.
Jessika: So many states have very ambitious de-carbonization targets by mid century for example, New Mexico recently adopted one, New York State, California, both have very aggressive de-carbonization targets. It’s important to be thinking about how the policies we adopt now give us the options that we need and take into account some of the uncertainties that are there in order to reach those deep de-carbonization targets.
Jim: Yeah, I think that’s critical as a society that we be thinking about that, but that we be thinking about it realistically. One of the things that really pissed me off about climate change and thinking is how a lot of what I call magical thinking has been floating around recently, the exact opposite of the kind of thinking you just laid out. For instance, Bernie Sanders, a guy I supported in 2016, right on his website, under his climate change policy, he puts out as his goal, reaching 100% renewable energy for electricity and transportation no later than 2030. That’s total horseshit, can’t possibly happen.
Jessika: Yeah, I think I have a couple comments on that. I think, really what we want to keep our eyes on there as a goal is de-carbonization. So net zero emissions energy systems is the technical term, I guess or the jargon that we use. So that could come from renewable sources. It may be largely solar and wind energy, but also from other sources like hydro in places where it already exists, nuclear fission and that could come through electrification, as well as producing some low carbon fuels like hydrogen, which is an important one to keep working on.
Jessika: That’s actually another research priority there. So we want to be aiming for net zero emissions energy systems and it could be that that’s largely coming from renewable energy, but the policy target, I believe, should be focused on the end goal, which is getting carbon emissions out of energy. So that’s that net zero emissions energy systems. That’s important. Then, if we set a target for a certain time, so say we set a target for 80 to 100% emissions reduction by 2050, it’s really important to make sure that that can be reached and to make sure you have a plan for reaching that.
Jessika: So the Obama administration published a mid century strategy report shortly after the elections in 2016. This was something that they had been working on for a long time and this is the kind of analysis that should be behind policy targets for 2050, for example, for de-carbonization. It is really important to be thinking about how we’re going to get to those targets and to put out those plans alongside a statement of the end goal.
Jim: I agree that it has to be realistic, because again, this Bernie thing, I mean, think about what he’s saying. 100% renewable energy for All electricity and transportation no later than 2030, impossible. What’s going to happen is you put that out there on his platform, and it doesn’t even come close. We’d be lucky to get 20% by 2030. It’s going to cause people to believe that these forecasts and goals are utterly unrealistic. It seems to me the takeaway is that political statements about goals need to be based on science, not just on God knows what that damn thing was made up from.
Jessika: What I want to see first is candidates supporting the idea and really engaged and understanding the importance of climate change mitigation. So that’s the first thing I look for and actually, I did write some live commentary during the candidates’ climate town hall that was hosted by CNN last fall. So I got a close look at all of, at that time, the list of candidates, Democratic candidates, their policies, and I have to say that I was really heartened by the fact that first of all, this event was being held at all.
Jessika: If you had told me four years ago that CNN would be hosting a primary debate on climate change, I’m not sure how likely I would have thought that would be at that time. So the fact that this was happening at all, is really important and you could also see that many of the candidates have learned about this issue, some more than others and have an understanding of the issue. So that’s one of the first things that I look for and a number of them I would say, we’re stronger than others in terms of their plans and how well thought through they were.
Jessika: Certainly having a plan at all and actually wanting to do something about this problem is really critically important. Then, of course, we want to back that up and make sure that those plans are informed by achievable targets and achievable actions.
Jim: That’s, of course, what we want. One last thing and then a half a thing, global collective action problem. The United States or Western Europe, we could do our thing and we could get our carbon equivalent emissions to zero, but if the rest of the world doesn’t follow, it isn’t going to do any good. What are some of your thoughts on how we address the global collective action problem?
Jessika: Yeah, so one of the questions that got me interested in starting down this path almost two decades ago of this research that I’m doing was exactly this question of how do you bring about agreement among different decision makers and specifically among countries and regions that are at different levels of economic development. So you have some countries that have rapidly growing economies, they’re still growing and income levels are rising more rapidly.
Jessika: There’s others where income levels are already high, fairly high and growth is sort of leveled out some more. So basically, you have developed economies and then rapidly growing economies and these decision makers have different problems that they’re confronting, and the question was always how to bring these decision makers into agreement because rapidly developing economies, it was thought would not want to sign on to climate policy, because they don’t want to have to pay for the carbon emissions that developed economies have already contributed.
Jessika: The feeling was that developed economies have caused this problem, and they should be the ones to pay for it. Now, from the developed economies’ perspective, they said, we don’t want to do this alone. You have to contribute your fair share to the rapidly developing economies. So this was a problem but one of the motivations for the research that I started to do was to ask, okay, well, if we consider technological innovation, how does this picture change?
Jessika: I can say that I think there is actually reason for optimism that agreements could be reached, because what you see when you look at what’s happened over the last few decades, is that in cases like in solar energy, where we have policies around the world, there wasn’t much coordination but there were different policies at different times in different countries that brought about this very rapid and significant improvement to this technology that created a lot of opportunities.
Jessika: In places where manufacturing innovation happened, it created jobs in installation and manufacturing. Then this technology was used everywhere around the world. So I think this is something that could be repeated in other technology. So I guess what I’m saying is that by adopting climate policy, what happens is you can, and especially if you do this in a way that’s carefully designed and strategic, you can stimulate very significant technological innovation that benefits you and hat leads to new technologies, better technologies that can then be exported to other markets.
Jessika: So it can really be seen as an opportunity and this is a message that was in a report that we wrote ahead of the Paris climate negotiations. It’s something that was referenced there and used at least in some of the discussions based on what I’ve heard. So it’s basically it’s pointing out that when you adopt climate policy and you enforce climate policy, you don’t just get the emissions reductions out. You also get technology innovation out, which creates lots of opportunities.
Jessika: So I see that there’s actual potential once we recognize that innovation opportunity for greater agreement decision makers around the world and actually that people will not want to be left out. So at some point, we’ll hit a tipping point where this de-carbonization trend will really take off. I hope, I don’t know if this is going to happen, but this is something that could happen if we put the effort in. So this tipping point would then, once we cross this or hit this tipping point, it’s in everybody’s interest to kind of stay on board and to stay on top of this and not be left behind. So I feel like that was a little bit of a confusing answer. I don’t know if I should start over.
Jim: No, I think it’s good. I think you hit on a lot of the key points. Let’s exit on, I hear people talk about despair about climate and that really makes me mad because from what I see, it is certainly a fixable problem. It’s probably on par with World War II or something like that in terms of percentages GDP and instead of being concentrated in two or three years, it’s spread over 50 years. So why do people despair? I shouldn’t say why they despair. I know why they despair, because of bad memes floating around social media but do you think that there is more hope than despair appropriate in where you sit and knowing better than almost anybody on earth where are these technologies really are and what’s possible?
Jessika: Yeah, I think there’s a lot of reasons to be hopeful. Now, I’m not going to say that it’s a done deal and that we are definitely going to address this problem. I don’t know if we will but there’s so much opportunity and I guess my approach and sort of what I would encourage everybody to do is to try. If we’re not trying, if this is a problem that you care about, and you’re not trying, you’re not doing what you can, then the problem definitely won’t be addressed.
Jessika: If everyone tries, everyone that cares about this problem tries, then I feel very confident that we’ll get to where we need to be. So I remain hopeful but I don’t spend my time thinking about whether or not we’ll address this problem. Of course, that thought does come to me and I do have those thoughts, but I quickly try to refocus my attention on doing what I can and trying my best. That’s the approach I take, yeah.
Jim: On that note, I want to thank you for everything I was hoping this episode would be, great detail great thoughts and a great wrap up.
Jessika: Thanks, Jim. That was a lot of fun.
Production services and audio editing by Jared Janes Consulting, music by Tom Muller at modernspacemusic.com