Will Obama’s Push for Renewable Energy Get a Tailwind?

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U.S. President Barack Obama recent strong endorsement of wind and solar power could help accelerate the development of renewable energy technologies. However, the real game changer would be a carbon tax that provides incentives for a large-scale shift to emission-free power generation, according to renewable energy experts at Wharton and the University of Pennsylvania.

Wind energy could provide as much as 35% of America’s electricity and supply renewable power in all 50 states by the year 2050, Obama said in his speech at the National Clean Energy Summit it Las Vegas on Aug. 24. In solar, too, the U.S. has made big strides, and generates 20 times more solar power than it did in 2008, he noted.

Obama’s latest push on renewable energy follows his unveiling earlier in August of the Clean Power Plan that aims to cut carbon emissions from power plants and energy stations across the U.S. by 32% from 2005 levels by 2030. Also, in June, the U.S. and Brazil jointly committed to source 20% of their energy needs from renewable sources by 2030.

Economics Holds the Key

“It is possible [to achieve Obama’s goals], but it depends on the economic trade-offs and designing the right policies to get PV (photovoltaic or solar power) and wind to take off,” said Ruben Lobel, Wharton professor of operations, information and decisions, whose research specialties include renewable energy and green technology adoption.

Andrew Huemmler, senior lecturer at Penn’s School of Engineering and Applied Science, agreed that Obama’s clean-energy goals are achievable by 2050. He noted two aspects of that will help in that journey. “It would accelerate implementation of technologies in weatherization, solar and wind,” he said. Second, it would “provide research funding to advance those technologies so they will be ready 15 to 20 years down the road.”

Lobel and Huemmler discussed the significance of Obama’s clean energy programs during the Knowledge@Wharton show on Wharton Business Radio on SiriusXM channel 111. (Listen to the podcast at the top of this page.)

Preparing for the ‘New Normal’

Huemmler believes the “new normal” among U.S. consumers could be a major shift towards the use of solar and wind energy. “People have been advocating solar for years without clear market signals,” he said. “We are on the verge of a big change in the energy industry, particularly in electricity. The whole industry will be turned upside down.” Two big drivers for that to occur are the rapid advances in solar and wind power technologies, and the gathering strength of the worldwide effort to combat climate change.

“We are on the verge of a big change in the energy industry, particularly in electricity. The whole industry will be turned upside down.” –Andrew Huemmler

However, it will take more than speeches to get there, according to Lobel. He said Obama’s moves to encourage solar power installations in affordable housing projects and in military bases “will make a political impact rather than a serious impact on adoption.” He noted that cash subsidies for solar adoption in California paid off well — the state produces more than 3 gigawatts of solar power.

In addition to incentives, it is also critical to prepare the ground for electricity grids to accept solar or wind power, according to Huemmler. “You can’t plug big things on to the grid without the grid being able to accept them.” Many policy and regulatory issues have to be worked out for a smooth transition. Solar power is typically fed into a grid during midday, but when the sun goes down, power plants have to be ramped up steeply and that is difficult with older plants, he explained.

In fact, solar power has upset the industry math in some places. Huemmler said Chicago-based energy company Exelon is considering closing down three nuclear power plants in Illinois because energy prices have fallen far too much for them to be viable. “Suddenly you have solar as a disruptive technology taking out all this incumbent technology,” he said. Ironically, nuclear power is a zero-carbon emitter, he noted.

Pricing Carbon

A carbon tax would turbo-charge clean energy production and adoption more than any other policy measure, according to Huemmler. “If there is a price on carbon, energy prices should go up just enough, carbon emission credits should be valuable enough and that will provide more incentives for people” to use clean energy.

Making carbon emissions expensive will also spur innovation in clean energy technologies, said Huemmler. “There is an amazing amount of innovation without a price on carbon; with a price on carbon we will see a lot more innovation — 10 times or a hundred times or a thousand times more innovation,” he said. “A whole industry will take off and be a job creator.”

“When consumers have access to market signals, it would encourage a push for distributed [energy] storage.”  –Ruben Lobel  

In addition, energy storage is gaining much attention as an enabler in the clean energy movement. Here, Lobel felt that providing consumers access to real-time pricing information will encourage energy storage. “When consumers have access to market signals, it would encourage a push for distributed [energy] storage,” he said. If consumers find that power costs more during peak hours, they would shift some of their consumption to other parts of the day, he added.

Intermittent wind supply is another factor. “It is hard to predict when exactly wind is going to come in,” he said “So if you depend on it for a third of your power generation, you need a lot of backup generation on standby or more efficient and economically storage systems.” He expected technological advances to make that doable by 2050.

Added Huemmler: “Energy storage is the Holy Grail of this entire equation,” and referred to electric car maker Tesla Motors’s efforts with energy storage batteries as “fantastic.” However, he did not see retail consumers directly taking advantage of real-time pricing of energy. He explained that energy markets are too volatile and unpredictable to allow for that. He predicted that intermediaries would step in to buy energy, add a risk premium and offer customers flat pricing. “I hope these intermediaries develop off-peak and peak pricing, sunny pricing and night-time pricing.”

Other gains from Obama’s clean energy drive would be job creation, and some bragging rights. In his speech at Las Vegas, Obama noted that the U.S. has more than 500 wind manufacturers across 43 states, and that the industry supports more than 50,000 jobs. Lobel said employment rates in solar companies per megawatt hour generated are higher than for coal power plants. Huemmler added that at the forthcoming U.N. climate change summit in Paris in December this year, Obama can point out that the U.S. is moving ahead aggressively on clean energy.

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