EV and the Renewable Electricity Conundrum, Part 2

02.23.23 | Blog | By:

There is always a silver lining under any ominous cloud in the sky. The war in Ukraine may has helped realize that electricity is not just about building renewable production capacity at breakneck speed, but also about security of supply and affordability.

The “rapid ramping-up of wind and solar”, and a recovery on the nuclear side, should contribute more than 90% of the additional demand for electricity in the next three years, and will come with significant additional investments regarding grid connection and management of intermittency. As impressive as it may seem, this does not make the electricity production more decarbonized, even though this sector is seen as the front-runner in this essential aspect of the fight against climate change, which looks more and more like adaptation to or attenuation of its consequences.

So, despite the numerous, heavily mediatized, calls to stop fossil energy extraction, the use of coal and natural gas is set to remain “subject to developments in the global economy, weather events, fuel prices and government policies”, according to the International Energy Agency (IEA) recent report on the electricity market outlook. This is newspeak code to say that we are not on the way to access carbon-free electricity any time soon, especially as the increase in electricity demand is set to rise to 3% per year, fueled by plain growth in emerging economies, the Global South, mostly in Asia, and all-out electrification in the advanced economies, the Global North or West, more than compensating for the de-industrialization.

The end of globalization, as we have known since the 1980s, implies focusing more on the regionalization of activities, an approach sometime called localism. One could expect a bifurcation of strategies, with some parts of the world marching forth more quickly than others on the path to decarbonization. Any simplistic forward analysis of the data in the graph above shows the next decades may indeed create quite a bifurcated world when it comes to the carbon neutrality of electricity production, with consequences on the standard of living.

Despite re-shoring needs, for security of supply, and despite a lot of automation in the 21st century industry, renewable energy cost, including the amortization of significant investments to use electricity instead of fossil fuels (like in cement or steel manufacturing), may well nip in the bud the trend to re-industrialize in the West, lowering the hopes for employment, the good jobs that have been lost during the globalization era.

And all-out electrification has inflationary consequences, across the board of human activities. Purchasing an electric vehicle immediately comes to mind, a present hard fact. That could last, especially when subsidies dry up. Observing the Chinese market in December 2022 and January 2023 is testimony to the importance of state support, and this crutch may not last forever.

Price of delivered goods will rise as well. According to a famous U.S. research company dealing with clean transport, heavy trucks running on electricity would emit much less CO2 than their equivalent diesel models, using the European energy mix average between 2021 and 2040 for the calculations. Electric and fuel cell (hydrogen) trucks cost much more than their fossil equivalent model, a premium that will be passed on to consumers, especially if, as for cars, hard bans are put on sales of thermal models, as in the European Commission blueprint of February 2023.

Etc …, etc …

The overall likely consequence can be described as: (1) either a more frugal lifestyle, price increases driving a reduced demand, thus reducing the carbon footprint, some would say as an atonement for our previous excessive emissions in the West; or (2) a pauperization of the society, with a limited impact on climate change, regional improvements in the diminishing West (in terms of contribution to global CO2 emissions) having a marginal impact if the rest of the world is not close behind. Again, the graph above shows large discrepancies between regions that will take time to be reduced.

In the meantime, will the populations living in our democratic regimes gracefully accept or violently react to such a bleak future? Utopia or dystopia?

Philippe Marchand is a Bioenergy Steering Committee Member of the European Technology and Innovation Platform (ETIP).

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