US takes up challenge to accelerate global energy transition

The new US administration’s policies could herald a pivotal moment in the global fight to tackle climate breakdown. ‘Climate Day’ at the end of January saw President Joe Biden sign a host of executive orders: to rejoin the Paris agreement; to appoint a ‘climate czar’; pull the plug on the Keystone XL oil pipeline, and order the Pentagon to make climate change an issue of national security.

The US has an ambition for a zero-carbon energy sector: the question is, how can the country deliver that in practice? What is the cost-optimal energy mix for the US to achieve a renewables-led energy system? Can it be delivered within the aggressive timeframes set out by the new president?

At the core of US energy policy is a pledge to invest $2tn to create a zero-emission electricity system by 2035. The stated aim is to drive economic recovery and job creation, while protecting communities that lie in the crosshairs of climate change.

Naysayers are already claiming, however, that the energy transition won’t be possible within that budget or timescale, with one source even estimating that the costs of realising a 90 per cent decarbonised energy system would reach $7tn.

At Wärtsilä, we have used our energy experience and power system modelling to analyse the potential to meet the vast energy demands of the US using the lowest-cost power source: renewables. Our recent report – ‘Aligning Stimulus with Energy Transformation' - estimates that the US could achieve a zero-emission electricity system by 2035 through investing $1.7tn into wind and solar, plus energy storage and flexible generation to balance system intermittence and volatility.

The most productive areas for wind and solar in the US are in relatively sparsely populated areas, so massively scaling-up renewables is possible, but will require significant investment in network infrastructure to transport clean energy to homes and businesses where it is used.

However, even considering the construction of new transmission lines to export the increased amount of wind and solar power, our modelling shows the overall cost of a zero-emission electricity system would stay well within the US administration’s $2tn estimate.

Onshore wind and solar are by far the cheapest forms of new electricity generation and are the only economically viable way to achieve decarbonisation at the pace and scale required. According to our modelling, the US vision for a zero-emission electricity system could be achieved by deploying 1,700GW of new renewable energy capacity over the next 15 years. This is undoubtedly a huge undertaking, but would be transformative for the US, creating cleaner air, transforming the green economy and generating almost nine million sustainable jobs, according to our calculations.

With such a significant amount of new renewables to be installed, flexibility in the form of energy storage and carbon-neutral flexible gas power plants - enabled by future zero-carbon fuels - will be key to balancing the grid. Our modelling found that the US would need 410GW of new battery energy-storage capacity by 2035, combined with 116GW of new flexible gas-fired power capacity operating on renewable bio or synthetic carbon-neutral fuels. That would be created via 151GW of new electrolyser capacity for power-to-gas fuel production.

In this approach firm, fast-starting natural gas power plants bridge the load to renewables in the short-term, while also future-proofing utility portfolios to burn the carbon-neutral fuels such as synthetic methane and hydrogen that are just around the corner.

Future fuels produced via a ‘power-to-x’ process present a huge opportunity to capitalise, not curtail, excess renewable energy to provide clean, flexible thermal balancing, alongside clean, transportable fuel to power buildings, mobility and industry.

At Wärtsilä, we are already generating power with engines that can use blends of natural gas and hydrogen and which are being developed to be able to burn 100 per cent green hydrogen within the next few years. These fuels form a large seasonal storage to compensate for weather changes and seasonal variations. They can be stored, transported and used to decarbonise all energy-consuming sectors, from mobility to heavy industry, making the utility sector more relevant than it has ever been within the US economy.

This cost-optimal zero-carbon energy system will come to fruition when energy systems reach 80-90 per cent renewables, as power-to-x will enable the final step to 100 per cent renewable power by powering responsive gas engines with carbon-neutral fuel. Future fuels represent the missing piece of the puzzle of to bridge energy portfolios to zero emissions.

A zero-carbon energy system may be viable for $2tn, but in a post-Covid world, can the US be expected to generate that level of investment? The signals coming from the White House suggest as much and reflect the changing investment structure and valuing of carbon.

The United States spends an eye-watering $40bn in fossil fuel subsidies, which have long been seen as public enemy number one for achieving decarbonisation. That looks set to change as the new administration calls on the US to “be bold” and put an end to fossil fuel subsidies once and for all.

The impact of shifting that level of global capital away from fossil fuels would be vast and the ripples would be felt around the world, especially if it were to be redirected towards renewables and future fuels. That level of subsidy with a focus on flexible power systems would accelerate commercialisation of future fuels and mark a significant step in enabling and speeding up the energy transition.

Countless governments have set ambitious carbon-neutral targets, but these are yet to be matched by clear strategies and firm action plans. That approach is like trying to conquer Everest without a map and must change if we are to realise the energy transition.

Having modelled power systems for over 145 countries worldwide, our experience tells us that every country can achieve a cost optimal, future-proof path to 100 per cent renewable energy using technology that is available today.

The path to net zero will not materialise through incremental steps and organic change. An unplanned, step-by-step journey risks energy systems being burdened with technologies that do not support the transition to 100 per cent renewable energy. Governments and utilities must adopt clear strategies to drive action, developed in collaboration with all sectors of the economy and setting clear milestones for transformation.

The US has the opportunity to accelerate the energy transition globally. Current policies suggest the next four years will be dedicated to rapidly progressing the march towards a net-zero energy system. Energy companies can either use this opportunity to evolve and shape the new model, or they can be pushed along by regulation, attempting to cling onto an inflexible model where their value has been eroded by lower cost, clean technologies.

President Biden will outline the US climate plan on the global stage at the COP26 meeting in Glasgow this coming November. John Kerry, the recently appointed special presidential envoy for climate, has called the Glasgow climate summit "the last best chance the world has to come together to avoid the worst consequences of the climate crisis".

The chance of grasping that opportunity today seems more possible, especially if the utility sector steers the way.

Sushil Purohit is president, Wärtsilä Energy