With events in the Middle East once again disrupting global energy markets, we need to revisit one of our favorite energy policy concepts, the energy trilemma, a simple variant of the trolley problem with an added variable. The three variables are 1) affordability, 2) security of energy supply (can a hostile government cut off your supply?), and sustainability (are your energy sources heavy polluters or consumers of finite resources?). The trilemma says that policymakers can only enjoy two out of three of these variables, with the third one getting the trolley, so to speak.
If we look at energy-producing technologies, we can see how this works. Coal as a boiler fuel is plentiful in the earth’s crust, and it produces energy that is affordable for most. Coal also provides the user security of supply in places where it is mined domestically, so there is no threat of foreign interference. But it is definitely not sustainable, polluting heavily with sulfur dioxide, nitrogen oxides, particulate matter (soot), heavy metals like mercury, carbon dioxide, and toxic fly ash that has to be carefully stored for decades. So, affordable? Yes. Secure sources of supply with domestic mines? Again, yes. And is it environmentally sustainable? Not even close. So, two out of three, like we said. Fossil gas from the trilemma perspective looks almost identical to coal, except that methane emissions and CO2 are the principal environmental concerns. In this context, LNG is the least desirable. Assuming the price is right (affordable), it offers neither security of supply nor is it environmentally sustainable. Turning to nuclear power, it is considered sustainable because it produces no CO2 emissions. There is also security of supply as uranium (and thorium) is fairly plentiful at least in the US. But is it affordable compared to energy-producing alternatives? Nope.
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Now, let’s focus on renewable sources of energy production. Are renewables affordable? Yes, they produce some of the cheapest energy around and are displacing fossil fuel usage in literally every market where they compete. Are renewables sustainable? Obviously yes. Do they provide security of supply? Hmmmm. First, renewables advocates have recently pointed out that photons of sunlight for solar panels travel 92 million miles before reaching the earth, and none of those photons has to traverse the Straits of Hormuz. Still, critics complain about the intermittency problem. These technologies produce excess amounts of energy during the day and when it’s windy. But what happens at night or when there’s no wind? The Germans even have a term for the latter, “Dunkelflaute”, the “dark doldrums.” This is where contemporary critics of renewables leave the matter. And they would be correct if not for the fact that in many regions, wind power conditions are better at night, plus the fact that large, commercial-scale battery technologies can fill the gap. Grid scale batteries are in the process of making renewables the ideal technology in terms of the energy trilemma because they permit those technologies to provide security of supply and round the clock resilience. From the perspective of the trilemma, batteries change everything.
And from the perspective of fossil fuel providers, it just gets worse. Renewable technologies are continuing to improve because they are in relatively early stages of development. The efficiency rates of solar panels have improved from a 7% conversion rate of solar power to energy to now 30% with the inclusion of new materials like perovskites. Wind turbines are undergoing a similar transition as they get bigger and cheaper. But it is battery technology that is the game changer. We previously reported on a German academic study that essentially concluded that a modern industrial economy like Germany’s could totally sustain itself with renewables, 100%. Recently, a similar study from economists in British Columbia reached the same conclusions. Interestingly, both studies found that in an energy market dominated by renewables, both fossil fired generation and nuclear power would cease to be price competitive because they were simply too expensive relative to renewables.
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The energy trilemma has real-world policy implications. In our home state of NY, Governor Hochul has advocated for more gas pipeline infrastructure (for power plants) as well as a loosening of environmental restrictions. In terms of the trilemma concept, these proposed policies look less than ideal. Will this gas be affordable? It’s not clear (but we’re leaning towards no). If the US pursues its LNG export policy and turns LNG into a worldwide commodity like oil, then prices will likely be both higher and more volatile—especially during times of military “excursions”. Is this gas sustainable? That’s another no, dawg. Well, at least we have security of supply right? If we look at the recent performance of our natural gas infrastructure during extreme winter weather events, we’ve seen well head freeze offs and other system impairments that have taken a substantial portion of gas infrastructure offline precisely when it was most needed. So in terms of the trilemma concept, our Governor’s energy policy may not provide affordability, sustainability, or security of supply. This seems like the worst of all possible outcomes.
We conclude with some unpopular advice. If we were advising NY’s governor, we would recommend building several new, large coal fired power plants. At least then, the power would be affordable, and these plants have a much better operating history during extreme winter weather than comparable gas-fired plants. In addition, a coal plant can store several months of coal supply on site. Obviously, new coal-fired power generation is not environmentally sustainable. But the governor already told us she doesn’t care about that because her preferred outcome is not environmentally sustainable either. Chinese energy policymakers, in their coal heavy system, are dealing with this in an interesting way. They begin by acknowledging that eventually, cheap renewables will eliminate fossil fuels from the merit order. So they are rebuilding these facilities to cycle (turn on and off more rapidly) as they shape themselves to accommodate increasing renewables penetration. To us, this makes a lot of sense. In the US, on the other hand, the energy trilemma concept is useful if, for no other reason, than it exposes policy incoherence.
By Leonard Hyman and William Tilles for Oilprice.com