01 Dec 2016
Ask the Expert: Energy’s Next Era
Two alumni illuminate the path to making renewables a global realityRe: Jules Kortenhorst (MBA 1986); Nushin Kormi (MBA 2005); Tonye Cole (AMP 186); Catarina Lopes (MBA 1999); Dick Bailey (MBA 1981); Mark Caron (MBA 1993)Topics:
Governments across the globe are getting serious about weaning themselves off of fossil fuels. Denmark has pledged to be powered solely by renewable energy by 2050; Sweden pledged to reach the goal by 2040. Hawaii made the same promise, with a 2045 deadline. But even with all that seeming progress, the nonpartisan, nonprofit Rocky Mountain Institute (RMI) notes that wind and solar still only accounted for 2.9 percent and 0.7 percent, respectively, of total global power generation in 2014. How can we hasten the energy transition and make sure no one is left behind?
This is the kind of question that RMI is tackling as a member of the Energy Transitions Commission—a global coalition of energy companies, nonprofits, academics, and innovators working toward the goal of “reforming the energy system.” RMI CEO Jules Kortenhorst (MBA 1986) and principal Nushin Kormi (MBA 2005) took alumni questions on the energy transition, adoption strategies, and the practical steps to a fossil fuel–free future.
Nigeria is the sixth-largest producer of fossil fuel in the world, and its national economy derives 90 percent of its federal income from fossil fuel production. How can a nation like Nigeria provide affordable renewable energy in a depressed economy so dependent on fossil fuels?
—Tonye Cole (AMP 186, 2014)
KORTENHORST and KORMI: The world of fossil fuels is a volatile one, and exporters of fossil fuels expose their economies to that volatility. Domestically, Nigeria, Africa’s largest oil- producing country, has expensive and unreliable energy. Whether it is lines for automobile and generator fuels or blackouts of the electricity grid, Nigeria is a perfect example of a country that cannot afford to do without efficiency and renewable energy. Efficiency and renewables compete very well with expensive oil-based energy and are more reliable. A domestic focus on efficiency and renewables can reduce domestic energy bills and create diversification. A favorable business climate for renewables investors could make all the difference.
As the energy world moves toward renewables, it also moves from variable cost to fixed cost—from an Opex world to a Capex one. How should pricing evolve to reflect a Capex world and induce consumption when energy is abundant and prevent it when it isn’t?
—Catarina Lopes (MBA 1999)
KORTENHORST and KORMI: Indeed, the transition to renewables, in particular solar and wind, means that our electricity system is going to be Capex-driven, and the marginal cost of power will essentially be zero much of the time. Matching demand closer to supply, rather than the other way around, will then be a crucial mechanism to let markets function. One important element will be time-based pricing that stimulates demand when renewables are producing abundant electricity. Additionally, electrification of whole new sectors such as transportation (through electric vehicles) or heating (through heat pumps) will make demand more flexible over time, and allow demand to follow supply.
Are global R&D budgets being allocated efficiently to the most promising technologies to prepare for the next era—or to those technologies in which our industrial champions have the largest stakes? Or do you believe these are the same?
—Richard Bailey (MBA 1981)
KORTENHORST and KORMI: The global energy transition involves the public and private sectors alike. Global R&D budgets for energy are growing, with 20 countries, including the United States, making commitments at the 2015 United Nations Climate Change Conference (COP21) in Paris to double their energy R&D spending. Although government R&D has its challenges, it also brings the ability to finance the early stages of technology demonstration and scaling. At the same time, the business community is increasingly positioning itself for a sustainable energy future. This requires that the private sector supports, develops, or acquires the most promising low-carbon energy technologies of the future. Ultimately, the companies that are willing to make investments in these technologies will become our next generation of corporate champions.
Generating electricity for electric cars produces carbon emissions. What percent of a nation’s electricity has to come from non-fossil fuels before electric cars lead to a net reduction in carbon emissions?
—Mark Caron (MBA 1993)
KORTENHORST and KORMI: Generating electricity from fossil fuel produces carbon emissions, and so electric cars powered by our electricity grid are associated with carbon emissions. But an electric vehicle is less carbon intense (in terms of pounds of CO2 per mile) than a 25-mile-per-gallon internal combustion engine vehicle—even if the electricity grid that powers the vehicle is generated from 100 percent coal. It is important to note that electric vehicles can provide a solution to both personal and freight mobility, and even work with the electricity system to help manage variability in demand, which will result in more economic value and lower carbon emissions.
Kortenhorst shares how the fall of the Berlin Wall inspired a career change on the Skydeck podcast.