Our latest JEI Working Paper (link to the full paper can be found at the end of the following Executive Summary) features Associate Editor Jordan Sabin on this rising investment opportunity and imperative.
The global climate is quickly changing as the atmosphere reacts to the trillions of tons of carbon dioxide released in the past two centuries. This warming is wreaking havoc on ecosystems around the globe, and is expected to accelerate in coming decades. In recent years, international organizations have called for dramatic investments in clean technologies in order to keep the planet cool. This paper outlines how to apply such investments to the American utility grid.
The United States power grid is perhaps the most antiquated piece of infrastructure in the country, relying on technologies first developed following World War II. In the 6 decades since the grid took shape, industry has produced myriad new technologies allowing for cleaner energy production and more efficient storage and transmission. Furthermore, the advent of computing and the arrival of the Internet of Things have resulted in numerous technologies that promise to improve grid efficient and cut costs for consumers.
Advances in clean power production have been largely focused on the development of reliable and efficient renewable energy resources. This paper briefly discusses the plummeting price of solar power and the need to implement wind power on a large scale. Particular attention is paid to the Cape Wind project and its promise to transform Cape Cod’s energy sector.
Physical improvements to the grid’s infrastructure should include a complete overhaul of the tangle of power lines crisscrossing the country. They are incredibly inefficient and only satisfactory for transporting power over short distances. The large-scale role out of renewable technologies will require the ability to effectively transport energy over thousands of miles from remote generation sites to urban consumers. Advances in transmission technologies have been slow – significant financial resources should be devoted to the development of high-temperature superconducting cables. The creation of cost-effective superconducting cables will revolutionize how the country distributes energy.
Beyond changing how the grid transmits energy, investments should be made in energy storage technologies, particularly in compressed air energy storage and lithium ion batteries. This paper examines how the electric vehicle market is driving innovation in lithium batteries, and how Tesla Motors is rebranding itself as an energy company positioned to provide lithium ion batteries on a grid scale. A brief discussion is given to how grid scale battery storage could move the United States to a decentralized power grid.
On a smaller scale, American homes need to embrace the Smart Grid – the Internet of Things promises substantial savings for the average consumer. Symbiotic relationships between computing and the grid could lower home heating bills while expanding the cloud-computing network. At the same time, the arrival of real time energy pricing could cause a paradigm shift in how consumers use power, smoothening demand throughout the day and reducing the burden of peak power on utilities. All these things are possible with the addition of computers to existing grid infrastructure.
Finally, this paper concludes by examining how to pay for the renovations the grid requires. Several different taxes, including traditional carbon taxes and novel power loss taxes, are examined. At the same time, the potential for climate bonds and the development of an independent power storage sector are examined. In all likelihood, a combination of methods will be necessary to finance an overhaul of the grid.
As the international community races to mitigate the impact of global warming, the United States can contribute by investing significant resources in the national power grid. Every aspect of the grid requires extensive updating to prepare the United States for the low-carbon economy. The cost of renovation will be substantial, but the returns will be even larger.