Plus: Record new energy storage coming
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OCT 13, 2021

Good morning from DC! I’m here meeting some of my co-workers in person for the first time.

Tune in for my virtual interview with Bill Gates on Oct. 20 at a climate tech conference hosted by SOSV, a global venture capital firm. You can register for free here.

Today’s newsletter covers the puzzle pieces of change, the International Energy Agency’s report out today and the big growth projected in energy storage. OK, let’s dive in!

Fitting the pieces of energy, climate together: This is how things change
Climate change is like a puzzle whose pieces are constantly changing in size and shape.

Our focus at Cipher is on the technological transformations needed to get to net-zero emissions of greenhouse gases by 2050. Nothing, including technology, lives in a silo. Like a puzzle, we can only fully understand the opportunities and challenges when they fit together.

For change to happen in any part of society, I see three factors at play:
  • Politics and policy
  • Money and finance
  • Technology

"Advocacy is about harnessing powerfinancial power or people powerin order to affect one or all of these levers of change," said Tzeporah Berman, a long-time environmental activist based in Canada who is international program director at Stand.Earth. "That’s how change is made."

Operating within these three levers, I see eight puzzle pieces within the energy and climate space that drive change.

1. Tangible climate change
Unlike most problems facing society, this one is cumulative. The longer we wait to address it, the worse it gets, and that makes it even harder to address. As the impacts of a warming world become ever more tangible, this will galvanize the public’s attention—particularly via politics.

2. Social movements
The public, particularly younger people who will inhabit this planet longer than the rest of us, are increasingly concerned about climate change. Big societal changes have often occurred only once a concerted constituency rose and called for change.

Climate change poses uniquely global and omnipresent challenges that will make it a lot harder for a social movement to drive change compared to, say, civil rights campaigns in the past.

3. Clean-energy technology costs
Unlike a lot of society’s problems, tackling climate change is deeply intertwined with technologies and commodities.

Costs of some clean energy technologies, like wind and solar, have plummeted over the last decade, buoyed by state mandates and federal subsidies. That price drop has in turn helped build political and financial support for these technologies.

Now the focus must also turn to reducing the cost of even more complicated technologies—like sustainable aviation fuel and clean manufacturing.

Ideally, the same virtuous cycle that helped bring down the costs of renewable energy will prevail here: costs drop and political and corporate support grow, which in turn help prices to drop even more. The biggest challenge is doing this faster than what happened with wind and solar given the urgency of the problem.

4. Fossil fuel costs
Clean-energy technologies must compete with oil, natural gas and coal. These fossil fuels have traditionally been cheaper because they’ve been around longer, receive permanent government subsidies and aren’t economically penalized for their environmental toll.

The last few weeks have reminded us how volatile fossil-fuel prices can be. Such a predicament could actually make it more difficult to transition to cleaner energy because volatility creates consumer unrest and political chaos.

5. Corporate and investor concerns
Wall Street is finally starting to think that investing in clean energy—and compelling publicly traded companies to green their assets—makes good business sense. This trend has been accelerating since 2017 in response to these other puzzle pieces, including pressure from employees and falling cleantech costs.

This is critical because our planet can’t depend on altruism alone to save it. Our capitalistic capitalistic society needs the risk of financial losses and the potential for financial gains.

6. Media coverage
Media companies on both TV and in print are covering this issue far more than in the past—including me when I was at Axios and now here at Cipher. Cipher is a prime example of how journalism can help support action on climate change through objective scrutiny.

This trend is both a reflection of these other factors and a force for change because the media plays a role in shaping public opinion.

7. Political shifts
Politics tend to follow, not lead, societal trends. That’s why corporations and their usual Republican allies in Congress are just now beginning to support policies reducing greenhouse gas emissions to at least some extent, after decades of fighting or ignoring them.

The shift is subtle and uneven, not to mention unsatisfying to many Democrats and activists who want drastic action immediately. History suggests that the most long-lasting laws Congress passes are those that have at least some level of bipartisan support, so their role is central.

8. Political compromises
On that note, bipartisanship begets compromise. In March, President Biden pledged $15 billion for electric-vehicle charging, yet he compromised with half that amount in the bipartisan infrastructure legislation. Washington is now in the throes of further compromise with the bigger reconciliation bill.

The inherent problem with compromising on climate change leads us back to the first puzzle piece: The longer we wait to address it, the bigger the problem it becomes and the more aggressive the policy solutions must be. That’s leading progressive Democrats to want even more than they did a few years ago. Republicans and corporations, on the other hand, are (still) slowly coming around to the policies Democrats wanted a few years ago.
IEA on oil demand, energy-price shocks and more
Oil demand declines for the first time under all energy-system scenarios modeled by the influential International Energy Agency, according to its flagship annual report released today.

Even in a scenario assuming that countries only pursue policies either already in place or under development, oil demand begins to decline over the next decade because of slower growth in petrochemicals and faster reductions in other oil-dependent sectors.

The IEA also projects a far faster decline in demand for coal and a much slower growth in demand for natural gas than its previous scenarios. The upshot of these fuels taking up smaller market shares is a bigger potential for clean-energy technologies.

IEA seeks to put context into the energy crisis unfolding around the world due largely to the global economy coming back after the pandemic shut it down last year.

IEA analyzed the impact of a commodity price shock on average energy bills in 2030 by applying the highest oil, natural gas and coal prices in various regions over the past decade. It concluded that consumers would see less of a shock from volatile fossil fuel prices in a world running mostly on clean energy because consumers are less dependent on them.

But to ensure consumers are shielded from these price shocks going forward, policies need to be put in place that allow them to reduce demand for the fuels by shifting to affordable clean-energy options, as opposed to just reducing supply, the IEA emphasized.

The nearly 400-page report covers a lot of ground. Stay tuned for more in-depth coverage in future editions.
Amy’s Lunchtime Reads
and Hot Takes

An energy crisis is gripping the world, with potentially grave consequences The Washington Post
My take: Energy is the thing we all need but don’t notice until it’s gone, expensive or going awry. All three of those things are happening now, as this article does a good job of pointing out. But it also has a line about how "energy analysts" argue Europe moved away from fossil fuels too quickly without really backing that up with an actual quote or attribution. The main reason for the energy crisis is the pandemic and knock-on effects from that.

A Scary Energy Winter Is Coming. Don’t Blame the Greens. The New York Times opinion
My take: I get what Tom Friedman is saying here, and I mostly agree with him. My holdup is that for the average consumer, it won’t matter why energy prices are going up, they’re unlikely to support anything that adds to it, even if it’s a small factor in a complex web of drivers. The challenge is either trying to separate the nuanced reality from blunt perception and/or throwing enough money at the problem that the high costs are sufficiently blunted.

More than $60M spent in a battle over hydropower corridorAP
My take: This a record-breaking amount for a Maine referendum ever—and it’s over a power line proposal that’s actually a relatively small and easy project compared to what we’re going to need to reach net-zero emissions by 2050. Also, tucked in at the end of the article is the revelation that NextEra Energy Resources LLC, which prides itself as being a huge producer of renewable energy, is fighting the project. It owns an oil-fired power plant whose bottom line would be threatened by the Canadian clean hydropower.

This tiny town got the first big Kansas wind farm 20 years ago. Here's what happened KMUW
My take: This is a cool story that is a good reminder of the arc of new industries. I do think it glosses over the opposition facing such projects, but perhaps it’s also a sign that, with time, that opposition will lessen if critics see economic benefits.

Solar-powered steel mill blazes trail for green energy transitionFinancial Times (paywall)
My take: Here's another cool story looking at the knock-on benefits of renewable energy. This looks at how a new solar farm in Colorado will provide clean and cheap electricity that will in turn help a steel mill to expand its production.

Climate change worries fuel nuclear dreamsPOLITICO
My take: This article documents a surprising and frankly much-needed turn of events if we’re going to tackle climate change: Protests at nuclear power plants to keep them open.

More of what I’m reading:
  • IEA Says World Isn’t Investing Enough in Future Energy Needs – Bloomberg
  • Creating the new hydrogen economy is a massive undertakingThe Economist
  • Denmark Breathes New Life Into Junk Wind Turbine Blades. As Recycled Bike Shelters?Interesting Engineering
  • The hard road to electrifying a mighty truckE&E News (paywall)
  • Bill Gates-backed ESS—which makes giant batteries out of iron, salt and water—starts trading CNBC
  • Concrete industry says carbon capture a key to hitting emissions targets Reuters
Energy storage poised to soar
Driven by massive amounts of variable wind and solar power, annual global storage deployment is set to nearly triple this year, according to a new Wood Mackenzie report.

"The U.S. and China will dominate the global storage market, together commanding over 70% of total global installed capacity through 2030," says senior research analyst Xu Le.

Wood heating
Biomass—energy made from organic material like corn and wood—has always been controversial; it also has ardent supporters.

A Cipher reader from Washington state shares this photo and writes: "This is a cord of mostly Douglas fir, which I gleaned from the leftovers after a clear-cut. The mills tend to only take the prime logs, and so the odds and ends get left behind. When split and well-dried, these logs burn with very low particulates if burned in an EPA-certified woodstove. And it is all aboveground carbon. Not burning these leftover logs from the thinning would mean leaving them to rot and get eaten over time by termites, who fart methane, thus resulting in a stronger greenhouse gas effect. The cut area will get planted as soon as I can get the seedlings."

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