Power Shift
Jeffrey Ball
Scholar-in-Residence
Steyer-Taylor Center for Energy Policy and Finance
Stanford University
Japan-China Policy Research Workshop | Beijing | September 6, 2017
B I G C H A N G E S A N D B I G Q U E S T I O N S
F O R E N E R G Y, E M I S S I O N S , A N D C L I M AT E P O L I C Y
I N T H E U. S .
Today’s Presentation
• U.S. energy landscape• U.S. emissions status• U.S. climate policy: status, questions, observations• Recommendations for U.S.: The New Solar System
U.S. Energy Landscape
• Era of energy abundance• Oil, coal, and natural gas cheap• Wind and solar cheap
• Electricity sector decarbonizing• Coal-to-gas shift: Coal fell to 34%, gas rose to 31%, in 2015 (EIA)• Nuclear and renewables rose to 34% in 2015; wind and solar
represent more than half all electricity-capacity additions (EIA)
• But transport emissions rising• One reason: Gasoline prices fell 28% in 2015. (EIA)
• Takeaway: Mixed signals on U.S. energy relationship with China
An (Early) American Energy Revolution
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Source: U.S. Energy Information Administration, March 2017
U.S. Carbon Pledges in Paris
• The numbers• 17% cut below 2005 by 2020• 26-28% cut below 2005 by 2025
• The elements• Climate Action Plan• Clean Power Plan• Methane regulations for oil-and-gas projects• Extension of tax credits for wind and solar• Tougher fuel-economy standards for cars and trucks
U.S. Emissions Status
• U.S. carbon emissions falling• Energy-related CO2 emissions down 2.7%, GDP growth up 2.6%, in 2015
Emissions down 13.7%, or 1.1 billion metric tons, from 2005 through 2016
• Slower-than-expected economic growth (1.5% instead of expected 2.7%)• Reduction in carbon intensity of energy (down 9.6%); due largely to
natural gas eclipsing coal• Rise in renewables
• U.S. likely to reach 2020 goal• U.S. unlikely to reach 2025 goal• Important: U.S. is declining slice of global carbon pie• Important: Fall in U.S. emissions due largely to
actions not motivated by climate concerns.
Sources: U.S. Energy Information Administration; Rhodium Group; Pew Research Center
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Who Cares About the Climate?
Source: Pew Research Center, Nov. 5, 2015
Global Differences
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Who Cares About the Climate?U.S. Partisan Differences
Source: Pew Research Center, Oct. 4, 2016 8
U.S. Climate Policy Today
• Executive Order rescinding Climate Action Plan• Directive to Environmental Protection Agency to
review and possibly withdraw Clean Power Plan• Will U.S. exit Paris accord? Unclear.
Questions About U.S. Policy Today
• Will U.S. withdraw from Paris accord?• Will U.S. expand offshore oil-and-gas drilling, as
Trump pledged during campaign?• Will Hurricane Harvey, which hit U.S. oil-and-gas
country hard, spur concern (and action) about climate change?
• Whither U.S. trade relations with China on low-carbon technologies?
Observations About U.S.
• Decarbonization of economy will continue; the market (investors, corporations, and states) is moving
• Even if it meets its Paris pledge, U.S. will have to dramatically intensify carbon cuts
• U.S.-China relationship will be key – and is unclear
RecommendationsFor the U.S.
Through One Lens:Solar Power
Study’s Goal
Clarify an economically efficient growth path for the global solar industry—an industry that’s maturing and centered in China.
Study’s Three Key Questions
• How is the China-based solar industry changing?
• What do those changes say about China’s comparative advantages in the global solar industry?
• What does that analysis suggest about changes in U.S. policy and investment that would facilitate• solar power that’s cheap enough to meaningfully help cut global
carbon emissions• a U.S. solar industry that’s economically viable over the long
term
Busting Myths About China’s Solar Sector
Myth: China’s solar industry is a financial bubble about to burst.Fact: Chinese solar companies are reforming their capital structures to make them more economically efficient.
Myth: China doesn’t innovate.Fact: China is innovating significantly in solar—not only in manufacturing processes but also in underlying R&D.Myth: The global solar industry is centralizing in China.Fact: The global solar industry, led by Chinese companies, is starting to decentralize geographically.
Myth: Tariffs imposed by the West are hobbling the Chinese solar industry.Fact: The tariffs have pushed the Chinese industry to get more efficient; their effect on U.S. manufacturing is mixed.
Myth: China’s solar market is largely closed to foreign investment.Fact: Chinese leaders want sophisticated investment structures from the West—an opportunity for U.S. players.
Study’s Recommendation for U.S.: Approach
• Main goal: cut solar’s cost.
• Leverage—don’t seek to defeat—China.
• U.S. solar manufacturing? Be surgical.
Study’s Recommendations for U.S.: R&D
• Increase U.S. investment in solar R&D.
• Include China in international solar-R&D efforts.
• Reform requirement that federal-R&D recipients produce resulting goods “substantially” in U.S.
Study’s Recommendations for U.S.: Manufacturing
U.S. manufacturing likely economically viable for three categories of solar products:
• Products for U.S. consumption that are expensive to import.
• Goods for export that are energy-intensive to manufacture
• “First factories” of goods for export that leverage U.S. R&D excellence; however, scale-up likely to happen elsewhere
Study’s Recommendations for U.S.: Deployment
• U.S. deployment policy• Significant price on carbon• Maintain agreed-upon phasedown of solar tax credit• Continue Clean Power Plan
• Help U.S. investors engage in Chinese solar market• Leverage existing bilateral discussions• China seeks less-expensive institutional capital
Next Step: Efficient Clean-Energy Finance in China
• April 2017 investor workshop at Stanford
• May 2017 workshop and meetings in Beijing and Shanghai
• Fall 2017 Stanford clean-energy-investment forum
• Ongoing interaction with U.S. investors and policy makers
• Ongoing interaction with Chinese investors and policy makers
