“There is some strategic interest in renewables”

Kelly Sims Gallagher on the prospects for a renewable future

21/03/2012 | by Kelly Sims Gallagher

Category: Renewables, Resources and Energy, Non-Renewables, Nuclear Energy, Worldwide

New investments in China and the Middle East have demonstrated a developing strategic interest in renewable energies. Yet every country still faces obstacles: be it legislation in the United States or enforcement and rapid development in China. Kelly Sims Gallagher of the Fletcher School at Tufts University sits down with IP to talk about the future of energy policy and its effects on foreign relations.

IP: It has been a year since the nuclear disaster at Fukushima. Since then, Japanese trust in nuclear energy has eroded and Germany has put in place an ambitious plan to transition away from nuclear power. Do you think that Fukushima will have a more lasting impact on global views toward nuclear power or that it will—perhaps in the future—be looked at as a turning point for renewables and nuclear power?

Gallagher: Well I think we’ve seen fairly divergent responses from different countries. Clearly in Japan you have a major reassessment that is going on and it’s still not clear to me what the outcome is going to be. And from the people I’ve spoken with in Japan it seems like it’s not so clear what the alternative is for them. Over the last thirty years, most of their public R&D investments went into fission research. They haven’t made big investments in renewable energy. I think they’ve made considerable investments in energy efficiency technologies: they have the most energy efficient economy in the world. So it’s not clear to me what the immediate alternative is for them. They do not perceive themselves as very good candidates for renewables because of their shortage of land. Of course, there is the possibility of offshore wind, but I don’t think we have an answer yet from Japan.

IP: Right, they seem to be stuck.

Gallagher: Yes, and then Germany made this very quick decision after that. Not much has changed in the United States. Even though nuclear power represents about twenty percent of our electricity supply today, all of the plants are now pretty old. We licensed a new nuclear power plant last month, which will be the first new nuclear plant since 1973.

I don’t think we are going to see a lot of new nuclear, not so much because of public perceptions or support, but because of the cost. It’s just not competitive with gas, which seems to be the thing we want right now: gas-fired power. There’s so much new shale gas in the market. Prices have plummeted and it continues to be the most economical power source. It’s also hard for renewables to compete against that. But it’s especially hard for nuclear.

And in China, there was a momentary pause and then they just kept on going with their construction of nuclear plants. So it’s hard to predict. I think the Chinese feel a tremendous need for fuel diversification. In the United States, nuclear is kind of viewed as a nuisance. We still haven’t figured what to do with our waste, and we have no long-term disposal plan: the Yucca Mountain has been eliminated as a repository. We’ve had several proposals now for interim storage facilities, one on each side of the Mississippi, but that doesn’t seem to be going anywhere. We don’t know what to do with all of this waste, the plants are very expensive, and decommissioning them is extremely expensive. There are very few people who are supportive or enthusiastic; it’s almost as if those who are enthusiastic support it out of ideological reasons.

IP: Do you see shale gas and fracking getting us away from where we should be going? Will it hinder us from going renewable or do think there could be a mixture?

Gallagher: It could go either way. The enthusiasm for shale gas is due to it enhancing the possibility that we could achieve self-sufficiency, or energy independence, which is a goal much sought-after by politicians. It’s pretty hard for us to actually do that unless we switch to an electric or CNG fleet for cars. But we already made this big transition to gas during the late 1990s and early 2000s. And that became less and less economically sensible because gas prices were increasing a lot and we were starting to think about building LNG import terminals. And shale gas has just exploded. Prices are now coming back down and so it’s sort of the most economical thing to do. Some people argue that this is good because we could use these gas plants as back-ups for renewables, and that they are easier to turn on and off. And some people argue that it could undermine renewables because if we really do have all this shale gas and we really can exploit it, prices may be really low and then nothing can compete against it.

IP: Do you see there being a real national effort to push renewables in the United States in the near future or do you think the political situation in Washington will hinder a comprehensive energy transition for the foreseeable future?

Gallagher: I don’t see a lot of hope in the near term for that at the federal-government level, but at the state level we already have 35 states with renewable portfolio standards, which is pretty good. These standards seem to be very popular. They create jobs, and they don’t seem to have caused much of a rise in energy prices. These programs have been supported by federal tax-incentive policies, a production tax credit, a loan-guarantee program, as well as the stimulus and an investment-tax credit program, all of which made it easy and sensible for firms to invest in renewables. So we’ve actually had really good growth in renewables in these states over the last ten years. The problem is that they’re inconsistent; it’s a fragmented market that is different in each state. But I don’t see any likelihood of those renewable portfolio standards being disbanded.

IP: How strong is the example Germany is setting with renewable energy? Do you think if Germany successfully transitions to renewables that other countries such as the US or China would follow Germany’s lead?

Gallagher: A lot of people are studying Germany and other countries such as Denmark and, increasingly, China to learn from different models and experiences. It is extremely useful and important to see what countries like this are doing, because some day we’ll get to the point where we’re able to have a coherent climate policy.

IP: Who has made the most progress in renewables over the past decade: Europe, the United States, or China? And who is in the best position now going forward?

Gallagher: In terms of the sheer amount of renewable energy that’s being produced now, it’s China. China has the largest renewable energy capacity in the world, and has set forth very ambitious targets. It has really committed to developing the industry—or industries. That being said, it’s sort of paradoxical because China also uses more coal than any other country in the world and if you were in China you wouldn’t feel like you were in this green economy. But because of China’s scale, you can have this tremendous expansion in renewable energy and investment in the industry and still not make much of dent in the overall percentage of the energy supply. But if you measure renewables as a proportion of energy supply, then Germany wins. 

IP: If we look at China versus the United States: In China you have a very centralized political system where they can make decisions and implement them, but they don’t have as much innovation or competition in their economy. In the United States you have a more messy and complicated political system that makes it harder to implement policies, but in the economy there is a lot of innovation and competition. Do you think one of these systems is more advantageous for switching to renewables?

Gallagher: I think the way you characterized things is not quite correct. I would say it’s a fallacy that if the Chinese government wants to do something it can just issue an edict and everybody will comply. The Chinese have tremendous challenges enforcing policies, regulations, and laws. In many cases, they have the most progressive laws on the books but their ability to enforce at the local level is really limited. And part of that is because of institutional capacity, maybe a lack of will, or a prioritization of economic growth, and another part of it is because competition is extremely fierce inside China. You’ve got all these provinces trying to lift people out of poverty, and they’re trying to create industries that are job-creating. And each provincial head is trying to demonstrate that he has been the most successful at generating jobs and economic growth, and he should therefore be the person who’s promoted. And so there’s fierce competition and repetitive industry creation. So it’s really hard for the Chinese government to get energy efficiency laws complied with and it’s been very hard for them to achieve their energy intensity reduction goals. I think this is the major preoccupation of the Chinese government now: what kind of climate policies will work and be effective in this system? So now they’re experimenting: they’ve just announced a modest carbon tax, they have at least seven low-carbon development zones, and several regions are setting up cap and trade.

In the United States, there is competition and we have a democracy. I think what’s hard for us—because of the way system is set up—is having strategic policy. Congress is responsible for the budget. The executive branch may develop some really good ideas or have some strategic energy policies, but if they can’t get the budget to fund the programs and policies, you get incoherence in the system. And I think that is a challenge. But if and when we ever agree on something or there is a new policy, there’s no question about enforcement because there is a total culture of enforcement and you know you’ll be sued if you don’t comply. So the systems are really, really different and the challenges they face are quite different as well. I think the Chinese central government can be more strategic in their planning and have longer-term thinking.

IP: In China, we have seen a massive increase in urbanization. Do think having so many people living in urban environments puts them at a disadvantage as they try and green their economies or can that also be an advantage?

Gallagher: I think it’s definitely an advantage. It is a tremendous challenge for the Chinese because they have to build all this housing stock. But we know that urban environments are typically much more sustainable, use much less energy, and are less resource intensive. The question is are they doing it right? So far, the answer is clearly “no.” They don’t have the ability to enforce efficiency standards. I don’t think I’ve ever been in a building that’s insulated in China. This is an area that is a key challenge for China.

IP: Do you think that the greening of cities is an integral first step to getting green policies implemented on a wider scale?

Gallagher: Yes. Many American cities have set ambitious climate goals. A lot of them even aim to meet or beat the Kyoto targets. And that has definitely trickled up to the state level and it is a puzzle to me why it hasn’t trickled up to the federal level in terms of political support. You could argue that many of these municipal programs that have been successful and uncontroversial have saved these cities a lot of money. Many cities, for example, are converting to LED traffic lights—just no-brainer things that maybe don’t occur to you until you’re trying to figure out how to meet a target and then you realize: “Oh, we could do this and it will pay for itself in six months.” So that sort of thing has really taken off at the municipal level in the United States.

But for some reason the conventional wisdom at the federal level is: “Doing this sort of thing is suicidal and politically crazy.” But, wait a minute; we have all of this activity at the municipal and state level. I can’t explain it.

IP: There are a number of cities in China that did not exist a few years ago, whereas in the West, most cities were developed without the idea of “greenness” in mind. Is it harder to retrofit a pre-existing city to be green, or is it just as hard to develop a green city from the ground up?

Gallagher: This is where I feel that a lot of opportunity is being missed in China. Take transportation systems. If you’re building a city from the ground up, you can really think about how to do that in a sensible way from a transportation point of view—whether it’s subway systems or rapid bus transit or even bike paths. I don’t see a lot of that in China, to be honest. But there are some examples. An intercity high-speed rail system is developing extremely fast in China, and that is definitely a good thing. And people really use it. You get on the trains and they are completely packed and it’s a huge upgrade from a regular slow intercity train ride. That is one thing I think the Chinese are doing really well. They’re also experimenting with rapid bus transit systems in at least twelve or fifteen cities, and they’re building subways like crazy. But they can’t keep up. And so then perverse things happen such as more road building. Beijing is a great example of this. I don’t know how many… I think they’re up to the sixth or seventh ring road around the city, and there’s no provision for bicycling. So bikes are disappearing from the streets even though they started with a biking culture, which is now being lost. Everyone tells you you’re absolutely crazy if you are riding your bike in Beijing because you’re going to get hit. I also think the bike and the public transit culture took a huge hit during the SARS scare because nobody wanted to be in a closed subway car with someone who might have SARS. I think that provoked a lot of people to buy cars. And then of course they’re going to keep using their cars.

IP: If there were a more concerted effort to adopt green policies by the world’s major nations—i.e., focusing more on renewables instead of coal and gas—how do you think that would affect international relations?

Gallagher: Well let me answer that question in two parts. We have to separate gas from this. In the US, gas is perceived as clean energy. And one of the great attractions to shale gas and the possibilities of being more energy independent is of course not having to worry so much about the Middle East and the geopolitics of that region. Meanwhile, countries in the Middle East are looking east, since their biggest importers now are China and India. The US has actually significantly decreased its dependence on the Middle East in the last ten years. So geopolitically at some point that is really going to hit. Will the US stop being the defender of oil shipping lanes around the world? I don’t know. That is a big strategic decision we would have to make. Does that make China and India engage more in the complex issues related to Iran? It has to already be having an effect since China now imports a lot of its energy from Iran. Those trends are only going to become more acute.

I think we’re experiencing a pretty significant shift already. And with shale gas in the US that is going to change even more. As it turns out, China has a lot of shale gas, too, but so far they are not exploiting it. So I think that is an important question that could have a big geopolitical impact. Now, if everybody went more renewable? Of course that would change things. But that just seems so far in the distance that it’s hard to really imagine what it would look like.

IP: Do you think countries with abundant non-renewable resources—such as Russia and Saudi Arabia—will try to hold off as long as possible to make a transition to renewables, or are they already thinking: “Well, at some point, we won’t be able to sell this oil and we have to switch now”?

Gallagher: There are certainly some countries in the Middle East that are already starting to make strategic investments and starting to explore alternative energy technologies. I know that the Saudis are doing that. They’re very interested in the concept of carbon management and carbon storage and renewables. In Abu Dhabi, they have a whole solar city called Masdar City, and it’s a massive, extremely expensive demonstration project on how to be a zero-energy city in the Middle East. I think that we are starting to see that there is some strategic interest in renewables.

Interview conducted by Colin M. Adams.

KELLY SIMS GALLAGHER is associate professor of energy and environmental policy at the Fletcher School, Tufts University. She is also the 2012 EADS Distinguished Visitor at the American Academy of Berlin.

 

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