An economic argument for renewable energy

Tesla recently published their Master Plan Part 3 – Sustainable Energy for All of Earth, which contains their proposed path towards a sustainable global energy economy through end-use electrification and sustainable electricity generation and storage.  The conclusion of the report positively supports a transition away from fossil fuels and to a renewable electrified energy grid and its recommendations and conclusions are summarized below.

We all know that Tesla is heavily involved in the renewable energy sector, so it was not a big surprise to see them come to this conclusion as pushing this narrative can only be good for business.  But it is important to note that the International Energy Agency (IEA), the U.S. Energy Information Administration (EIA), and the U.S. Department of Energy – National Laboratories were acknowledged as playing a role in the conclusions of this report.  Also, this report is not narrowly focused on only energy markets in which Tesla is commercially involved, it is a comprehension analysis of the entire energy economy and includes many different sectors and industries.

With that, Tesla makes a strong economic case that while transitioning to a fully electrified energy economy will be expensive – around $10 Trillion dollars – the cost of remaining on fossil fuels and operating “business as usual” will be even more expensive – estimated around $14 Trillion dollars.  A sustainable energy economy is technically feasible and requires less investment and less material extraction than continuing today’s unsustainable energy economy.

It is also worth noting that this report only focuses on the direct economic aspect of a transition, externalities such as climate change, environmental pollution or peak fossil fuel scenarios, factors very little in the overall analysis.

Master Plan 3 Recommendations

The Master Plan recommends 6 principal strategies to eliminate fossil fuel use and electrify our global energy economy.  These strategies detail the electricity demand assumptions for a transition to a sustainable energy economy, with efficiency and eliminating waste as primary sources of focus.

1. Repower the Existing Grid with Renewables

Globally, 65PWh/year of primary energy is supplied to the electricity sector, including 46PWh/year of fossil fuels; however only 26PWh/year of electricity is produced, due to inefficiencies transforming fossil fuels into electricity. If the grid were instead renewably powered, only 26PWh/year of sustainable generation would be required.

2. Switch to Electric Vehicles

Electric vehicles are approximately 4x more efficient than internal combustion engine vehicles due to higher powertrain efficiency, regenerative braking capability, and optimized platform design.

3.  Switch to Heat Pumps in Residential, Business & Industry

Heat pumps move heat from source to sink via the compression/expansion of an intermediate refrigerant9. With the appropriate selection of refrigerants, heat pump technology applies to space heating, water heating and laundry dryers in residential and commercial buildings, in addition to many industrial processes. 

Global electrification of residential and commercial appliances with heat pumps eliminates 18 PWh/year of fossil fuel and creates 6PWh/year of additional electrical demand.

4. Electrify High Temperature Heat Delivery and Hydrogen Production

Industrial processes such as electric resistance heating or electric arc furnaces that require high temperatures (>200C) do require special consideration.  This includes steel, chemical, fertilizer and cement production, among others.

Thermal storage is modeled as an energy buffer for high-temperature process heat in the industrial sector and can be used in regions with high solar installed capacity.  Green hydrogen can be produced via the electrolysis of water or via methane pyrolysis and used in place of fossil fuel generated hydrogen.

Global electrification of industrial process heat >200C eliminates 9PWh/year of fossil fuel fuels and creates 9PWh/year of additional electrical demand, as equal heat delivery efficiency is assumed.

5.  Sustainably Fuel Planes & Boats

Both continental and intercontinental ocean shipping can be electrified by optimizing design speed and routes to enable smaller batteries with more frequent charge stops on long routes.   Short distance flights can also be electrified through optimized aircraft design and flight trajectory at today’s battery energy densities, while longer distance flights, estimated as 80% of air travel energy consumption, can be powered by synthetic fuels generated from excess renewable electricity.  Carbon and hydrogen for synthetic fuels may also be sourced from biomass.

6.  Manufacture the Sustainable Energy Economy

Additional electricity is required to build the generation and storage portfolio – solar panels, wind turbines and batteries – required for the sustainable energy economy.   Manufacturing the batteries, solar panels, and wind turbines in the sustainable energy economy is estimated to require 4PWh/year of sustainable power.  This electricity demand was modeled as an incremental, inflexible, flat hourly demand in the industrial sector.

Conclusions

According to the International Energy Agency (IEA) 2019 World Energy Balances, the global primary energy supply is 165 PWh/year, and total fossil fuel supply is 134PWh/year.  However, only 36% or 59PWh of the primary energy supply produces useful work or heat for the economy, as a whooping 54% is either consumed during fossil fuel extraction, lost during energy transformation or wasted by inefficient end-uses (i.e., internal combustion engines and natural gas furnaces).

By applying these 6 strategies to the world’s energy flow 125PWh/year of fossil fuels used for energy use would be displaced and would be replaced with 66PWh/year of sustainably generated electricity. An additional 4PWh/year of new industry is needed to manufacture the required batteries, solar panels and wind turbines.  Even with the 4PWh/ year requirements to maintain the generation and distribution infrastructure, this plan outlines a workable solution for the US to meet its energy demands of 60PWh/year.

Master Plan 3 Model

In order to meet the above demand assumptions a generation and storage portfolio is established using a model based on resource-specific cost and performance attributes with a global objective of minimizing the levelized cost of energy.  This plan considers onshore/offshore wind, solar, existing nuclear and hydro as sustainable electricity generation sources, and considers existing biomass as sustainable although it will likely be phased out over time

The model was done on the US energy economy (using data from the Energy Information Administration (EIA) from 2019-2022) and the results were scaled to estimate actions needed for the global economy using a 6x scaling factor.

The full details of this model is available with the Master Plan Part 3 starting on page 14.  Covered are evaluations of the energy generation and energy storage technologies (including batteries) that will be needed.  A review of the total land area required for renewable energy generation along with a section detailing the total materials required for their manufacturing and maintenance are included.

Investment requirements for both a sustainable energy economy and a “business as usual” fossil fuel energy economy is cataloged and included in the model.  The investments are inclusive of the manufacturing facilities, mining and refining operations for materials that require significant capacity growth.

As mentioned in the opening, a “business as usual” fossil fuel economy is predicted to cost more than switching over to a renewable fully electrified energy grid.  And this doesn’t take into account any of the externalities we face by continuing our fossil fuel dependency. 

Every day we receive information making the decision to support ending our fossil fuel dependency clearer, maybe the arguments based purely on economics and cost will be the one to make a difference.