POWER June 2013 - 55

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beginning of a decline in the appeal of
green energy?
Makovich: It's a very interesting phenomenon.
The original production tax
credit legislation was put in place for just
seven or eight years. I've always asked,
" Why seven or eight years and then expire? "
That's about the amount of time it
took us to put a man on the moon after
President Kennedy made the commitment.
I think the logic was, if we can put a man
on the moon, we ought to able to encourage
enough activity in wind and solar so that
within eight years or so, we would have
moved up the learning curve, driven costs
down, and achieved sufficient innovation
so that the reduced cost would have created
a widespread disruptive technology. It
didn't happen.
The reason it didn't happen was that the
biggest innovation that we've had in energy,
maybe in our lifetime, was the shale
gas revolution. It wasn't an innovation that
people really wanted. A long time ago, the
government took away its support for this
kind of fossil development. Nonetheless, it
happened. People were slow to recognize
what was occurring, but the notion that
innovation would deliver more abundant,
lower-cost fossil fuels was not what people
expected. Instead, people were told for years
that fossil fuels were the fuels of the past.
So the innovation that people didn't want,
or expect, has substantially undermined the
economics of renewables.
The cost gap between renewables and
conventional fuels is as big today as it was 10
years ago. You can see it very dramatically
in the stock prices for clean energy companies.
They soared when people thought this
was the disruptive technology of the future,
they dropped with the rest of the market
in the recession, and did not recover when
the stock market reached an all-time high.
I think this has occurred because today's
investment hypothesis is renewable energy
is no longer a disruptive technology ready
to take off. Instead, the investment hypothesis
says that without long-term government
support, you're not going to see growth in
renewables.
I think that's what we've got ahead for
us right now-a renewables business that's
going to depend for many years to come on
continued government support.
The Regional Greenhouse Gas Initiative
in the Northeast was the first U.S. carbon
market, recently followed by California.
Do you think this will spread to other regions
of the U.S.?
Makovich: I think the success of these
markets to date is rather mixed. In Europe,
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there were lots of problems with the way
the market was set up. Prices initially were
much higher than people expected, then
much lower, and there were some concerns
about fraud in the marketplace. I think the
biggest lesson here is that these markets, if
set up properly, are a very effective way to
put a price on CO2
emissions.
The problem is when some regions do
it and others don't. California and Europe
put a price on carbon with a very well-intentioned
effort to internalize these costs,
while the rest of the world, in particular
China, is expanding its power sector largely
based on coal-fired generation. Despite
all the efforts in the developed countries,
CO2
emissions globally are over 50% higher
than they were in 1990.
I think the lesson here is that unless you
get all the major emitters to participate,
taking action unilaterally puts you at a
competitive disadvantage. Some people say
that every little bit helps, but unilateral efforts
have not materially affected the trends
of CO2
concentrations in the atmosphere.
CERA focuses on the question, " What
would it cost to transition to emit lower
amounts of carbon for the energy that's
used? " There are some huge gaps in the
application of good engineering, economics,
and science. I think people are doing
a lot of things today that don't make sense
from an economic and science perspective,
a lot of inefficient activities to address
CO2
.
For example, Germany is a leading proponent
of solar photovoltaic for people's
rooftops. The problem is, Germany isn't
a sunny place. It's a relatively inefficient
application of resources to a technology
that does not give you much bang for the
buck. The implicit cost is probably over
$100/ton of CO2
removed with PV panels
in Germany. You could get a 10-fold reduction
in CO2
simply by purchasing the
allowances on the marketplace because
other people have cheaper options to reduce
CO2
.
The ironic thing is that as the Germans
emissions and the absolute level of
learn the limits of intermittent renewables,
they're being forced back toward conventional
power plants. Today, Germany is
building more coal-fired power plants than
the U.S., a power grid with six times the
capacity. ■
-Mark Axford, POWER contributing editor,
conducted and edited this interview.
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POWER June 2013

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