The Green Industrial Revolution: Why Clean Energy Companies Must Learn From Heavy Industry To Scale Up Decarbonization

Human energy consumption has grown exponentially over the last 80 years. As our lives become more energy dependent, the world continues to grapple with the various costs associated with this insatiable demand for more and more energy. It has long been recognised that this growth in demand cannot be met in the same way as it has been in the past, by simply burning more coal or natural gas, as the environmental costs of this become too high. However, economies of scale for established energy sources have brought financial costs down, and it is difficult to convince consumers to switch to clean energy alternatives when the financial burdens of doing so are much higher (Epstein 2023). This is particularly true in the developing world, as societies move from agricultural to industrialized.

Additionally, in many cases, renewables can’t yet compete with their fossil fuel counterparts for energy output, which makes replacement many years and technology iterations away. This is particularly true in the transportation sector. All of this highlights the enormous scale of the problem. To make a significant impact on decarbonization, the solutions must be equally large.

Fossil Fuels: A Dominant Force

The fossil fuel industry is a colossal component of the global energy sector, accounting for almost 60% of global energy output. Approximately 94 million barrels of oil are produced worldwide each day, amounting to about 34 billion barrels annually (Statista 2023). Additionally, approximately 8 billion tonnes of coal are produced worldwide each year (International Energy Agency 2022).

In 2022, the world used around 178,000 TWh of energy from all sources (Ritchie 2021), with oil contributing roughly 53,000 TWh (30%) and coal contributing roughly 44,000 TWh (27%). These figures highlight the substantial roles both oil and coal play in meeting global energy demands, even as the world increasingly shifts towards clean energy sources.

The Challenge of Energy Density

When compared within a unifying energy density framework (Layton 2008), fossil fuels provide many orders of magnitude more energy density than clean energy sources like solar and wind. For example, the energy density of oil ranges from 35 to 45 gigajoules per cubic meter (9,722 to 12,500 kWh/m3). In contrast, solar energy has a density of 1.5 microjoules per cubic meter, which is over twenty quadrillion times lower. The energy density of various sources is shown in the tables below:

This stark difference in energy density makes it clear why fossil fuels have been so dominant. It also highlights the challenge of transitioning to clean energy sources, which must become far more efficient and cost-effective to compete on a level playing field.

Developing Countries and the Energy Dilemma

It is little wonder then that many developing countries have little interest in pursuing renewable energy (Moss 2019). Coal, with an energy density half that of oil, is generally cheaper than its alternatives, is more spread out geographically and available domestically in many developing countries. Coal mining employs simple technology and the end product is easy to transport and store. The process is labor intensive, which suits countries where labor is cheap and in plentiful supply due to high population growth. The pollution generated is often a secondary concern, far behind the basics of food, clean drinking water, shelter, reliable energy and adequate medical care. China, for example, has increased its use of coal to power economic growth and competitiveness (Goodman 2022).

The Developed World’s Quandary

This leaves the developed countries in a quandary. With energy prices and cost of living rising across the developed world, and middle income earners struggling to cope, policy makers must walk the tightrope between meeting their environmental commitments and reducing the financial burden on their citizens. This is where industry must be incentivized to lead.

A Green Industrial Revolution can only be self-sustaining if it achieves cost-parity or better with traditional fossil-fueled industries. Government funding, tax credits and voluntary carbon credits are a catalyst for innovation but they are too little, too uncertain and too frequently subject to the political whims of the ruling party of the day.

Driving research and development dollars into cost-competitive solutions that compete at parity with fossil fuels is the only sure, sustainable path to large scale solutions. Expensive solutions that will forever depend on government subsidies are doomed – and deserve their fate as historical oddities and failed experiments.

Lessons from Conventional Industries

The success of conventional industries like the oil industry continues to be driven by strong economic incentives. The cost of transportation and the prevalence of energy sources were transformed when humanity discovered that it could extract fuel from the ground to power the industrial revolution. To power the green revolution, we need to create an equivalent set of conditions: more clean energy at lower cost.

We are already seeing this shift. Currently, there are 2.6 TW of pending power generation capacity projects, and 95% of these are renewable (Howland 2024). This means that the proposed pending projects could double existing electricity generation, almost all of it from renewable sources. The economic argument for using renewable resources over fossil fuels is becoming increasingly compelling.

The Path Forward

To reach the tipping point for a green industry, financial considerations must take center stage. For example, comparing a ton of bio-oil with a calorific value against a ton of coal on a level playing field highlights the potential for clean energy alternatives. Conditions for scaling up green technologies will require significant investment, much like the story of solar panels, which began over 50 years ago. The tipping point will only be reached if financial considerations favor clean energy, making the case for investing in transformational technologies.

Innovative solutions, such as turning waste into fuel, could provide the necessary energy at a lower cost. However, achieving this on a large scale will likely be a multigenerational effort. Governments should play a role in stimulating economies of scale for green technologies, just as they have historically done for fossil fuels, but in the final accounting, green industry has to compete and win on its own.

James White PhD and Joseph Moniodis PhD | 22nd May 2024

Citation: James White and Joseph Moniodis. 2024. “The Green Industrial Revolution: Why Clean Energy Companies Must Learn From Heavy Industry To Scale Up Decarbonization.” Carbon Critical. https://carbon-critical.com/why-clean-energy-companies-must-learn-from-heavy-industry/.

References

Energy Education. 2012. “Energy density.” Energy Education. https://energyeducation.ca/encyclopedia/Energy_density.

Epstein, Alex. 2023. “The ultimate debunking of “solar and wind are cheaper than fossil fuels.”” Energy Talking Points by Alex Epstein. https://alexepstein.substack.com/p/the-ultimate-debunking-of-solar-and.

Goodman, Joe. 2022. “Analysis: What does China’s coal push mean for its climate goals?” Carbon Brief. https://www.carbonbrief.org/analysis-what-does-chinas-coal-push-mean-for-its-climate-goals/.

Howland, Ethan. 2024. “Grid interconnection queues jumped 27%, to 2.6 TW, in 2023, led by solar, storage: DOE lab.” Utility Dive. https://www.utilitydive.com/news/grid-interconnection-queue-berkeley-lab-lbnl/712926/.

International Energy Agency. 2022. “Global Coal Production, 2000-2025.” Global Coal Production, 2000-2025 – Charts – Data & Statistics – IEA. https://www.iea.org/data-and-statistics/charts/global-coal-production-2000-2025.

Layton, Bradley E. 2008. “A Comparison of Energy Densities of Prevalent Energy Sources in Units of Joules Per Cubic Meter.” International Journal of Green Energy 5:438-455. 10.1080/15435070802498036.

Moss, Todd. 2019. “The Long Goodbye: Why Some Nations Can’t Kick the Coal Habit – Kleinman Center for Energy Policy.” Kleinman Center for Energy Policy. https://kleinmanenergy.upenn.edu/research/publications/the-long-goodbye-why-some-nations-cant-kick-the-coal-habit/.

Ritchie, Hannah. 2021. “How have the world’s energy sources changed over the last two centuries?” Our World in Data. https://ourworldindata.org/global-energy-200-years.

Statista. 2023. “Global oil production 2022.” Statista. https://www.statista.com/statistics/265203/global-oil-production-in-barrels-per-day/.