[Bryce Plank] Generating electricity through the combustion of coal and methane natural gas
is currently responsible for the most emissions around the world.
This episode will profile the best policies for getting to net zero emissions by 2050 featuring
my conversation with Energy Innovation policy expert Robbie Orvis who co-authored a great
book on the subject Designing Climate Solutions. In it, Orvis and his team analyzed every type of
emissions reduction policy around the world to figure out which are the most effective.
[Robbie Orvis] There's a handful of policies that really deliver on emissions reductions,
and a lot that don't. We've kind of synthesized what policies work and
what aspects of those policies work. [Plank] There are two main policies
to encourage utilities to invest in wind and solar energy production:
feed in tariffs and renewable energy tax credits. [Orvis] A feed-in tariff is designed to provide a
developer of a power project with a fixed set of revenue in future years, it's kind of guaranteed
by the government. So if you're coming in and building a new technology that's still
expensive and you might not be able to find a market just by going out and looking for buyers,
the government basically says 'okay we'll buy your power from you in an effort to commercialize this
technology and bring down the cost.' We really have Germany to thank globally for bringing down
the price of of solar power because the feed-in tariff in Germany was very aggressive in early
years and really helps deploy a lot of solar that helped drive it down the learning curve. So the
idea of that feed-in tariff is really to create a market for technologies that we know we need,
but might be too expensive on their own in early years to be deployed. A renewable portfolio
standard is similar, but instead of saying 'I'm going to guarantee a developer a certain amount
of money,' the government says, 'we want the utility to supply x percent of electricity from
a category - like renewable energy.' And then the utilities have to go out and get that power
and generate what are called credits renewable energy credits to show the government, 'hey we've
gone out, we've gotten this power, and here's our credit demonstrating that we're meeting the law.'
It similarly creates a financial incentive to invest in new renewable projects
and projects that are maybe not cost effective in earlier years without reaching that scale,
but it does it through a different - more market-based - mechanism.
[Plank] I don't think there's any place in the whole world that's more on board the
market-based solution train than Texas. So how does extending the electricity grid - like Texas
did - increase our use of wind and solar energy? [Orvis] Wind and solar tend to be developed in
more remote places so maybe the desert or the great plains,
there's a lot of wind potential there. What Texas did is they built a transmission system
out to an area where they knew there was a lot of renewables and wind potential knowing
that if they built it, the demand would come. And what they did is they pre-zoned a lot of
areas. They said, 'okay, we're building this transmission network here and we already know
that this is a good and safe area to build renewables and so the requirements and the
hurdles to build your projects here will be lower - a lot lower - and therefore the cost would be
lower.' And that's been wildly successful. [Plank] Did Texas have an advantage
because they're in - what - a regional utility? [Orvis] So Texas has - you're right - a regional
transmission organization, or an independent system operator. Which means that - in general -
there are private companies that own power plants, and then there's an independent quasi-governmental
operator of the grid. And so the power generators say, 'okay here's my information here's how much
it cost me, you tell me when to go.' When you have a system that's restructured so that it allows
more competition, you can get these projects coming in that have very low operating costs.
So renewable projects - because they have no fuel - they're actually very cheap to run. And so where
you tend to see the most deployment of those projects are in regions where they're very cost
competitive. So all of the wind in the Midwest - that's in a grid operator region called MISO.
There's a lot of wind in the Southeast and Southwest as part of the Southwest Power Pool.
And California has a lot as well. And you tend to see less in the states that still
have vertically integrated utilities because there it's more dependent on what the specific
utility wants to do - and that regulators will approve - and less on the market dynamics.
And we've hit a point where renewables are actually cheaper to operate
than a lot of existing fossil resources. [Plank] I'm glad that you mentioned that
it's cheaper now because that's a huge point, especially given where we're going.
And where we're going is to an electrify-everything strategy
to take advantage of all the renewable electricity we'll soon be generating.
But the main fossil fuel consumer in the United States is now the transportation sector. So far,
the primary tool for governments around the world to lower gasoline consumption, cut emissions,
and increase investment in new technologies - like electric vehicles - has been a vehicle
performance standard. This sets a minimum limit on the miles per gallon a manufacturer's entire fleet
of vehicles for sale in a country must average. [Orvis] So there's a few types of performance
standards, but generally there's something called a minimum energy performance standard,
and then there's different ways in which countries kind of implement that rule. The regulator - the
government - says, 'okay, new cars must be at least this efficient.' And then automakers go out
and they produce cars that meet that standard. In the US it's called C.A.F.E. - or Corporate Average
Fuel Economy standard. That allows vehicle manufacturers flexibility in how they meet
the standard. So the idea is, on average - over the total number of sales in a year - your cars have
to be at least this efficient. And that allows vehicle manufacturers to produce different cars,
some of which hit the standard, some of which may not hit the standard, some of
which exceed the standard, but on average we're getting the level of performance that we want,
while providing that flexibility to vehicle manufacturers. And they can also trade with
each other. So maybe a performance - a Ferrari - manufacturer, they're not going for fuel
efficiency, they're going for performance. But they can just buy credits from another
manufacturer who's maybe exceeded their target and gets rewarded by being able to sell those credits.
So the the corporate average fuel economy standard in the US has been quite successful
in driving forward vehicle performance. It's really important there that the testing protocol
is really rigorous. There's been problems in other regions - I'm sure you've heard of
'Diesel-Gate' - unmonitored testing of vehicles, so it's really important that that element
is well designed. Another aspect of this, and a lot of other policies we touch on in the book,
is the idea of continuous improvement. In Japan they have a program called Top Runner. And
every few years under the Top Runner program the government surveys the existing fleet of vehicles
and says, 'okay this company was able to produce a vehicle that's this efficient. That's going to be
the new standard for the rest of you. And, by the way, we know that vehicles are going to improve
over the next few years so we're going to add a little on top of that.' And having that built-in
continuous improvement ensures that the standard doesn't just stagnate, but continues to drive
improvements in fuel efficiency into the future. [Plank] Of course the ideal vehicles are electric,
that require no gasoline whatsoever. Their production - and adoption by consumers - has
been promoted by policies like a Feebate. [Orvis] The idea of a Feebate is you tax
inefficient vehicles and you rebate that tax to efficient vehicles. The idea is to create an
incentive for consumers to go out and buy the more efficient vehicles and not buy the less efficient
ones. Maybe the best example is in France, the Bonus-Malus Program, which is a Feebate there
that awards about a $500 credit to buyers of efficient vehicles that's
drawn from taxes on inefficient vehicles. [Plank] That brings us right to the US EV
Tax Credit. So why does that phase out after the manufacturer sells 200,000 vehicles? Is that the
fossil fuel industry pushing back on that policy? [Orvis] I think the concept - in theory - is good.
Once a manufacturer sells a certain number of vehicles, maybe they won't need the credit
anymore. The problem is that, basically, Tesla has just totally been leading the chart on that,
and now they're essentially being penalized for being the first
movers and sticking their necks out. [Plank] You allude to two cases in,
what, Denmark and Georgia? Where there was an incentive to buy an EV and then they took that
away and the market just - drastically - was hurt. [Orvis] Yeah, in Georgia in particular there was a
backlash from rural politicians who thought that the EV credit was basically just subsidizing
wealthy city dwellers to buy electric vehicles. And so once they got control of the legislature
not only did they eliminate the tax credit, but they actually implemented a tax on EV's and the
market just disappeared overnight. [Plank] That's insane.
The country that's probably been the most successful in EV subsidies is China.
What they're doing with buses right now is incredible--they have half a million e-buses on
the streets there. They have significant subsidies for cars. Is there any sense that they're going to
pull those back the way we've done, or put a limit in place? Or is it all about making them the
world leader in manufacturing and EV technology? [Orvis] China really sees itself as the future
global exporter of cleantech. And they've really already capitalized on that a lot;
on solar, on electric vehicles, on electric buses. They're really leading the charge on
becoming the 21st century cleantech economy. And so I think they see that as a large potential
and I expect that would continue. [Plank] The full-length, hourlong
version of this interview is available to members of my new on-demand offering, TDC.video
If you found this interesting, you should definitely check that out. A premium membership
not only gets you access to every full-length episode of the Climate Change Solutions show,
you help support this project, and its goal of bringing these solutions to the attention of as
many people as possible. Plus you get access to my research links from each episode of this show
to help you efficiently dig much deeper into these solutions on your own.
Until next time, for TDC, I'm Bryce Plank. Thanks for watching!