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The devil’s in the details: Policy implications of ‘clean’ vs. ‘renewable’ energy

15th March 2019

Topic(s): Carbon capture, COP24, Economics, Policy, United States

In the wake of several major climate reports by the Intergovernmental Panel on Climate Change and the U.S. Government, climate change has taken center stage in American political discourse, encapsulated by — but in no way limited to — the Green New Deal. Many of the proposed plans for confronting the climate crisis stress the imperative of decreasing emissions by transitioning to 100% "clean" or "renewable" sources of energy.

The terms "clean" and "renewable" are often thought to be interchangeable, especially when used in highly engaged and passionate public debates, while at other times authors simply use them without providing clear definitions. However, what seems like a small wording issue can have wide-ranging consequences for the policies and financing that support decarbonization — and ultimately the success of our decarbonization efforts.

Renewable energy is derived from sources that can naturally replenish themselves — wind and sun are the two most obvious examples — while clean energy encompasses all zero-carbon energy sources.

The clean energy or zero-carbon energy tent is wider; it not only leaves the door open to 100% renewables, but it also includes nuclear energy and the carbon-neutralizing impact of technologies like carbon capture and sequestration (CCS).

Carbon capture is a suite of technologies used to decarbonize emissions-producing sources of energy as well industrial processes like steel production, where electrification has its limits. This, in turn, can lower the life-cycle carbon footprint of solar and wind power.

Hydrogen can be renewable if it is produced through electrolysis using renewables and water, or it can be produced from natural gas, coal, biomass and oil; in the latter cases — and if utilized with CCS — hydrogen becomes a zero-carbon energy source.

Clean energy concerns

Critics have pointed to a host of issues with some forms of clean energy; namely, questions abound regarding slow deployment of carbon capture technologies at a commercial level. Additionally, nuclear energy raises a number of concerns, from spent fuel storage and safety to non-proliferation.

However, the enormity of the climate crisis is great enough that that there may no longer be time to choose preferred decarbonization technologies. In light of mounting evidence of climate change, climate advocates — including many environmentalist organizations — are rallying behind the idea of a comprehensive approach to clean energy.

The differences between clean and renewable energy can have meaningful policy impacts, particularly on the ability to reduce overall emissions and energy security, and they can also have massive financial implications for global energy markets.

In the U.S., 38 states as well as the District of Columbia have some type of renewable portfolio standard (RPS), an effective policy mechanism that has driven renewable energy deployment at the state level. These plans vary between states, with some adhering strictly to renewable energy, even as others include clean energy resources.

If the standard includes other sources of clean energy, especially nuclear power to varying degrees, it can also be referred to as a Clean Energy Standard.

A unified clean energy standard is technology-neutral, meaning that it treats all zero-carbon sources of energy equally. It allows clean energy sources to generate an alternative revenue stream and is largely seen as a market-friendly mechanism geared towards eliminating emissions.

California ambitions

California, arguably one of the most ambitious states when it comes to climate, recently passed SB100, requiring the state to acquire 100% of its electricity from renewable and zero-carbon electricity, a tiny but important detail. The bill still boosts renewables with a 60% RPS by 2030.

However, the remaining 40% can come from any source of clean energy, including nuclear, CCS and renewables. Although some media outlets have described the bill as "mandating 100% renewable energy use by 2045," the most accurate definition of the standard is that it is 100% zero-carbon.

Indeed, the bill's careful wording signals that there are realistic limitations for a 100% renewable energy grid with today's technology, particularly regarding cost.

The cost of renewable energy sources has fallen dramatically, leading to a beneficial and accelerated global build-out and making renewables the most competitive source of electricity in some parts of the world. But large quantities of renewable energy sources pose challenges for the grid, in part due to their intermittency.

Currently, most market and policy designs evaluate the competitiveness of energy sources by their levelized cost of electricity, essentially the average price of electricity where the asset will break even over its lifetime, which fails to incorporate other elements of value to the energy system such as flexibility.

Dispatchable, zero-carbon resources, working in tandem with large quantities of intermittent renewables, will bolster renewables' success in the medium to long-run, while ensuring emissions reductions now.

In 2018, the International Energy Agency (IEA) introduced the concept of value-adjusted levelized cost of electricity built on modeling hourly supply and taking into account energy, flexibility and capacity. Under this measure, renewables continue to become more competitive in the medium-run, albeit varying by region.

However, as the intermittent generation of renewables increases, it poses more challenges to the grid, which diminishes the competitiveness of their output. In turn, the value of dispatchable energy increases.

Hence, the analysis concludes that the continued growth of renewables will not only depend on their cost, but also on their relative value to the grid. In the case of solar PV, continued market growth might be tied to governments' ability to boost all clean energy sources, including nuclear energy and CCS.

Lowering energy system costs

Several studies demonstrate that including all clean energy sources can lower the cost of the overall energy system, which is most likely to translate into slower price increases, boosting energy security and access.

U.K. researchers modeled a zero-carbon grid by 2050 and found that a renewables-share of more than 80% led to realistic constraints on energy supply. In the U.S., researchers who analyzed 40 different decarbonization pathways came to a similar conclusion: a system inclusive of clean energy will be much cheaper than a system based entirely on renewables.

Stakeholders are becoming increasingly aware of this tiny difference with potentially large impacts — even Google moved from a 100% renewables energy purchasing goal to a commitment to carbon-free energy for its daily operations.

From a global perspective, the energy transition will need to deliver decarbonization in sectors for which renewables have — as of today — limited applicability, including transportation and industry.

A carefully-worded approach that emphasizes zero-carbon energy takes this wide range of considerations into account as it opens the door to all sources of clean energy, while not dismissing a 100% renewable future.

This article was first published on Utility Dive and was written by Jennifer T. Gordon, Deputy Director of the Atlantic Council's Global Energy Center, and Lee Beck, Senior Advisor for Advocacy and Communications at the Global CCS Institute.

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