Energy innovation needs more than R&D

Unleashing zero-carbon energy means reforming regulations

Back in September, voters in Norway — probably the most socialistic of the Nordic states — went to the polls, booted the incumbent right-wing coalition, and installed Labor Party leader Jonas Gahr Støre as the new prime minister.

Labor got 48 seats, which is a lot, but still well short of the 85 seats needed to form a parliamentary majority in Norway’s proportional system. Both the Greens (with three seats) and the Socialist Left Party (13 seats) said they would only join a government that committed to winding down Norwegian oil production. Støre, as I understand it, was initially hopeful that the Socialist Left was bluffing and would join Labor and the Center Party (28 seats) to form a majority government. But the Socialist Left stuck to their guns, and Støre now leads a minority coalition between Labor and the Center. In practice, I’m sure the Socialist Left and Greens will support some left-wing bills (perhaps even on climate topics), but Norway is going to keep pumping oil and gas as long as someone is buying it.

Norway isn’t an outlier. Kevin Drum did a brief tour of the world that makes it clear no country on earth is willing to leave its fossil fuel reserves in the ground. Drum concludes that “our only real hope is to spend huge amounts of money on R&D in the hope that we discover a genuinely cheaper alternative to fossil fuels.”

I agree with what I think is the controversial part of Drum’s thesis, but the emphasis on R&D strikes me as limited.

R&D is both good and necessary, but the really crucial challenge we face in scaling up zero-carbon power at this point is deployment. We’ve been consuming large quantities of fossil fuel for a long time, and the resulting infrastructure confers a huge advantage on fossil fuels. But it’s not just the physical infrastructure; it’s the regulatory infrastructure.

You may have heard conservatives complain that the National Environmental Policy Act creates a cumbersome environmental review process that makes it hard to build things. And you may have thought to yourself “some of those complaints sound valid, but without environmental review, we could have tons of pollution and other problems.” Except for oil and gas drilling have categorical exemptions from most environmental review requirements. Other forms of energy are not so lucky.

So, yes, the federal government should continue to fund science, especially on zero-carbon electricity and storage. But we also desperately need to take steps to ease deployment.

Regulatory barriers to nuclear deployment

A company called Oklo is currently midway through the licensing process at the Nuclear Regulatory Commission to try to get approval for a tiny 1.5-megawatt nuclear reactor that can be built in a factory and then run for 20 years without refueling or staff.

The Aurora, if it gets approved, would still be a high-cost electricity option that probably appeals mostly to people in unusual situations (an Air Force base in Alaska) or institutions with particular PR needs (a bitcoin mining company that wants to say it’s carbon-free or a tech company that wants zero-carbon server farms). But the theory is that since you’re building small reactors in factories rather than doing custom jobs on-site, you exhibit falling costs as you increase the scale of your output — both because of learning-by-doing, but also just because of the nature of mass production: if you use your facilities more intensively, your per-item costs drop.

But beyond the specifics of Oklo, this is the first significant test of the NRC’s mandate from Congress to develop a regulatory approach suitable to new reactor designs. Part of Oklo’s application is a proposed regulatory methodology — a way they think the safety of these reactors ought to be assessed — which, if accepted, could be used by other startups in this space.

This, however, relates to another snag: it’s hard to turn the bureaucratic aircraft carrier without strong leadership. Right now, there’s generally bipartisan support for advanced nuclear but also two vacancies on the NRC — one for a Democrat, one for a Republican. Good names keep getting floated for these jobs, but they keep getting spiked by the Nevada delegation because basically anyone you can find who is pro-nuclear has, at some point, said there is no technical problem with the Yucca Mountain waste storage concept.

A total sea change in Nevada politics that ends this blockage would be nice, but realistically that’s not going to happen. More feasible would be a shift in official national policy away from Yucca Mountain and toward consent-based siting of nuclear waste. This would be a political decision rather than a technical one and would mean that Nevada doesn’t need to insist on NRC members who raise fake technical objections to Yucca Mountain — the lack of local consent would be a sufficient reason not to put the waste there, and we would send it in caskets (along with money) to places that want the deal. Then we could get the commission firing on all cylinders on modern regulations.

But it’s also worth reiterating the point that Brett Kugelmass pressed on me recently, namely that apart from politics, there’s nothing actually wrong with large light-water reactor designs; you would just need to relax the safety regulations. I think that’s a bit of a dead-end, but it’s out there. Meanwhile, even the warmest, fuzziest renewable energy sources are facing big permitting challenges.

Regulatory barriers to renewables

Austin Vernon wrote a very nice post at the beginning of this month subtitled “Solar and wind are cheap, but hard to permit” that perfectly captures a very underrated energy dynamic.

At this point, I think everyone knows what’s cool about renewables (no emissions and no waste) and what the problems are (intermittency, mostly). Less known is the extent to which the barrier to a utility-scale solar project is not building the project, but building the required grid connections:

The amounts in the queues are eye-popping. But only 20%-25% of projects typically make it through. Projects struggle to get interconnection approval because the process is outdated. New facilities often require grid upgrades to sell electricity into the grid. Rules force the next new entrant to shoulder all grid upgrade costs. New electricity generation comes online in an area until major grid upgrades make the next project unfeasible. After getting hit with a huge bill, it leaves the queue. The next project undergoes a study until it learns that it has to pay astronomical grid upgrade fees. It exits the line. The next project undergoes a study...

On a larger scale, the places where it’s sunniest or windiest are not always the places with the most electrical demand, so you’d need to build interregional transmission lines to move the electricity from the wind turbines to the cities. This is especially important because of the intermittency of renewables — you need to be dispatching solar power when the sun is shining, but then be able to flexibly replace it with wind power from somewhere else.

The problem, as I wrote in “America needs more interregional electric lines,” is that regulatory authority over this is held by state Public Utility Commissions. The PUCs don’t always cooperate appropriately and, more important, picayune state-focused interests tend to underrate the national benefits of more transmission. There are good proposals on the table (the one I discuss in that article from Sheldon Whitehouse and Mike Quigley is great), but we’d need to actually pass them.

Many states also have barriers that prevent utilities from doing rooftop or other distributed solar projects. And even in jurisdictions that are politically committed to being pro-solar, you need to wrestle with historic preservation and other rules. The federal government, meanwhile, promotes solar power with one hand but taxes imports of solar panels with the other. On the wind front, we recently got a substantial improvement in offshore wind permitting from the Biden administration, which is great. But even under the new, more permissive framework, “potential building sites could be crossed off the list if they are found to have a negative impact on wildlife, tourism, military activities or other commercial services.”

We shouldn’t just brush those concerns off. You wouldn’t want to build an offshore wind farm that accidentally crippled the entire Pacific Fleet or something.

But as with nuclear plants, offshore wind farms should be regulated in a comprehensive cost-benefit framework. Energy is very valuable. Burning fossil fuels to get that energy creates a lot of harm. A zero-emissions source of electricity does not have to have zero downsides to be worth building, since there are large downsides to not building.

Geothermal on public lands

Geothermal energy strikes me as in many ways the great known unknown of the energy ecosystem.

We know for sure that there is a ton of heat stored underground. And from the handful of places where that heat is close to the ground, we know that geothermal energy is really useful. Iceland has extremely cheap electricity that they use to power an aluminum smelting industry. They also use geothermal home heating systems, as a zero-emissions solution. In the U.S., our best idea for decarbonizing home heating is to get more people to install electric heat pumps instead of burning natural gas (or heating oil in New England), which is a great solution in a lot of the country but runs into some problems in places where the weather routinely gets very cold. Heat pumps still work when it’s cold; they just get less efficient. If you’re one guy installing a heat pump that’s probably fine. But if all of Minneapolis is on heat pumps and there’s a cold snap, you then have a huge surge in electricity demand that we might need massive overcapacity to meet.

It’d be nice if we could all be Iceland instead and use geothermal district heating.

But what’s cool about geothermal is that while we’re not sitting on top of volcanos like Iceland is, the heat really is down there. It’s just a question of drilling a deep enough hole.

A key point from Dave Roberts is that “the line between a conventional hydrothermal resource and a resource that requires EGS [Enhanced Geothermal System] is not sharp” — it’s just that the deeper you need to go, the harder it is to drill.

We know from the oil and gas world that iterative improvement in drilling technology is very possible if the financial incentive exists. You’d start out with relatively easy EGS projects, then hope to get better and better, and someday it’s geothermal everywhere. And as Eli Dourado points out, “if you look at a map of temperature at depth in the United States, you will notice that the best spots for geothermal drilling overlap considerably with land owned by Uncle Sam.”

As an East Coast person, I had in my head for the longest time that federal lands were all national parks or nature preserves. But actually, most of this land is open to natural resource extraction. And in particular, the oil and gas companies can avail themselves of their categorical exemption from NEPA review to drill holes.

Geothermal projects do not have the same regulatory exemption and can face a years-long permitting process. What we need, once again, is regulatory parity and cost-benefit principles. Drilling geothermal holes is much better for the environment than drilling oil wells and should not be held to a higher standard.

Unleash zero-carbon power

The climate debate largely takes place along the axis of either wanting to subsidize zero-carbon sources or wanting to tax or regulate dirty sources. You also have a somewhat less contentious debate in Congress about innovation.

These are all important topics, even if I’m fairly pessimistic about strangling fossil fuels relative to undercutting them.

But I do think that they are becoming somewhat obsolete. We have actually made enormous technical strides in terms of zero-carbon electricity. And subsidies are most potent at an early point in the adoption chain. When solar power was expensive and rare, subsidies generated a large percentage-wise increase in solar deployment, which generated learning-by-doing and helped bring costs down. But the bigger renewables get, the more expensive it becomes to generate further growth purely through subsidies.

The big subject we need to tackle is fossil fuels’ huge inbuilt advantage. Fossil fuel companies already have most of the infrastructure they need, and they have a regulatory system geared toward letting them build more of the kinds of things that they need. Zero-carbon power, by contrast, doesn’t have the same legacy of worming its way into the fabric of the regulatory state. At this point, permitting obstacles are a huge barrier to short-term increases in renewable power and an even bigger barrier to longer-term developments that at least might unlock enormous amounts of zero-carbon advanced nuclear or geothermal projects.

Demolishing these barriers is more important than further spending on R&D and innovation. Not because no innovation is needed, but because deployability will unlock not only private R&D but also the kind of practical learning-by-doing that has taken solar from “this is technology that works” to “this is technology that’s cheap.”

We’re underperforming the state of our scientific knowledge because the regulatory state perversely privileges fossil fuels over zero-carbon power.