The New Form of Energy Generation

Just like fossil fuels changed the world in the 20th century, I expect renewable energy to change the world in many of the same ways during the 21st century. Solar energy and wind energy have recently become the cheapest forms of energy generation, according to reports, and trends indicate that they will only get cheaper. As renewable energy prices continue to decline, hydrogen will also become increasingly viable as an energy source. Combined, solar, wind, and hydrogen have the potential to completely disrupt how we consume energy - from how you heat your home, to how you get around, and everything in between.
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The New Form of Energy Generation

The Current State of Energy Generation (in the U.S.)

Before predicting the future of energy generation, it is helpful to understand the current state of energy generation.

Figure 1 - Estimated U.S. Energy Consumption in 2019: 100.2 Quads
Source: Lawrence Livermore National Laboratory

It may surprise you to learn that, in 2019, less than 4% of the energy generated in the U.S. was produced from wind or solar energy - as shown in the flowchart above produced by the Lawrence Livermore National Laboratory. It is even more surprising when you consider the current Levelized Cost of Energy from various sources, courtesy of Lazard. The research report conducted by Lazard concluded that wind energy and solar energy are currently the cheapest sources of energy. Similarly, the IEA (International Energy Agency) released a report concluding that solar energy is now the cheapest form of energy generation in history. That being said, the cheapest forms of energy generation are the ones that are least prevalent in the U.S.

Some Tips to Understand the Graph

Firstly, the numbers on the flowchart above are in Quads, which is a unit of energy. Fortunately, the U.S. consumed nearly exactly 100 Quads of energy in 2019, so the numbers on the graph above can also be thought of as percentages (of the total energy consumed) if that is more intuitive.

Secondly, it is very important to remember that "Rejected Energy" is included in the flowchart above. Rejected Energy can also be thought of as wasted energy, most of which is lost in the form of heat when combusting fossil fuels to produce energy. Perhaps the best example of this is the traditional ICE (internal combustion engine) vehicle - which typically only have an efficiency of about 20%. An efficiency of 20% means that if you have a tank of gas with 100 units of energy in it, 80 units would be wasted mostly through heat and friction, while only 20 units of energy would actually be used to propel you where you want to go. In general, burning fossil fuels results in a lot of "Rejected Energy". Renewable energy sources tend to have a much better efficiencies than burning fossil fuels. Since most of our energy comes from fossil fuels, it should not come as a surprise that about 67.5% of the energy the US consumed in 2019 was in the form of wasted energy - refer to the right side of the flowchart above.

Key Takeaways

There are some key takeaways I'd like to highlight from the flowchart above:

  1. Natural gas, coal, and petroleum (fossil fuels) accounted for about 80% of the energy generation in the U.S. in 2019.
  2. Only about 37% of the energy we consumed was intended to become electricity. In other words, over 60% of the energy we consumed was directly in the form of Fossil Fuels. (Refer to the yellow block in the top-middle of the flowchart titled "Electricity Generation".) How is this possible? Our most energy-intensive activities do not consume electricity, but instead consume fossil fuels directly. Driving to work, heating your home, and cooking food, are some of the more energy intensive activities in our daily lives and most people consume gasoline when driving to work, and consume natural gas when heating their home or cooking. The same is true for these activities on a commercial scale such as heating office buildings, driving logistics trucks, piloting planes and even moving cargo ships. All of these activities consume fossil fuels directly and are the biggest consumers of energy as a whole.

The Future of Energy Generation

The World Finally Embraces Renewables

I would not be surprised if the world is able to completely eliminate coal, natural gas, and petroleum as energy sources by 2050. It seems like every global power has recently embraced renewable energy, not just because it is good for the planet, but because it is an opportunity to be at the forefront of a new industry - a very valuable industry. The EU, China, and the US have all announced multi-trillion dollar plans to accelerate the adoption of renewable energy. Australia has passed legislation that aims to double their (already substantial) renewable energy capacity over the next decade. [Source]Not to mention England, Japan, Spain, South Korea and Saudi Arabia have all unveiled bold roadmaps to make hydrogen a key part of their economy. [Source]

What has caused this dramatic change of heart? In short, costs. But each form of renewable energy has a different story.

The Rise of Solar Energy

As I mentioned earlier, the IEA just released a report concluding that solar energy is now the cheapest form of energy generation in history. That being said, the most interesting trend is that solar energy prices are still on a downwards trend, indicating that solar energy will continue to get cheaper. On the other hand fossil fuel costs have remained steady for quite some time. The reduction in solar energy prices is due to continued innovation across multiple fields including manufacturing, design, materials selection and more. Overall, thanks to all of these innovations solar prices have fallen around 90% since the end of 2009.

The Rise of Wind Energy

Size Matters

Similar to solar energy, wind energy has recently become one of the cheapest sources of energy. The difference with solar energy, is that the drivers of cost reductions are less technical and easier to understand. Unlike solar panels, the wind turbines of today are very similar to the wind turbines of 30 years ago. They are produced using similar manufacturing techniques and materials, the lay-up of composite materials[Video] - and have virtually the same design. The big difference is that wind turbines just keep getting bigger.  Illustrated best in this Real Engineering youtube video, wind turbines have ballooned in size from just 27m diameter in the '90s, to over 125m diameter in 2019. In fact, GE recently released a new wind turbine that is a whopping 220m in diameter. Just one rotation of this massive wind turbine could power the average home for 2 days.

Why Bigger, Is Better

Unless you studied engineering, it may surprise you how much size affects wind energy generation. The economies of scale of wind energy are best explained by this Real Engineering youtube video. In short, the amount of energy a wind turbine can produce is exponentially proportional to its size, or specifically the radius of the blade. If you increase the size of the blade by 2x, the amount of energy generated will increase 4x. That being said, it should not be a surprise that wind energy prices have fallen 55-60% since 2010 [Source]. These figures do not even reflect the cost reductions brought on by the new, even bigger, wind turbines that have come on the market recently, such as the new GE Haliade-X.

New Problems

As wind turbines have grown in size, the blades of wind turbines have quickly become some of the largest single-piece structures ever made by humans. The issue is that wind turbine blades cannot be manufactured in pieces. For various reasons, the blade has to be manufactured and transported as one single piece, which has been quite problematic - especially for logistics.

New Opportunities

Fortunately, the industry has found a way to bypass these logistical nightmares; offshore wind turbines. Cheaper, faster and safer logistics is just one of the reasons that wind energy development has started shifting offshore, but it is certainly one of the biggest reasons. That being said, I was not surprised to hear that the IEA estimates that offshore wind looks set to become a $1 trillion business by 2040, with global capacity increasing 15-fold - according to this CNBC article.

The Rise of Hydrogen

Some Background

Fuel cells convert hydrogen into electricity. When combined with a hydrogen storage tank, fuel cell systems can act much like a battery. For example, vehicles that use electric motors can get the energy to power the motors from a battery or a hydrogen fuel cell system. In that sense, anything that uses electricity can be powered from hydrogen just as it can be powered from traditional batteries.

Hydrogen is the most abundant element in the universe and the most environmentally friendly way to produce hydrogen is to use electrolysis - which only consumes water and electricity. If the electricity that is fed into the system was produced via renewable energy, then the hydrogen that is produced is called green hydrogen. If renewable energy were to get much cheaper, then so would green hydrogen.

Hydrogen has a higher energy density than petrol, natural gas, and even jet fuel - which makes it a great fuel. [source]

I encourage you to watch this Real Engineering Video about "[Video]The Truth About Hydrogen" if you want to take a deeper dive into how hydrogen fuel cells work, how hydrogen is produced & distributed, and how hydrogen systems compare with battery systems. The video concludes that hydrogen may not end up being used in the cars of the future, but as I outline in the rest of this article, hydrogen holds much promise to decarbonize many other industries.

How Hydrogen is Better than Batteries - Sometimes

Hydrogen is Good for Transportation

Industries that currently consume fossil fuels directly, such as transportation, have only two options to decarbonize: batteries or hydrogen. In short, the more energy intensive the industry, the more likely that hydrogen will be the replacement of choice - and in many cases it all comes back to energy density. For example, Airbus aims to develop the first zero-emission commercial airliner by 2035 - using hydrogen. To replace the tank of aviation fuel currently in use, Airbus could replace it with a slightly lighter tank of liquified hydrogen - given that hydrogen has a higher gravimetric energy density than aviation fuel. If they wanted to use batteries, they would have to fill the entirety of the cargo bay with batteries and they still probably would not have as much energy as one tank of aviation fuel or hydrogen - not to mention the plane would be too heavy to fly. This is because hydrogen has a gravimetric energy density (energy per unit weight) that is hundreds of times higher than lithium batteries and a volumetric energy density (energy per unit volume) that is dozens of times higher lithium ion batteries - nevertheless that is not the whole story.  

A small lithium ion battery will have the same energy density as a large lithium ion battery. That is not the case for hydrogen fuel cell systems, once you take into account the whole system. Hydrogen itself may have a significantly higher energy density than batteries, but batteries do not need auxiliary systems to provide energy, like fuel tanks, compression and cooling systems, and fuel cells. Keeping that in mind, the smaller the system, the more the auxiliary systems have an impact on the overall energy density and efficiency of the hydrogen system. On the other hand, the bigger the system, the less the auxiliary systems bring down energy density and efficiency. This is why hydrogen is the most likely alternative fuel for numerous energy intensive industries including railways, aviation, and cargo shipping.

Hydrogen is Good For Heating

For similar reasons, it is looking increasingly likely that hydrogen will replace natural gas as a way to heat our homes. It is also worth noting that existing natural gas infrastructure can be retrofitted to work for hydrogen distribution.

How Hydrogen Will Compete with Fossil Fuels

Cheap solar and wind energy will be the biggest driver for cheap hydrogen. As I mentioned earlier, electrolysis is the most environmentally friendly way to produce hydrogen, but I did not mention that it has the potential to be the cheapest method to produce hydrogen as well - even cheaper than current natural gas prices.

Firstly, it is important to know that, even now, energy prices fluctuate from one hour to the next. More than anything, this has to do with fluctuations in supply and demand. Currently, energy will likely be more expensive during a hot summer day, when everyone is using their AC units, than later in the middle of the night. This will continue to be the case as we transition our grid towards renewable energy, and in some cases, price fluctuations may even become more dramatic. As more of our grid transitions towards renewable energy, we may find that areas with plenty of sun will have very cheap energy prices during the day, and more expensive energy prices during the night. In this case it is not demand driving the prices, but rather the change in supply (since you cannot produce solar energy at night.) Hydrogen producers will be able to take advantage of not only cheap solar energy, but also the dramatic fluctuations in energy prices, to produce green hydrogen at very favorable prices. This is why many companies are developing hydrogen production facilities in conjunction with renewable energy sources to guarantee the cheapest prices for hydrogen production.

Secondly, fossil fuels are more costly than you might think. Globally, fossil fuels received $447 Billion of subsidies during 2017, while renewables only received $128 Billion in subsidies. [Source] Without these subsidies, not only would fossil fuel companies find it very hard to be profitable, but consumers would end up paying much more to fill their cars with gas or heat their homes. Now that renewables have become cheaper than fossil fuels, governments will find it harder to rationalize subsidizing industries of the past and will likely start reducing fossil fuel subsidies to push the economy towards industries of the future.

In short, hydrogen has a good chance to compete with fossil fuels in certain industries thanks to declining renewable energy costs and the possibility that fossil fuel subsidies will also start to experience a decline as well.

What would a 100% transition to renewable energy look like?

It is hard to tell when such a transition would occur, but the picture is getting clearer and clearer if you make a few assumptions.

Assumptions:

  • Fossil Fuel subsidies reduce significantly
  • Renewable energy costs reduce significantly.
  • Natural Gas, Coal and Petrol have been eliminated as energy sources.

Expected Outcomes (using Figure 1 as a reference.)

  • Automotive transportation services would consume energy directly from wind and solar farms instead of petroleum, since cars and most commercial trucks will likely be replaced with battery-electric vehicles.
  • Larger transportation services like aviation, trains and cargo shipping would consume energy in the form of hydrogen, which would be produced using electricity from renewable energy sources.
  • All commercial and residential heating services (which currently consume natural gas) would consume energy directly as electricity or consume energy in the form of hydrogen, which would also be produced using electricity using renewable sources.
  • Most of our electricity generation would come from renewable energy sources. Some would inevitably come from nuclear power.

Undetermined Outcomes:

  • It is still uncertain how some industrial sectors, such as steel processing and other manufacturing industries, could transition away from fossil fuels.
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