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Why We Fail to Correctly Project Renewable Energy Growth

by Michael Levi
July 23, 2012

There’s an interesting discussion going on in the blogosphere over why energy experts “failed to predict” massive growth in renewable energy over the past decade. David Roberts speculates that it’s because renewable energy is technologically dynamic and often distributed – two things that, he says, we’re bad at modeling. Paul Krugman sees something much uglier at work: capture (“both crude and subtle”) of energy experts by fossil fuel interests.

But there’s a much more mundane explanation: The sources that Roberts and Krugman point to as evidence of chronically underestimated renewable energy growth weren’t trying to predict the future. The sources – mostly the Energy Information Administration (EIA) and the International Energy Agency (IEA) – were explicitly tasked with modeling future developments assuming no changes in policy. Renewable energy has taken off precisely because of changes in policy. The EIA and IEA weren’t wrong – they just weren’t modeling what Roberts and Krugman suggest they were.

Don’t believe me that the difference is mostly about policy? Consider this: Wind installations dropped close to zero in each year that the production tax credit (PTC) expired. That’s because building wind farms doesn’t make sense without supportive policy. But the EIA and IEA modelers were specifically projecting the future assuming that the PTC would not exist.

To be certain, Roberts cites expert projections that weren’t from the EIA or IEA. “In 2002,” he writes, “a top industry analyst predicted an additional 1 gigawatt annual market [for solar] by 2010. The annual market in 2010 was 17 times that at 17 gigawatts.” But one analyst does not constitute a collective failure; moreover, the large growth in solar was driven by large-scale installations, not by distributed generation. He also reports that “In 2000, the European Wind Energy Association predicted Europe would have 50 gigawatts of wind by 2010 and boosted that estimate to 75 two years later. Actually, 84 gigawatts of wind power were feeding into the European electric grid by 2012.” Perhaps Krugman can explain how the European Wind Energy Association succumbed to capture by fossil fuel interests.

There’s an important lesson here. Some people seem convinced that falling prices are the reason that renewable energy has done so well in recent years. They’re certainly part of the story, but without supportive policy that wasn’t in place a decade ago, renewables wouldn’t have done nearly as well. If we want more renewable energy in the coming years than the EIA and IEA currently project, we’re going to need new and more robust policies too.

Post a Comment 7 Comments

  • Posted by Jeff

    PK sees evil around every corner

  • Posted by Peter MacConnachue

    Hi Michael – this is an interesting topic article about the linkahge between policies and forecasting challenges. The link in the 3rd paragraph about wind installation dropping “close to zero” seems to be broken. Can you please direct me to the original source document?

    Thanks,
    Peter

    [ML: Thanks for the heads up. Here you go: http://www.ucsusa.org/assets/images/ce/AWEA-wind-capacity-graph.png

  • Posted by Brinda Thomas

    Thanks for the timely analyses — I had been wondering about these blog posts as well. I think Roberts’ point on the deficiencies of modern technology forecasting tools is still a valid one. Energy forecasting tools (i.e. diffusion/experience curves) are quite limited and economists tend to have very crude measures of technology change in their energy demand models.

    It would be interesting to see how well the EIA/IEA forecasting models would have predicted deployment of wind & solar, after accounting for supporting policies.

  • Posted by jim

    ML: thanks for a sensible take on a topic that attracts little, but desparately needed, sensible analysis.

  • Posted by Amory B. Lovins

    Michael’s thesis is generally correct, but for one detail. Wind installations IN THE U.S. dropped sharply each time Congress messed with the tax credit, but not because it didn’t make sense to build wind turbines without the credit (whose levelized aftertax value is 1¢/kWh). Rather, the additions shifted abroad to countries offering a better deal. Windpower’s global net additions have increased every year (except 1996) since 1990.

  • Posted by Mary

    Paul Krugman sees something much uglier at work: capture (“both crude and subtle”) of energy experts by fossil fuel interests.” This would not be possible if we had scientifically accurate information to base our discussion about wind energy on, but we don’t. The wind industry has created perceptions based on modeling. Those models are often not supported by real world data. A document by a company that does wildlife surveys and aides with design of wind installations was revealing: permitting is political, not scientific. Perception is reality. Influence the PERCEPTIONS of decision makers. We might be able to make headway if we shut off the spigot of money and insist on verifiable, scientific facts.

  • Posted by M. Straub

    How about the fact that the ‘experts’ never seem to take into account the fact that new technology continues to emerge nearly everyday. Policy makers have continuously called for an ‘all hands on deck’ approach, and the private sector has responded with innovations that continue to inspire, and find ways to provide large quantities of power with zero fossil fuels required. Take Ocean Thermal Energy Conversion (OTEC) for example. It creates a constant, and endless, flow of power from the temperature difference in shallow and deep water. It’s starting to grow on the commercial scale, and can drastically cut fossil fuel usage for island nations, and tropical locations around the world.

    It’s just one example of something it seems like these predictors never take into account, but fortunately in the real world, millions of people will benefit from the technology for generations to come.

    Lots more on how OTEC works at The On Project.
    http://www.theonproject.org/otec/?utm_source=CFR&utm_medium=web&utm_campaign=mscomment

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