The adage “Only two things in this world are certain: death and taxes,” could be correctly amended to “Only three things in this world are certain: death, taxes, and the correlation between economic growth and energy consumption.”
Simply put, there are no examples of economic success occurring in the absence of rising energy consumption.
Source: Energy for Growth Hub
Let me disclose I am biased toward humanity. I want us to flourish. In order to reach our potential, we’ll need to use more energy. A lot more. Not just because AI data centers will demand it, but because energy usage and wealth go hand in hand, and they probably always will.
Our bright, potential future requires us to produce abundant energy as cleanly, safely, and cheaply as possible. That’s the goal. If the world’s energy usage declines, it means something has gone horribly wrong, and life will be a lot worse.
Yet, in recent years, global bureaucrats have bought into the concept that renewables are our only future. The results are restrictions on our most stable energy sources, stagnation of our most promising options, and pushing "green" technologies with serious shortcomings.
This will almost certainly lead to much higher energy prices.
Consider that households in California, which has gone all-in on renewables, pay 29.9 cents per kilowatt hour (kWh), on average. Households in Texas, which has a far more sensible attitude toward energy, pay 14.58 cents per kWh.
Meanwhile, across the pond in Germany, which has gone so far as to ban fracking and shutter nuclear plants, households pay 40.07 cents per kilowatt hour for their energy, on average.
Higher energy prices are, of course, political kryptonite come election time.
Even so, in no small part thanks to Al Gore’s dystopian documentary An Inconvenient Truth, demands for government policies favoring “clean” energy in recent decades have been made with a near-religious fervor, especially among younger generations.
And that brings us to the purpose of this article: to examine whether it’s possible to achieve energy nirvana with low-cost, non-hydrocarbon-based fuels… with a focus on the two most promising options, solar and nuclear.
Outlook 2050
As you can see here, despite the US government pushing for “renewables,” the bulk of baseload power in America is still provided by carbon-based fuels: oil, gas, and coal.
For the record, there are currently no natural pressures on supplies of natural gas, coal, or oil. For example, despite the global population doubling since 1980, oil reserves are at all-time highs.
With proven global oil reserves currently at approximately 1.7 trillion barrels, and with steady advancements in oil extraction technology, the supply of oil is more than enough to meet demand for a very long time.
Toss in virtually unlimited supplies of natural gas and coal, and the world has no risk of running out of fuel for something close to “forever.”
Despite this fundamental truth, policy decisions are being made based on political imperatives, with little thought as to real consequences.
Thus, we see initiatives, such as Net Zero 2050, adopted by most of the world. Net Zero institutionalizes the goal of living in a carbon-neutral world by 2050. That basically means a massive rebalancing of the energy mix in favor of renewables while implementing various carbon-capture schemes to offset emissions from remaining hydrocarbon use.
Net Zero has its fans, but even a cursory analysis shows that such an extensive government intervention in the marketplace would have Milton Friedman spinning in his grave.
Given the likelihood of skyrocketing global energy demand, understanding how we will best meet that demand is important to us societally and individually.
Models Are Not Reality
Most forward-looking models suffer from recency bias, the tendency to give undue weight to recent data when making predictions. But that leads to inaccurate forecasts and skewed perceptions of trends.
What most models don’t consider are the sorts of dramatic evolutionary changes that are the hallmarks of our current “Age of Miracles,” and the ever-changing political winds and resulting policy shifts.
In the case of the former, exponential increases in computational power and the widespread adoption of artificial intelligence will impact every corner of the global economy in unforeseeable ways. In the case of the latter, political will is nothing if not changeable.
Therefore, we shouldn’t get overly hung up on longer-term projections for things like energy demand. Instead, we should focus on which energy sources are economically scalable to a level that would allow us to meet any rational expectations.
Alternative energy sources are pushed forward by governments and NGOs. For a number of reasons I think it is safe to write off wind (too unreliable, polluting, dangerous to birds, aesthetically unpleasing), hydro (amazing, but always localized), geothermal (promising, but mostly localized) and biomass (very inefficient and polluting).
That leaves us with solar and nuclear as the leading contenders in the quest for energy nirvana: abundant clean energy at affordable prices.
Let’s Start with Solar
There is something incredibly appealing about harnessing the abundant power of the sun for free.
In recent years, solar businesses have been given carte blanche with massive government grants, favorable loans, and tax breaks.
Any time central planners meddle in the free market, expensive failures are sure to follow. Failed solar enterprises have racked up billions of dollars in losses.
Solyndra is a poster child for the long list of failures. It received $535 million in federal loans in 2009, then filed for bankruptcy in 2011.
That said, to quote Elon Musk, “If things are not failing, you’re not innovating enough.”
There’s no question that solar technology's development has benefited from all that cash, leading to important breakthroughs:
Better solar panels: New materials and designs, including perovskite cells, allow solar panels to produce more power using the same amount of space.
Cheaper manufacturing: Companies have found ways to make solar panels with less expensive materials, lowering the overall cost of solar energy systems.
Bifacial solar panels: By using both sides of the panel, bifacial solar panels can produce more electricity, especially when installed on reflective surfaces like white roofs or light-colored ground.
Solar tracking systems: Special equipment allows solar panels to follow the sun's movement across the sky. By constantly facing the sun, these tracking systems help solar panels capture more sunlight.
Energy storage: Improved battery technologies and other storage solutions are making it easier to save solar energy for later use, even when the sun isn't shining. (More on that momentarily.)
The end result of the government injecting so much cash into solar energy is a higher degree of efficiency coupled with a dramatic reduction in production costs, a trend likely to continue.
According to the International Renewable Energy Agency (IRENA), the global weighted-average levelized cost of electricity (LCOE) from utility-scale solar photovoltaics (PV) fell by 85% between 2010 and 2020, from $0.381 per kWh to $0.057 per kWh.*
So far, so good.
Not So Fast
While the cost of solar power generation has fallen dramatically, when it comes to providing power to the grid, solar faces what may be an economically insurmountable hurdle called “night.”
In the middle of a sunny summer day, solar shines.
However, as sure as night follows day... well, night follows day. At night the production of solar energy plummets to zero.
The folks at the Manhattan Contrarian, who pay a LOT of attention to these matters, recently asserted the Levelized Cost of Electricity (LCOE), which makes solar appear cheaper than fossil fuels, is grossly misleading.
That’s because the calculation doesn’t consider the costs of overbuilding the necessary production capacity to work on overcast days and at night.
And it doesn’t take into account the cost of the energy storage needed to make a 24/7/365 system without fossil fuel backup.
The fact is that building a wind/solar/storage electricity system without fossil fuel backup does not provide cheaper electricity than a predominantly fossil fuel system, but more expensive electricity.
And the additional expense is not some small amount like 10 or 20 or 30 percent. It’s more like a multiple of 10 or 20.
The blue line on the chart below shows the amount of demand for power throughout a typical summer day. The red line shows the power generated by solar which is naturally concentrated in the middle of the day. During peak sunlight hours, there is plenty of solar power to meet demand.
Source: ResearchGate
However, meeting the power demands of an urban area during periods of low or no sunlight—including the shorter days of winter—requires massive and very expensive storage battery arrays. As of this writing, these simply do not exist.
This is not to say that solar energy cannot contribute to the power grid. Its variable nature can be managed with smart grid technology which reduces energy from traditional sources when the solar surge occurs during the middle of the day. Then, it can ramp those sources back up when the solar surge declines and collapses at night.
Therefore, for the foreseeable future, the only way solar can play a significant role in powering a major grid is by building a redundant system that includes reliable baseline power generation sources, adding layers of complexity and cost.
Since private investors and consumers are unlikely to be willing to bear the multitrillion-dollar price tag for a pure solar solution, the only way to build such a system is through massive government subsidies on an unprecedented scale.
US Treasury Secretary Janet Yellen recently said, on the record, that the world should spend upward of $3 trillion a year between now and 2050 to achieve Net Zero.
I’m not sure how popular that level of spending will prove to be, given all the existing government debt and the inflationary consequences.
There are other negatives for solar. Surprisingly high levels of pollutants are used in the production of solar panels, including toxic chemicals, heavy metals, and silicon tetrachloride, a hazardous substance.
Then, over time, as exposure to the environment degrades their output, oceans of old panels will have to be discarded and replaced, as will the mountains of batteries needed to store the energy for periods of low and no light.
Finally, solar requires large amounts of land. Would you want to look out your window in the morning and behold a shining sea of plastic and silicon panels? No thanks.
Matt Ridley, the inspiration for The Rational Optimist Society and its Honorary Founder, illuminates the problem.
To match UK electricity demand from solar on a June afternoon would mean covering 5-10% of the entire country with solar farms but they would be useless at night and in winter. British solar output peaks at precisely the times we least need it: in the middle of the day in the middle of summer. It contributes the square root of sod all in December, and spring and autumn it stops generating just when demand starts to peak in the evening.
Of course, we humans are masters at problem-solving, so new and better technologies to improve solar will certainly be forthcoming. But that will take time and a lot of resources.
Does solar work?
Undoubtedly.
Solar has many applications, and steady improvements in efficiency and cost are only for the good. Solar is essential for off-the-grid power applications, for example, powering space vehicles and satellites, providing supplemental power in sunny areas, powering individual homes without large power needs, and for portable solar-powered objects.
It is, in fact, a very useful technology, and it will only get better and be used in all manner of new and interesting ways.
But a rational analysis of the storage issue suggests that, for the foreseeable future, the role of solar will be limited to these sorts of specialized applications.
Nuclear Nightmares
Even a few years ago, overblown fears about safety issues would have disqualified nuclear as a contender in the search for energy nirvana.
It wasn’t always that way.
Like solar today, in the early days of nuclear power, the government threw its considerable weight behind it with massive research grants. It also provided a framework so the fledgling industry could secure the insurance coverage it needed to operate.
That all changed with the 1979 Three Mile Island accident, after which nuclear was unceremoniously tossed into the political dungeon, putting the usual new technology innovation cycle on hold.
In my opinion, humanity missed a critical turn in the road when it turned its back on nuclear. Fortunately, people are beginning to rediscover nuclear for the superpower it is.
Consider:
The world’s first nuclear-powered submarine, the USS Nautilus, was launched in 1954… 70 years ago. Ever since, the US has had a fleet of dozens of nuclear submarines and aircraft carriers circling the globe, and there has never been an accident involving the small nuclear reactors powering these technological marvels.
Here’s a little-known fact, a modern nuclear-powered submarine will serve its entire 30- to 40-year life without ever needing refueling.
The reactor installed at Three Mile Island was built in 1968 and was one of the first “second generation” reactors. Despite all the hoopla surrounding the partial meltdown, no one was killed, and extensive studies have shown the radiation released had zero effects on the health of employees or the local community.
Unfortunately, the public got worked into a frenzy by the institutionally alarmist “if it bleeds it leads” news media, as usual. As a result, nuclear’s forward progress quickly became entangled in the thick muck of bureaucratic red tape and NIMBY environmental protests.
Quantifying that point, the first large-scale nuclear reactor became operational in 1957. By the time of the Three Mile Island incident 11 years later, there were 72 operational reactors. That means, on average, there were 6.5 new reactors built per year between 1957 and 1968.
Today, there are just 94, a net increase of just 22 reactors over the 56-year period following Three Mile Island.
Of course, when talking about nuclear accidents, we have to mention Chernobyl (1986) and Fukushima (2011).
While both cases were deservedly headline-grabbing and resulted in the loss of billions of dollars, the actual loss of life was minimal (under 100 in Chernobyl and one in Fukushima). That pales in comparison to the number of lives lost from exposure to pollutants released by the burning of hydrocarbons.
Furthermore, the lessons learned from these incidents are proving instrumental in developing the new reactor designs which are the future of nuclear power generation.
That Was Then, This Is Now
Soaring demand for energy—caused in no small part by massive increases in energy-sucking arrays of supercomputers, coupled with the politically unpopular high costs of energy—has led to a long overdue reevaluation of the government’s anti-nuclear attitude.
Tellingly, the sultans of Silicon Valley have started climbing on the nuclear bandwagon. Building the advanced new world these technologists envision requires a LOT more energy, leading many to begin using their considerable political clout for nuclear.
To that point, a 2020 study by Anders S. G. Andrae estimates that by 2030, global energy consumption solely associated with Artificial Intelligence could reach between 2,229 TWh and 10,923 TWh per year.
To put this into perspective, the lower end of that estimate is more than the total amount of electricity consumed in the United States in 2020.
Thus, in the proverbial blink of an eye, nuclear has gone from being the worst thing in the world to a safe, clean, and inexpensive energy.
Ed D'Agostino wrote about this in his Global Macro Update newsletter.
Billionaire tech titans are funding new types of advanced nuclear reactors. TerraPower, founded by Bill Gates, is building its first nuclear reactor in Wyoming with the help of up to $2 billion in federal funding. It should come online by 2030.
Jeff Bezos is participating, too, financially backing Canadian nuclear power company General Fusion, which aims to bring “commercial fusion energy to the grid by the 2030s.” And over at Amazon, the company he founded has purchased a massive, $650 million nuclear-powered data center campus to help support Amazon Web Services.
OpenAI CEO Sam Altman is the chairman of Oklo, a nuclear power tech firm developing fission reactors.
These early movers into the sector are like the first wagons in a gold rush. Lots more will follow.
Sensing the shift in the narrative about nuclear and with political donations at stake, the Senate recently passed the Accelerating Deployment of Versatile, Advanced Nuclear for Clean Energy (ADVANCE) Act.
This bipartisan legislation aims to support the development and deployment of advanced nuclear technologies by reducing regulatory costs, streamlining the licensing process, and incentivizing the deployment of next-generation reactors.
The importance of this change in attitude can’t be overstated.
With nuclear emerging from its long winter, the natural innovation cycle has restarted. And we can expect the race for the development of new kinds of smaller, safer reactors to accelerate rapidly.
Nuclear-powered cars anyone?
The Pros of Nuclear
In the contest for energy nirvana, nuclear has unassailable advantages.
Energy density. Energy density refers to how much energy is contained in a fixed amount of space or weight. A kilogram of gasoline provides far more energy than a kilogram of firewood. So gasoline has a higher energy density than wood.
The denser the energy, the better suited it is for providing baseload power. And nuclear power is, hands down, the most energy-dense source of power of all the candidates. (More on this in a moment.)
No particulate pollution. Ever notice the “smoke” coming from nuclear power plants? That “smoke” is nothing more than steam, as nuclear emits virtually no particulate pollutants.
No carbon emissions. You can take comfort in the fact that nuclear power has the smallest carbon footprint of any energy source. While Greenpeace continues to be reflexively anti-nuclear, a long and growing list of well-known members of the ecology movement—including former Greenpeace Directors—now fully support nuclear as the ultimate clean energy.
Cheap and abundant fuel. Uranium is actually quite common in nature, on a level with minerals such as tin or zinc. And, per the example of the USS Nautilus, reactors are very efficient. Credible estimates say there is plenty of uranium available to power the entire world for thousands of years.
Ease of distribution. Again, consider the long and successful history of nuclear submarines and aircraft carriers. The Russians are already operating two floating nuclear reactors to provide power to remote population centers.
Stability. Unlike solar and wind, the output of a nuclear plant is consistent day or night, year after year.
What about the cons?
While we can hope the ADVANCE Act will reduce the paperwork, building a large-scale nuclear power plant currently requires jumping over nearly endless regulatory hurdles. Largely for that reason, it costs $5 billion to $12 billion to build an operating nuclear reactor.
Another negative is that nuclear plants produce a steady output of power which, unlike natural gas, cannot be easily reduced or increased. As a result, their integration with variable energy sources, like solar, is less flexible.
Consequently, incorporating energy from sources such as solar or wind into a grid that includes nuclear power becomes more complex.
Of course, the storage and disposal of nuclear waste is a concern, but these issues have largely been addressed in recent years.
And, yes, while the newest technologies are making nuclear plants far less likely to suffer a meltdown, a unicorn event such as the earthquake-tsunami combination that hit Fukushima is always possible.
We humans are industrious down to the DNA level, and so all of these challenges will be met and overcome, especially now that leading technologists have jumped onto the nuclear bandwagon.
YES, ENERGY NIRVANA IS POSSIBLE
As mentioned, when comparing energy sources in the contest for providing baseline power to the grid, the higher the energy density, the better.
Using solar as our baseline, here’s how the energy mix stacks up.
Solar Energy:
The energy density of solar radiation on Earth's surface is approximately 1,360 W/m² (watts per square meter), but only a fraction of this energy can be converted into electricity by solar panels.
The average efficiency of solar panels is around 15%–20%, meaning that a solar panel with an area of 1 m² can generate about 150–200 W of electricity under optimal conditions.
Natural Gas:
Natural gas has a lower energy density than oil but is still higher than solar energy.
One m³ of natural gas contains about 50–60 times more energy than 1 m² of solar panels can generate in an hour.
Oil:
Oil has a high energy density compared to solar energy.
A kilogram of oil contains about 100 times more energy than 1 m² of solar panels can generate in an hour.
Nuclear Power:
Nuclear power has the highest energy density among the energy sources discussed here.
1 kg of uranium-235, the form of uranium used in nuclear reactors, contains about 5 million times more energy than 1 m² of solar panels can generate in an hour.
Based on energy density, and for all the other reasons discussed, nuclear is the hands-down winner for providing baseline 24/7/365 energy production in urban and suburban areas.
Interestingly, the 2050 consumption projections of the US Energy Information Agency (EIA) completely discount a nuclear renaissance. It projects that the percentage of the power demand provided by nuclear will fall from 8.17% today, to 6.53% in 2050.
Nonsense… and a good example of why we shouldn’t put too much faith in long-term modeling.
While the transition to a nuclear-powered world will take time, and it won’t be a one-way street, it seems a safe bet that by 2050 nuclear will play a far, far bigger role than envisioned in the EIA’s forecast.
Because solar does offer advantages in specialized applications and because it has many ardent supporters, we can also expect to see continued advancements in related technologies, including smaller, more efficient panels and storage solutions, all of which will benefit humanity.
Solar should, as a result, become an ever more useful source of power, but it won’t manage to power our advancing world single-handedly. Any talk of investing trillions to try to fit the square peg of solar into the round hole of baseline power production should be challenged.
However you slice it, you can take a great deal of comfort in the fact that the world has an abundance of the energy needed to ensure a thriving, prosperous future.
And the accelerating improvements in energy-related technologies—especially nuclear and solar—guarantee that energy will only become cleaner, more readily available, and inexpensive going forward.
The future is so bright, we’re going to need sunglasses.
David Galland for The Rational Optimist Society