The end of the energy crisis

OPINION:

Be thankful for entrepreneurs, scientists and engineers. They offset many of the sins of the political class and make our futures better. For decades, self-proclaimed environmentalists and their power-seeking political and media allies have been demanding the end of the use of fossil fuels — all in the name of saving the planet. We were also told we would run out of oil and natural gas, so renewables — mainly wind and solar power — were the only hope.

Rather than running out of oil and gas, economically recoverable reserves keep growing, and because of carbon recapture and other new technologies, harmful emissions will soon be almost eliminated. (If you are old enough, you might be able to remember when the tailpipe of cars spilled lots of dirty and bad stuff — now almost gone.) Because of fracking and other technologies, the U.S. alone has several hundred years’ worth of oil and gas reserves.

At one point in the past, it was argued that the world would have an almost infinite amount of cheap nuclear power. Rather than being the dominant form of energy, the industry almost died because of Chernobyl and other accidents and the extremely high cost of building nuclear power plants. But now, advancements in nuclear technology, such as small modular reactors and Generation IV reactors, appear to enable much safer and much lower-cost reactors. The new smaller reactors can be manufactured in factories and transported to sites, reducing construction time and costs.

Geothermal energy, which harnesses the Earth’s internal heat, now appears to be a reliable and sustainable power source with vast untapped potential. Recent technological advancements have expanded geothermal energy’s feasibility in regions previously considered unsuitable. The cost of geothermal power is largely influenced by factors such as drilling expenses and the initial development of geothermal plants. As drilling technology improves and exploration methods become more sophisticated, these costs are expected to decrease. The long life span and low operating costs of geothermal plants make them likely to be economically attractive.

The big surprise on the energy production front is solar power, whose costs and prices have been plummeting — far more than projections. The price reductions have a self-reinforcing effect so that economies of scale enable even further cost reductions as demand increases. The cost of solar energy is falling much faster than that of wind power and is poised to make much of wind noncompetitive (along with the advantages because it is not unsightly, noisy, or kills birds).

Solar power has seen great improvements and innovations in photovoltaic technology, such as perovskite solar cells, which offer higher efficiency rates and lower production costs than traditional silicon-based cells. (China has more than 90% of the silicon cell panel market.) The development of bifacial solar panels, which capture sunlight on both sides, further enhances energy output and efficiency.

The marginal cost of electricity from solar energy is almost zero — the cost is all in the collection and installation. Once installed, there are no moving parts, and it can continue to produce electricity for decades. The problem is that the sun does not always shine, and thus for solar to be the single source of electricity, it needs to be stored in batteries or converted to fuels such as hydrogen. Fortunately, the cost of batteries is also falling rapidly.

With the rise of the electric car, there is enormous pressure and investment going into improving battery technology. A good bet is that battery capacities, their useful lives and cost reductions will continue to improve at rapid rates for many years (as have solar cells, semiconductors and other new technologies). (The June 22 issue of The Economist has a long cover story worth reading, “The Sun Machines,” that is very bullish on the future of solar power for those interested in the topic.)

The widespread adoption of solar energy will mean that power failures from storms or other grid malfunctions will cause fewer problems as people have more power alternatives. Decentralization of power sources is desirable, and individual solar units are the ultimate in decentralization. People living in areas that are deficient in electricity production can quickly and inexpensively acquire electric power without the cost and time of building large power plants. This is already happening in much of Africa and elsewhere, where inexpensive, small solar panels and smartphones can provide power for lighting (especially with the development of low-consumption LEDs).

The cost of almost everything depends on energy, including food, physical products, transportation and communication. Many in the environmental movement had predicted a world of scarcity, where humanity would run out of resources — including food — and everything would cost more.

The opposite is happening: Famine has largely disappeared, and everything in real terms is becoming less expensive (except in countries experiencing temporary bouts of inflation because of monetary and fiscal mismanagement). Again, as the real costs of energy decline, so will the real costs of almost everything else — leading to higher real incomes for most people.

• Richard W. Rahn is chairman of the Institute for Global Economic Growth and MCon LLC.