Power Shift. Jeffrey Ball Scholar-in-Residence Steyer-Taylor Center for Energy Policy and Finance Stanford University

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1 Power Shift B IG C HANGES AND B IG Q UESTIONS F OR E NERGY, EMISSIONS, AND C LIMATE P OLICY I N THE U.S. Jeffrey Ball Scholar-in-Residence Steyer-Taylor Center for Energy Policy and Finance Stanford University Japan-China Policy Research Workshop Beijing September 6, 2017

2 Today s Presentation U.S. energy landscape U.S. emissions status U.S. climate policy: status, questions, observations Recommendations for U.S.: The New Solar System

3 U.S. Energy Landscape Era of energy abundance Oil, coal, and natural gas cheap Wind and solar cheap Electricity sector decarbonizing Coal-to-gas shift: Coal fell to 34%, gas rose to 31%, in 2015 (EIA) Nuclear and renewables rose to 34% in 2015; wind and solar represent more than half all electricity-capacity additions (EIA) But transport emissions rising One reason: Gasoline prices fell 28% in (EIA) Takeaway: Mixed signals on U.S. energy relationship with China

4 An (Early) American Energy Revolution Source: U.S. Energy Information Administration, March

5 U.S. Carbon Pledges in Paris The numbers 17% cut below 2005 by % cut below 2005 by 2025 The elements Climate Action Plan Clean Power Plan Methane regulations for oil-and-gas projects Extension of tax credits for wind and solar Tougher fuel-economy standards for cars and trucks

6 U.S. Emissions Status U.S. carbon emissions falling Energy-related CO2 emissions down 2.7%, GDP growth up 2.6%, in 2015 Emissions down 13.7%, or 1.1 billion metric tons, from 2005 through 2016 Slower-than-expected economic growth (1.5% instead of expected 2.7%) Reduction in carbon intensity of energy (down 9.6%); due largely to natural gas eclipsing coal Rise in renewables U.S. likely to reach 2020 goal U.S. unlikely to reach 2025 goal Important: U.S. is declining slice of global carbon pie Important: Fall in U.S. emissions due largely to actions not motivated by climate concerns. Sources: U.S. Energy Information Administration; Rhodium Group; Pew Research Center 6

7 Who Cares About the Climate? Global Differences Source: Pew Research Center, Nov. 5,

8 Who Cares About the Climate? U.S. Partisan Differences Source: Pew Research Center, Oct. 4,

9 U.S. Climate Policy Today Executive Order rescinding Climate Action Plan Directive to Environmental Protection Agency to review and possibly withdraw Clean Power Plan Will U.S. exit Paris accord? Unclear.

10 Questions About U.S. Policy Today Will U.S. withdraw from Paris accord? Will U.S. expand offshore oil-and-gas drilling, as Trump pledged during campaign? Will Hurricane Harvey, which hit U.S. oil-and-gas country hard, spur concern (and action) about climate change? Whither U.S. trade relations with China on lowcarbon technologies?

11 Observations About U.S. Decarbonization of economy will continue; the market (investors, corporations, and states) is moving Even if it meets its Paris pledge, U.S. will have to dramatically intensify carbon cuts U.S.-China relationship will be key and is unclear

12 Recommendations For the U.S. Through One Lens: Solar Power

13 Study s Goal Clarify an economically efficient growth path for the global solar industry an industry that s maturing and centered in China.

14 Study s Three Key Questions How is the China-based solar industry changing? What do those changes say about China s comparative advantages in the global solar industry? What does that analysis suggest about changes in U.S. policy and investment that would facilitate solar power that s cheap enough to meaningfully help cut global carbon emissions a U.S. solar industry that s economically viable over the long term

15 Busting Myths About China s Solar Sector Myth: China s solar industry is a financial bubble about to burst. Fact: Chinese solar companies are reforming their capital structures to make them more economically efficient. Myth: China doesn t innovate. Fact: China is innovating significantly in solar not only in manufacturing processes but also in underlying R&D. Myth: The global solar industry is centralizing in China. Fact: The global solar industry, led by Chinese companies, is starting to decentralize geographically. Myth: Tariffs imposed by the West are hobbling the Chinese solar industry. Fact: The tariffs have pushed the Chinese industry to get more efficient; their effect on U.S. manufacturing is mixed. Myth: China s solar market is largely closed to foreign investment. Fact: Chinese leaders want sophisticated investment structures from the West an opportunity for U.S. players.

16 Study s Recommendation for U.S.: Approach Main goal: cut solar s cost. Leverage don t seek to defeat China. U.S. solar manufacturing? Be surgical.

17 Study s Recommendations for U.S.: R&D Increase U.S. investment in solar R&D. Include China in international solar-r&d efforts. Reform requirement that federal-r&d recipients produce resulting goods substantially in U.S.

18 Study s Recommendations for U.S.: Manufacturing U.S. manufacturing likely economically viable for three categories of solar products: Products for U.S. consumption that are expensive to import. Goods for export that are energy-intensive to manufacture First factories of goods for export that leverage U.S. R&D excellence; however, scale-up likely to happen elsewhere

19 Study s Recommendations for U.S.: Deployment U.S. deployment policy Significant price on carbon Maintain agreed-upon phasedown of solar tax credit Continue Clean Power Plan Help U.S. investors engage in Chinese solar market Leverage existing bilateral discussions China seeks less-expensive institutional capital

20 Next Step: Efficient Clean-Energy Finance in China April 2017 investor workshop at Stanford May 2017 workshop and meetings in Beijing and Shanghai Fall 2017 Stanford clean-energy-investment forum Ongoing interaction with U.S. investors and policy makers Ongoing interaction with Chinese investors and policy makers

21 Thank You Contact Information: steyertaylor.stanford.edu