Waiting for the price to come down before switching to a new technology sounds like a frugal decision. But when it comes to a country’s electrical grid, what saves you money now could actually cost you much more in the long run. That’s the central conclusion of a new study led by Imperial College London’s Clara Heuberger.
Almost every nation in the world (depending on how you categorize the United States’ erratic behavior) has pledged to reduce greenhouse gas emissions in pursuit of limiting global warming. A large component of that pledge is the conversion of electrical generation from fossil fuels to renewables. But there is a tension between the cheap and immediate availability of fossil fuels and the varied status of different renewable technologies.
Waiting for unicorns
It may make some economic sense to watch the price of solar continue its fall before installing. But there’s also the temptation to wait for what the researchers categorize as “unicorn technologies”—things like next-generation batteries for grid-scale storage, cheaper systems for capturing carbon dioxide from power plants, or even fusion. In other words, there’s a tendency to think that renewables aren’t worth pursuing too hard until some game-changing, cheap technology comes along that revolutionizes the grid.
To analyze the consequences of these decisions, the researchers use a model of the UK’s power system. In the model, utility companies make choices based on current market prices with different amounts of foresight. On one extreme, the simulated utilities know exactly when new technologies will become available, and they follow an optimal construction plan through 2050. On the other end, the utilities build new plants and infrastructure based purely on what makes financial sense for the next five years—a “myopic” operation.
All the simulations are aiming to reduce emissions so the UK can do its part to limit global warming to 2°C, some by enforcing cuts and others by simply allowing a price on emissions to guide the market. But in some cases, utilities drag their feet in the hopes a unicorn will come along. In other simulations, the utilities simply forge ahead with the best available tech—even stuff like battery storage before it gets cheap.
Not worth the wait
Waiting for unicorns, it turns out, tends not to pay off. The biggest difference among the scenarios isn’t the appearance of a unicorn; it’s whether the utilities took an aggressive strategy or dragged their feet. Even if utilities a unicorn technology will become available in 2035, waiting for it results in a higher total cost by 2050 than an aggressive strategy with the knowledge is coming.
Of course, our crystal balls are typically cloudy, and we don’t know when a game-changing technology will arrive. Assuming a myopic approach that only sees five years ahead, the aggressive strategy is cheaper than foot-dragging of whether cheap unicorn tech becomes reality. Without a unicorn, foot-dragging costs 60-percent more to hit emissions targets—or fails to sufficiently cut emissions.
The reason for this is that waiting results in a much less optimal mix of power plants by the time 2050 rolls around. Instead of tying electrical generation together into an efficient system that balances supply and demand, you build many more power plants than you need and frequently shut down intermittent solar and wind generation that exceeds demand. Power plants have a long life, so your construction choices today lock you in for decades. The cheapest plant to build today may not be what keeps your total costs the lowest 20 years from now.
At least under the parameters of these simulations, early adopters of things like battery storage, CO2 capture, and offshore wind are actually financially rewarded over the long term because they don’t have to build extra plants later—and they make cutting emissions easier. Early adoption also brings the added benefit of helping new technologies get started, which accelerates the pace at which their cost comes down.
A clearer crystal ball certainly makes efficient decision-making easier, but studies like this one can also point you to the smart thing to do when looking into a cloudy one.