About the Analysis
We conducted this analysis to evaluate, at a basic economic level, the benefits of breakthrough rates of innovation in clean technology using McKinsey and Company's US Low Carbon Economics Tool.
The model estimates potential changes in energy and the economy from different technology and policy inputs. It doesn't predict what will happen, but rather offers perspective on potential outcomes from different inputs, such as energy prices.
Google's energy team developed aggressive "breakthrough" cost/performance levels for solar photovoltaics (PV), concentrated solar power (CSP), on-shore and off-shore wind, geothermal including Enhanced Geothermal Systems, carbon capture and sequestration (CCS), nuclear, Plug-In Hybrid Electric Vehicles (PHEV), Hybrid Electric Vehicles (HEV), Battery Electric Vehicles (EV), rapid and long discharge grid-storage, and natural gas.
These breakthroughs were then modeled in 14 different technology, policy, and fuel price scenarios.
Download the full analysis to learn more about the potential impact of clean energy innovation.
Business as Usual
Continuation of Status Quo Innovation Rates, Energy Prices (Defined by US Energy Information Administration's Annual Energy Outlook 2011), and State and Federal Energy Policies.
Clean Power Breakthrough
This scenario modeled major clean energy technologies including nuclear, solar PV (Utility and Rooftop), solar CSP, on-shore & off-shore wind, geothermal including Enhanced Geothermal Systems (EGS), and new & retrofit CCS. In each case, we selected an extremely aggressive breakthrough LCOE level for 2020 and 2030. These rates were set by our own aspirational estimates of each technology's potential, informed by technical cost models and industry experts. State and federal policies remained the same as BAU.
Storage helps integrate intermittent renewables like wind and solar, shape demand, and prevent service interruptions. Two basic types of breakthroughs in grid-storage were modeled: short duration storage capable of discharging loads for less than 1 hour; and larger scale storage capable of discharging for over 1 hour. We then modeled five business cases for storage: 1) Frequency Regulation; 2) Load Following; 3) Price Arbitraging; 4) Capacity Deferment; and 5) Grid Reliability. State and federal policies remained the same as BAU.
Power, Storage, and EV Breakthroughs.
Electric Vehicle Breakthrough
This scenario modeled the impacts of battery breakthroughs on PHEV, HEV, and EV vehicles. Vehicle adoption was driven by a consumer choice model which was triggered by total cost of ownership (TCO) and vehicle range, in competition with Compressed Natural Gas (CNG) and conventional Internal Combustion Engine vehicles (ICE). Impacts were modeled for both the light duty and medium duty vehicle segments. Breakthrough energy densities were not high enough to displace long-haul heavy trucks, so they were not covered by this model. State and federal policies remained the same as BAU.
$30/Ton Carbon Price
This scenario models a power sector-only carbon price used to fund a cut in corporate and individual income tax rates. The $30/ton price was chose for its ability to cause natural-gas generation to be dispatched ahead of coal, since the carbon intensity of coal generation can be more than double that of combined cycle gas turbines. Absent very aggressive cost reductions in clean energy, much higher natural gas prices, or regulation on natural gas, a price on carbon below $30/ton may not sufficiently incentivize cleaner sources.
$30/Ton Carbon Price + Breakthrough
$30/ton Power Sector Only Price on Carbon with Power, Storage, and EV Breakthroughs.
The Clean Policy scenario models a package of mandates, standards, and incentives. It includes: a national CES of 15% by 2020 and 25% by 2030; national EERS of 5% by 2020 and 10% by 2030 (roughly 20% capture of total energy efficiency potential); extension of PTC and ITC through 2030 capped at $10 billion annually along with loan guarantees for all clean technologies capitalized at $15 billion; CAFE standards are increased by 4%/year from 2016 to 2025, 1%/year thereafter for LDVs; and coal retirements of roughly 55GW by 2020 based on strict EPA regulations along with tightening of SOx/NOx caps, MACT/HAPs, transport rule 316b (cooling towers), and CCR (ash disposal).
Clean Policy + Breakthrough
This scenario uses the same policies as "Clean Policy" but integrates breakthroughs in Power, Storage, and EVs.
$3 Natural Gas
Natural Gas has undergone a revolution in just the last few years driven by the advent of shale technology. What if innovation in gas technology continues, bringing additional low-cost resources online? To model gas innovation (and assuming shale gas is not heavily regulated), gas prices were held at the arbitrarily low level of $3/MMBTU and assumed to have sufficient supply to meet all demand.
$3 Natural Gas + Breakthrough
$3/MMBTU Natural Gas Price Through 2030 with Power, Storage, and EV Breakthroughs.
This scenario models breakthroughs in Power, Storage, and EVs. Except instead of starting breakthrough learning curves in 2010, they start in 2015 from the 2015 BAU level.
Commodity prices for oil and natural gas were were pegged at 50% above those from the US Energy Information Administration's AEO 2011 projections.
High Commodities + Breakthrough
High commodity prices plus breakthroughs in Power, Storage, and EVs. Commodity prices for oil and natural gas were were pegged at 50% above those from the US Energy Information Administration's AEO 2011 projections.