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Next Economy and Faith for Empiricists

Garvin Jabusch, Green Alpha Advisors, LLC
August 03, 2012  |  10 Comments

Let's be clear: Justice is not an immutable law of nature. Neither math nor physics nor chemistry recognizes justice as one of the universe's governing principles. The strong, rich, and powerful have, since long before humans emerged, by and large taken what they wanted, when they wanted, and never counted the costs to those they took it from. Despite what Socrates may have said, justice has forever occurred, at best, in fleeting, ephemeral flashes. We yearn for a god capable of seeing and ultimately judging all rights and wrongs -- because we know we can't be counted on to do it ourselves. Small wonder that the legend of Robin Hood – the original 99 percenter -- still resonates after 800 years.

We can say that humanity might change, but that's just another, kinder, more optimistic lie. We can't. Not as a whole, not within the time scales required to preserve ourselves. We are descended, on a time frame of 3.5 billion years, from organisms that succeeded because they were the best at gathering as much as they could in the shortest amount of time possible. This has been true throughout history. And prehistory. And primordial history. It's too deeply ingrained to switch off or even ignore. We just don't work that way, and it's time for us to accept that and start thinking about how to address our problems without relying on an ultimate goodness in our nature.

So, what, then? How can we approach our main challenges? How can we arrive at the sustainable, circular, next economy and learn to live within the various budgets that earth can provide?

In concept, it's simple: Align people's economic interests and sense of well-being with the best interests of Earth's ecological totality. Call it next-economy capitalism.

In practice, that's insanely difficult.

It's difficult, because, again, maximizing short-term profit while ignoring larger costs is humanity's prevailing worldview, and extracting fossil fuels (especially when subsidized) is a fantastic way to earn short-term profits. Consequently, the phalanx of opponents of renewable energy and electric transportation is impressive and daunting. It's the list of industries that stand to lose market share and profits as renewables advance: oil, coal, gas, traditional electric utilities, and makers of internal-combustion cars.

Given this opposition, rather than lament the slow adoption of renewables and electric vehicles, we should be proud and even amazed that we have made as much progress as we have. That's a testament, really, to two things: the tireless efforts of all those working for change and, more importantly, the fact that ultimately renewables just make better economic sense. No matter how much disinformation gets thrown at people, there's no escaping the fact that technologies with a zero cost of fuel will inevitably become cheaper than any extractive industry of the same or even somewhat larger scale, even, ultimately, natural gas.

But there's the rub, renewables are still such a tiny fraction of the size of fossil fuel industries that their true potential does not yet shine brightly in the popular imagination. And when we do see hints that this tide is turning, tactics are swiftly deployed to keep the status quo intact. Is it coincidence that large tariffs are being placed on the world's least-expensive solar modules just as those modules reach cost parity with coal on the U.S. electric grid (see "Why We Pay Double for Solar in America (But Won't Forever)")? Or that in North Carolina "sea level rise" is pilloried as a "liberal buzzword?" Facts of science are not buzzwords. Forbidding developers from planning for accelerated sea level rise will not protect low-lying communities from storms, nor force insurance companies to cover them. Placing authoritarianism ("because I said so" laws) above science and empiricism will simply not work. Folks who plan for sea level rise are outlaws now? Please.

Given the power of our fossil fuels oligarchs, it seems like change toward sustainability faces long odds. Who can doubt the power of the oil plutocrats when there are still huge subsidies for fossil fuels (the most profitable industry in history), while renewables (which are actually still in the "kick start" phase that subsidies are meant to support) get relative pennies. When the temporary denial of the KXL pipeline to cross the U.S.-Canada border quiets critics, while construction both north and south of the border legs continues unabated. (On this point let's not forget that the last major tar sands pipeline spill cleanup is still underway and costing $800 million.) When there are already over 680,000 deep-injection wells that have pushed more than 30 trillion gallons of toxic liquid into U.S. ground, and yet there is scarce examination from policy makers? When the U.S. supported the obviously nondemocratic coup in the Maldives against a popular, democratically elected president, Mohamed Nasheed, who happened to be a tireless worker to limit fossil fuels where possible. Nasheed, who was crusading to limit global warming to such an extent that he held a symbolic cabinet meeting underwater, was illegally removed from office with rhetorical support from U.S. officials.

I think it's naïve to blame this or that administration for our refusal to slow the growth of our carbon emissions, when it's clear that in certain areas, oil executives have as much or more influence as the executive and legislative branches combined. They're the richest organizations in all of human history, so that's simply where power resides.

And one assumes big oil will have seen the writing on the wall of the future by now, and be plotting ways to become the masters of the next great sources of energy. I hope that's the case, but other than Total buying a big piece of Sun Power, I've seen no major moves in that direction. In fact, as recently as October 2011, I heard an oil executive at a conference say something very like "yeah, we tried experimenting with solar in the '70s, but it was just way too expensive to make a decent value proposition," as though he thought the audience was credulous and uninformed enough not to know PV efficiency has improved more than 100 times per dollar's worth since then.

So leaving global warming, pollution, disease, resource scarcity, and war aside, the argument we can win is going to be economic: The best renewables are a better value proposition. At least on a level playing field. The race is, even after we've come all this way, to prove that we still have even small reasons for long-term optimism that we can credibly make this case. 

And, fortunately, we do. For as surely as humans are programmed to maximize short-term gains, we're also fantastic innovators, and we may have a greater capacity for adaptationthan any other species. And this is where the most rational of empiricists, who only believe in what they can observe, can place some modicum of faith. Because when it comes down to adapt or fail, we will take a big swing at adapting. And, being much better at adaptation than some of earth's former dominant species, e.g. dinosaurs, we have a far better chance of success.

It's now clear that unrestrained burning of fossil fuels is backing us into an existential corner. Therefore, we will hopefully try to adapt by limiting fossil fuels' use where we reasonably can. (The struggle between short-term individual gain and larger picture group selection that ultimately benefits individuals as well was recently discussed in an editorial by E.O. Wilson, who argued that we're the products of both types of evolutionary pressures, and that we apply whichever is most appropriate to given circumstances. For what it's worth, I believe that the primary ideological divisions in this country are straightforward manifestations of Wilson's approach to this "multi-level natural selection," and that evolution proves that we need both.)

So to tie our remarkable capacities for innovation and adaptation to our economic and social well-being is clearly now, as it has always been, the way forward. Plus ca change… Most directly, we need to accelerate investments into the best, most profitable, most effective renewables, water solutions, agricultural solutions, and all other sustainable manifestations of technologies required to run an economy. And we need to invest in them until it becomes so obvious that they're the most efficient multipliers of human effort that all ideological considerations fall by the wayside, the way oil replaced coal, the way coal replaced water wheels. We know how to be better, more innovative, and smarter at accumulating profits and wealth. As computer science pioneer Alan Kay put it, "the best way to predict the future is to create it."

Garvin Jabusch is cofounder and chief investment officer of Green Alpha ® Advisors, and is co-manager of the Green Alpha ® Next Economy Index, or GANEX and the Sierra Club Green Alpha Portfolio. He also authors the blog "Green Alpha's Next Economy."

This article was originally published on AltEnergy Stocks and was republished with permission.

Lead image: Solar panels via Shutterstock

10 Comments

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Peter Bradshaw
Peter Bradshaw
August 24, 2012
The solar panels on our roof, that generate 70% of our annual electricity usage, were made by BP, although between ordering the system and actually having it installed, the installer stopped using BP as a supplier, I think. We got about the last of their inventory. Of course, Chinese panels are now much cheaper.

We live in a two story 5 bedroom house, now rarely full, since only two of us live here full time, and we do use CF and LED lighting. I did greatly improve the ceiling insulation a few years ago, but the walls are not all well insulated, and the many screen doors and big windows are single pane. The home help that looks after my wife rarely use the most efficient settings on the clothes dryer. Still, we get 70% for an investment of under 2% of the house value. And since they have been there for over 3 years now, the panels are probably net generators of power over their full lifetime already.

Thank you for an article which fairly presents the tradeoffs, and gives some hope for the future, that we may not, after all, repeat the foolishness of the person who, as Jared Diamond points out in the book "Collapse", cut down the last tree on Easter Island. Although many of the comments above do trim my hope a bit...
Cliff Claven
Cliff Claven
August 15, 2012
Perhaps Diego represents the demographic of an older couple living in a gated community and driving a golf cart to most events. Solar, with its current efficiencies and subsidies could plausibly support that energy austere lifestyle in a passively climate controlled home in a favorable climate. If, on the other hand, Diego lives where snow accumulates he's screwed. Of if he has a couple of kids attending different schools with after school sports practices, he's going to need a second car--and that blows the whole thing up right there. Or god forbid he has a pool and wanted to use that rooftop space for a solar pool heater. Solar on the grid also only works when only a few people are on it. When everyone in the neighborhood is pushing the same peak power to each other at noon and then drawing max loads from the grid at night to charge their cars, the currents are too large for the existing infrastructure and the power companies will be wastefully turning on and off fossil fuel plants to try to balance out this totally uneven demand. Want to buy some batteries (or really cool high tech fuel cells) to load-level? Clear out some space in the garage or back yard and pony up some cash that wasn't mentioned in the brochure. Of course the payback for this exceeds the lifespan of the equipment, but that's life on the bleeding edge.
Cliff Claven
Cliff Claven
August 15, 2012
Alternative energy has created about 60,000 temp jobs and less than 4,000 permanent jobs per DOE and the Washington Post, and at a cost of $34.7B in stimulus spending. That's half a million per temp job and about $9M per permanent job. I'm sure Christie, like everybody else, will take the cash and the temp jobs rather than let it go to another state. But that doesn't counter the fact that the taxpayers are getting ripped off royally and that this is really about politics and cronyism rather than about fixing the country. (sources: 1. https://lpo.energy.gov/?page_id=45 ; 2. http://www.washingtonpost.com/politics/obama-green-tech-program-that-backed-solyndra-struggles-to-create-jobs/2011/09/07/gIQA9Zs3SK_story.html ).
Cliff Claven
Cliff Claven
August 15, 2012
The subsidy numbers above are for 2010 and were compiled by DOE from all government agencies including DOE, USDA, DOD, IRS. Getting the per barrel rate is done by applying the subsidy data from the DOE link above to the U.S. Energy data for 2010 provided by Lawrence Livermore National Laboratory. ( https://flowcharts.llnl.gov/content/energy/energy_archive/energy_flow_2010/LLNLUSEnergy2010.png ). In absolute terms, oil and gas total subsidies in 2010 were $2.8B, while alternative energy received $14.7B. Tax credits are "deferred revenue" and contribute the same to the budget deficit as spending, and the government tallied them the same way (to answer an objection above). As to why the government subsidizes oil and gas (and coal) at all, it is to steer them to do things they wouldn't voluntarily do, or to accelerate progress. Typically the money is provided as a matching grant so the companies foot 50% of the research bill for things such as oil spill clean up technology, clean coal technology, etc. $2.8B is about what they pay for one deep water oil well these days. The idea that oil companies are subsidized is to look at only one side of the ledger. The $36B in taxes they paid to the federal government (2009 data) is far more than they received back. The $32.7B the feds collect from you and me in gas pump taxes (2011) all makes for a pretty good ROI on their $2.8B investment. Yes there are many "externalities" that need to be considered including environmental, GHG, and health impacts. However, this is true for renewables as well, particularly biofuels. If we ended all subsidies and priced in all externalities, I think most people would be surprised at the outcome. Oil and gas actually have the smallest environmental footprint per unit of energy delivered by far compared to renewables. Like them or not, fossil fuels subsidize our civilization and currently all renewables except hydro simply by virtue of their much higher EROI.
Charles Watson
Charles Watson
August 14, 2012
Cliff I'm curious about the per barrel equivalencies you quote. I haven't had time to pore over that report yet - how many years of production are used to calculate the lifespan of solar technologies?

I'm also curious why we're subsidizing mature industries like fossil fuel at all. The purpose of subsidies is to bolster the development of industries and technology that will, in their maturity, benefit all of society. Even if you're not one to acknowledge the ecological burdens of burning fossil fuels (or the externalized economic costs to society), certainly you can see the advantages economically of having a fixed price for fuel (free).

It seems fairly clear that the fossil fuel industries have grown to the point where it costs them far, far less money to lobby for legislation artificially extending the subsidies (or pouring billions into disingenuous and/or outright false campaign ads) than it would cost them to operate without the subsidies.

If solar hasn't reached break-even yet, why is Christie in New Jersey a proponent? Maybe all those jobs created have something to do with it...
Charles Watson
Charles Watson
August 14, 2012
Diego doesn't claim or need to be completely off-grid to have a house that makes as much energy as it uses. He doesn't even need to be in a State with net-metering laws (although it certainly helps). His claim that his house is using only 20% of the power used by an average house is quite realistic, especially for a passive-design home, and about 400kW/month could easily be enough to power a well designed and built efficient home and electric car travelling the American average of about 40 miles/day. It is very likely that he is grid-tied, stand-alone systems do not qualify for the FTC (that's the tax credit, FIT, feed-in-tariff, is something else), and $8200 for a 3kW system very likely does include the 30% Federal Tax Credit. That price almost definitely doesn't include batteries either. Here's an interesting wrinkle concerning the tax credit - it's not refundable (yet). So in a sense it's not costing the gov't (us) anything, because it's simply a reduction in tax owed, as opposed to money that the gov't is actually dispersing. It's very much like the loopholes enjoyed by the super-wealthy (individuals or corporations [which of course are people nowadays...]), or like lower tax rates on capital gains.
Cliff Claven
Cliff Claven
August 14, 2012
@Diego: You appear to claim to run both your car and your house completely on rooftop solar. Unless you eschew air conditioning, use candles for light, and only drive at night and only around the block, I will have to throw the BS flag on that. I suspect what you are really doing is net metering on the grid. Since car chargers pull about 3 times the average home electrical load, anyone who actually has rooftop solar knows what would happen when you plug in the 240V charger for your Nissan Leaf for the 3-8 hours it takes to recharge it if you didn't also have grid power. Better go to a neighbor's to watch TV and don't open the fridge door and let the cool air out. BTW, Did the 30% federal Investment Tax Credit and additional savings from state and local government incentives help you with your purchase? If you are on the grid, you are also benefiting from the FIT. You're welcome. The federal government alone is subsidizing solar at $59.60 per barrel of oil equivalent energy output. That's our tax money being redistributed to hide the fact that solar has not yet hit break-even on savings versus costs. Compare that to oil which is being subsidized at a rate of 27 cents per barrel, while with the other hand, the federal government is collecting $6.55 a barrel in oil company corporate income taxes and gasoline and diesel excise taxes (a healthy reverse subsidy). Almost as fortunate as Solar, Wind is being subsidized at $31.33 per barrel equivalent energy and Biofuels at $10.46. Until solar can pull its own weight, it is an expensive hobby. (source for subsidy data is a DOE report specially prepared for Congress: Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2010. Energy Information Agency, July 2011. http://www.eia.gov/analysis/requests/subsidy/ ).
Charles Watson
Charles Watson
August 14, 2012
Corn is a notoriously inefficient source of ethanol, and is used because of extensive lobbying by the corn industry and allowed by the corporate/political powers that be to show that "renewables won't work". Renewables of course will work if pursued from the standpoint of making them work rather than the current disingenuous standpoint of maintaining the status quo (1.2 trillion gallons of oil still in the ground). The energy footprint of manufacturing solar electric panels is returned within 3 years of the panels' deployment, and certain microinverters now carry 25 year warranties just like the panels, with expected lifespans of 40 years or more. Energy efficiency is the lowest-hanging, most valuable fruit on this tree. Most homes (certainly in America) could easily cut their energy use in half with no lifestyle changes required, and all-electric vehicles charged from coal-fired power plants go several times as far per unit of pollution than gas or diesel powered vehicles, for significantly fewer dollars per mile.
Diego Matter
Diego Matter
August 14, 2012
What a refreshing article on the topic. Wise words.

to cliff-claven:
I think you're on the wrong path here.

Firstly fossil fuels served humanity very well until now. But we also learn about the impact it has on our world the hard way.

Therefore I prefer a 3kW PV system on my roof which is producing enough electricity to run my house AND my Nissan Leaf. Cost: $8,200 for the next 30 years, ok, the inverter will centainly brake twice in that time. But electricity and oil will also be more expensive in 30 years.

That's what the author is refering to when he states that renewables have the better economics. Your statement about fossil fuels would be ok if there wasn't any possiblity for energy efficiency. But our house is only using 80% of a normal house's energy and our Nissan Leaf is in the same category. There's simply no need for the energy density and power density of fossil fuels. We live a very good life with low energy density PV electricity and PV "fuel" for our car. The same goes for Passive Houses. The use 90% less energy and gain passive solar energy, therefore they don't need a normal heating system, hence a "passive" house.

I really think we are on the brink of a new century, but because of the attacks of people who have to loose the most, the public doesn't understand this economic reasoning yet.

And by the way - I don't feel my Nissan Leaf is a product of a "century of tinkering we've been doing with electric cars". This phrase of yours shows me that you have no interest in a new economy at all. So please keep running your expensive fossil fuel car and live in a vastly inefficient and expensive to operate house, but please, please don't spew deliberate falsehood. Get informed on the facts today, not facts from the seventies.
Cliff Claven
Cliff Claven
August 14, 2012
This article squarely addresses the issue of worldviews and echoes a common one that views fossil fuel as evil and unfairly subsidized. It takes the rare person to overcome their worldview and prejudices with a true spirit of skeptical inquiry and scientific quest for facts. The truth is that every form of energy has environmental consequences that must be measured against the benefits delivered. For example oil provides 94% of U.S. transportation fuel (25 quadrillion BTUs of energy per year) and that is why oil infrastructure and environmental consequences of oil are so visible. To generate that same energy from corn ethanol at the rate of 500 gallons per acre and 76,321 BTU per gallon would require 655 million acres (> 1M square miles) of corn. The environmental consequences from the pesticide and herbicide and nitrate runoff, the biodiversity impacts of converting that much land from natural complex biome into cultivated monoculture, and the global warming from the millions of tons of nitrous oxide emissions from fertilizer (a GHG 298 times worse than CO2) would be devastating. An inquiring mind would do the same calculations for the environmental costs of all the mining and manufacturing for the concrete, steel, and glass, and the enormous reclamation footprint of land required for solar and wind as well. The size of the environmental impact of a primary energy source is inversely related to its energy density and power density and EROI--and fossil fuels win handily in all of these categories. It is only because of the huge EROIs of fossil fuels that the industrial revolution and modern civilization exist, and that energy advantage has subsidized the century of tinkering we've been doing with electric cars and biofuels, and the half century with solar power.

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Garvin Jabusch

Garvin Jabusch

Garvin Jabusch is cofounder and chief investment officer of Green Alpha ® Advisors, LLC. He is co-manager of the Shelton Green Alpha Fund (NEXTX), of the Green Alpha ® Next Economy Index, and of the Sierra Club Green Alpha Portfolio. He...
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