By: Shay Bahramirad, IEEE Power & Energy Society, 2024 President
As the effects of a changing climate continue to impact nearly every corner of the world, the challenges posed to the world’s electric grids and our respective economies will, as every year passes, become increasingly stark. The tens of billions of dollars in devastation associated with record-high temperatures, let alone extreme weather events such as droughts, wildfires, and hurricanes, are unlikely to dissipate anytime soon. Strengthening the global energy system to mitigate against these climate threats and damages while simultaneously transitioning the global energy system toward the adoption of cleaner and more renewable energy, will further add hundreds of billions to the cost of addressing climate change. The inconvenient truth is that the impact of climate change will not just be on the planet, but on the pocketbook.
As Dr. Michael Spence, a Nobel prize-winning economist, emphasized at a recent fireside chat at IEEE Power and Energy Society’s (PES) Transmission & Distribution Conference, the global climate challenge will compel policymakers to confront “very difficult economic, policy, and societal truths.” For example, “sustained economic health is essential for financing the massive infrastructure investments needed to combat climate change, and this will become increasingly put at risk if, as the International Monetary Fund projects, global growth slows to 2% from the pre-pandemic 3.8%.” Adding to this economic pressure, as Dr. Spence highlighted, is that the world is seeing inflation for the first time in four decades, “interest rates are higher [and] there’s an open question about whether the cost of capital is going to be permanently higher.” The financial burden of addressing climate change will, in much of the world, also fall on utilities who will need to – as we are already witnessing – raise consumer electric bills to pay for massive and long-term capital improvement energy projects
The cost of all these economic and policy pressures cannot be ignored. At a time when societal support for addressing climate change is critical, slowing global economic growth, higher interest rates, and persistent consumer economic pain caused by rising energy bills and chronic inflation risks undermining the very public support that will be critical to fulfilling this multiyear energy transition. The good news, according to a recent IEEE PES survey of U.S adults, is that public support in the U.S. for action and embracing experts, specifically engineers, to build a clean and climate-ready energy future, remains very high. The danger, however, is that the economics of this climate action threaten the necessary scope of actions required to address this existential global threat.
Rethinking the economics of climate change will undoubtedly cause enormous political and policy anxiety. While there are no easy answers, what is not advisable nor sustainable is expecting the average citizen to fund this energy revolution. The signs of a backlash against such a model are already emerging around the world. A new model of financing climate action and the energy grids of the future will need to be considered – a model that lessens the financial burden on the average consumer and alleviates the growing anger towards utilities raising rates, while not jeopardizing the tremendous strides in advancing sustainable solutions. Whether the solution is creating a national or global climate to mitigate or eliminate the financial burden on consumers or some other kind of global financing initiative that spreads climate costs over time, now is the time to have these discussions to ensure the progress being made.
From the development of cutting-edge solar and wind technologies to the optimization of grid systems and energy storage solutions to building transmission lines that must carry this energy to meet growing demand, there is a critical need to discuss how to best socialize the costs of the technological revolution that will help save the planet before the issue of cost impedes the progress this nation and the world needs. And while there may be public consensus now on the need for climate action, there is far less consensus on how best to pay for it. This must change. A global and national discussion, coupled with cross-collaboration among thought leaders, is needed to connect the dots between technological advancements, policy reform, investment, and economic cost. The planet is at a critical point in its fight against climate change. We can ill afford to fail in this challenge because our corporate, policy, and elected leaders chose to ignore the economic boogeyman in the room.
