As the world grapples with the urgent need to address climate change, transitioning to cleaner energy sources has become a top priority. The United States, one of the world's largest carbon emitters, faces significant challenges and gaps in its efforts to shift towards cleaner energy. While there is a growing awareness of the need for change, several barriers and complexities are impeding a swift and seamless transition. In this article, we will explore the current barriers and gaps the United States faces in its quest for cleaner energy and why there will be a time lag in achieving this transition.
One of the most substantial barriers to transitioning to cleaner energy in the United States is the outdated energy infrastructure. Much of the country's energy grid and transportation systems rely heavily on fossil fuels. Replacing or retrofitting this infrastructure to accommodate cleaner energy sources is a monumental task that requires substantial time, resources, and planning. This infrastructure gap contributes significantly to the time lag as it cannot be transformed overnight.
Infrastructure Challenges Example - Electric Vehicles
We commonly get asked about what our thoughts are on electric vehicles and what the adoption timeline on them will be. Our oversimplified answer to this is that you will know EVs have fully arrived when you start seeing charging stations as often as you do gas stations. Now this is a generalization, because in certain regions of the country there are abundant chargers and closer commutes using an EV all the time realistic.
The following two charts are from KORE, note that the data ends in 2021 so it is likely the numbers are higher now but the general takeaway of the growth trends remain the same. We will continue to keep our eye on this area and the updated data that comes available.
Transitioning to cleaner energy sources often requires substantial upfront investments. While the costs of renewable energy technologies have been steadily decreasing, they can still be prohibitive for some businesses and communities. Additionally, the fossil fuel industry has long been a significant economic driver in the United States, and a transition away from it may result in job displacement and economic disruptions. Policymakers need to address these economic factors to ensure a just transition and educate citizens about the short-term frictions and volatility they may face in order for the future to reap long-term gains. Energy Storage, Reliability, and Reach
One of the critical gaps in the transition to cleaner energy is energy storage. Renewable energy sources like solar and wind are intermittent, and there is a need for advanced energy storage solutions to ensure a stable and reliable power supply. Developing efficient and cost-effective energy storage technology is essential, and until this gap is addressed, the transition will continue to face time lag. Solar, windmills, and nuclear power plants also need appropriate amounts of land to operate on. This leads to the issue that areas that have this space may be more rural and to get that energy to urban areas requires proper infrastructure. Building renewable energy also requires the approval of the locals in these towns and getting citizens to approve of these things can be a challenge because it may disrupt their land, their views, or their lifestyles.
Public Perception and Education
Public perception and awareness of cleaner energy options play a vital role in their adoption. Many people still lack a clear understanding of the benefits of renewable energy and may resist changes due to misinformation or skepticism. It is also extremely difficult to have a clean energy conversation without it becoming politically charged. We believe this should be viewed as an apolitical issue. Instead of both parties pointing fingers across the aisle on who is at fault, the focus should be on building infrastructure so that the future of our country. Politicians and people may disagree over the causes and drivers of climate change, however I think all parties would share the goal of seeing the United States and its citizens prosper as long as possible in the future. And that starts with education efforts to bridge these knowledge gaps and garner public support for energy innovation and transition. Policy and Regulatory Hurdles
Inconsistent policies and regulations at the federal, state, and local levels create uncertainty for investors and businesses in the clean energy sector. A lack of a clear, long-term strategy can hinder investments in renewable energy projects. Frequent policy shifts can disrupt the transition process, making it challenging to attract capital and drive innovation. The United States needs stable and comprehensive policies in this area to incentivize the transition to cleaner energy effectively.
The goal of this article is not to suggest a rapid shift where we are all driving electric cars and relying on windmills and solar within a decade. That is far from the objective. This shift will take a long time and in the meantime, traditional fueling methods will still be necessary. Scientific innovations, policy coordination, capital investment, and adoption will take years. The road to success will be gradual explorations of how we can integrate more nuclear and renewable sources and building the infrastructure to support those. Over time, coal, oil, and natural gas will become smaller portions of the world's overall energy use...but the key phrase there is ''over time''. That time lag is not one simple estimate. It is a gigantic and complicated puzzle that is evolving daily and it could be spontaneously catalyzed or delayed by unexpected global events or scientific breakthroughs.
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This edition of Market Watch was written by RMH Analyst, Ashlyn Tucker, under the guidance of Richard Mundinger, CFA.