As government support for clean energy technology innovation increases across the United States, scholars at Resources for the Future (RFF) are asking big questions about advanced energy technologies: How large would the benefits be of making those technologies less costly through innovation? And would those cost reductions still be valuable even without any new national clean energy or environmental mandate?
Research from RFF finds that reducing the costs of five advanced energy technologies could provide societal benefits of up to $16 billion per year with no additional federal climate policy, and $47 billion annually with a national clean electricity standard. The five technologies examined are included in the American Energy Innovation Act (AEIA)—an energy package currently being considered by the US Senate.
In a new working paper, RFF researchers examine these five technologies—carbon capture from gas power plants, advanced nuclear reactors, geothermal power, direct air capture, and energy storage. They find that reducing the costs of these advanced energy technologies can provide billions of dollars in net societal benefits, with significant reductions in electricity prices for consumers.
Through rigorous power-sector modeling, the study indicates that if a new national clean electricity standard was enacted, cost reductions for the five technologies could create benefits as high as $47 billion per year by 2050. Most of these benefits would arise from reducing the cost of achieving the federal clean power goal.
But even without a federal standard or other environmental policies, the study finds that these technologies could still produce up to about $16 billion in estimated benefits per year by 2050. In this scenario, most benefits would come from electricity cost savings for consumers and a reduction of harmful emissions.
“Deep decarbonization with just wind and solar would be quite challenging, so it’s not surprising to me that these technologies are valuable in meeting a national clean electricity standard,” said paper coauthor Christoph Funke, an RFF research analyst. “What surprised me, however, is how large the estimated benefits are, even without a national standard for 100 percent clean power.”
“For each technology, you get little or no benefit unless its cost reaches a level where it is widely competitive,” said Daniel Shawhan, paper coauthor and RFF fellow. “Beyond that level, further cost reductions produce billion-dollar benefits. You can also get a virtuous cycle, where lower cost leads to greater deployment which further lowers cost through learning, and so on.”
The technologies also have uses outside the power sector. A related study in this series uses an economy-wide model to estimate the economy-wide benefits of reducing the cost of direct air capture of carbon dioxide (DAC). Under an emissions target consistent with 80 percent decarbonization of the US economy in the next thirty years, the estimated annual net benefits of the modeled cost reductions are $57 billion in 2050. In this scenario, the economy-wide benefits of DAC innovation are nine times as large as the most comparable net benefits estimated in the power-sector-only modeling described above.
“DAC technologies have the potential to play a large role in meeting net economy-wide emissions targets, but much depends on the design of emissions reduction policies and the future level of DAC costs,” study author Marc Hafstead, an RFF fellow, noted. “Research, development, and demonstration spending decisions designed to drive down the cost of DAC need to be carefully crafted in conjunction with policies to reduce emissions.”
“While this study is not narrowly focused on the AEIA, and the technology cost reductions considered are not tied to the AEIA, the findings offer new understanding about the benefits of the type of cost-reducing innovation that is advanced by the AEIA,” said Shawhan. “The study is relevant to any policies or investments that advance these five technologies.”
“Markets alone do not provide strong enough incentives for investment in this type of innovation because many of the benefits—in the form of reduced electricity costs and emissions—go to people other than the innovating companies,” said Shawhan. “As a result, deciding how much to support research, development, and technology demonstration is a core responsibility of the US government. These results can help inform such decisions.”
These studies are part of RFF’s Advanced Energy Technology Series. Future work will include projections of the anticipated effects of the AEIA on the costs of these five technologies.
To learn more, read "Benefits of Energy Technology Innovation Part 1: Power Sector Modeling Results" by Daniel Shawhan, Christoph Funke, and Steven Witkin. To learn more about direct air capture, read "Benefits of Energy Technology Innovation Part 2: Economy-Wide Direct Air Capture Modeling Results" by Marc Hafstead.
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