Abating the easy stuff

Electrification is often easy in many cases. It is just about changing appliances. Of course, it is also about lifestyle and way of life. I personally still prefer to cook over a gas stove. But I won’t stop cooking without one; I’ve used various electric stoves before as well and didn’t face any major issues.

I’ve lived in house that had gas heating and also one with electrical heating. Regardless, the level of thermal comfort tends to be a trade-off between use of energy and insulation rather than necessarily the equipment for heating though the efficiency of the appliances would play a part. Going on to bigger things, there’s the electrification of transport. For most part, this can be based off just taking public trains or trams instead of driving. It can also involve using electric bikes. Of course finally, there’s the transition to electric cars.

None of these really do reduce emissions in and of themselves assuming no particular changes in energy efficiency of the basic fuel used. It is the energy source that matters. Electrification must be paired with switching power generation to renewable sources such as wind, solar, hydropower and so on. It is meaningless to have electric vehicles on the road and heating of homes with heat pumps when you are generating the power. The challenge of the energy transition is that many things are taking place together and people are not able to really keep track of how much emissions are going to be or might be. Therefore, the direction and rate of change is perhaps more significant to give a sense of how much change can or will happen.

Abatement of emissions through increasing power generation through renewable energy combined with electrification remains the simplest and most effective way to decarbonise our economies. However, the complexity lies in the fact that power prices affects the economy broadly and in many countries, they are subsidised at least for some sectors of the economy. By increasing the demand for power through electrification, the plans for subsidies for certain sectors might be affected. If supply is not increasing fast enough, power prices may increase in a way that reduces the competitiveness of other sectors and the economy as a whole. At the same time, there is also a risk that renewable power supply that is coming online is much more expensive, leading the overall electricity prices to increase anyways even if the supply is keeping up with demand.

Governments are afraid of adversely affecting the power prices as it has very broad sweeping economic consequences. Additionally, power transmission and distribution investments will also have to accelerate to cope with the increased demand and supply for power. Unlike the older set of infrastructure invested over time and much longer ago, we are looking at a huge ramp-up during a short period which means the infrastructure cost will have to be passed on to customers during an intense period of change. So while electrification combined with renewable power generation is the easiest pathway to decarbonise, there are systematic and political challenges around the distribution of the cost of energy transition to consider. Overall, the players who are electrifying some of the previous energy uses actually pass on parts of their cost of transition to the overall system as their participation in the market raises the cost of power for everyone.

For the typical electricity consumer, they would expect their share of the energy transition cost to be converting their load to be drawn from renewable energy sources. However, they now have to pay a share of the heightened infrastructure cost from the increased load, as well as the increased energy cost due to competition for renewable electricity. These complexities are slowing down a process that needs to happen much more quickly.