What’s Next for Wind, Solar and Other Renewable Energy?

Steve Odland: Welcome to C-Suite Perspectives, a signature series by The Conference Board. I'm Steve Odland from The Conference Board and the host of this series. In today's discussion, we're going to talk about the US energy needs. How can we meet all the rising needs of energy, and what role will carbon and alternate energy sources play?

Joining me today is Dr. Alex Heil, senior economist here at The Conference Board. Alex, welcome.

Alex Heil: Thank you, Steve. Thanks for having me.

Steve Odland: Alex, you've done just an incredible body of work on the energy situation in the US and globally, the distribution system, alternate energy. And I would just urge all of our listeners to go into tcb.org and to search "alternate energy" and all of Alex's work. It's just wonderful. But Alex, you've pointed out in your papers that our energy needs in the US continue to rise, but there are varying projections for what capacity is needed, what distribution is needed, and so forth.

Talk about what your projections are on all of this over the next coming decades.

Alex Heil: Yeah, Steve, thank you. We have indeed done a lot of research on these issues. So just to center the audience a little bit, if we're considering 2024, the US electricity demand was about 4 billion kilowatt hours. And that was, on an annual increase over 2023, that was a large increase of a couple percentage points. That's, just to provide a little historical perspective, that's 2% increase in the annual electric demand. That's a significant number.

If we could go back to 2007, the year that the iPhone was introduced, there was a lot of concerns then that electricity demand in the country was going to explode in a matter of a decade or so. None of that happened, largely because of efficiencies., even though everybody has more electronic devices and so forth. But certainly the electric sector has become more efficient over time. And demand has flatlined, in a sense.

But now we're at a similar inflection point, and a lot of the analysts in this space are now projecting that demand is going to go up. I would agree with that sentiment. It's just a question of how much. So if we're now considering some of the, maybe the baseline, middle-of-the-road-type projection, they would suggest that over the remaining three decades until we get to, essentially, 2050, we're going to add 25% in total in demand. So that's a little less than a percent per year.

Some of that is driven by artificial intelligence data centers, all these issues that we're reading about in the papers every day. But also in addition to that, it's just simply the electrification, not only of transportation, as we're all aware with electric vehicles and so forth, but also the building sector. We have more heat pumps, we have more electric devices. Everything moves in that direction. So there is certainly uncertainty around that projection, but I think it's fair to say that we're going to see a significant buildup in the demand for electricity in the US over the next two-and-a-half decades or so.

Steve Odland: Yeah, so 25% is pretty significant. And you can see why it's been flat. There's been a huge conversion from incandescent to LED light bulbs. There's been huge increases in energy efficiency of appliances, home heating, commercial heating, all of these things. But what you're forecasting is diminishing returns on these efficiencies over the next couple of decades. And hence, now demand will rise with normal kind of usage and expansion. So the question, then, is how are we going to meet these needs, and what's the projected cost?

Alex Heil: Yeah, I think if we're looking at what the trend has been now, let's say, over the last 10, 15 years or so, that's been a period of time during which renewables have taken an increasing share. So within probably the next 12 months or so in the US, renewables, solar, wind, hydro, and so forth are going to be making up about a quarter of electricity production in the US.

The share of coal is now less than what it is from renewables, and that's continuing to fall. Natural gas has taken a relatively preeminent role there in some of the resources that are providing electricity. And the nuclear share has stayed constant at around 20% of the total. And we've written about this. Nuclear is one of the big topics certainly, but with an aging nuclear portfolio of reactors. that share, if we are not adding to it significantly over the next few decades, that is going to decline.

So if we're trying to dissect the increase in electric power supply that came online in 2024, the largest share really came from renewables, in particular solar. Texas and California, the two states where the addition was really the greatest, and the projection is that that is going to continue. Why? Because it's relatively a friendly part of the country to add solar just because of weather conditions, but also the cost has come down so tremendously for some of these renewables that it just makes sense to add them to the grid mix.

The big question with that is, and we've also researched this in quite some length, the more you base your electric grid on solar and wind resources that come with so-called intermittency—in other words, they don't just provide a stable baseload of power, but they vary based on either sun or wind conditions—you do need to mix it. You do need to have a blend. You need to probably add a significant quantity of storage that allows you to fill in those time periods when renewables are producing less than the desired amount. Or you need to have other baseload sources available, such as nuclear aforementioned. Even fossil fuel is playing a role there when it comes to natural gas.

So I think we're sort of in the middle of this transition for the power sector. Power sector is far ahead of many other sectors in the economy when it comes to decarbonization. Certainly, most of the greenhouse gas emission reduction in the US is actually a result of the changes in the power sector since about 20 years ago. That's certainly true, and we are now at this point where putting this grid mix together is like a Lego set, and it requires different types of resources that all work together to make sure that an increasing load demand essentially can be met by American households.

Steve Odland: Yeah, a big portion of the carbon reduction has been the transference from coal, essentially, to natural gas, which is easier than doing some of these other bigger moves. That's going to run out at some point as we continually retire these coal plants, because you're just using alternate sources of fuel, essentially coal, natural gas versus coal, in order to fire these boilers.

Nuclear's a whole different kettle of fish. Now they're just reopening Three Mile Island, one of the reactors there that's been shut for some time, or mothballed. But you've written about this, it takes, what, 10 to 15 years to get a new nuclear facility approved. All the environmentals, all the regulatory hurdles, get it built. And then it's really capital inefficient. I mean, it's the highest-cost option, but this is the carbon-free baseload option currently, right?

Alex Heil: I think that's true. The most recent additions to the portfolio, really, for the country were the addition of the reactors at the Vogtle plant in Georgia. And they can came online relatively recently, within the last 12 to 18 months or so. But we are still now at the point where we have about 95 or so reactors in operation in the country. The average age of a reactor in the US is about 40 years. What's the expected life? Maybe you can stretch it to 60, but that means that over the next two decades, the share of nuclear is going to start to fall, and fall pretty rapidly.

Once we're at the point where we have to retire plants, similar to the plant that was located just north of New York City that was retired a couple years ago, the Indian Point Plant there. So I think going forward, the costs issue, the overrun of these kind of investments, are certainly an issue. Once in operation, nuclear provides a big advantage, which is, it is carbon-free power that, from an operations point alone, is relatively affordable. But it's getting to that point that is providing a big, big challenge that if one wants to identify baseload sources, it's hard to see how we can manage a decarbonized grid, how we can get to the point of a decarbonized grid, without a significant share of nuclear being part of it.

Steve Odland: Now you mentioned that solar has been increasing in share, but also decreasing in costs. And a large portion of that is that we've been using Chinese-made solar panels. The question is whether those are going to be available to the US going forward, given the tariff policy and trade policies. And there are not substitutes for those inexpensive panels. So where does solar go?

Alex Heil: Well, solar has been on a tremendous trajectory, really. If you go back a few years, probably the costs were, and that's actually still fairly recent, let's say $10 per watt for a new installation. We're now basically down to 10 cents a watt in terms of just the cost of what these panels cost to create. So the profit margins have disappeared. The resource costs are so small that solar as a resource is, in most parts of the world, really the most cost effective, if you will.

But what you are alluding to is very much a real problem. And that is these solar panels are not manufactured in the US. They come from overseas. This is a function of what happens to trade relations with other countries. And we have had, for the last few years, certainly. trade barriers imposed on solar panels so that US households that want to fit their houses with the solar installations do not benefit from necessarily the lowest cost.

So solar going forward, I think it is likely that the share is going to continue to grow, especially if you consider how solar now, in more cases than not, is also at the utility level, paired with storage. That happens now frequently in California, is happening in Texas where storage is being added to the mix.

We have run some of those modeling estimations and some of these projections, what is actually happening when you add storage. You can achieve, still, relatively low-cost electricity, even though you have to invest in storage at the same time that you're putting up solar panels. I think that is just an advantage that that particular segment of the market has. It's hard to see how that's going to give it up.

So solar is going to continue to grow, but storage, still, on the margin is still quite an expensive addition and diminishes some of the cost advantages that solar has. So I think it's not going to be a solution that fits everybody, every location of the United States. Certainly not of the world. So I think going forward, we will see more solar installation, but some of this is also a function of what US households actually pay for some of the installation. That can be very different from the production cost of some of these panels.

Steve Odland: So even though there are trade issues with the inexpensive panels coming from China, your point is that they're so cheap today, they could be produced elsewhere. We could produce them in the United States. It's still going to be economically attractive for us, and therefore the share should increase.

But you've also written about other energy sources, geothermal and fusion and tidal and some of these other things that are kind of more developmental, but have some promise.

Alex Heil: Yeah. I think that within the energy infrastructure, there's now research ongoing in all these different areas. Basically, trying to find additional sources that either are in the category of, "Oh, this is really going to be a visionary moonshot," or something that we know at least to a certain extent, and it's just a function of bringing it up to scale. So geothermal energy is basically an example of the latter.

Geothermal energy has been used for decades, for centuries, really. Hot steam that comes out of the ground, you imagine what happens in Iceland in other seismically active parts of the globe. And you can access some of the heat directly by capturing the steam. So you can certainly also not just capture the heat, you can run turbines off of this, and this has also happened in part of California. It's the largest geothermal installation in the country that uses that approach.

But it's also true, and that's the new technology in the geothermal field, that is, you can access the heat that is essentially part of the Earth's crust everywhere you go. You just need to install technology that allows you to create artificial reservoirs below ground that you fill with substances—water, if nothing else—that then artificially create that steam. There's a lot of potential there, just because of the way that our planet works, inevitably can access this heat.

The problem with some of those technologies is certainly that you are doing a lot of drilling, you're doing a lot of basically creating spaces below ground that then be used for this. It can create seismic imbalances, it can create great seismic activity where it's not supposed to be because it's close to population centers, let's say.

So there is a lot of potential in some of the what's called next-generation technologies when it comes to geothermal. That is certainly true, but we still have a pretty long way to go. And the Energy Department has identified to be sort of pilots of what is the best technology, let's have a competition, almost, to identify some of those.

Fusion. So, not fission technology when it comes to nuclear, but fusion—fusing atoms together in order to free up the energy that occurs during that process. That's really been much more of a moonshot type of technology, and that's been essentially several decades out for the last few decades.

So this can either be accomplished by highly concentrated lasers or by heating a plasma up to millions of degrees. Basically, in either case, creating, recreating the conditions that exist on the surface of the sun. And if you can manage to do that, and some of this plasma heating has been now done for several minutes, at some point you can reach this point what's called ignition. What's ignition? Ignition is the point where the energy that you take out is larger than the energy you're putting into the process.

As of right now, that has only happened literally for fractions of seconds. Ignition is hard to get to. It's very highly energy-intensive, as one can imagine. And now what we're really, from the fusion technologies point of view, we're now trying to get to the point where one has a reactor technology in operation that, on a continuous basis, can have ignition, meaning more energy coming out than one has to put in to create these high temperatures.

We're still years away, clearly. I think skeptics say we're never going to get there. I mean, I think there's more optimism now for that part of the nuclear industry, but it still seems, if one looks at this somewhat objectively, that this is probably several decades away at this point.

Steve Odland: Yeah. And tidal?

Alex Heil: Tidal is in a similar vein. I think there are certainly technologies that have been tested on how one can identify tidal energy as a resource. But the scalability there is also difficult. I think there's been pilot projects that have been put in operation, but as of right now, we're not necessarily having that as one of the building blocks of a decarbonized energy system.

Steve Odland: We're talking about the US energy needs and what's going to happen over the next couple of decades. We're going to take a short break and be right back.

Welcome back to C-Suite Perspectives. I'm your host, Steve Odland, from The Conference Board, and I'm joined today by Dr. Alex Heil, senior economist here at The Conference Board.

OK, so Alex, before the break, we were talking about all these alternate sources. It sounds like lots of good stuff in the R&D pipeline, but pretty far away here. So the probability of hitting these expansion goals come back to the ones that are right before us, the ones that are tried and true. So how do you see that 25% increase in demand being met, in what mix, over the next couple of decades?

Alex Heil: So I think about this as, when I'm faced with this projection of, oh, demand is going to go up by 25%, we're going to reach 5 billion kilowatt hours of electricity demand in the United States alone. There's three layers to this from my perspective.

There's usage efficiency. Basically, how electricity is used at the consumer's level, and consumers, not only households, but also businesses, commercial entities, all the industrial sectors that use electricity. There's the electricity as it's transported from the generation point to the usage point. And that's the grid. And then there's the generation source. So let me, let me target the last one first, since that was your question.

I think that over the next couple decades we will have an electric mix in this country that is going to be much more based on renewables. I would expect the solar share, almost certainly the renewables share, to basically double from where it is now. That would not be surprising to me. I think that natural gas, just because of its very nature and the fact that nuclear is going to pull back with the retirement of some of the older plants, it's going to play an important role to basically make up some of the baseload demand, or meet the baseload demand, that we as a society are putting on the system.

And some of the new technologies that we just talked about, I would think that under certain usage cases, geothermal and others are going to play a role. I just would be surprised if, over the next 20 years, those can be scaled. And sure, I mean, certainly with current technology.

If I'm looking at the process by which electricity is transferred from the generation to the usage point, so the grid, they're actually—the shortages within the grid, they're well-documented in terms of how much the grid is not resilient, how much investment it needs. That's all true. And there needs to be a lot of money invested in grid infrastructure, but it's also true that there are technologies that have been identified that is going to create greater capacity within the grid.

One of those is called reconductoring, where you basically replace some of the materials that are part of the current power grid structure, and that is expected to increase demand by up to 20% or so. So I think there's a fair bit of capacity that can be added even within the existing grid structure. It requires investment. That's certainly true, but it's not a complete rebuild. There will be rebuilding required just because of the age and the deterioration, but I think there's additional technologies that certainly can be harvested there.

And then on the usage side, I think there's actually a lot of potential to say, well, the 25% increase in demand, we should revisit if there are additional efficiencies on how electricity is being used—not just for households, but certainly for industrial sites, for commercial applications, for government, for anybody who is a large electric customer. And I think that is going to come with challenges. I think there's efficiency, certainly that are the easy ones have been harvested, right? You talked about the switching of light bulbs and so forth. I think that's true, but we will be, as part of electrifying large sector economy, we are going to put on just simply more demand as a result of more operations being powered by electricity and not by other fuel sources. And that's going to bring with it additional challenges.

One challenge that I just like to bring to your attention is what planners call the winter peak phenomenon, for instance. So that's the, "Oh, if you're heating no longer with fossil fuels directly, but now with an electric generation source, then electric heat is going to increase the demand during winter months pretty substantially." So in order to heat buildings, you need a lot more electricity. And in the summer, it is certainly harmful to people if they're exposed to too much heat. But if they're exposed to very, very cold conditions, it's life-threatening, literally, from one hour to the next.

So there are issues with the usage side, as well, and all of those, these three layers that are identified, they all require very careful planning.

Steve Odland: So generation's going to require about a 25% increase. What about distribution? What, what percentage increase in distribution capacity do we need? Same?

Alex Heil: Well, it's hard to say. I think this is not necessarily linear in terms of one increase mirrors the one on the transmission side. But I think that we will have to deal with a grid that has been aging. Some of the wildfires in California were caused by old poles, old lines that were sparking, they weren't necessarily operating the way they should have been. And so I think there's going to be a lot of investment required, not just for the incremental load increase, but also just revisiting what's already there.

Some of these poles are essentially a hundred years old. They really need to be exchanged. And so there's a lot of capacity that can be added. I think if you change out some of the old grid infrastructure, you will benefit, replacing that with newer technology that allows you to increase capacity. But I think in a world where more and more of the economy will likely be electrified, we probably need to plan for a grid that is increasing at a faster rate than some of these generation increases that we're talking about.

Steve Odland: OK, all right, so even though you get deficiencies, you're saying there's going to be an increase in demand due to electrification of transportation and other things that you've written about, so therefore it's probably higher than 25%. So you've got dual demands here, generation and distribution. Any gross estimates in the cost of meeting those needs over the next couple of decades?

Alex Heil: Yeah, I've looked at this in all kinds of level of detail. And it's hard to come up with real cost numbers because it's important to recognize the way that they are framed and they were put together. Usually, you find estimates that are in the trillions of dollars in terms of what's required, not only on the generation side, but also what's on the grid expansion and in efficiency technology at the usage point.

So that's all true, but those are investments that probably would've been done anyways, to a certain extent. But I think that it's fair to say that these kind of investments will be necessary in order to modernize both the generation sector, of our power sector, as well as the distribution and transmission lines.

So I think. We are talking about large-scale investments of trillions of dollars that are necessary in order to make sure that we have enough capacity—and maybe more importantly, also resilience in the system that can respond to fluctuations and power demand, that can deal with intermittency, that can deal with outages, that can deal with impacts from storms and other climate impacts.

I think there's going to be large investments that are needed. Because as we have all learned, under certain circumstances, the grid and some of that infrastructure is not able to withstand some of these pressures the ways that it's currently constructed.

Steve Odland: So trillions, and then no one individual, individual company, sector can bear the cost of that. So it's really going to have to be spread across consumers and industry and government in order to cover all that, which goes to a point that you've made over and over again, which is that you can't just put out a goal of carbon-free 2050. You really have to have a master plan here to meet all of these demand needs while at the same time overlaying the environmental goals. And that's been a little elusive for us. It's been do all the above and go like crazy. But we do need this master plan.

Final question, do you see anything on the horizon that really particularly excites you in terms of development in this whole area?

Alex Heil: I think that some parts of the economy, if you look at certain states, they've done a tremendous job of managing their renewable portfolio. I think that what's been, we talked about this already, the decline in cost when it comes to renewable solar, in particular, and that's really been moving forward pretty dramatically.

I think that's a real success story, that's very true. And that's not only a US story, by the way. That's also a global story of how much that has sort of really taken on a dominant role in some parts of the world where one would've imagined years ago that decarbonization is going to be really difficult.

I think this whole storage component is an interesting one. In terms of combining some of these renewable resources with storage, that is going to become a much more practical solution, when it comes to how one can actually meet the additional load demand that we're all going to be facing going forward. I think that's, if one thinks about what's necessary here and where technological advances and improvements are necessary, I think it's primarily on the storage side.

And just, as an additional layer that is unrelated to that, but just sort of speaks to some of the fossil fuel infrastructure that is already in place, and we've also researched and written about this. I think there are areas in which some of the fossil plants that are currently in operation, they can be made more efficient when it comes to carbon emissions.

For instance, we had this whole series of papers that we wrote about methane emissions. Methane in the energy sector is a real issue. So, for instance, just tightening up plants, you can reduce methane emissions. That's going to make a difference in terms of its global warming potential.

I also think, and we've also written about this, the whole carbon-capture technology that has improved pretty rapidly along the lines of being applicable at various plants. Now, that's not a panacea, that's not the ultimate silver bullet in some of these decarbonization efforts, but it certainly can play a role. So I do think that we need to be open to all of these solutions and make sure that it is driven by underlying economic parameters and economic decision-making, as well as, as you pointed out, comprehensive planning.

Steve Odland: Dr. Alex Heil, thanks for being with us today.

Alex Heil: Thanks so much for having me, Steve.

Steve Odland: And thanks to all of you for listening to C-Suite Perspectives. I'm Steve Odland, and this series has been brought to you by The Conference Board.