Every quarter at BCG, the Houston office “Green Team” sends out a newsletter with a media spotlight section, which I occasionally write. This is a copy of that section.
There's a lot of content out there on climate change and decarbonization, but I'd like to share a couple amazing slides from a presentation given at a recent-ish UT Energy Symposium lecture (the YouTube recording is available at https://energy.utexas.edu/events/173, and slides are at https://energy.utexas.edu/sites/default/files/Daniel%20Cohan%20UTES%2020220420.pdf).
The first two are around the historic pessimism of forecasters when it comes to the speed at which we're cleaning up the power grid. The two charts below show how the EIA forecasts have evolved over the course of the millennium to adapt to the rapid decline of coal in the US power grid (driven mostly by subpar economics compared to renewables and natural gas), and the rapid growth of solar on the US power grid (wind shows a fairly similar story, though it began taking off about a decade before solar did). Pretty much everyone got it wrong! A few years back, I had looked at the different forecasts made by the energy supermajors, different government agencies, and even folks like MBB. They were all universally way off - predicting the future is hard.
No one expected the costs for wind and solar to come down at an exponential rate as fast as they did - Lazard runs a great study each year showing the decline of the cost of wind and solar over time. The decline in cost is dramatic (solar is a tenth as expensive today as it was in 2009; wind is a quarter), and cost reductions have been best modeled by learning curves (another one of BCG's famous frameworks!) - basically, every time we double the amount of deployed wind/solar in the world, costs tend to decline by X%:
All of this leads into the last slide - perhaps the single-best view of how to decarbonize the global economy. Each box represents some use case for energy, like air travel, lighting, refrigeration, etc. Some of those run primarily off of electricity today (e.g. refrigeration) and are toward the bottom of the chart; others don't (e.g., air travel, steel production, etc.) and are placed higher. The thick black line shows the electric frontier - the borderline of use cases that are served by electricity today. Decarbonizing the economy, then requires just five "simple" steps:
Increasing the efficiency of any process to reduce the total energy needed (modern cars are leaps and bounds more efficient than those a couple decades ago)
Electrifying use cases, e.g., switching to induction stoves, electric cars, or electric heating - this means pushing up the electric frontier
Cleaning up the power grid, so that all of the use cases below the electric frontier get cleaned up "for free"
Developing clean fuels for use cases above the electric frontier (such as green hydrogen, or e-fuels)
Relying on high-quality carbon offsets to abate whatever's left.
This in turn gives insight into what we can do to personally clean up our energy consumption. Buying appliances that are electric (e.g., induction stoves over gas stoves, electric cars or plug-in hybrids over traditional gas cars), buying carbon-free power [1], and purchasing high-quality carbon offsets [2] can all work to reduce your carbon footprint.
1: Most plans in TX that advertise 100% renewable energy aren't actually buying renewable energy; they're buying production credits from wind and solar farms across the state. They're still helpful however - ultimately, the cost differential you're paying goes to wind and solar farms directly, which incentivizes more development for clean power.
2: Stripe Climate (https://stripe.com/climate) tends to identify good companies for this. A fair warning - true carbon removal is quite expensive; usually hundreds of dollars per ton of carbon you want removed.