What does the price of a battery have to do with the global climate talks in Paris?
There's certainly a rough thematic relevance: Because green energy sources like wind and solar are intermittent, battery technology will be critical to making large-scale use of green energy viable across societies. Cheaper batteries are a good thing because they allow us to store green energy for less money.
But I'm talking about something much more specific: The possibility of coordinated global action to drastically cut down greenhouse gas emissions continues to run aground on the same basic conflict. Major economic powers like America and Europe reached their current stage of development by burning enormous amounts of fossil fuels over two or three centuries. And they clearly have no plans to significantly slow down doing so anytime in the foreseeable future. Because the effects of greenhouse gas emissions are cumulative, this leaves poorer and developing countries effectively no room to emit anything without driving the total amount of carbon in the atmosphere far beyond any limit that scientists have agreed is safe.
Poor and developing countries are understandably unwilling to give up their chance to get in on the economic development promised by burning fossil fuels — at least without sufficient reimbursement. And more advanced countries are understandably unwilling to fork over anything even close to the necessary amounts of money to make such a reimbursement. Hence the current impasse.
Which brings us back to batteries.
General Motors recently announced that the lithium-ion batteries it uses in electric cars can now be produced for roughly $145 per kilowatt hour (kWh). That's an enormous drop from where batteries for electric cars were just a few years ago, and GM thinks it can get that down to $100 per kWh by 2021 or so. Elon Musk has been saying Tesla could hit that goal around the same time.
That's a big deal for the electric car industry: Batteries are one of the biggest contributors to the price tags for electric vehicles (EVs), and $100 per kWh is roughly the threshold where experts think EVs will become competitive with their fossil-fuel-powered counterparts. At that point, we won't have to encourage people to buy EVs with subsidies or eco-friendly press campaigns. The market will do the work for us.
The implications of all this go well beyond electric cars and even batteries. Any home solar array needs to store energy for use during the night, or during the low-sunlight months of winter. So between the dropping costs of solar panel technology, and the dropping costs of batteries, we're rapidly approaching the point where the cost of a home solar array will actually be lower than what it would cost to buy electricity from the traditional grid during that solar array's lifecycle.
Green energy is catching up with fossil fuels. Taking into account overall costs, wind is already cheaper than both coal and natural gas in the United States. With the very real help of government subsidies, large solar arrays have already outpaced some forms of coal and natural gas, and are closing in on others. It's not hard to imagine a world in which some large minority of American households drop off the grid entirely, while those who remain on it could enjoy a far cleaner power mix. Both sets of households could rely on battery storage to smooth out the intermittency of solar and wind, and electric cars could draw on that same energy mix.
More importantly, imagine this whole societal energy and transportation system costing less than our current system.
That doesn't mean it's just a hop, skip, and a jump from here to there. We usually think of innovation as a matter of coming up with new ideas. But most of the hard work of innovation really lies in getting everyone across all of society to adopt the ideas we've already come up with. We already have grids, utilities, homes, cars, and a whole economic infrastructure set up around the assumption that we'll be using fossil fuels. Switching over to the green alternative requires enormous up-front costs. We're not talking about getting one "green energy" price point to drop lower than one "fossil fuel energy" price point. We're talking about getting a swarm of millions of price points to drop lower than another swarm of millions.
So we'll still need a price on carbon — via either a carbon tax or a cap-and-trade system — to make the crossover happen as rapidly as possible. And we'll need massive amounts of public spending on green energy to get households and utilities over the initial investment hump. (Remember that sunlight and wind are costless, so once you're over that initial hump, the energy is free.) The good news is that all signs suggest that lots more deficit spending by America and Europe is exactly what's needed to get the global economy back on its feet. Global investment in green energy is a perfect opportunity to do just that.
Even better: The effect of this sort of deficit spending would be to boost employment and raise inflation back to a healthy level, which in turn would re-balance global trade flows and start closing the United States' trade deficit. That would move us back to the way global trade is supposed to work: where poor countries run trade deficits with rich ones to bring in the resources to develop their economies.
That brings us to the final happy coincidence: While the developed world already has a whole fossil-fuel-based infrastructure it needs to replace, the developing world is still building its infrastructure. To a large extent, it doesn't have to make the switch. Simply building green energy infrastructure from scratch is already an economically viable prospect. They just need someone — i.e. rich countries — to build all that green energy capital so they can buy it.
I don't mean for this to sound overly optimistic. But we've all been talking about the shift to a global green economy as if it would be a long, slow slog; and one that almost certainly won't happen fast enough. Perhaps that's so. But there seems to be a possibility that, instead, we're at a kind of global tipping point. That with just the right nudge over the hump, global adoption of green energy wouldn't be a slog — it would be an overnight, barreling cascade.
We wouldn't even need a grand international plan to make it happen. We'd just need America and Europe to undertake the kind of macroeconomic and climate policies they should be adopting anyway. And the market would do the rest.