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Can Clean Energy Address America's Domestic Woes?
by James McGinniss, CEO & Co-Founder of David Energy
Since WWII, the global economy has undergone a period of rapid globalization backed by the US dollar, enforced by American military might, and powered by fossil fuels largely extracted or traded by American companies. Petroleum was the lifeblood of this global economic system, marking this era as the Age of Oil.
That’s changing fast. Decarbonization and electrification of the economy mean that not only will we (thankfully) move away from fossil fuels, but that electricity will become the most important global commodity, ushering in the Age of the Electron. Past energy transitions have traditionally disrupted incumbent superpowers, but the transition to electricity uniquely offers America the opportunity to successfully reposition itself globally and improve the domestic economy while securing a clean energy future.
Electrification is a de-globalizing force
There are fundamental physical differences between electricity and petroleum which will radically change energy production, consumption, and how our global economic and political systems are structured as a result. Petroleum is incredibly energy dense and remarkably easy to store and transport safely. Electricity, on the other hand, is currently expensive to store and transmit and relies on a less flexible network of poles and wires and “just-in-time” delivery. However, it is extremely cheap to produce and is proving more efficient in converting into work than fossil fuels.
This difference will produce disruptive changes in trade routes and supply chains. Because electricity is so expensive to transmit, we will instead move production of goods to where power is cheapest . This is meaningfully different from the Age of Oil, where we extracted oil from the cheapest areas and sent it where we needed it. We could do this because shipping oil was comparatively cheap: production of Saudi oil ($2/barrel) plus shipping costs to end users in the US is still cheaper than producing in Texas ($40/barrel) right next to end users. But building high voltage power lines from here to Saudi Arabia is inconceivable.
This means the domestication of supply chains to areas where cheap electricity is abundant is a feature of the Age of the Electron. While historically it was advantageous to move manufacturing abroad to access cheap labor, this was only because energy prices were established in a global market. Cheap labor pools could access cheap energy and were the most economically competitive manufacturers–all other factors equal, cheap labor wins. But in the Age of the Electron, access to cheap power will be geographically determined as power prices differ wildly nation to nation or even state to state; there is no energy resource in Germany or China that comes close to how cheap West Texas solar and wind is. This will mean cheap labor may lose access to cheap power and more expensive labor with access to cheap energy can start winning again.
This is good for the US, which has some of the cheapest energy in the world in the form of wind and solar and a domestic labor force left behind by globalization. This access means the US can stay ahead in the transition, unlike past superpowers, and accomplishes 3 important objectives: 1) Reinvigorate domestic labor by onshoring manufacturing, 2) Prevent disruptions to clean energy deployment and access to other critical technologies like semiconductors and 3) Keep America competitive with other nations in the Age of the Electron. This framing should make the clean energy revolution a bipartisan issue.
Smooth over domestic political challenges
Since 1973, globalization has widened the wealth gap in the US, benefitting the professional class staffing the ranks of banks, consulting firms, and multinational corporations over American workers, creating domestic challenges. Leveraging cheap American energy to re-onshore manufacturing of solar, batteries, and other critical technologies like semiconductors will bring back high-paying manufacturing jobs to domestic workers while making the clean energy revolution a bipartisan issue.
Ensure America successfully deploys clean energy at a rapid pace
Global supply chain bottlenecks slowed solar deployment and EV manufacturing this year, revealing an existential threat to the clean energy transition. These vulnerabilities highlight the advantages of creating goods closer to home, as we are currently dependent on others to create them for us and have to compete globally to purchase them. This also means relying on countries with which our relationship is potentially adversarial.
China, with which the US has a complex and at times adversarial relationship, manufactures 70%+ of the globe’s solar panels and battery storage, including the raw materials supply chains crucial to the manufacturing process. If the future depends on the electron, that needs to change. When Russia invaded Ukraine, the US responded with an embargo on their oil and gas. If China committed a similar act of aggression or our diplomatic relationship deteriorated, would we be able to afford embargoing their solar and batteries if we disagreed with their actions? Certainly not.
Preserve America’s dominance on the global stage
Not only is our own access to critical technologies in jeopardy, but our ability to provide value to others is at risk. China’s dominance of clean energy supply chains mirrors the US’s early dominance of oil during the late 1800s . Developing nations will increasingly turn to China to purchase clean energy goods, not to America as they did in the past. If we don’t act fast, the US’s relevance will fade, and the CCP’s will grow.
The clean energy transition can become the defining issue that addresses America’s domestic woes. If the rhetoric here sounds like the American right –”tough on China” and “bring back manufacturing” – that’s partially by design: the climate community should focus on narratives that cross party lines. Committing to clean energy abundance and turning America into an energy juggernaut in a truly bipartisan manner will make the US a more unified, resilient, and dominant nation than ever before.
✍️ The Draw-down
Weekly climate art by our MCJ Artist-in-Residence, Nicole Kelner.
📢 Climate Action of the Week
Want to do more? Sign up for the next Climate Changemakers Hour of Action here.
Leverage the influence of your local elected officials to pressure Congress to pass federal building electrification legislation. Plus, ask your mayor to sign a nationwide electrification pledge. Get started with our action playbook.
🏡 Take Action at Home
Tip from Carbon Switch.
If LEDs were installed in every lighting fixture around the world tomorrow, we could cut 800 million metric tons of carbon emissions. But most homes still use inefficient incandescent and halogen light bulbs. Learn more about this climate solution and the history of LED lighting technology.
🍿 The Leanback
Congrats to our friends at Pique Action for closing their recent funding round!
Learn about Huue this week with Pique Action’s mini-documentaries.
🤑 Jason spoke with Craig Shapiro and Tomás Alvarez Belon from Collaborative Fund about their new Shared Future Fund, what led them down the path of programmatic climate investing, and how they think differently about approach and returns.
🏍 Cody caught up with Mohit Yadav from BOLT about how the company is accelerating India’s EV transition with a massive, peer-to-peer network of customers.
In the spirit of transparency, we are publishing as much of the contents of our quarterly letter to our Limited Partners (LPs) as allowable. We hope you enjoy the insights herein. Full public report from Q2 2022.
MCJ Chicago Meetup was a hit! S/O to Arooshi Dahiya and Steven Jones for organizing/hosting. Get in touch with them on #g-chicago to join the next one.
👩💻 Climate Jobs
Energy Hub is looking for an Engineering Manager, Analytics Lead, DevOps Manager, DevOps Engineer, and more to join their mission of empowering utilities and their customers to create a clean, distributed energy future. (NY/Remote)
Project Drawdown is seeking qualified candidates for several roles, including Operations Associate, Policy Advisor, Development Assistant, PT Engagement Coordinator, and more. Full list and details. (U.S./Remote)
Seabound is still looking for a Founding Marine Engineer, Chemicals Engineer, and Controls Engineer to help decarbonize the shipping industry. (London, UK/Remote)
For more climate events, check out the #c-events channel in MCJ Slack.
Conversation with IPCC Author Bill Collins by AirMiners (7/12)
Why Grid Resiliency Matters and How to Mitigate Events Like Wildfires by Women in Cleantech and Sustainability (7/13)
Barriers to Working In Climate Webinar by Climate People (7/26)
MCJ Vancouver Meetup (7/27)
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