Economic and energy-security concerns — not climate change — drove countries such as China and India to ramp up their clean-energy investments.
It is economic and energy-security concerns — not climate change — that have driven countries such as China, India, and Japan to ramp up their clean-energy investments.
W riting in these pages recently, the Manhattan Institute’s Jordan McGillis took issue with a 2021 essay I wrote for the National Interest, in which I contended that clean energy is crucial to American energy security. My essay’s premise — that China is beating the United States in the clean-energy race, and that our security interests are tied to our capacity to invest more aggressively in clean technologies — “courts energy-security disaster,” McGillis argues. Challenging my contention that “America must reduce its broader reliance on Chinese energy” by pursuing “innovative new renewable technologies,” he writes that “coercing our economy in that direction does not strengthen U.S. energy security; it does the opposite by putting the United States into a dependent position relative to China.”
In the abstract, this is a crucially important debate. The problem is that, at various junctures, McGillis is debating an argument that I didn’t — and wouldn’t — make. He alleges, for example, that I favor renewables at the exclusion of nuclear power, contrasting “the pro-renewables response Thomas Hochman favors” with that of the “nuclear-forward response to the environmental imperative” that my brother, Nate Hochman, recently defended in NR.
But there’s no daylight between Nate and me on this issue, nor was there anything that I wrote in the original piece McGillis is criticizing to suggest otherwise. Although most of the piece was focused on renewables, an area where my brother, McGillis, and I all agree that reliance on China is a major problem, I also explicitly argued for “an all-encompassing approach — one that involves sustainable extraction, to be sure, as well as nuclear power, wind and solar, and next-generation technology.” Last week, I reiterated that point in an article for City Journal, wherein I made the case for “the policies and technologies — from nuclear power to regulatory reform — that will help developed economies reduce emissions.”
I should, however, stress that McGillis is no absolutist. He argues that the U.S. shouldn’t compete aggressively with China on clean energy — writing that “a race to renewables would swap climate risks for dependency on Beijing” — but notes that he, Nate, and I all agree “that it is time to launch an agenda enabling the domestic development of key minerals, permitting new energy infrastructure such as pipelines and transmission lines, and approving new nuclear designs,” ceding “the importance of reliable, affordable energy from stable, trustworthy sources,” including “wind, solar, and battery technologies,” a few paragraphs later. To a degree, perhaps, the difference between McGillis’s view and my own may be a matter of timing.
The most fundamental problem with McGillis’s article, however, is that the author largely fails to consider the question of cost in comparing and contrasting energy sources. He recognizes the importance of cheap electricity in the context of non-renewable energy sources, lauding the market’s “displacement of coal by lower-cost natural gas.” He further recognizes that when “markets fail to account for polluting emissions, it may be appropriate to accept a cost trade-off and implement a framework to account for them.” But in his thesis that a pivot to a cleaner energy economy would “introduce certain new energy-security vulnerabilities” vis-à-vis China, McGillis ignores the abundant cost benefits of renewables altogether. That’s a rather important omission — for energy economics and energy security are largely inseparable from one another. Different energy sources have very different price points, for example, and thus the makeup of our energy mix has a considerable influence on how much residential, commercial, and industrial customers pay for electricity. This has downstream effects, impacting everything from production costs to inflation to disposable household income. Reliance on expensive energy sources, then — as well as a lack of access to cheap alternatives — represents a significant energy-security vulnerability.
It’s for this reason that the International Energy Agency defines energy security as “the uninterrupted availability of energy sources at an affordable price.” The affordability is important and demands recognition of the highly variable levelized costs of energy (the measure of the cost of producing one unit of electricity) of different power sources. Coal’s levelized cost of energy (LCOE) is one and a half to two times higher than that of natural gas, for example — and has been a key factor in the decline of the American coal industry.
The same idea holds true for renewables. Recent analysis finds that the LCOE of utility-scale solar is $29–$38 per megawatt-hour (MWh), making it far cheaper than coal ($65–$159 per MWh) and gas ($44–$73 per MWh) — even in an unsubsidized environment. And renewable costs continue to drop much more quickly than their fossil-fuel alternatives: Between 2009 and 2019, the price of solar power declined by a whopping 89 percent, nearly three times faster than gas and 44 times faster than coal over that same period. These cost reductions are likely to continue (albeit at a somewhat slower rate) for at least the next ten to 15 years. Any discussion of energy security must take these factors into account — but McGillis’s argument misses the subject of cost entirely. He’s right, of course, to argue that “public policy is an exercise in trade-offs,” reasoning that “rarely can one commitment be fully endorsed without it coming at some expense to another.” But it’s impossible to do an adequate cost-benefit analysis while ignoring the element of cost.
The cost issue, as it pertains to energy trade-offs, is not just a question of raw numbers. Clean-energy markets have another important advantage that McGillis neglects: They are far less prone to price shocks than their fossil-fuel alternatives. Crude-oil prices, on the other hand, are set on the international market. This means that although the United States is the largest oil and gas producer in the world — and produces more oil than it consumes — it still doesn’t enjoy what might be assumed to be the benefits of energy independence. The ongoing gas crisis is a perfect example of how this issue plays out in real time: Despite our status as a net oil exporter, Americans are today paying more at the pump because of a war waged by a major oil-producing country thousands of miles away.
Many of America’s global competitors recognize all this. It is economic and energy-security concerns — not climate change — that have driven countries such as China, India, and Japan to ramp up their clean-energy investments in recent years.
None of this means renewables are some sort of panacea. As McGillis rightly points out in his article, solar and wind are still unreliable sources of energy, only generating electricity when the sun is shining or the wind is blowing: “Any policies that move our grid away from the natural-gas and coal plants that supply more than 60 percent of our utility-scale power,” he writes, “must account for the pitfalls they would invite.”
Here, McGillis and I agree. In the absence of greater storage capacity, renewables should not represent more than about 40 percent of our electricity generation. The conventional view is that the rest should be generated by nuclear and natural gas.
But debates over the proportion of renewable power in energy grids really have nothing to do with the argument about energy security I was making in my original piece. The fundamental goal of energy policy is to secure reliable energy for the lowest costs possible. Nuclear and natural gas solve the reliability problem, while renewables can deliver electricity at increasingly low costs. Both are vitally important. Thus falling behind on renewable investment — or allowing China to box us out of the clean-energy market entirely — would be the real “energy-security disaster.”