Accelerating the US energy transition

Over the past 150 years the US has been shaped by repeated energy transitions. In the latter part of the 19th century the petroleum industry emerged and led to the mobility boom of the early 20th century. Electricity appeared on the scene with the opening of the Pearl Street Station, the first central power plant in the US which began producing electricity on September 4th, 1882.  It was located at 255 – 257 Pearl Street in Manhattan and initially served 85 customers, providing electricity to 400 lamps. In the late 1950s and throughout the 1960s and 1970s nuclear power plants were built and although this was a substantial change, it was also the transition that didn’t quite deliver on the scale initially imagined. More recently, hydraulic fracturing to produce natural gas has led to widespread change in US power generation and to some re-industrialization of the US economy.

Today a new energy transition is gaining pace in the US, built on the back of the falling costs of wind, solar and batteries. Batteries are not just facilitating the deployment of wind and solar, but are beginning to transform the mobility sector. These developments offer the prospect of a deep and rapid transition, but also one that could deliver a net-zero CO2 emissions energy system over the coming decades. But what might a rapid transition to net-zero CO2 emissions look like in the US?

Very recently the Shell Scenario team released a Scenario Sketch which details a US transition to a net-zero emissions energy system by 2050. The story-line builds on the theme of wind and solar, but recognizes that these energy sources are not yet fully equipped to deliver net-zero emissions in the medium term. The complete story is more complex and varied, requiring renewable power, nuclear, bio-fuels, hydrogen, natural and man-made sinks and the rapid development of new infrastructure at a pace probably not seen in the US since the Interstate freeway system was built in the 1950s and 1960s. The story also requires a robust enabling framework, built on the willingness of the US people to want change, a strong push from the business community in response and a helping hand from government in terms of policy levers such as carbon pricing in some form.

While rapid electrification of the energy system is an important theme, molecular fuels continue to play a critical role. In particular, biofuels and hydrogen both feature in the mid-century energy mix. Today biofuels are found mainly in road transport, particularly ethanol in passenger cars. By the 2050s they have shifted to aviation, although not as ethanol but as a drop-in hydrocarbon fuel. Where fossil fuels deliver very high temperatures or are required for high energy density applications such as airplanes, hydrogen also appears, with the main source being electrolysis of water using renewable electricity.

Perhaps the most significant change, apart from the decline in emissions as fossil use plummets, is the increase in electrification of final energy services. The built environment, much of industry and a large proportion of the transport fleet all turn to electricity as their source of energy. In the scenario, more than 60% of final energy demand will need to be electrified by 2050, compared to about 22% now. The electricity system will also need to be more than double the size it is today, requiring a five-fold increase in the historical rate of electrification (2.5% points per decade since the 1960s). Some regions, notably the Upper Midwest and Texas, will produce substantially more renewable power than they consume, while others in the West and Northeast will consume much more than they produce. This will require high-voltage transmission lines to connect renewables-rich regions with demand centres. For example, the proposed 780-mile Grain Belt Express high-voltage transmission line is expected to carry 4 gigawatts (GW) of low-cost solar and wind power from Kansas to Missouri and Illinois, enough to power 1.6 million homes a year. To put this into context, this sketch estimates more than 28 GW annually of wind and solar power will be required by 2050.

Similar to almost all scenarios that seek very deep decarbonisation in a relatively short space of time, the US Sketch also requires significant sink capacity in the form of carbon capture and storage (CCS). The use of CCS includes direct application at industrial sites and pairing with bio-energy production to effectively remove carbon dioxide from the atmosphere (BECCS). A removal, or negative emissions, can be used to balance emissions from sources such as aviation where fossil fuels will continue to be used through 2050. US CCS deployment rises to about 1 Gt per year in the 2050s, although deployment needs to aggressively build on the good start the US has already made with CCS. Importantly, through the 2020s the US needs to see a nearly ten-fold increase in CCS projects across the country, which also makes this technology a policy priority in the near term. To date the US has successfully made use of the 45Q tax-credit provision for geological storage of CO2.

The Sketch also highlights the need for an expansion of the land under the care of the US National Forest Service, so as to increase the carbon sink capacity of the US and to offer the many benefits associated with rewilding. Increasing the carbon uptake of the land can also be accomplished through changes in agricultural practices and urban planning decisions. In 2018 the US reported a net land use sink of about 800 MT. Although an expansion of the sink capacity isn’t strictly required by the Scenario Sketch to meet the goal of net-zero carbon dioxide emissions from the energy system, an overall expansion will help the US meet a broader climate neutral goal by 2050 owing to emissions from other activities across the economy.

Natural carbon sinks do provide an additional lever to support the transition. In the US, national forests cover 193 million acres, an area larger than Texas. The US could further reduce CO2 emissions by up to 300 million tons a year by 2050 through afforestation – the planting of new trees where there were none before. But this would require increasing the size of US national forest reserves by about a third. It has taken 100 years to expand the national forest area by 40 million acres, so a shift of this magnitude in just 30 years would demand a concerted focus and effort. Investment for such an expansion could also come from outside the US as the nation has the potential to be a significant exporter of emissions reduction – for example, through the mechanisms provided by Article 6 of the Paris climate agreement.

Achieving a net-zero CO2 emissions energy system in the US by 2050 will be extremely challenging, but in Shell we believe that it is possible with societal support and an alignment of interests across governments, business, and consumers. It will require a deep understanding of the economic and social impacts of the energy transition, establishing sectoral coalitions for action and creating comprehensive policy frameworks. The US’ history of innovation and entrepreneurship is cause for optimism, but those attributes must be highly focused on developing low-carbon technologies, driving down costs, and scaling up those technologies to reduce emissions as soon as possible.

Read the Sketch here.

View the info-graphic here.

Note: This scenario starts with data from Shell’s Sky scenario. In developing this scenario, we have assumed that the US energy system reaches net-zero CO2 by 2050. We then work back to see how this could occur. Of course, there are many possible paths for the US to travel to a net-zero CO2 energy system, but this is what we believe to be a technically possible path while maintaining a growing US economy. While this scenario is more aggressive in its goal and assumptions than our Sky scenario, we believe, while extremely challenge it is still today technically possible. However, we believe the window for success is quickly closing and without significant action it may take longer for the US to achieve a net-zero CO2 energy system. Shell scenarios, including this scenario, should not be confused with Shell Strategy or Business Plan. When developing Shell’s strategy, our scenarios are only one variable among many that we consider. Ultimately, whether society meets its goals to decarbonize, is not within Shell’s control. While we intend to travel this journey in step with society, only governments can create the framework for success.