Climate change is a global problem, with two polarized viewpoints making it difficult to find a solution. Rob and Jackie sat down with Robin Gaster, Director of Research at ITIF's Center for Clean Energy Innovation, to discuss how price/performance parity in green technologies can bridge the gap between left and right viewpoints on clean energy.

Mentioned

• Robin Gaster, Robert D. Atkinson, and Ed Rightor, “Beyond Force: A Realist Pathway Through the Green Transition,” (ITIF, July 2023).

Related

• Robin Gaster, “A Realist Approach to Hydrogen,” (ITIF, January 2024).

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Rob Atkinson: Welcome to Innovation Files. I'm Rob Atkinson, founder and president of the Information Technology and Innovation Foundation.

Jackie Whisman: And I'm Jackie Whisman. head of development at ITIF, which I'm proud to say is the world's top-ranked think tank for science and technology policy.

Rob Atkinson: This podcast is about the kinds of issues we cover at ITIF, from the broad economics of innovation to specific policy and regulatory questions about new technologies. So if you're into this kind of stuff, please be sure to subscribe and rate us. It really does help.

Jackie Whisman: Our guest today is Robin Gaster, who is Director of Research at ITIF's Center for Clean Energy Innovation. He's president of Incumetrics, Inc., and a visiting scholar at George Washington University. Robin's primary interests lie in economic innovation metrics and assessment, small business and particularly startups, regional economic development, transformation in education, and the rise of the big technology companies. He's editor of the Great Disruption blog, and we're happy to have you Robin. Thanks for being here.

Robin Gaster: Thank you very much for having me.

Jackie Whisman: Today we're talking about clean energy technology and importantly, a concept called P3. For the uninitiated, myself included, what is P3 and why is it important?

Robin Gaster: P3 is price/performance parity. That means that a clean technology has reached both price and performance parity with a dirty technology, a fossil fuel technology. It's a critically important concept because we believe that clean technologies can only be widely adopted once they're fully competitive without subsidies and without regulation.

So P3 is a critically important concept because low-income countries will not adopt clean technologies unless they are competitive. They have many other things to spend their money on, and they won't pay a big premium for green technologies. So we have to make sure that the technologies we develop are not simply sitting on top of subsidies because that won't work in a world where emissions are growing fastest in low income countries. That's where the future lies. We have to fix emissions in low income countries, and P3 is absolutely central to that.

Rob Atkinson: So Robin, let me play devil's advocate for a minute. In the U.S., at least on the, if you will, on the left and center left, and particularly with environmental advocates, the view is that we're doing a great job. We're funding all these factories, building clean technology, particularly through the Inflation Reduction Act tax credits. We're spending an enormous amount of money on bringing down that price, not necessarily the cost. And so we're moving towards a clean energy economy in the U.S. because we're subsidizing these things. What's wrong with that? It seems like a good thing.

Robin Gaster: It's not a terrible thing. It's just not the most important thing. We can do that we can afford to do that, and there are reasons to do that. I'll come back to that in a second.

But climate is a global problem and solving it in the United States and Europe is increasingly irrelevant because those regions are a lower and lower share of global emissions. So it's great that they are being solved, that we want to pay a lot of money to have clean technologies. That's fine for us, but it's not a solution.

What is important is for us to fund technologies that will eventually get to price/performance parity. That's why it's such an important concept. If all we're doing is basically buying down emissions through subsidies, that's not a global solution. It's a U.S. solution. Possibly. Though there will be pushback and there already is, but it's not a global solution.

This is not to say that subsidies and regulations don't have a place. Subsidies help tremendously to drive down the cost of wind and solar, and in many places, new solar and new wind are indeed at P3 with competing technologies. But you have to be smart in where you do this. If you put a lot of money into technologies that will never reach P3, you're distracting from the main objective here.

Rob Atkinson: I have to say I'm quite pessimistic about the global efforts on climate change. I really am, and the reason I'm pessimistic about them is they're largely driven by this view that we can subsidize our way there and change our behavior. Like you, I've stopped eating meat. I won't fly anymore. I stopped using my dryer. I put all my clothes out on the laundry line, and I'm making a big dent in climate change. Obviously, I'm being facetious, although I do ride my bike to work, but not because of climate change. I like the exercise.

We are releasing a new report that looks at the role of science, early stage research in developing clean energy innovations. And what's striking is what a massively small share of US spending is going to research. It's amazing. We're spending very little on developing these new technologies.

So Robin, we've talked about how critical it is to get to P3, and not only by the way for the marginal technology. You can put in some wind turbines now that are, although they're still tax subsidized. What you can't do now is you can't completely decarbonize the grid with existing technologies just not cheap enough or good enough.

But one technology that a lot of people now are excited about as a green technology is hydrogen. You just wrote an excellent report on hydrogen and different colors. There's gray, there's blue, there's green. What does P3 tell us about hydrogen and how close is hydrogen to reaching P3?

Robin Gaster: Just a tiny bit of context. Hydrogen is currently mostly used for ammonia production and oil refining, and it's pretty dirty. It produces a lot of carbon dioxide. So there are two dimensions to the hydrogen bubble, if you like.

First is to change the type of hydrogen being used in these existing industries, but perhaps more important is this notion that hydrogen is the Swiss Army knife of clean technologies, that it can be used for all kinds of difficult to decarbonize industries like heavy trucking, aviation, cement, steel, shipping. The list is long, and for that to happen, the type of hydrogen has to change.

So there are two ways to create clean hydrogen. You can use dirty hydrogen and then you can capture the resulting emissions through a process called carbon capture. Mostly that will then be stored somewhere in a salt cavern, most likely.

The other way is completely different. Green hydrogen is made by electrifying water to break it apart into hydrogen and oxygen. So this is completely clean, but it uses a lot of energy, a lot of electricity, and much of that electricity today is not very clean. So the resulting hydrogen isn't very clean either. You have to have clean energy to get clean hydrogen.

What does P3 tell us about this? It tells us that for hydrogen to be the miracle fuel that it's supposed to be, it has to reach price and performance parity with the existing fuels, which in this case is first of all, gray hydrogen, dirty hydrogen, which costs about a dollar a kilo. Today, blue hydrogen is about three bucks a kilo and green hydrogen is six bucks a kilo. So those who are in the pro-hydrogen camp believe that as light wind and solar economies of scale will kick in, it will become cheaper and cheaper and cheaper, and eventually as these various industries adopt it, the scale will be such that this reaches P3.

Unfortunately, I don't believe that's true at all, and even a pretty simple look at the structure of production and distribution makes that clear. So blue hydrogen will not get much cheaper because it's expensive to capture emissions, and it's a bespoke process. You have to find a specific cavern somewhere to store it. A lot of the expenses in the transportation and the cavern, that's not something you mass produce, so it won't get cheaper, and the International Energy Agency says that.

Green hydrogen depends entirely on electricity. 85% of the cost is in the electricity. So it doesn't matter if you have better and cheaper electrolyzers until electricity becomes almost free. You can't get competitive green hydrogen. So this tells us that we're going to need subsidies for a long time. And that I think is a sort of key insight from P3. It makes us focus on what really are the processes that will get us to a competitive technology. In the case of hydrogen production, that's just not going to happen.

Rob Atkinson: What if we had fusion? It's one of the things I remember, you and I both were at the Office of Technology Assessment back in the prehistoric days. They were talking about fusion was 20 years away and fusion's still 20 years away, although maybe it's closer. It seemed to me that if we had fusion that that's the Swiss army knife, maybe it solves a lot of problems.

Robin Gaster: Well, that's right. Or possibly geothermal, that's another important and widespread, potentially widespread source of energy. But so far as hydrogen is concerned, even if electricity was almost free, I still don't think hydrogen is a viable fuel. It requires building out a completely new delivery infrastructure. You have to have new pipelines. You have to have new delivery trucks. You have to have new fueling stations. If you want to do trucks, the fueling stations in California are out of use about a third of the time. They haven't solved that technology yet. Maybe they will.

The other part is that technology is not standing still. So in these other industries, for example, heavy trucking, it's pretty clear that battery electric trucks are improving rapidly. And while they're not near P3 now, one can see with battery improvements and drivetrain improvements that it's not impossible that they'll get there. And I think they'll get there a lot faster than hydrogen trucks.

Hydrogen has to worry not just about fossil fuels, but the other clean technologies which are increasingly competitive as well. So on your point about fusion, yes, free energy would be wonderful. It would solve a lot of problems, including for hydrogen.

Jackie Whisman: We often focus on the cost of producing energy. What are other key factors we should be talking about?

Robin Gaster: Hydrogen is hard to deliver. Existing pipelines can only handle a 20% hydrogen mix, and people don't really want that. New pipelines are very expensive, take a long time, and they are inflexible. So once you've built a pipeline, it goes where it goes. So if demand shifts, you have to build new pipelines.

So it's a very expensive way to deliver molecules. There is an existing massive gas pipeline network, but that's paid for and it's not entirely relevant to delivering hydrogen. And if you look at other methods, well, delivering it by truck is a lot more modular. It's more flexible. You can set it up more quickly with less capital. But it's very, very expensive to deliver by truck because you have to have super cool trucks, super cold trucks to deliver the hydrogen. So delivery is really a problem for hydrogen, and it's not been solved yet.

Rob Atkinson: Let's broaden the aperture out a bit. You and ITIF, we've written a couple of major reports on this. One was last summer with a manifesto, if you will, for P3. Why largely the current approach that almost everybody in the world, certainly the COP conference that happens every year, a couple of years, everybody's sort of into this, let's subsidize our way out of this conundrum or problem we're in, and let's take personal responsibility and change our behavior.

We make that point that really innovation is the only way to solve this problem. We're not going to shame people into getting rid of their cars. We're not going to revision our cities. We're not going to subsidize our way there because certainly I think if, and this isn't the partisan point, but with the budget crisis and all it's possible that you'll see a cut in the IRA tax credits and other spending investments.

So let's broaden the aperture and say, why do you think the P3 concept has been not, first of all, why haven't people come up with on their own? And secondly, why isn't John Kerry talking about P3, although John Kerry just left his role. I mean, I know why. I think I'd be curious what your thoughts are. Why is this such a hard concept to push and get adopted?

Robin Gaster: Well, you can talk about the politics of clean energy and P3 is a pretty market-oriented model. It says you can help technologies get to market, you can help technologies get traction, but in the end, the market is the only lever big enough and powerful enough to make the change that we want to make. And that is not a vision that the left is particularly comfortable with.

And on the right, we're still in many countries and in the U.S largely stuck in a climate denial posture where you don't believe that there's a problem, and you certainly don't believe that government has an important role in the solution. So I think on both left and right, there are powerful forces which would suggest you find a different solution, either denial or subsidies. Subsidies don't ask you to look at the market. They just say, well, we'll push money down this funnel until it works. And I think our view is that there ain't enough money in the world to do that.

Rob Atkinson: In a lot of ways our politics are so fractured right now. But there is really, if you will, a third way that's just sitting there really waiting for adoption. I think many Republicans now will acknowledge climate change. What they don't want, and I don't blame them, is they don't want the government to take away our cars and to take away our right to fly and make us eat fake meat. And so I do think there's a potential compromise, and it seems to be P3 is that compromise. Republicans can say, look, we're not forcing anybody, but what we want to do is drive innovation. Now what they have to do is come to grips with the reality that government plays a key role in that process. And then Democrats need to recognize that we're not going to be able to spend our way out of this. It's just impossible. And that innovation is key. Maybe closing thoughts, what do you think?

Robin Gaster: I think that's about right. We just don't have enough money to make the transition through subsidies and government spending. Nobody does. I guess I'm not quite as positive as you about the current posture of the right in most countries, not just in the U.S. Look, it's a very popular and populist position to just simply deny climate change or just say, well, it's happening, but we have nothing to do with it. We don't have to do anything really. That's a very popular and easy position to take, and a lot of Republicans have taken it. I don't see until the Trump era is over, I don't see any likelihood that Republicans will really come to the table.

Rob Atkinson: Although, to be fair, Robin, I do think that it's one of those areas where I agree with you, but there are more Republicans than there used to be who are willing to acknowledge this and take action. But what I really object to, I think in a way, and here both sides are at fault, but there are a lot of positions that the environmental left has taken that just make the Republicans really mad and rightly, to force everybody out of their cars. You can't have a gas stove anymore.

These are meaningless things. They're never going to solve the problem, but they make sort of environmentalists feel good, and when they push that, they force Republicans emotionally to be against it. So in my naive, long-standing call for comedy, I just wish both sides could get more common-sensical.

Robin Gaster: I do think P3 is pretty useful because it's a lens that in a certain way, both of them can look through. This is not a lens that forces either really out of their full comfort zone, or at least it accepts the notion. There's nothing in it that says climate isn't a problem, climate isn't something we should do. We should deal with now. So the climate emergency can be retained if you keep the P3 focused. And similarly, I think Republicans will be happy with a market-oriented solution, even if they're going to have to make some movements, as you say, towards a solution that has pretty substantial government involvement all the way through.

Rob Atkinson: Great. Well, on that note, Robin, we should wrap up. So I really want to thank you for being here. This was great.

Robin Gaster: Thank you very much for having me.

Jackie Whisman: And that’s it for this week. If you liked it, please be sure to rate us and subscribe. Feel free to email show ideas or questions to [email protected]. You can find the show notes and sign up for our weekly email newsletter on our website itif.org. And follow us on Twitter, Facebook, and LinkedIn @ITIFdc.

Rob Atkinson: And we have more episodes of great guests lined up. Most of them will be real, some might be fake, but we hope you'll continue to tune in.

Jackie Whisman: Talk to you soon.