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.
If you enjoyed this article, check out the Age of the Electron series on James’ Substack or the DER Task Force podcast and newsletter.
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I love the idea of environmental friendly humans. Just as if we watch any episode of ALONE, survival is tough and burning that stored carbon tree flesh to keep warm on a cold night is not something we can solve by telling the participants to build a geothermal passive heating tubes out of coconuts. This is the real rub. The fly in the ointment. We would not have achieved eight billion humans by telling the one billion humans in 1800 they couldn't use coal or oil or any stored carbons. Why are we suddenly so confident we can do it all with magic technology right now today?
What is more concerning is we have all of these collapsing nations around the world like Sri Lanka, Italy, Ghana and many many more suffering and seeing famine and death in their efforts to get the best climate ESG scores. Thanks Al Gore!
The other side of this equation is who seriously thinks Joe Biden and Nancy Pelosi can solve the climate crisis? Joe can't solve the problem of what happens when his bike slows down. Giving these people money is no different than giving a panhandler twenty bucks and expecting him to come work on your lawn tomorrow. Spoiler alert. He wont. Well at least he will get a hot meal with the twenty so feel good about yourself. Second Spoiler alert. He didn't. Maybe it is time for us to stop all being so uber-gullible and naive.