[Annotated] Wind and solar power are disrupting electricity systems

But that's no reason for governments to stop supporting them

Almost 150 years after photovoltaic^[각주:1] cells and wind turbines were invented, they still generate only 7% of the world's electricity. Yet something remarkable is happening. From being peripheral^[각주:2] to the energy system just over a decade ago, they are now growing faster than any other energy source and their falling costs are making them competitive with fossil fuels. BP, an oil firm, expects renewables to account for^[각주:3] half of the growth in global energy supply over the next 20 years. It is no longer far-fetched^[각주:4] to think that the world is entering an era of clean, unlimited and cheap power. About time, too.

There is a $20trn hitch^[각주:5], though. To get from here to there requires huge amounts of investment over the next few decades, to replace old smog-belching^[각주:6] power plants and to upgrade the pylons^[각주:7] and wires that bring electricity to consumers. Normally investors like putting their money into electricity because it offers reliable returns. Yet green energy has a dirty secret. The more it is deployed, the more it lowers the price of power from any source. That makes it hard to manage the transition to a carbon-free future, during which many generating technologies, clean and dirty, need to remain profitable if the lights are to stay on. Unless the market is fixed, subsidies^[각주:8] to the industry will only grow.

Policymakers are already seeing this inconvenient truth as a reason to put the brakes^[각주:9] on renewable energy. In parts of Europe and China, investment in renewables is slowing as subsidies are cut back^[각주:10]. However, the solution is not less wind and solar. It is to rethink^[각주:11] how the world prices^[각주:12] clean energy in order to make better use of it.

Shock to the system

At its heart, the problem is that government-supported renewable energy has been imposed on^[각주:13] a market designed in a different era. For much of the 20th century, electricity was made and moved by vertically integrated^[각주:14], state-controlled monopolies^[각주:15]. From the 1980s onwards^[각주:16], many of these were broken up, privatized^[각주:17] and liberalized^[각주:18], so that market forces^[각주:19] could determine where best to invest. Today only about 6% of electricity users get their power from monopolies Yet everywhere the pressure to decarbonize^[각주:20] power supply has brought the state creeping back into^[각주:21] markets. This is disruptive for^[각주:22] three reasons. The first is the subsidy system itself. The other two are inherent to the nature of wind and solar: their intermittency^[각주:23] and their very low running costs^[각주:24]. All three help explain why power prices are low and public subsidies^[각주:25] are addictive. 

First, the splurge of^[각주:26] public subsidy, of about $800bn since 2008, has distorted the market. It came about for noble reasons - to counter^[각주:27] climate change and prime^[각주:28] the pump for new, costly technologies, including wind turbines and solar panels. But subsidies hit just as electricity consumption in the rich world was stagnating because of growing energy efficiency and the financial crisis. The result was a glut of^[각주:29] power-generating capacity that has slashed the revenues utilities earn from wholesale^[각주:30] power markets and hence deterred^[각주:31] investment. 

Second, green power is intermittent^[각주:32]. The vagaries of^[각주:33] wind and sun - especially in countries without favorable weather^[각주:34] - mean that turbines and solar panels generate electricity only part of the time. To keep power flowing, the system relies on conventional power plants, such as coal, gas or nuclear, to kick in^[각주:35] when renewables falter^[각주:36]. But because they are idle^[각주:37] for long periods, the find it harder to attract private investors. So, to keep the lights on, they require public funds.

Everyone is affected by a third factor: renewable energy has negligible^[각주:38] or zero marginal running costs^[각주:39] - because the wind and the sun are free. In a market that prefers energy produced at the lowest short-term cost, wind and solar take business from providers that are more expensive to run, such as coal plants, depressing^[각주:40] power prices, and hence^[각주:41] revenues for all. 

Get smart

The higher the penetration of renewables, the worse these problems get - especially in saturated markets^[각주:42]. In Europe, which was first to feel the effects, utilities have suffered a "lost decade" of falling returns, stranded assets^[각주:43] and corporate disruption^[각주:44]. Last year, Germany's two biggest electricity providers. E.ON and RWE, both split in two^[각주:45]. In renewable-rich parts of America power providers struggle to find investors for new plants. Places with an abundance of^[각주:46] wind, such as China, are curtailing^[각주:47] wind farms to keep coal plants in business.

The corollary^[각주:48] is that the electricity system is being re-regulated^[각주:49] as investment goes chiefly to^[각주:50] areas that benefit from public support^[각주:51]. Paradoxically^[각주:52], that means the more states support renewables, the more they pay for conventional^[각주:53] power plants, too, using "capacity payments" to alleviate^[각주:54] intermittency. In effect, politicians rather than markets are once again deciding how to avoid blackouts. They often make mistakes: Germany's support for cheap, dirty lignite^[각주:55] caused emissions to rise, notwithstanding^[각주:56] huge subsidies for renewables. Without a new approach the renewables revolution will stall^[각주:57].

The good news is that new technology can help fix the problem. Digitalization, smart meters and batteries are enabling companies and households^[각주:58] to smooth out^[각주:59] their demand - by doing some energy-intensive^[각주:60] work at night, for example. This helps to cope with^[각주:61] intermittent supply. Small, modular^[각주:62] power plants, which are easy to flex up or down^[각주:63], are becoming more popular, as are high-voltage grids^[각주:64] that can move excess power^[각주:65] around the network more efficiently. 

The bigger task is to redesign^[각주:66] power markets to reflect^[각주:67] the new need for flexible supply and demand. They should adjust^[각주:68] prices more frequently, to reflect the fluctuations of^[각주:69] the weather. At times of extreme scarcity^[각주:70], a high fixed price could kick in^[각주:71] to prevent blackouts. Markets should reward^[각주:72] those willing to use less electricity to balance the grid^[각주:73], just as they reward those who generate more of it. Bills could be structured to^[각주:74] be higher or lower depending how strongly a customer wanted guaranteed power all the time - a bit like an insurance policy^[각주:75]. In short, policymakers^[각주:76] should be clear they have a problem and that the cause is not renewable energy, but the out-of-date^[각주:77] system of electricity pricing^[각주:78]. Then they should fix it.

1. photovoltaic ; [형용사] (물리) 광전지의, 광발전의 [본문으로]
2. peripheral ; [형용사] ~ (to sth) (격식) (중요하지 않은) 주변적인, 지엽적인 [본문으로]
3. account for ; ~을 해명하다[~의 이유가 되다] [본문으로]
4. far-fetched ; [형용사] 믿기지 않는, 설득력 없는 [본문으로]
5. hitch ; 1. (잠깐 지체하게 하는) 문제[장애] [본문으로]
6. belch ; 2. [자,타동사][V, VN] ~ (out/forth) (sth) (연기 등을 펑펑) 내뿜다; (펑펑) 뿜어져 나오다 [본문으로]
7. pylon ; [명사] (고압선 설치용의) 철탑 [본문으로]
8. subsidy ; [명사] pl. -ies (국가・기관이 제공하는) 보조금[장려금] [본문으로]
9. brake ; [명사] 브레이크, 제동 장치 [본문으로]
10. cut back ; [동사] 축소하다, 삭감하다. [본문으로]
11. rethink ; [동사] re・thought , re・thought / -'TOːt / (특히 계획・행동 방침 등을 변경하기 위해) 다시 생각하다[재고하다] [본문으로]
12. price ; 1. [주로 수동태로] ~ sth (at sth) 값[가격]을 매기다[정하다] [본문으로]
13. impose ; 2. [타동사][VN] ~ sth (on/upon sb/sth) (힘들거나 불쾌한 것을) 부과하다[지우다] [본문으로]
14. vertically integrated ; [명사] 수직 통합형의(원자재로부터 단말기 제품까지 다루는, 필요한 원자재를 자체 제조하고 있는) [본문으로]
15. monopoly ; [명사] ~ (in/of/on sth) (상업) (생산・시장의) 독점, 전매; 독점[전매] 상품[서비스 [본문으로]
16. onwards ; [부사] from… onwards (특정 시간부터) 계속 [본문으로]
17. privatize ; [동사] (기업・산업 분야를) 민영화하다 [본문으로]
18. liberalize ; [타동사][VN] (법률・정치・종교적 시스템을) 완화하다 [본문으로]
19. market forces ; [명사] 시장의 힘, 자유 시장 방식 [본문으로]
20. decarbonize ; [타동사] (엔진의 실린더 벽 등의) 탄소를 제거하다 [본문으로]
21. creep into ; …에 몰래 다가[들어]가다; 살살[남의 비위]를 맞추다 [본문으로]
22. disruptive ; 지장을 주는 [본문으로]
23. intermittency ; 간헐도, 간헐성 [본문으로]
24. running cost ; 1. (전기공학, 전자공학, 전산학, 통신학) 운전비 [본문으로]
25. public subsidy ; (세무) 공공보조금(公共補助金) [본문으로]
26. splurge ; [주로 단수로] (비격식) 돈을 물 쓰듯 쓰기 [본문으로]
27. counter ; 2. [타동사][VN] (무엇의 악영향에) 대응하다 [본문으로]
28. prime ; 2. [타동사][VN] (사용・작동할 수 있게) 준비시키다 [본문으로]
29. glut ; [명사] (주로 단수로) ~ (of sth) 과잉 [본문으로]
30. wholesale ; 1. 도매의 [본문으로]
31. deter ; (-rr-) ~ sb (from sth/from doing sth) 단념시키다, 그만두게 하다 [본문으로]
32. intermittent ; [형용사] 간헐적인, 간간이 일어나는 [본문으로]
33. vagaries ; [명사] (격식) 예상 밖의 변화 ;; [|veɪgəriz] [본문으로]
34. favorable weather ; 순조로운 날씨 [본문으로]
35. kick in ; 효과가 나타나기 시작하다 ;; [VERB] to start or become activated [본문으로]
36. falter ; [동사] 불안정해지다, 흔들리다 [본문으로]
37. idle ; 2. (기계・공장 등이) 가동되지 않는, 놀고 있는 [본문으로]
38. negligible ; [형용사] (중요성・규모가 작아) 무시해도 될 정도의 [본문으로]
39. zero marginal cost ; 한계비용제로 [본문으로]
40. depress ; 3. [타동사][VN] (물가・임금을) 떨어뜨리다[하락시키다] [본문으로]
41. [부사] (격식) 이런 이유로, 따라서 [본문으로]
42. saturated market ; 포화된 시장 [본문으로]
43. stranded asset ; Stranded assets are "assets that have suffered from unanticipated or premature write-downs, devaluations or conversion to liabilities".[1] Stranded assets can be caused by a variety of factors and are a phenomenon inherent in the 'creative destruction' of economic growth, transformation and innovation, as such they pose risks to individuals and firms and may have systemic implications.[2] Coal and other hydrocarbon resources may have the potential to become stranded as the world engages in a fossil fuel phase out. [본문으로]
44. disruption ; 1. 붕괴; 분열; 중단, 두절; 혼란 [본문으로]
45. split in two ; 둘로 빠개지다, 나누어지다 [본문으로]
46. abundance ; [sing., U] ~ (of sth) (격식) 풍부 [본문으로]
47. curtail ; [타동사][VN] (격식) 축소[삭감/단축]시키다 [본문으로]
48. corollary ; [명사] pl. -ies ~ (of/to sth) 필연적인 결과, 당연한 귀결 [본문으로]
49. reregulate ; (transitive) To regulate again or anew. [본문으로]
50. chiefly ; [부사] 주로 [본문으로]
51. public support ; 공공지원 [본문으로]
52. paradoxically ; [부사] 역설적으로, 역설적이지만; [문장 전체를 수식하여] 역설적으로 말하면, 역설적으로 들릴지 모르지만 [본문으로]
53. conventional ; 2. [주로 명사 앞에 씀] 전통적인, 종래의 [본문으로]
54. alleviate ; [동사] 완화하다 [본문으로]
55. lignite ; [명사] 갈탄 [본문으로]
56. notwithstanding ; [전치사] (관련된 명사 뒤에 쓰이기도 함) (격식) …에도 불구하고 [본문으로]
57. stall ; 4. 교착 상태에 빠뜨리다, 지연시키다; 교착 상태에 빠지다, 지연되다 [본문으로]
58. household ; [명사] (한 집에 사는 사람들을 일컫는) 가정 [본문으로]
59. smooth out ; (문제·장애 등을) 없애다[제거하다] [본문으로]
60. energy-intensive ; [형용사] 많은 에너지를 소비하는, 에너지 집약적인 [본문으로]
61. cope with ; [동사] …에 대처[대응]하다; …에 대항하다 [본문으로]
62. modular ; 2. (기계・건물 등이) 모듈식의(규격화된 부품을 조립하여 만들 수 있는) [본문으로]
63. flex ; (준비 운동으로) 몸을 풀다 [본문으로]
64. grid ; [명사] (신조어) 현대 사회의 기관이나 설비 (대개 'off the grid(현대적 설비를 이용하지 않고, 자족적으로)'라는 관용어구 형태로 쓰임) [본문으로]
65. excess power ; EP 여유 마력 [본문으로]
66. redesign ; [동사] 다시 디자인하다 [본문으로]
67. reflect ; 3. [타동사][VN] (사물의 속성・사람의 태도・감정을) 나타내다[반영하다] [본문으로]
68. adjust ; 1. [타동사][VN] ~ sth (to sth) (약간) 조정[조절]하다 [본문으로]
69. fluctuation ; 1. (방향·위치·상황의) 변동, 오르내림; 파동; (사람·마음의) 동요; [pl.] 성쇠, 흥망(ups and downs) [본문으로]
70. scarcity ; [U , C] (pl. -ies) 부족, 결핍 [본문으로]
71. kick in ; 효과가 나타나기 시작하다 [본문으로]
72. reward ; [타동사][VN] [흔히 수동태로] ~ sb (for sth/for doing sth) 보상[보답/사례]하다 [본문으로]
73. balance ; 1. KEEP STEADY | ~ (sth) (on sth) 균형을 유지하다[잡다], 반듯이[넘어지지 않게] 놓다 [본문으로]
74. structure ; [타동사][VN] [주로 수동태로] ~ sth (around sth) 조직하다, 구조화하다 [본문으로]
75. insurance policy ; [명사] 보험 증권[증서] [본문으로]
76. policymaker ; [명사] 정책 입안자[담당자] [본문으로]
77. out-of-date ; [형용사] 시대에 뒤떨어진, 구식의(old-fashioned); 케케묵은(*보어로서 쓸 경우 out of date). <반의어> up-to-date [본문으로]
78. pricing ; [명사] 가격 책정 [본문으로]