The Regulatory Policy Institute Research Group

Technology Tussles: The Trilemma Strikes Back!

Professor Roger Pielke Jr. observes that discussions of energy technologies “can be a lot like discussions of sport, where everyone has their favourite team.” We hear a lot about the fossil fuel lobby, but nuclear and renewables also have their supporters who spend time promoting the positives of their favoured energy technology while downplaying the negatives. Lobbying is a fact of life, but the retreat to narrowly focussed, partial thinking during an energy transition carries the danger of unseen consequences. 

As a starting point, problems with existing dominant technology solutions testify to the desirability of diversification to mitigate uncertainty. We can see this in the current consequences of German reliance on imported Russian natural gas (geopolitical risk) or the dominance of nuclear in France’s power generation fleet which has recently developed widespread performance issues (engineering risk). Looking ahead, intermittent renewables offer the promise of cheaper and cleaner power generation, heat, and transport mobility, but associated system support costs (externalities) will become greater, requiring a more complex grid with substantial back-up capacity. Like all solutions, it also carries uncertainty around future engineering challenges and the risk of technology redundancy. 

More generally, both electricity generation and grid technologies cannot be isolated from a wider ecosystem context. We are embarked on a low carbon journey because we anticipate the climate-related damages associated with unconstrained business-as-usual fossil fuel exploitation. Greater system stress may be imposed by rising climate volatility, along with increasing physical pressures on electricity infrastructure. This includes flooding which inundates assets; violent storms which force curtailment of wind generation and disrupt grid connectivity; plus heat waves and droughts which reduce the efficiency or degrade the capacity of solar, hydro-electric, nuclear and some thermal assets. Just because a generating technology or a specific grid solution is more sustainable does not guarantee its durability in the face of the wider challenges which it is designed to moderate.

A decarbonising energy system may carry increased concentration risks (correlated risk exposures). It will be more complex, backed-up and interconnected. Prudence dictates a growing demand for system insurance, in turn elevating technology complementarity over cost, further nudging policy towards a portfolio approach.  

The acknowledgement of the need for broad thinking and sensible diversification within an energy system cannot be an excuse for ‘anything goes.’ The policy risk partly settles on the trade-offs between adopting a technology winners’ approach (more state) and getting it wrong, and favouring energy technology neutrality (more market), delivering too little too late. The “more government” strain seems likely to persist, but the policy challenge might be better framed less around picking technology winners and more about picking which races to enter. The latter approach provides positive policy signalling to stimulate private-sector investment and R&D, while reducing the danger that resources are spread too thinly or deterred by too many competing possible energy futures.

In parallel with any imaginative policy approach to our energy future, a dose of realpolitik is also required as an integral element of the relevant context in terms of trade-offs. It is difficult to conceive of an energy transition which does not involve significant recourse to fossil fuels; they account for around 80% of global primary energy demand. At a basic level, the assumption of the fungibility of global fossil fuel supplies has been challenged by events in Ukraine. There may be five times as many reserves in the world than can be safely burned, but when they sit in hostile or unstable jurisdictions, they are, from an energy security perspective, of unequal value. Their price has consequences for the costs of delivering the transition (funding, current account deficits, and infrastructure input costs). The policy tension here is between more secure access to less expensive fossil fuels to support the transition, and less impetus to accelerate the energy transition precisely because of that ease of access.

In balancing these tensions, policy might do well to consider aspects of Nassim Nicholas Taleb’s thinking on risk and uncertainty. Robustness might be thought of as the ability of a system to tolerate or resist perturbations that could adversely impact its functionality, and Resilience its capacity to recover quickly from major challenges. Antifragility goes further – a system that is not easily broken or compromised, but which evolves and thrives through exposure to a survivable level of stress, volatility, failures and attacks. This suggests a fruitful approach to energy policy might be one which preserves optionality and learning, where ideas are tested but which can “fail well”. 

In the end, the Energy Trilemma serves as a reminder of the tensions at the heart of any energy policy. Given the reality of our complex economic system, the most important thing is for policy to avoid Darth Vader’s silver bullets. Instead, the spirit of Skywalker suggests competition and innovation are our friends.

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