JPMorgan Report: Carbon-Free Energy Transition Needs ‘Reality Check’ 

This piece was originally published at Independent Women’s Forum on May 13, 2024. Read more here:

A recent report from JPMorgan Chase warns that moving away from fossil fuels will take “decades or generations,” citing inflation, high interest rates, and geopolitics. This prediction is at odds with U.S. government policies mandating a rapid and complete transition.

The report highlights the high costs of supplanting reliable, affordable fossil fuel sources with wind and solar. JPMorgan estimates that the wind and solar buildout between 2024 and 2030 will take approximately $3 trillion annually, or “0.5% of the global annual GDP.” That’s an enormous amount of cash, and leaves “governments (and ultimately taxpayers) as the major underwriters of the energy transition.”

It’s unclear what that $3 trillion annually covers, but the cost of renewable energy includes far more than manufacturing wind turbines and solar panels, which require the mining of large quantities of critical minerals. However, because the wind is not always blowing and the sun does not shine 24/7, battery storage must be built to store electricity and compensate for intermittency.

Utilities must then ensure a reliable dispatchable power source, such as a natural gas plant, is available to ramp generation up or down—which is not only a capital expenditure, but can incur wear and tear and higher fuel costs. Utilities also usually significantly overbuild wind and solar, to try to meet peak demand, adding to their cost.

Because wind and solar use ten times as much land per unit of power as natural gas or coal-fired plants, and the areas with high wind and solar resources are often far from populated areas, these sources must be interconnected to the grid and more high-voltage transmission lines will need to be constructed.

The short-term solution, according to JPMorgan’s report, is “the coal to natural gas switch,” which “could save up to 17% of global emissions compared to a 2022 baseline.” Natural gas is a cleaner-burning fuel than coal and emits less carbon dioxide. The U.S. electric power sector’s emissions were 32% lower in 2019 than in 2005, thanks to the electricity generation mix shifting toward natural gas.

The JPMorgan report astutely notes that “social unrest and consumer revolt,” are possibilities from the “rising energy costs,” of an “expedited transition.” No kidding. JPMorgan’s warning should remind us that reliability and affordability should guide U.S. energy policy. A 100% wind and solar grid does no one any good if it cannot keep the heat on in a freezing winter.