The phasing out of fossil fuels was the big topic at this year’s global climate conference. Regardless of the final outcome of COP28, the debate will continue. At some point in the not-too-distant future, we will almost certainly phase out fossil fuels. The fossil fuel industry is already fighting a withdrawal. It’s a losing battle over an uncertain time scale. The final question is all about the prerequisites: What kind of innovation do we need to phase out fossil?

The good thing is that we already have a lot of the technology needed. Renewable energy is getting cheaper every year and has already begun to drive fossil fuels out of the market. We can electrify everything to increase energy efficiency massively:

The USA, as an example, only needs about 50% of the primary energy coming into the economy to power everything if all the primary energy is renewable and all the energy end points use electricity. The problem is a lot smaller than it seems.

Existing technology can solve the first 90% of the problem:

We have housing insulation, we have electric vehicles, we have renewables, we have batteries. Scaling them up is not trivial, but we don’t need a magical new technology.

The issues we still have are economic.

What’s needed to drive down costs is efficiency innovation: making these products cheaper. Solar technology follows Wright’s Law, while coal power plants don’t. Neither do nuclear plants.

Nevertheless, 20 countries signed a pledge at COP28 to triple their nuclear energy capacity by 2050. This is, in essence, a bet against other solutions for the intermittency problem. As I wrote previously:

Unlike fossil or nuclear, renewable energy is generated intermittently. This means we have either too much or too little at any given time. Therefore, demand-side management should smooth out the imbalance between supply and demand.

The intermittent nature of renewables creates incentives to build new capacity to be on the safe side. 

The oversupply then needs to be stored, and tripling nuclear energy capacity equals betting against storage solutions, like green hydrogen. This is the realm of system costs, and here are the hard economic issues: upgrading power networks, building storage capacity and providing control energy (to balance supply and demand) aren’t cheap.

How to solve the riddle

Battery storage is already catching up, and batteries follow Wright’s Law. Gas peakers, the gas-powered plants that step in when the sun is not shining and the wind is not blowing, do not. It remains to be seen whether gas peakers can compete with batteries and other means of storing electricity or managing demand. Germany is working on a national power plant strategy to solve this riddle and tender new hydrogen-operated power plants – because the market won’t build them.

Again, COP28 revealed that it’s not so much about technology and innovation but economic frameworks and state subsidies. Apart from efficiency innovation, we need systemic innovation: figuring out the best combination of existing technologies, developing business models, and setting the right regulatory framework for the energy markets.

In addition, COP28 has shown there’s still room for market-creating innovation. There was much debate about carbon removal technologies such as carbon capture and storage (CCS), carbon capture and utilisation (CCU) and carbon dioxide removal (CDR). It’s clear that we’ll need them to reach climate goals. It’s also clear that they aren’t silver bullets. We can’t continue burning fossil fuels and solve climate change with carbon removal.

COP28 and the role of innovation

But the field in between is large, and we’ll need innovation to figure out how to scale carbon removal technologies. Scale effects have been a well-known factor since the industrial revolution, and the digital revolution took them to new and unknown heights. Will carbon removal technologies follow Wright’s Law? We don’t know yet, but start-ups like Noya are working on it. The founder has a clear opinion:

Carbon removal is a waste management problem. You can’t just throw trash in the middle of the street. The way we currently deal with trash is polluters pay to clean up their waste. Carbon removal should be like that. CO₂ is a waste product, and we should have regulations in place that are requiring polluters, like businesses, to clean up their waste emissions. It’s a public good to provide cleaner air.

Carbon removal is indeed expensive today. But the same used to be true for renewable energy not terribly long ago. Today, we already have cheap renewable energy at scale. Since we need carbon removal, we must invest in it, to foster innovation in this field. The State of Carbon Dioxide Removal report, published this year, makes it clear:

While scenarios show that the bulk of CDR deployment will occur in the second half of the century, those levels will only be feasible if we see substantial new deployment in the next 10 years – novel CDR’s formative phase. Almost all scenarios that limit warming to 1.5°C or 2°C require novel CDR.

There is no single wonder weapon against climate change. We need renewables, carbon removals, and demand reduction, the report says. When it comes to carbon removals, we again need both expanding land-based CDR and scaling up novel CDR.

COP28 showed that we still need innovation. We know what to do. We have the technology, but upscaling requires innovation. When it comes to building up renewables, phasing out fossil, carbon removals and demand reduction, it’s not a question of either/or: we need everything in combination.