By Kunj Chheda, MBA ’24
This article was written in response to a seminar given by Akash Patel, CFO of NET Power, in an EDGE Seminar at Duke University’s Fuqua School of Business in Fall 2023. This article voices one student’s perspective and does not necessarily represent the views of either Duke University or the seminar speaker.
In August 2022, U.S. President Joe Biden signed into law the Inflation Reduction Act (IRA), which designates $369 billion for investments towards energy security and climate change over the 10 years from 2022 to 2031.1 The U.S. energy grid is in a state of adding renewable energy sources to its mix. While the imperative to combat carbon emissions is a global one, the pursuit of clean energy technology intersects with the interests of individual nations and corporations, creating a complex web of conflicting priorities that need to be carefully navigated to ensure a sustainable future.
National and corporate interests prioritize energy security and financial returns
Nations and corporations are driven by their own unique set of priorities, challenges, and economic structures; governments prioritize energy security and affordable access, while corporations seek financial returns, competitive advantage, and protection for their proprietary technologies.2 When it comes to the clean energy transition, several key local interests often come into play.
Fossil fuels have long been the lifeblood of many economies, providing jobs, revenue, and stability. In our recent EDGE Seminar class, we discussed with Akash Patel, CFO of NET Power, the ways in which transitioning away from fossil fuel industries can be politically challenging for local governments, particularly in developing countries, where the demand for electricity is forecast to grow exponentially with rapid economic development and movement of people to the upper middle class.3
Countries are prioritizing energy security as a matter of national interest. This manifests as a focus on domestically produced fossil fuel energy sources, especially in countries in emerging Asian markets. The emphasis on self-reliance in energy supply can run counter to global efforts to reduce carbon emissions through the adoption of cleaner, more interconnected energy systems. This has been evidenced by the stance taken by countries like India and China on purchasing Russian oil in the aftermath of the war in Ukraine.
Ensuring access to affordable energy for all citizens is a top priority for these nations. While clean energy solutions hold the promise of reducing carbon emissions, concerns about energy affordability for vulnerable populations has created a hesitancy in investments in renewable technologies.
Global interests prioritize climate mitigation
On the global stage, a different set of interests and imperatives comes into play.
The most pressing global interest is the mitigation of climate change by transitioning to a clean energy grid. The scientific consensus is clear: we must drastically reduce carbon emissions to limit global warming and its consequences. At the peak of COVID lockdowns across the globe, we were able to reduce carbon emissions by ~5 percent—roughly 1/10th4 of the reduction required to avoid the catastrophic impacts of climate change.5
Protecting global ecosystems, preserving biodiversity, and reducing air and water pollution are essential for a sustainable planet. These environmental interests often conflict with the interests of nations seeking to exploit fossil fuels for economic gain, energy security and societal development.
Corporations are facing a similar dilemma. Let’s look at the case of NET Power. They have made a tech innovation which changes the game in natural gas power plants drastically. However, the deployment roadmap for NET Power and their focus remains largely on monetizing and commercializing their patent-protected technology in the U.S. That all the exponential increase in energy demand in the next 10 years is going to be concentrated in Asia and Africa, where power grids are largely dependent on fossil fuels, brings me to question the impact this revolutionary technology will be able to make on the future of the planet.
Balancing act: The way forward
The challenge of the clean energy transition lies in reconciling these conflicting corporate, national and global interests. A successful transition requires a delicate balancing act between corporate and national sovereignty and global cooperation. I believe the key to achieve this balance is scientific and corporate cooperation.
Multilateral diplomacy has implemented international agreements. The Paris Agreement, for example, unites countries under a common goal while respecting their individual circumstances and development stages. Such agreements provide a framework for cooperation and accountability. However, the missing piece to the global puzzle of tackling carbon emissions has been the immobility of technology and concentration of capital in a few locations.
Global collaboration on clean energy research and technology sharing is essential to address concerns about energy security and economic impacts. Developing nations, in particular, should have access to affordable clean energy technologies—this is where the biggest possible delta of carbon emissions in the future lies. Initiatives to share energy technology know-how can accelerate the transition to cleaner grids across the globe. We must concentrate the bulk of our efforts to finding the right financial model—one that rewards companies like NET Power for their innovation, and at the same time makes their revolutionary technology available to communities in India, China, and Africa.
—
Footnotes:
- Sarup, Rajat. “Inflation Reduction Act: Impact on Energy Transition.” State Street Global Advisors, September 2022. ↩︎
- Liu, Chuyu and Johannes Urpelainen. “Why the United States Should Compete with China on Global Clean Energy Finance.” The Brookings Institution, March 9, 2022. ↩︎
- “Fossil Fuel Demand to Continue Expanding This Decade.” Economist Intelligence Unit, July 10, 2023. ↩︎
- “For a livable climate: Net-zero commitments must be backed by credible action.” United Nations. Accessed September 24, 2023. ↩︎
- Bhanumati, P., Mark de Haan, and James William Tebrake. “Greenhouse Emissions Rise to Record, Erasing Drop during Pandemic.” IMF, June 30, 2022. ↩︎
—