Dan Arvizu, head of the National Renewable Energy Laboratory, the world’s largest renewable energy research facility, has some simple points to make when he says that the energy system of today is unsustainable.

The first point relates to cost, as renewables become a cheaper option than coal or gas; the second relates to environmental impacts, as the world finally absorbs the impact of coal generation; and the third relates to the arrival of new, disruptive (and mostly renewable) technologies, such as rooftop solar andstorage

But the most stunning piece of evidence is this: the energy industry spends only 0.3 percent of its revenues, which are in the trillions of dollars, on R&D. And even that money is spent by new players looking to bring new technologies to the market.

In an interview on the sidelines of the 2XEP energy efficiency conference in Sydney this week, Arvizu said he knows of no other incumbent industry that has spent so little on securing its future and on innovation, and was relying so much on the models of the past.

“The energy sector has the highest level of conservatism and the lowest level of risk-taking,” he said. Change, via disruptive technologies such as solar, storage, and other renewables, along with smart devices, is now upon it. But the industry will be fighting hard to resist change.

“We need to change the business model. We need new infrastructure, and brick by brick we will dismantle the old system and make a new one,” Arvizu said.

“One hundred years ago, we looked at hydrogen and electric vehicles, and we made assumptions that fossil fuels were limitless, and we didn’t fully appreciate the environmental consequences.

“There’s no doubt that those technologies served the economy well. But now we have energy security issues, and carbon issues, and economic issues. We’re not meeting any of those challenges with the system that we created a century ago.”

NREL is the centerpiece of the U.S. Department of Energy’s commitment to renewables. It is a massive organization, based in Colorado, with more than 1,700 researchers.

Earlier this year, it released a study that looked at a variety of renewable scenarios for the U.S., ranging from 30 percent to 90 percent, but ultimately focusing on a scenario where the world’s biggest economy met 80 percent of its overall energy needs (including transport) through renewables by 2050.

The conclusion was that it could be done -- and that it could be done at a very modest cost.

“The future is much more promising than a lot of people expect,” Arvizu said, adding that even he is surprised at the pace of technological change and cost reduction.

He dismisses the protests of people who say that renewables are too expensive -- in particular those like Bjorn Lomborg who insist that more research should be undertaken (ironic given the industry’s low R&D commitment so far). “That’s just kicking the can down the road,” Arvizu said.

“If we are just talking about incremental changes to the existing system, we will never fully utilize the potential.”

It is, he says, a scary prospect for the incumbent utilities, who have enjoyed decades -- nearly a century -- of uninterrupted growth and extraordinary market power. And they are protected by layers and layers of regulation.

“We created this monster,” Arvizu said. “You often hear the words, ‘Let the market decide’, but this is a disingenuous argument in such a highly regulated market.

“The classic supply and demand equations do not work...because we’ve allowed the incumbents to create a set of highly regulated markets where they have tremendous market share, and there has been an alliance between public policy markets and incumbents, where reliable power supply has been exchanged for a high return on investment.

“But now we have other options in the market place, and in order to break into that market, they need to mature and they need an ecosystem around them.”

The key to change, he says, will come in empowering consumers, and that will come with the widespread introduction of storage technology.

“If we had storage that was cost-effective, [we] would very quickly be able to encourage the utilities to get with the program. Once you have the opportunity to say, 'I don’t need your electrons any more' -- that is when consumers will have the power.”

Arvizu says that storage costs may still be too high by a factor of two or three, but he points to the likes of Tesla, and its proposed Giga factory, as a key to bringing down those costs quicker than most expect.

“The game will change so that people will have a choice. Those costs will continue to come down, and [it is] happening at a rate that surprises even me, and I have been at it for 35 years.”

The next step, he suggests, is to scale up. In the U.S., this is not happening at a federal level, but it is happening at the state level. A total of 29 states now have renewable energy targets, and all are meeting them easily.

In the U.S., industry lobbying groups are trying to force state governments to back down on their renewable energy targets. So far, the legislators have resisted these efforts.

Arvizu says he's confident that the higher renewable targets can be achieved. It will require innovation and access to capital, but most of all, it will require vision.

“We can invent the future we desire,” he said.

The most ambitious state, California, is set to easily surpass its 33 percent target by 2020, and Arvizu's home state, Colorado, will surpass its 30 percent target by the same time.

In Colorado, he added, there was initially a cost cap of 2 percent of electricity bills on its renewable target, but it looks like the state will be able to achieve its goals at a cost of just 1.5 percent.

“The genie is out of the bottle,” Arvizu said.

“I started out in the AT&T Bell labs. When they said they would dismantle the monopoly of the mother Bell, we thought it was going to be the end of the world. But the regulators allocated the bandwidth and got out of the way. The phone calls of today may not be cheaper than they were, but there is a lot more choice and opportunity. In the energy arena, the principle is the same. If you open up that market to broad competition, and open it up to choice, then it will be very different than a market where people are just trying to sell electrons."

But, he notes, it is important that the new model be integrated with the old. In other words, the best of distributed generation must be merged with the best bits of the old centralized model.

This will be difficult, considering the regulatory hurdles, but it is important. And in the same vein, he dismissed the idea of “energy independence” for a country.

“I don’t think we need to go to 100 percent renewables, although I think we can,” he said. “And I don’t know why you would want to pay to be autonomous. The extra cost that it entails...to be isolated, [purely] as an act of bravado, is absurd; it is an interconnected world.”

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Editor's note: This article is reposted from RenewEconomy. Author credit goes to Giles Parkinson.