We hear a lot about the need to move to cleaner forms of power from all sides—utilities, politicians, advocates and energy companies. There are all sorts of ideas on where we want to go, and how to get there.

But let’s step back and ask a more fundamental question: Where exactly do we stand on alternative energy now?

There’s...

We hear a lot about the need to move to cleaner forms of power from all sides—utilities, politicians, advocates and energy companies. There are all sorts of ideas on where we want to go, and how to get there.

But let’s step back and ask a more fundamental question: Where exactly do we stand on alternative energy now?

There’s definitely big movement under way. Electricity generation from coal, oil and natural gas represented 60% of all power generated world-wide this year, down from 67% in 2010, according to data and consulting firm IHS Markit. That is likely to drop to 42% to 48% by 2030, depending on how aggressively countries move toward renewables.

Those are just projections, of course. Each of the alternative fuels has its own potential, and its own obstacles. Here’s a closer look at current status and outlook for five types of carbon-free energy that could play a bigger role in the future.

A solar farm in Devon, U.K.

Photo: Ben Birchall/Zuma Press

SOLAR POWER

THE STATUS

HARRY CAMPBELL

Harnessing the power of the sun to generate electricity has a long record. While the basic technology hasn’t changed much in recent years, its costs have come way down, triggering a global boom in new solar installations.

The photovoltaic cells used in solar panels convert sunlight directly into electricity. Government mandates for more renewable energy, incentives such as tax credits and corporate commitments to purchase renewables have helped drive the global market. Lower costs have boosted utility-scale projects and interest from consumers in rooftop installations.

The technology is in a “rapid takeoff phase,” says Xizhou Zhou, vice president and managing director of global power and renewables at IHS Markit.

There is plenty of room for growth. The Energy Department says the U.S. now gets just 3% of its power from solar sources. Globally, just 4% percent of power generation this year is from solar, up from 1.4% five years ago, according to IHS Markit. Global installations will likely increase 20% this year to 175 gigawatts, according to IHS Markit. That’s about enough to power roughly 35 million U.S. households for a year.

The solar industry is beset by the same supply-chain and inflation challenges bedeviling much of the business world, though. Prices of materials such as steel, glass and aluminum have soared, and there is a global shortage of semiconductors, a key component for converting sunlight to electricity.

Labor shortages and supply-chain issues could last two years, says George Bilicic, vice chairman of investment banking and global head of power, energy and infrastructure at investment bank Lazard.

“But the long-term trend here is powerful and dramatic,” Mr. Bilicic says.

THE COST

Solar has increasingly become one of the cheapest power sources, judged by the levelized cost of electricity—a way used to compare potential investments that considers the present cost of building a power plant against the power generated over its expected lifetime. Levelized costs are usually in price per megawatt-hour, or one million watts of electricity for an hour.

The levelized cost of solar photovoltaic systems has fallen to about $45 per megawatt-hour this year from $381 in 2010, according to IHS Markit. That makes it the cheapest form of electricity on a global basis, and doesn’t take into account tax breaks or other subsidies that governments may provide, which would push costs down more. Coal-fired generation is around $55 per megawatt-hour, down from $62 in 2010.

Falling costs have made panels more affordable to a wider range of homeowners and has shortened payback times.

“Ten years ago, this was a product for early adopters with the resources, probably a very small group,” says Peter Faricy, chief executive of SunPower Corp.

, which sells and leases solar-power systems.

Workers install solar panels on the roofs of homes under construction near Corona, Calif.

Photo: MediaNews Group/Getty Images

THE OBSTACLES

Solar’s downside is as obvious as its upside: While the sun is Earth’s primary energy source, it doesn’t shine all the time. That means solar power works only during daylight hours. For solar to provide continuous power, it must be paired with other generation such as natural-gas plants, or some form of energy storage such as batteries.

The price of such batteries is dropping, making solar plus storage increasingly attractive to many customers. But most current batteries don’t have a high capacity—today’s cost-effective ones last around three to four hours.

SunPower this year started offering battery storage with its panels—so far 27% of customers are signing on, Mr. Faricy says.

“I would not be surprised if sometime next year in something like maybe half of our solar installations, people also immediately have battery storage,” he says, adding that electric-grid instability due to California wildfires and the Texas winter storm is helping drive that demand.

Solar faces other challenges. For one thing, the industry is heavily dependent on materials and panels from China.

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The Biden administration has put new penalties on importing Chinese solar material and kept Trump-era tariffs on Chinese solar materials that have raised the U.S. industry’s costs and tempered its growth. Imports could face even more restrictions due to accusations that China is using forced labor in its solar supply chain—a claim its government strongly denies.

As a result, American solar companies want to “reshore” more of the panels’ manufacturing and materials sourcing to the U.S., but that could be a long process.The industry is also having growing pains, such as the need to hire and train workers quickly enough to keep pace with demand. The International Renewable Energy Agency estimates global solar photovoltaic employment reached nearly four million in 2020, up from 2.8 million in 2015. By 2030, the group estimates solar jobs could grow to between 10 million to 17 million globally, depending on government climate policies.

“There’s not only an equipment supply-chain issue, there’s also a trained-labor issue,” says Elizabeth Sanderson, executive director of Solar Energy International, a Colorado-based nonprofit that trains solar-industry workers internationally. “It’s hard to keep up with the new demand.”

Workers in the control room of Unit 2 at Exelon’s Braidwood Generating Station in Braidwood, Ill.

Photo: Taylor Glascock for The Wall Street Journal

NUCLEAR

THE STATUS

HARRY CAMPBELL

Creating energy by splitting atoms is also an established technology, but has fallen out of favor in recent years due to safety concerns and cost overruns at new plants. Now that countries are seeking to transition to cleaner energy, nuclear power is getting a second look in many parts of the globe.

The reasons are clear: Nuclear fission can generate energy without greenhouse-gas emissions, and unlike other technologies such as solar, it can do so 24 hours a day.“Having something operate 24/7 regardless as to whether the sun is shining or the wind is blowing is really an important enabling technology to allow you to get to a carbon-free grid,” says Jeff Navin, director of external affairs at the Bill Gates-founded company TerraPower, which plans to build a small reactor at the site of a retiring Wyoming coal plant.

About 10% of global commercial electricity production came from nuclear power in 2020, well below the high point in the mid-1990s of 17.5%, according to the latest World Nuclear Industry Status Report, an annual update compiled by researchers around the globe.Adding renewables to the electric grid that produce power intermittently—like solar—is easier if “we just keep the nuclear plants operating,” says Brett Rampal, director of nuclear innovation at the environmental-policy group Clean Air Task Force.

Once older reactors shut down, newer projects designed to more quickly adjust their electricity output in coordination with wind and solar “will be fundamental to the clean-energy economy of the future,” he says.

New traditional nuclear plants have recently started up in China, Russia and the United Arab Emirates. Dozens of developers such as TerraPower around the world also are testing designs for small modular reactors, or SMRs, which many see as the next generation of nuclear power.

The idea is that SMRs would provide competitively priced electricity that could be used as a constant source of carbon-free energy anywhere, even in remote regions. They produce less than a third of the electricity of a traditional plant, but have a modular design that could be mass-produced. Eventually, proponents say, they should cost far less to build.Nine countries are looking at developing SMRs, including the U.K. and France, which each said last month they would pursue the smaller projects as a part of climate plans. The U.S. Department of Energy is funding two demonstration projects.

A worker enters the intake tunnel on the construction site for the Hinkley Point C nuclear power station near Bridgewater, U.K.

Photo: Luke MacGregor/Bloomberg NEWS

THE COST

Nuclear power’s costs have risen in recent years, and on average, it is expected to remain among the most expensive forms of power generation to build. The global levelized cost for new construction rose to around $74 per megawatt-hour this year from $66 five years ago, according to IHS.

Nuclear power has higher required maintenance investments, and needs more workers and security than other kinds of plants. Many countries have enhanced safety regulations following triple meltdowns at Japanese nuclear reactors in Fukushima after a 2011 earthquake and tsunami.

But costs can vary even within the same country, due to regulations and other factors. Nuclear power in Europe and North America is more expensive than solar, onshore wind, coal, natural-gas and geothermal electricity generation. In Asia-Pacific countries, it can be cheaper than other kinds of power generation.

THE OBSTACLES

The downsides of nuclear power include long and complex construction timelines and regulatory hurdles that can result in runaway costs. Even if countries want to add more nuclear power, the process can be slow. Of 53 units under construction globally, 31 are behind schedule, according to the World Nuclear Industry Status Report.

Advocates hope that SMRs can overcome the history of high costs and slow licensing and construction.

“We’re not talking about a billion-dollar construction project. We’re talking about a building the size of a large house with a reactor that is about the size of a research reactor,” says Caroline Cochran, co-founder and chief operating officer of nuclear-fission startup Oklo Inc., which plans to build its first small-scale power plant at the Idaho National Laboratory. “You can do construction in a hopefully quick and relatively modular way, and what we want to do is make that easily repeatable.”

Nuclear energy also faces a wary public in some countries. Germany swore off the technology following Fukushima. Permanent waste storage remains an unsolved and politically difficult problem.

A wind farm near Hitchland, Texas.

Photo: George Steinmetz for The Wall Street Journal

WIND

THE STATUS

HARRY CAMPBELL

Much like solar, wind power is a plentiful, renewable, carbon-free resource. Global demand has soared in the past decade as costs have come down, moving wind firmly into the mainstream.

Wind electricity is produced when the force from moving air spins a turbine blade around a rotor, which spins a generator. Turbines are grouped together in large installations onshore as well as offshore.

These turbines have grown ever larger in recent years, which has improved efficiency and brought down costs, spurring more projects. The blades for onshore projects span more than 100 feet apiece, while the largest offshore blades can each stretch as long as a football field.

Wind provides about 7% of the world’s electricity, a share projected to at least double by 2030, according to IHS Markit. Installations last year reached a record 93 gigawatts, up 53% from 2019, according to the Global Wind Energy Council industry group. Pandemic-related travel restrictions and longer shipping timelines have slowed some projects, but around 88 gigawatts of installation is still expected in 2021.

“We have quite a promising outlook, even though we have a relatively challenging time for next year” with logistics and supply-chain issues, says Feng Zhao, head of strategy and market intelligence at the wind-energy council.

High demand for the steel, copper, aluminum and carbon fiber used in turbines has manufacturers and suppliers testing new materials to try to create the next generation of devices. There is also emerging potential to pair excess wind power during gusty weather with a hydrogen project—a setup that essentially stores the wind power in the form of hydrogen. So-called green hydrogen could create fuels to help decarbonize transportation, heating and heavy-industrial sectors.

While onshore wind projects have become common, Europe has the only well-established offshore wind industry. Countries including Korea, China and the U.S. are now moving into offshore wind more aggressively.

The Biden administration is preparing to open up swaths of the U.S. coastline to wind projects as part of a plan to boost production of clean energy. The U.S. currently has two offshore wind farms off Rhode Island and Virginia.

THE COST

Wind projects have seen dramatic price drops in the past decade, helping spur development and creating a global industry of suppliers and manufacturers. Levelized onshore wind costs have fallen to a global average of $48 per megawatt-hour this year from $89 in 2010, according to IHS. Offshore wind costs during that period dropped to an average $90 per megawatt-hour, down from $162.

Higher oil prices this year have boosted the cost of the fuels used to move supplies and equipment, though. The growing size of turbine blades makes them difficult to move and creates transportation challenges.

“Since the beginning of this year, the logistics costs have quadrupled and in some cases quintupled,” says Shashi Barla, principal analyst for wind supply chain and technology at Wood Mackenzie.

Workers unload a turbine at Tecolote, N.M., as part of the Western Spirit Wind Project.

Photo: Steven St. John for The Wall Street Journal

THE OBSTACLES

Put simply, the wind has to be blowing for wind power to work.

Finding a spot with consistent wind can mean a bonanza of cheap power. But onshore projects can face opposition from rural communities, which may not like changed landscapes or the noise of turbines. And offshore, the commercial fishing industry has concerns about the impact to wildlife or potential disruptions to navigation systems. Meanwhile, the windiest sites are often far from the cities that consume most electricity, requiring long-distance transmission lines to move the power to market.

That makes wind-farm siting and construction more complex than solar, which is more easily placed close to where it is used, says Mr. Bilicic at Lazard. Wind projects also face a daunting permitting labyrinth in most countries, which proponents say needs to be streamlined to meet net-zero goals.

“It can take up to 10 years from project idea to project execution,” says Morten Dyrholm, a senior vice president at Vestas Wind Systems A/S. “We can’t wait that long.”

Inflation is an increasing concern for manufacturers and developers. While there is much debate about whether inflation is a long-lasting or temporary feature of the global economy, cable manufacturer Nexans SA Chief Executive Christopher Guerin says he expects cost pressure in the wind industry for several years due to the demand outlook for materials like copper and aluminum.

“I think it’s only the beginning,” Mr. Guerin, who notes that copper recently hit historically low inventory levels. “I think that will be a hot topic for the next three to four years.”

A geothermal power plant near Reykjavik, Iceland.

Photo: Arni Saeberg/Climeworks/ap

GEOTHERMAL

THE STATUS

HARRY CAMPBELL

In the global race to add more renewable resources, geothermal checks many of the boxes that policy makers have on their wish lists. It can supply power to the grid around the clock, but avoids greenhouse-gas emissions.

Geothermal energy relies on the heat from the Earth’s mantle—deep wells tap steam or hot water from rock—to generate electricity by using steam to turn a turbine.

It has been an electricity source for more than a century in countries like Italy where hot springs bubble to the surface, but can also be used to heat buildings, or as the heat source for brewing beer and warming agricultural greenhouses.

“When we talk about saving the world with renewable energies, it seems to be focused on electricity, but that heat element is 50% of our energy consumption,” says Marit Brommer, a geologist who heads the International Geothermal Association.

Geothermal plants provide less than 1% of the world’s electricity, but drilling has been on the rise for the past six years. The sector is set for a significant growth spurt, according to data and consulting firm Rystad Energy.

An estimated 180 wells are being drilled each year for power generation, and that number is expected to rise to 500 by 2025.

“It’s a great baseload resource” to provide constant power with high reliability, says Henning Bjørvik, vice president of energy-service research at Rystad. “It’s also an energy resource that requires a minimal land footprint.”

Several European countries are building district heating, which taps geothermal energy to heat commercial buildings and apartments, or neighborhoods. Austria will drill around 40 wells between 2020 and 2030, while the Netherlands is drilling around 20 wells each year, but will double that pace between 2026 and 2030.

Around 30 to 40 wells are drilled each year for district heating projects in Europe, likely to increase to more than 100 wells by 2025, according to Rystad. Canada, Japan, Turkey, Ethiopia and Indonesia are among the countries with geothermal power plants under construction. About 6% of California’s electricity comes from geothermal, and new projects are being planned that would pair geothermal power with lithium mining.

An uptick in interest has led to recent technology advancements that aim to make geothermal more widespread beyond places where both porous hot rocks and water are available near the Earth’s surface. Water can be injected into deep formations to warm it, or closed-loop systems can circulate water.

Venture-capital deals for geothermal rose to $146.5 million globally by mid-October, nearly double the amount in both 2020 and 2019, according to data from Pitchbook. That is up from just $13.3 million in deals five years ago.

Although it hasn’t been commercially proven, there are some regions where lithium could be extracted from geothermal’s brackish waters. A handful of companies are looking into such developments in California, and General Motors has secured the rights to purchase lithium from the first stage of a geothermal project there.

Removing lithium from a geothermal resource would avoid more conventional hard-rock mining, which alters large landscapes, or evaporative processes, which pump large amounts of briny water to surface ponds. With global auto manufacturers planning to shift their fleets to electric vehicles, they are searching for sources of lithium for batteries. Auto makers could use geothermal lithium sources as a more environmentally friendly selling point, Mr. Bjørvik says.

Steam billows from pipework in a well at the Olkaria Geothermal Complex in Naivasha, Kenya.

Photo: Patrick Meinhardt/Bloomberg NEWS

THE COST

Geothermal is one of the more expensive forms of energy, with global levelized costs around $69 per megawatt-hour in 2021, more than coal plants or natural-gas plants, according to IHS Markit.

The industry is working to lower costs—the price per megawatt-hour was around $75 five years ago—but its relatively small size can make that difficult.

However, oil-field-service companies, which helped cut costs for shale drilling to create an oil and gas boom in the U.S., are entering the geothermal industry. That could help drive costs lower, Mr. Bjørvik says.

“It’s an obvious way for well-service companies to play in the transition” to lower-emissions energy, says Mr. Bjørvik.

THE OBSTACLES

Geology is the biggest hurdle for geothermal: The best prospects for power generation are in places with volcanoes along tectonic-plate boundaries, such as the Pacific Ring of Fire.The best locations can be far from users and existing transmission lines, but also home to national parks or indigenous populations that may or may not want projects, says Mr. Zhou at IHS Markit.

“You look at laws and regulations and realize you can’t build anything there,” Mr. Zhou says.

There can be other political hurdles. Though geothermal plants create local jobs and clean electricity or heat, some government officials and residents oppose drilling of any kind, says Ms. Brommer of the geothermal association, who nevertheless calls geothermal a “sleeping giant” of the power sector.

Workers walk by a hydrogen storage tank and loading system at the liquefied hydrogen receiving terminal on Kobe Airport Island in Kobe, Japan.

Photo: Akio Kon/Bloomberg News

HYDROGEN

THE STATUS

HARRY CAMPBELL

For years, hydrogen was seen as the great hope of the renewable-energy sector—but always another decade away.

Issues around affordability and demand persist, but companies and governments are throwing billions of dollars at commercializing production of the world’s most abundant element because it can solve some of the unique challenges of transitioning away from fossil fuels.

Hydrogen is increasingly seen as a viable clean-energy source for transportation—in trucks, planes and ships—all of which are currently hard to decarbonize because conventional batteries either weigh too much or hold a charge for too little time for long-haul voyages. Hydrogen, which is lighter, would solve that problem.

The explosive, colorless gas, which can either be combined with oxygen atoms in fuel cells or burned to generate power, can also supplant fossil fuels in household heating and industrial processes like steelmaking that require sustained high temperatures.

Meanwhile, companies are keen on using hydrogen as a way to effectively store power. This can be done by using excess electricity, often solar or wind power, to run machines known as electrolyzers that strip water molecules of their hydrogen—which is easier to store in tanks and caverns than electricity is to store in batteries.

“Hydrogen is targeting the sectors which are hard to electrify or where emissions are hard to abate,” says Christian Stuckmann, vice president of hydrogen-business development at German energy company Uniper. Companies can store these renewable-electricity molecules in hydrogen and transport the molecules through pipes at a much cheaper rate than through the high-voltage grid, he says.

Some businesses, such as Uniper, which is owned by Finnish utility Fortum, plan to use hydrogen production to complement their wind and solar projects. The company is planning hydrogen projects in the U.K. and the Netherlands.

Still, the role the gas currently plays in the global energy mix is negligible. The International Energy Agency says it currently supplies less than 1% of the world’s energy, and adds that only 1% of that amount is low-carbon, or green, hydrogen. The rest is made by burning fossil fuels, with only part of the associated emissions sequestered using carbon-capture and storage.

That said, with tens of billions of dollars set aside for hundreds of planned large-scale green hydrogen projects, the Hydrogen Council trade group forecasts that hydrogen could supply 20% of the world’s energy by 2050.

THE COST

Hydrogen is expensive compared with other energy sources—especially when it is made without fossil fuels.

Analysts’ price estimates vary when it comes to pricing different types of hydrogen, but they agree that fossil-fuel-free “green” hydrogen is significantly more expensive than so-called gray hydrogen, made using natural gas, and blue hydrogen—made the same way but using cleaner carbon-capture methods.

Investment bank Lazard says it currently costs between $28.55 and $48.30 to produce one million British thermal units of green hydrogen when accounting for development and other life-cycle costs. U.S. natural gas currently costs around $6 per mBtu. Power stations using a blend of 20% green hydrogen with 80% natural gas—as is increasingly being tested—could pay $130 per megawatt-hour, Lazard added.Even so, the cost of green hydrogen is expected to drop when it is produced at economies of scale. IHS Markit says the levelized cost of green hydrogen at a wind farm in Germany fell to $70 per megawatt-hour last year from $130 in 2015, while a utility-scale solar project in Saudi Arabia had more than halved costs in the same period to $32 from $70. The production costs of both projects are expected to roughly halve again by 2045.IHS Markit expects global hydrogen production to rise from around 300 million metric tons of oil equivalent this year to 740 million tons in 2050.

THE OBSTACLES

The world’s hydrogen supply needs to both clean up and grow at a rapid rate, but green hydrogen faces a chicken-and-egg problem in doing so, says José Miguel Bermúdez Menéndez, a hydrogen expert at the IEA.

Because green hydrogen is currently so rarely used and not made using economies of scale, it is expensive to produce in comparison to its gray and blue counterparts.

High prices, in turn, mean that demand—which will partly dictate how quickly producers build new projects—remains lethargic. It will come down to governments to implement policies that stimulate that demand and to reassure companies of their ability to recoup spending on new projects, Mr. Bermúdez Menéndez says.

Both the U.S. and EU have announced hydrogen funds and incentives in recent months.Even if enough cheap, green hydrogen can be produced, transporting it may also prove tricky. The countries planning to become the market’s big players—ones with abundant solar power like Australia and Morocco—are often far from the ones in Northern Europe or East Asia that would use green hydrogen in heavy industry.

Conventional natural-gas pipelines can in some cases be adapted to carry hydrogen, but thousands of miles of pipe will still need to be laid and billions of dollars spent on new infrastructure to safely transport and store the highly explosive fuel.

In addition, creating universal standards and certification processes presents a further challenge, Mr. Bermúdez Menéndez says.

“If I am Germany or Japan, I want to make sure that the hydrogen I import to my country from Morocco or Chile or Australia is really going to be low-carbon,” he adds.

Ms. Hiller is a Wall Street Journal reporter in Houston, and Mr. Hodari is a Wall Street Journal reporter in London. They can be reached at jennifer.hiller@wsj.com and david.hodari@wsj.com.

Money is a sticking point in climate-change negotiations around the world. As economists warn that limiting global warming to 1.5 degrees Celsius will cost many more trillions than anticipated, WSJ looks at how the funds could be spent, and who would pay. Illustration: Preston Jessee/WSJ