How the rise of renewable energy is burying fossil fuels
We are facing a climate crisis without precedent and society is making it clear that change needs to happen now.
In 2009, the International Energy Agency’s World Energy Outlook forecast energy-related emissions growing by 12Gt (metric gigatons), or 44%, during the 2010s and 2020s to hit 40.2Gt in 2030. Thankfully, in a more recent report published in 2020, these forecasts were reviewed downwards by 4.2Gt based on global emissions in the last decade; the agency now expects total emissions to reach 36Gt in 2030.
However, that is still not enough and much needs to be done if we are to avert a climate catastrophe.
Indeed, as awareness of climate change rises globally, solutions are emerging with technological progress. Recent years have been marked by substantial investments in global renewable energy (excluding hydrogen) that exceeded $250 billion for the sixth consecutive year in 2019, when the sum invested touched $282 billion.
Even though that only represents a 1% increase in investments from 2018, it generated an additional 20 gigawatts, or a 12% increase, in capacity when compared with 2018 thanks to cheaper solar modules and wind turbines.
When looking at the past decade as a whole, investments made to build energy capacity (excluding large hydro) totalled $2.7 trillion. Solar power was the biggest beneficiary (with $1.4 trillion) followed by wind ($1 trillion).
Greater investment in solar and wind is the result not just of better technologies, but also of cost reductions.
Solar photovoltaics (PV) are a great example of this disruption, with crystalline silicon PV modules prices decreasing from $80/W in 1976 to just $0.25/W in 2019, including a fall of as much as 85% from 2010 to 2019. Wind turbines have also experienced a price-per-megawatt reduction of 40% since 2010.
Has the fall in solar module and wind turbine prices had any impact? The answer is a clear yes! It is interesting in this regard to observe the relationship between PV module prices and installed volumes over time. For every 28.5% decline in the PV module price, solar capacity doubled. Solar PV costs are expected to drop by a further 14% in the next five years, according to BNEF.
Take the UK as an example. Increased investments – bolstered by government subsidies and favourable regulation, particularly in the first half of the 2010s – provided a much needed impetus for the renewable energy industry. That allowed the UK to lower its carbon emissions by 40% since 1990. Britain was also able to achieve over a week of coal-free power generation in 2019, compared with just approximately 30 minutes in 2016.
Fossil fuels have provided the majority share of the global power generation mix since the 1970s, but according to BNEF the 50-year equilibrium observed between fossil fuels and renewable power generation is thus coming to an end. Wind and solar technologies alone are expected to provide 48% of total electricity by 2050. In particular, solar is set to witness the fastest growth, rising from 2% of world electricity generation today to 22% in 2050, which represents an annual average growth rate of 9.1%.
Overall, GlobalData estimates that the cumulative capacity for global renewable power will reach 5,000 gigawatts by 2030, up from 1,347 gigawatts in 2010. BNEF expects to see more than $10 trillion of investments into new renewable power capacity by 2050 to help fuel this growth.
Given these trends, we believe the market for clean energy is poised for secular long-term growth through this virtuous cycle of investment, technological advancement, and increased adoption. This market spans equipment manufacturers, technology suppliers, and utilities and power producers, each of which will be crucial in helping the world address the climate emergency. Together, their innovation can help consign fossils to textbooks and museums.