What a global drive on renewable energy can (and can't) deliver

Frankly Speaking

Climate, Energy & Natural Resources

28 Sep 2021

Giles Merritt

Founder of Friends of Europe

Giles Merritt reports on the costs revolution transforming the economics of renewable energies, especially for poorer nations whose population growth threatens to overwhelm our ‘global greening’ efforts.

This has been a summer of ‘global warning’. Natural catastrophes point more clearly than ever to the dangerous reality of climate change. Devastating floods and fires underline the need for richer countries to re-examine their perceived self-interests. When the threat is global, so too must be the response.

More ‘green’ help for poorer nations is crucial to our collective future. And although ‘saving the planet’ obviously means a greater environmental effort by rich and poor alike, that’s not the biggest shift our bleak future demands. Above all, we must stop thinking of clean energy as an optional extra cost and instead see it as an essential investment.

The richer third of the world’s population, which includes China, should invest generously in renewable energy in the poorer two-thirds. So far, these governments have short-sightedly failed to do so on cost grounds, thus overlooking the economic bonanza that such a strategy could deliver.

The run-up to the COP26 summit in Glasgow has, however, seen several encouraging developments. At last month’s UN’s General Assembly, US president Joe Biden pledged a doubling of America’s financial backing for environmental projects in poorer countries, while Chinese leader Xi Jinping announced an immediate end to China’s plans to export hundreds of coal-fired power stations.

The public positions of many of the governments that sign up to UN-backed emissions targets are an exercise in hypocrisy

But these very desirable policy shifts by the world’s two largest and most polluting economies cannot hide the continuing reluctance of governments and major corporations to introduce rapid change. Some ugly politics lie behind this; they may pay lip service to ever-greener targets, but behind their reassuring platitudes they fear the massive financial losses that moving away from coal, oil and gas-powered energy would incur.

This century has seen a dramatic turnaround in the competing costs of renewables and fossil fuels. Solar and wind energy systems are enjoying a technological revolution that is reversing the balance of financial advantage. A costs analysis recently published by Lazard, a London-based investment bank, showed an 88% drop since 2005 in the average costs of photovoltaic solar energy. Wind energy’s costs were down 69%, while those of nuclear energy rose 23%.

Some renewables sceptics suggest these energy cost trends are being confused by the Covid pandemic’s impact on the global economy. But in the US, the National Renewable Energy Laboratory forecasts a further 60% drop by 2050 in the cost of solar energy. Wind advocates say that unsubsidised “utility scale” offshore plants can now deliver electricity at the same price, and sometimes cheaper, than existing fossil systems.

Lobbyists for renewable energies go further, and claim that 42% of coal capacity around the world has become unprofitable. In the US alone, they say, $78 billion could be sliced off overall energy spending if coal-fired power stations were closed as part of a determined switch to solar and wind sources. The political snag, of course, is that if America’s coal became a ‘stranded asset’ the financial hit for its owners and operators would be huge.

In other words, the public positions of many of the governments that sign up to UN-backed emissions targets are an exercise in hypocrisy. November’s COP26 looks likely to be no exception, although there’s growing evidence that public opinion may eventually force the hands of political leaders. This summer’s fires and floods, along with mounting fears over irreversible tipping points, could usher in electoral upsets that result in genuine change. Germany’s general election outcome may prove a forerunner of greener politics elsewhere.

Where is this re-evaluation of renewables’ contribution likely to lead?

The International Renewable Energy Agency (IRENA), which groups most of the countries taking part in COP26, is foremost among the voices spelling out the eventual benefits of change. Noting that “more than half renewables capacity added in 2019 achieved lower power costs than the cheapest new coal plants”, the agency holds out the prospect of powerful economic boosts for countries that embrace renewable energies.

IRENA also reckons that a worldwide renewables strategy aimed at closing coal-based power stations would not merely slow greenhouse gas emissions but would begin to reduce them.

Where is this re-evaluation of renewables’ contribution likely to lead? No one is suggesting that solar, wind and wave-powered installations could overtake oil, gas and coal systems overnight. But they could make a substantial dent in the environmental catastrophe now gathering momentum. They should urgently be deployed in Africa, Latin America and large parts of Asia, where industrialisation and population growth threaten environmental degradation that far outweighs the carbon savings of richer countries.

The answer is staring those rich countries in the face, providing they open their eyes to see it. Stop selling fossil-fuel energy to poorer nations, and instead actively help them to satisfy their energy needs with renewables. And seize this as an investment opportunity instead of shunning it as a development aid ‘black hole’.

This is the third and concluding part of a series by the Founder of Friends of Europe. Two earlier articles were published on 7 and 21 September.

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