Investors are crucial to building our 100% renewable energy economy
By Barbara Flesche, Director of Global Development and Finance, Solarcentury
Climate action is increasingly being pushed to the forefront of the political and media agenda. With citizens demanding a zero carbon economy and the BBC’s David Attenborough calling for urgent change, the need to divest from fossil fuels has been echoed once again by global financial leaders including Mark Carney from the Bank of England. As the call for an international Green Industrial Revolution, or Green New Deal, becomes louder it’s also a time of great potential for investors.
The good news for investors is that investing in renewable energy isn’t just a good thing to for society and the environment. Above all, it makes financial sense. Investment in solar energy has never been so economically advantageous, and forward-looking investors across the world are recognising its maturity and long-term growth story with ever more solar developments being built without subsidy. This makes the zero carbon transition a true win-win.
In 1998, when we started Solarcentury, solar power was significantly more expensive than it is today. But we knew this would not remain the case, and firmly believed that solar power would become the world’s dominant energy source.
In 2018 we saw solar breaking yet more records. According to the International Renewable Energy Agency (IRENA) costs have dropped 73% since 2010. This now means that solar joins onshore wind as the cheapest option for electricity generation in every developed country except Japan, according to Bloomberg’s analysis.
Since 2004, solar investment has increased by a factor of 11 and installations have increased by a factor of 110. Today’s solar asset builders invest an order of magnitude more money than they did 15 years ago, and they build far more generation capacity. Bloomberg’s New Energy Outlook sees $11.5 trillion being invested globally in new power generation capacity between 2018 and 2050, with $8.4 trillion of that going to wind and solar. Such high levels of forecasted investment will only see the cost of solar continue to fall.
The International Energy Agency (IEA) saw cumulative solar photovoltaic (PV) capacity reach almost 398 GWp in 2017 and generated over 460 TWh, representing around 2% of global power output. In particular, we’re hugely encouraged by the attractiveness of solar in countries like Spain, the Netherlands and Mexico.
But earlier this month a historic new report from Energy Watch shows we can be far more ambitious. We can reach 100% renewable energy in just a few decades, and it’s affordable, meaning Bloomberg’s forecasts could indeed be conservative. The group predicts that more than 90% of our energy will come from electricity by 2050. Fossil fuels will be phased out completely, with remaining fuels either electricity-based or biofuels. According to the study, solar PV is set to provide nearly 70% of our electricity, alongside a mix from wind energy (18%), biomass and waste (6%), hydro (3%) and geothermal energy (2%).
Brilliantly, a 100% renewable energy system is also substantially cheaper option than the one we have right now. This is good news for everyone. The Middle East and North Africa will see the price of energy production drop by over 30%, North America 22%, South America 34% and Europe 15%, while achieving zero emissions from their energy production by 2050. What’s commonly known at the Levelised Cost of Electricity (LCoE) decreases from around 78 €/MWh in 2015 to around 53 €/MWh by 2050.
As investment shifts into this zero carbon sector, investors are also creating something else crucial to economic development – jobs. This is where the story for renewable energy continues to get better. In 2015, the global power sector employed around 20 million people, with more than 70% in the fossil fuel sector. A 100% renewable power system will employ 35 million people, with solar PV emerging as the major job-creating industry, employing more than 22 million by 2050. The nine million jobs in the global coal industry in 2015 will be reduced to nearly zero by 2050 but will be more than compensated for by more than 15 million new jobs in the renewable energy sector.
For investors, this is compelling indeed. Solid, low risk returns, with positive social and economic benefits. Oh, and of course playing a role in contributing to the biggest challenge of our time: climate change. Its now time for us to work together in building a prosperous 100% renewable energy economy.