In the past few years, there has been a lively debate about the increasing role of renewables at the expensive of fossil fuels, particularly in power generation.
Some say that renewables are not an existential threat and believe that they might take only a small piece of the pie by 2040, due to high costs and vital government subsidies. On the other hand, others believe that costs are declining fast, and it may take a significant share in power generation, knocking not just coal, but also natural gas off the throne.
The fact remains that things are changing quite fast due to technological advancements. The breakeven cost of various renewable energy sources has come down significantly, and wind and solar energy are leading the charge. Total global cumulative wind power capacity reached 540 GW at the end of 2017, up from 93 GW in 2007. Meanwhile, solar went up from 100 GW in 2012 to close to 405 GW in 2017, a four-fold increase. PV solar even surpassed nuclear generation capacity (403 GW in 2017).
The role of renewables is only marginal in the total energy mix, but growing fast, and in the next few decades, it is likely to become a tough competitor for oil & gas. Surely, sources that are economically viable, easily accessible and environmentally friendly will sneak their way to the top of podium by 2040.
Renewable Capacity Outperformed
In the past, the high cost of renewable energy generation constrained investments in the sector. However, due to technological advancements, the levelized cost of electricity (LCOE) reduction for PV solar and wind energy have boosted the competitiveness of these sources against well-established power generation technologies, such as coal and natural gas. In 2017, the US average LCOE without subsidy for PV without tracking was $54/MWh, with onshore wind at $51/MWh, versus gas-fired generation at $49, coal $66 and nuclear at $174/MWh. The continuous declining trend in costs of renewable energy led to an upsurge in capacity and investments.
In 2017, 260 GW of net power generating capacity was added. The renewable industry invested $280 billion in 2017, adding 150 GW of solar (98 GW) and wind (52 GW); both added 58 percent as compared to 28 percent of gas (38 GW) and coal (35 GW). Large hydro and nuclear respectively added 19 and 11 GW.
Despite declining LCOE, the real issue with renewables is what happens when the sun is not shining and wind is not blowing. The intermittent nature of the power flow from either solar or wind remains a problem. Therefore, renewable energy continues to rely on the grid to meet any shortfalls or peak demand.
Tesla installed the world’s largest lithium-ion battery in South Australia in December 2017, which would prevent a reoccurrence of a notorious incident that took place in 2016 when the entire state lost power. The significant decline in battery prices and other cost cutting measures will further help the renewable sector to grow independent from government subsidies and without relying on grid support.
Bright Outlook For Renewable
The dominance of fossil fuels which in 2017 made up about 85 percent of the total energy mix seems to be challenged by two contenders: the penetration of electric vehicles and renewable energy sources. These together are supported by a change in mindset of the public which is increasingly concerned about greenhouse gas emissions and the environment in general. The next couple of decades will be challenging for the oil, coal, and natural gas sectors, particularly in the transport and power sectors. Coal is already in decline, and next could be natural gas.
According to a Bloomberg New Energy Finance (BNEF) study, solar and wind will gain a large share of global installed capacity by 2040 as compared to 2016. The share of both will rise immensely from 12 percent in 2016 to 46 percent in 2040 while the role of fossil fuels in power generation is expected to shrink.
Surely we cannot eliminate fossil fuels usage in our daily lives, it will remain an integral part of our life for a long time to come. Yet the golden era of renewables is just around the corner as preference and cost favor renewables over fossil fuels, a development that will improve the quality of life of many segments in society.