Saved by Plunging Solar Prices?

 

Of necessity, we cover a lot of grim news in SEI Reports (see the article above). But sometimes we come across information that is extremely positive. One such example is a just published report from Carbon Tracker, a UK think tank that focuses on the impact of the energy transition on financial markets. Written by energy strategist Kingsmill Bond and three colleagues, it argues that recent price drops in the cost of solar and wind installation have now revolutionized the market.

 

That solar and wind power have enormous potential has long been obvious. The sun’s capacity to direct energy toward earth is, of course, many orders of magnitude greater than human energy needs. In fact, it supplies enough potential energy in one hour to meet human needs for an entire year. Bond and his team argue that “with current technology and in a subset of available locations we can capture at least 6,700 PWh p.a. [petawatt-hours per year] from solar and wind.” That would be over 100 times more than global energy demand.

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The problem up to now, of course, has been that the technology didn't allow for a cheap enough price. It was just too expensive to capture much of that power. In 2015, for example, none of solar’s potential was economically viable, and large solar installations had to be heavily subsidized. But with technical advances and the dramatic drop in renewable energy costs in the last three years “half of this solar and wind technical potential now has economic potential” (that is, it's cheaper than oil or gas) and by 2030, the figure will be over 90%.

 

But what about land use? Wouldn’t solar installations take up an enormous amount of space? Bond and his team argue their footprint would be only 0.03%, something less than the current fossil fuel footprint. This would vary by region, of course, but even countries with high population density and less open space (Germany, for example) have shown that solar is feasible. The US would need to utilize less than 5% of its area. Africa, South American, and Australia all would need less than 1% of theirs.

 

Given the urgent need to reduce carbon emissions and the rapid technological development of renewables, the demand disparity between fossil fuels and solar/wind will continue to grow. Renewables are currently growing at rates of 15-20%, and Bond, et al, predict that all electricity generation will be from renewable sources by 2035. By 2050, they say, the totality of energy consumption will be with renewables.

 

It’s an extraordinary prospect, nothing less than “the unlocking of energy reserves 100 times our current demand.” The authors talk about a world with far less environmental stress, in which the poorer countries are the greatest beneficiaries, given their large ratio of solar/wind potential to energy demand.

 

Is it too good to believe? Are the authors reliable sources? Carbon Tracker appears to be a very solid, mainstream think tank, with an advisory board that includes members with senior positions in government and finance. It hardly seems naive or extreme. And an article last year in Forbes supports their basic claim, confirming the sharp drop in renewable energy prices:

 

“Over the last decade, wind energy prices have fallen 70% and solar photovoltaics have fallen 89% on average…Utility-scale renewable energy prices are now significantly below those for coal and gas generation, and they're less than half the cost of nuclear. The latest numbers again confirm that building new clean energy generation is cheaper than running existing coal plants.”

 

In a memorable line, Forbes points out that it is now “cheaper to save the climate than to destroy it,” adding that “installation trends reflect this economic reality, with new wind and solar generation coming online at a breakneck pace.” 

 

If solar has now become this technically feasible and this inexpensive, the consequences are enormous. For example, with these prices why would we need any additional natural gas plants (promoted as a “transitional fuel”), let alone coal or oil installations? And why would anyone even consider nuclear energy, given its environmental risks and the huge subsidies required?

 

With a rare exuberance, Bill McKibben says that transforming our energy systems is “infinitely easier now that renewable energy is suddenly so cheap. The falling price puts the wind at our backs, as it were. It’s the greatest gift we could have been given as a civilization, and we dare not waste it."

 

We will follow these developments closely, and doubtless shrewd investors will also. After all, it would be big news on Wall Street to learn that it’s “cheaper to save the climate than to destroy it.” 

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