Key Takeaways

• In a few years, the cost of renewable energy will be a consistently cheaper source of electricity generation compared to conventional fossil fuels. The cost of producing electricity from onshore wind has dropped by about 23% since 2010. During the same period, the cost of solar photovoltaic (PV) electricity has dipped by about 73%.
• In 2021, the U.S. state of California adopted a landmark policy directing all large trucks to be clean and electric by 2050, while all cars, SUVs, and light trucks to have zero emissions by 2035.
• Reports published by the PR Newswire, CNBC, and IEEFA reveal that the low costs of generating energy from renewables has enticed many corporations, including Apple, Facebook, Google, Amazon, and Wal-mart, which have all promised to shift towards using renewable resources to power their operations.

Introduction

Government Policies and Regulations

• Governments around the world have laid out plans for achieving climate goals aimed at reducing carbon emissions. The UK government, along with the European Union have laid down extensive plans and are committing budgets to the green economy.
• For example, the EU’s next budget includes budgeting for the green economy, and the European Commission’s new Sustainable Finance Disclosure Regulation came into force in March 2021, and will “require financial advisers to incorporate sustainable risk considerations into their diligence processes.”
• The U.S. has also returned to the Paris Agreement under executive order. U.S. President Biden has announced plans to invest approximately $2 trillion in clean energy. According to Miriam Tuerk, Co-Founder & CEO, Clear Blue Technologies says, the investments will drive “widespread adoption of renewable energy and electric vehicles and would help to foster growth in America’s clean tech and manufacturing sectors."
• The U.S. plans to re-introduce a “carbon price at the social cost of carbon, currently estimated at about $50” and is anticipated to have a significant market impact. The continuing tightening of policies around carbon emissions will further accelerate the adoption of renewables.
• Experts also assert that many more countries and regions of the world beyond the UK and EU will announce or accelerate net-zero targets to help drive the entire sustainability ecosystem forward.

Growing Investments in Renewables

• Countries around the world are increasing investments into renewables. A Bloomberg New Energy Finance (BNEF) analysis report conducted in 2017 revealed that by 2040, renewables will comprise three-fourths of an estimated $10 trillion of global investments into renewables. Renewables will capture an estimated 86% of the planned global investments of $10 trillion in new energy capacity up to 2040.
• China alone will account for over “40% of global renewable capacity growth and 45% of total investment” primarily driven by renewable energy targets and pollution concerns. Again, Chinese companies contribute about 60% of the world’s total annual solar cell manufacturing capacity.
• These investments will significantly increase renewable energy generation. By 2040, investments in renewables by technology will hit $3.3 trillion in wind, $2.8 trillion in solar, $1.4 trillion in nuclear, $1.1 trillion in hydro, $0.8 trillion in gas, and $0.7 trillion in coal.
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• In the U.S., it is anticipated that by 2023 solar and onshore wind will be economically competitive due to declining costs, resulting in new U.S. gas plants. By 2040 solar and wind energy will account for about 50% of installed capacity and over 33% of generation, marking a 4-times increase in wind capacity and a 14-times jump in solar capacity.
•  PowerChina is an example of a company investing in renewables. The company invested in a “0.5 gigawatt solar farm in southern Vietnam” which became the largest in Southeast Asia after completion in mid-2019.

Lower Costs for Renewable Sources

• In recent years, the global costs for solar, wind, and battery storage have dropped dramatically. Presently, the cost of building a new “onshore wind facility or a grid-connected solar facility” is estimated at or below the current cost of generating electricity from a new natural gas plant.
• In a few years, the cost of renewable energy will be a consistently cheaper source of electricity generation compared to conventional fossil fuels. The cost of producing electricity from onshore wind has dropped by about 23% since 2010. During the same period, the cost of solar photovoltaic (PV) electricity has dipped by about 73%.
• The global solar photovoltaics (PV) cost witnessed the sharpest decline over 2010-2019 at “82%, then concentrating solar power (CSP) at 47%, onshore wind at 40%, and offshore wind at 29%.” Electricity costs from utility-scale solar PV declined 13% year-on-year to approximately seven cents ($0.068) per kilowatt-hour (kWh) in 2019, while onshore and offshore wind both dropped by about 9% year-on-year to $0.053/kWh and $0.115/kWh, respectively.
• A PR Newswire report reveals that the low costs of generating energy from renewables has enticed many corporations, including Apple, Facebook, Google, Amazon, and Wal-mart, which have all promised to shift towards using renewable resources to power their operations.

Technological Advancements in Renewables

•  Technological advancements in the production of electricity, storage, to smart girds is also accelerating the adoption of renewable energy. The ongoing transition to renewables globally is also putting pressure on electrification needs of the world, increasing the interest in “grid-scale battery projects and in battery storage solutions for decentralized energy systems.”
• Innovations around electric vehicles and their uptake and other battery-based storage systems also have a significant influence on the transition to renewables. Advancements in these technologies have made batteries more efficient and lowered their costs of production.
• A recent Bloomberg New Energy Finance (BNEF) report shows the “advancements in battery technology have led to significant drop in battery prices providing further viability to renewable (where batteries are often used for storage) as a credible energy source. BNEF estimates that the costs of volume weighted average battery pack dropped 85%."
• Technology advancement in renewables is leading to reduced costs of renewable energy making it highly competitive to fossil-based energy. Likewise, these advancements are making renewable sources of energy more affordable, secure, and sustainable than fossil-based sources. Consumers are also shifting their consumption habits towards “technology adoption and sensitization towards climate change.”
• Overall, the technology advancements have boosted the growth of renewable energy sources that now play an important role in the world energy mix. The sharp decline in battery prices are also making electric vehicles more competitive and sustainable than internal combustion engines making “total electrification of the transport sector a reality in the future.” Importantly, the sector must continue investing in technology, digital solutions, and clean tech advancements to move portfolios towards net zero emissions.

Renewable Energy Cities

•  Cities are also among the key drivers of the transition towards renewable energy. According to the International Renewable Energy Agency (IRENA), many cities in North America and Europe have set renewable energy targets. The organization estimates that over 80% of these cities, i.e., 671 cities are in Europe and North America.
• The transition to renewable energy powered cities stems from the fact that presently, cities consume an estimated 67–76% of the global final energy consumption and are responsible for 71–76% of energy related CO₂ emissions. These high emissions and projected population shifts to urban settlements that will also result in more energy consumption and emissions are forcing cities to set emission targets in order to help decarbonize the global energy system.
• States and cities leveraging this factor include California, U.S., which in 2021 adopted a landmark policy directing all large trucks to be clean and electric by 2050, while all cars, SUVs, and light trucks to have zero emissions by 2035. Across California, over 40 municipalities have adopted “ordinances requiring or strongly encouraging electric appliances and equipment in new buildings.”
• In 2000, Barcelona became one of the first European cities that required all new and renovated buildings to power running hot water with at least 60% of solar energy. The city also proposed to operationalize a solar cooling network by the end of 2019.

Research Strategy