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Renewables Proven to Be a Smarter, More Efficient Investment Worldwide

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Kate Zerrenner's picture
Writer and Policy Professional, Triple Pundit

Dynamic, results-driven policy expert with nearly 20 years of non-profit and state and federal experience in climate, energy, and environmental policy, strategy, communications, and politics....

  • Member since 2018
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  • Dec 8, 2020

Originally posted at TriplePundit

Recent analysis of the renewables landscape by BloombergNEF has determined that solar and wind power are on the verge of a tipping point: In five years, it will be more expensive to operate existing coal or natural gas plants than to build new solar or wind farms. This comes on the heels of earlier data from the International Renewable Energy Agency (IRENA), which found that, in many cases, solar and wind are already the cheapest option.

In fact, IRENA concluded that investment dollars go further now than they did a decade ago: More than twice the renewable power generation capacity was commissioned in 2019 than in 2010, but it only required 18 percent more investment.

It’s no surprise: Renewables are now cheaper to deploy

The economics of renewables have been headed toward parity for several years, but this new data now shows renewable energy’s efficiency surpassing existing fossil fuels. Coal has always been an inefficient fuel source (about 65 percent of its energy is lost in the process of burning it to generate electricity), but it was cheap. That is no longer the case, and solar and wind power have become the better investment bet, with benefits beyond economics.

Some economists note that renewables will reach a saturation point in the future. With current technologies, renewable energy may only be able to generate 70 to 80 percent of electricity across the globe, depending on regional conditions. However, the technology continues to advance. For example, electric vehicles use three times less energy compared to combustion engine vehicles (and are even cleaner when the electric source for charging is solar or wind), and battery storage technology continues to improve. Further, energy efficiency — advances in more efficient technologies in everything from data centers to washing machines — reduces demand. Improving end-use efficiency means we need less energy to generate the same amount of electricity.

In addition to being cost-effective because of its return on investment through reduced energy demand, energy efficiency is also the cleanest energy resource. You can’t emit what you don’t use.

Energy efficiency, solar and wind power all have water benefits as well, as they use little to no water. In contrast, fossils fuels use copious amounts of water to generate electricity — coal being the thirstiest of all. This is a serious consideration for countries around the world, including the U.S., that are facing increased drought and heat waves due to climate change. Reducing the use of thirsty, expensive coal in favor of water-efficient, cheaper renewables makes simple economic sense.

Opportunities to invest in renewables keep increasing

As discussions continue around how to recover from the economic stress of the COVID-19 crisis, renewable energy offers an attractive investment opportunity. Investing in long-term, sustainable solutions can both help economies recover and tackle climate change and also address resilience issues by driving a faster than business-as-usual transition to a cleaner energy mix. Many clean energy jobs cannot be outsourced and help to fuel local economies: IRENA estimates that an accelerated energy transition could mean 42 million clean energy jobs worldwide by 2050.

Some industries may experience a tighter transition in the short term; such sectors include shipping, which transports fossil fuels, machinery and pipelines around the world, as well as utilities.

Nevertheless, strategic planning and investments can help those companies move to a more sustainable and resilient business model that takes advantage of the economic shift in the energy market. Further, the lower cost of renewable energy makes it an optimal time for companies to take serious action on diversifying their supply chains, transforming their business models and ramping up sustainability goals.

Finally, with targeted investing, companies and governments can ensure communities typically left out of economic growth — in particular, communities of color and low-income communities — can be included in the solution to a more resilient, cleaner economy on the other side of this pandemic.

Matt Chester's picture
Matt Chester on Dec 8, 2020

Is there any difference when you're looking on a simple per kWh basis vs. a whole system basis? By that I mean, one of the criticisms of renewables is that the more penetration they have on the grid the more potential for additional costs come up-- energy storage, peaker plants, curtailment, etc. So are these costs taken that into account, or is this more just looking on a generating unit vs. generating unit basis? 

Edouard Lotz's picture
Edouard Lotz on Dec 10, 2020

What is also interesting to see, considering the operating cost of energy infrastructure, not only for renewables, but also gas is becoming more attractive than coal. Despite being a fossil fuel, gas emits less CO2/kWh but it is also less costly to produce a single kWh of electricity thanks to gas than with coal. 

For instance, according to Bloomberg NEF, it is now cheaper to produce electricity with gas as an input rather than coal, in Germany (Source: Global Gas Report 2020, IGU). 

Renewables are key for a clean future, but some energy-intensive economies such as China, India or the US can hardly move from coal to renewables only. Natural Gas may be a cost-effective solution to be developed alongside renewables to help decrease the CO2 levels emitted by these countries. 

Kate Zerrenner's picture
Thank Kate for the Post!
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