Less than a decade ago, the cost of renewable energy could not compete with the cost of fossil fuels. Since then, that price gap has been eliminated. What’s more, renewable energy’s downward cost trend promises to continue. As New York Times columnist Paul Krugman writes: “Widespread use of renewable energy is still a new thing, which means that even without major technological breakthroughs we can expect to see further cost reductions as industries find better and cheaper ways to operate as they accumulate experience.”
But there have been major technological breakthroughs. The Guardian recently featured an item about plummeting renewable energy costs in Australia, which noted that “technology has improved in leaps and bounds.” As an example, Author Simon Holmes à Court notes that a 150-meter-tall wind turbine built this year will generate more than twice the energy that a top-tier turbine would have just a decade ago.
The Guardian goes on to say: “Unlike coal plants, solar panels and wind turbines are products not projects. Repetition leads to cheaper manufacturing and more efficient supply chains. China now produces seven solar panels every second — providing countless opportunities to trim unit costs.”
Financial markets likewise are evolving. A decade ago, there were only a few banks that invested in the potential of renewable energy, at the time considering it too risky. Today, the risk premium applied by banks for renewables is much lower than for coal projects.
Last December, in an installment of his blog called “Gates Notes,” the Microsoft founder wrote from the Paris climate change meeting that we had arrived at a pivotal moment: “We need to adapt to climate change that is already affecting the planet and develop new tools that will keep the problem from getting worse … The good news is that there’s a lot of progress to report on both fronts.”
Examples of the progress Gates cited include
- breakthroughs in energy storage that speak to the renewable energy riddle of what to do when the wind doesn’t blow and the sun doesn’t shine
- using sunlight to create liquid fuels that can power airplanes, trucks and other big polluters without adding more carbon to the atmosphere
- developing mini-grids that deliver electricity locally to, for instance, a neighborhood or village, without being connected to a centralized grid
- creating carbon-neutral building materials to replace concrete and steel, the production of which creates large quantities of greenhouse gases
- harnessing the geothermal power stored as heat under the earth’s surface, the volume of which is many times greater than all the known coal and oil reserves in the world.
In 2015, Gates and a group of investors started the Breakthrough Energy Coalition (BEC), which supports entrepreneurs working toward new sources of clean energy. Gates says members of the BEC have committed billions of dollars to creating new energy companies and commercializing new energy products. “Our goal is to bring ideas out of the lab and into the market much faster,” he adds.
Oil and gas producers, which have a vested interest in preserving the fossil-fuel status quo, are taking small steps that collectively signal their adaptation to the rapidly evolving energy market. Earlier this year, BP announced that it is looking to acquire more green energy firms while pledging to set carbon targets for its operations. According to Forbes, BP Deputy Chief Executive Lamar McKay said, “Our industry is changing faster than any of us can remember, certainly in my career.”
Shell, BP’s Anglo-Dutch peer, also is diversifying its business. The Guardian noted that, in the last three months of 2017, Shell bought a Dutch car-charging network; partnered with the electric car-charging firm Ionity; and bought First Utility, one of Britain’s biggest energy suppliers.
During BP’s February earnings call, Chief Executive Bob Dudley provided some context: “It’s not a race to renewables; it’s a race to lower greenhouse gas emissions. As fast as renewables and clean energy can grow — faster than any fuel in history — the world is going to require oil and gas for some decades to come.”
Antonio Galvao, CSCP, CLTD, is the vice president of global logistics — building efficiencies at Johnson Controls. He may be contacted at email@example.com.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of Johnson Controls.
Mike Dries is a retired business journalist and corporate communications executive now working as a freelance writer. He may be contacted at firstname.lastname@example.org.