Why I am positive for renewables, despite the fact that we continue to add more fossil fuels than renewables

The media has been full of headlines about 2015 being a “record year for global investment in renewable energy” and that “global investment in renewable power capacity, at $265.8 billion, was more than double dollar allocations to new coal and gas generation.” However, a closer look at the number of gigawatts of power generation assets installed shows that renewables still has a long way to go and that we are continuing to add in particular coal at enormous rates. In fact, there was more new coal plants installed last year (84GW) than there was any other generation technology. To make things worse there was some 62GW of diesel gensets installed across the world in 2015 and the likelihood is that these diesel gensets will deliver more power this year than all the new solar (57GW) put on the grid last year.  However, I remain positive and believe that renewables installations will continue growing and that we are not far off the point where we will add more renewables per year than fossil fuels. Why am I positive?

The Paris Agreement from last December was a major event in that it solicited national targets and common agreement on a global goal from more than 190 countries, setting the world on a common path, towards low-carbon energy alternatives.  One of the impacts of this will be that countries will put in regulations pushing cleaner sources of energy. In fact, we are already seeing this.

We are seeing a growing backlash against coal particularly in Europe and the US but also increasingly in markets such as China noting that the latter has built the majority of new coal plants across the world over the last decade.  We have already see the British government commit to exiting coal and we will likely see the same in Germany with other countries following behind.

One of the results of all this is the increasing risk of stranded assets. With increasing risks around coal production and generation going forward the costs of capital for new coal are increasing as investors become increasingly concerned about their ability to make a return on those investments. The best example of this is what happened in Germany where Vattenfall had to pay the Czech firm EPH over a $1bn to take its so called “coal assets”.  What this means is that we are not likely to see private capital being used to build new coal generation.

We will also move away from diesel gensets which are used throughout the world to bring power to islands, mines, offgrid communities and backup power purposes. We will do this because there are now cheaper alternatives, so called hybrid power solutions comprising differing generation technologies such as solar and batteries with diesel gensets being used as the “power source of last resort.”

The real reason that I am becoming positive however is not government regulation is the improving economics of wind and in particular solar which is fast to install and can be used for providing power to a calculator, a home, a business or on large scale to our grid. There also happens to be a lot of sun in areas such as Africa and China where the people do not all have access to power. And the power of the sun can now be combined with storage and other forms of generation in the form of hybrid power solutions that are able to deliver 24/7 power at low cost.

The low cost generation of choice for most of the world will be PVSG, a combination of PV solar, storage (S) in the form of batteries or hydrogen fuel cells, and natural gas (G). And what will happen is that depending on the region and the amount of sunshine we will vary the amounts of PV, S and G.  So in areas with lots of sun we will use more PV and less G. In less sunny areas we will use more G and in cloudy areas we will use more S. In some regions we may also have W, wind as part of the equation and maybe even H for hydro but the key technologies will be based around a combination of PV & S which together will enable cheap low cost decentralised solar to be better used in our system..

If you want to read other blogs from Gerard Reid go to the Energy and Carbon Blog