Clean energy has won the economic race
Updated: Jan 14, 2022
For decades, the Rocky Mountain Institute (RMI) has argued that the move to clean energy will be cheaper and faster than governments, companies and many analysts expect.
In recent years, this forecast has been fully justified:
● the cost of renewable energy sources declined faster than expected,
● implementation was faster than forecasts,
● there was a greater decline in value.
Research from two reputable research institutes shows that a fast transition to clean energy is the least costly way forward.
Decades of missed opportunities.
Policymakers, business leaders, and financial institutions need to urgently consider the promising ramifications of this development. World leaders must recognize that a 1.5 ° C warmer does not mean sacrifice. Climate change is creating a lucrative race for cleaner, cheaper energy technologies.
The world is already suffering from extreme weather events caused by climate. Moving quickly to clean energy is also the safest way forward. There is a risk of not only wasting trillions of dollars but also propelling civilization further along the dangerous and potentially catastrophic path of climate change.
For decades, forecasters have underestimated the decline in costs and the acceleration in the adoption of renewable energy sources. Due to poor forecasts, trillions of dollars have been invested in energy infrastructure, which is not only more expensive but also more harmful to human society and all life on the planet.
The last chance to rectify lost opportunities: Either continue to spend trillions of dollars on the energy system that is killing us, or move quickly to cheaper, cleaner and more advanced energy solutions of the future.
How the transition to clean energy will take place.
The report "Renewable Spring" (The Renewable Spring) International Renewable Energy Agency (International Renewable Energy Agency - IRENA) lead author Kingsmill Bond shows:
"... renewables are following the same exponential growth curve as past technological revolutions, following predictable and well-understood patterns. The energy transition will continue to attract capital and create a momentum of its own. But this process can and must be sustained to keep it going. As quickly as possible. Policymakers who want to drive change must create an enabling environment for optimal capital inflows. "
Four stages of transformation.
Kingsmill Bond has clearly identified 4 stages of renewable energy technology development:
1. Indiscriminate growth: "spring" of new technology - market share goes beyond 1% and rises to about 5%. The new technology is becoming cost competitive and growing rapidly. This is a period of rapid innovation.
2. Fever. The "summer" of new technology is a period of rapid diffusion. The market share will increase from 5% to about 25%. Financial capital stimulates the construction of new infrastructure. As capital moves faster than new investment opportunities are created, financial bubbles appear.
3. Synergy. At the end of the fever period, an event occurs that accelerates the collapse of the financial bubble. The necessary regulatory changes are then made to further the diffusion of the new technology. There is a full flowering of technology or the "fall" of a new technology. The market share increases from 25% to 75%.
4. Maturity is "winter". The new infrastructure has been built. Capital moves on to the next big project.
In financial markets, hedge funds and other "mobile" financial players will be pioneers in clean energy technologies:
● open to new ideas,
● accustomed to high risks,
● change-sensitive capabilities.
Lessons from past energy revolutions.
Capital gravitates towards technological revolutions. He enters the zones of growth and opportunity associated with the start of these revolutions. Once a new technology passes its maturing period, capital becomes widely available.
Financial markets are changing. Capital movements accelerate the process of change. New capital flows into growing industries and exits from declining industries.
Stock prices tend to underestimate the risks of climate change
Current signals from financial markets.
Indicate the 1st stage of the transition to the use of clean energy. The downgrade of the fossil fuels sector comes amid impressive growth in new energy sectors.
The Renewable Spring report notes market trends for policymakers to intervene. They are beginning to create the necessary institutional frameworks to accelerate the energy transition and realize the economic benefits of local clean energy supply chains.
A recent analysis by the Institute for New Economic Thinking (INET) at the Oxford Martin School shows trillions of dollars in savings from the rapid transition to clean energy solutions. The slow pace of clean energy adoption will be more costly from a financial point of view. Delay will lead to high climatic costs of eliminating the consequences of disasters and to a deterioration in living conditions.
A fast track for the development of renewable energy sources is quite achievable. The INET Oxford report states:
"... if the growth in the use of solar, wind, battery and hydrogen electrolyzers continues exponentially over the next decade, the world can achieve net zero emissions within 25 years."
Bloomberg News, in its commentary on the INET Oxford report, offers a "conservative estimate":
"... a quick transition to clean energy will save $26 trillion over maintaining the current energy system. The more solar and wind farms we build, the more the prices of these technologies will come down."
Bill McKibben, in his response to the INET Oxford study, notes:
"... the cost of fossil fuels will not go down. Any technological advances in oil and gas production will be offset by the fact that the world's available reserves are already exploited. Solar and wind energy will save consumers money. The fossil fuel industry will continue to slow the transition to clean energy for reduce their losses. "