The emergence of wind and solar power as the cheapest forms of new electricity generation is fundamentally reshaping the global economy.
Between today and 2050 it is estimated that $1.5 trillion (USD) will be invested in new power generation. 8.4 trillion of that investment will be in wind and solar generation plants, with another $1.5 trillion in other low carbon technologies such as hydro-electric and nuclear generation.
With almost three quarters of new global investment going towards clean energy generation over
the next 30 years this is a fundamental reshaping of our global energy sector. Since the middle of
last century fossil fuels have dominated the worlds electricity supply mix, totalling up to 70% of total
generation. The impact of this global reliance on coal and gas for electricity generation has been an
exponential increase in carbon emissions in the earths atmosphere. Since 1970 global carbon
emissions have increased by 90%, with the single largest impact from fossil fuel use for electricity
generation and industrial processes.
But the time of coal and other fossil fuels is rapidly fading. By 2050 it is estimated that electricity
from fossil fuels will make up only 29% of all electricity production, down from over 60% today. Coal
fired generation will only make up 11%. Within a 20 year period it is now projected that a
technology which has helped power the global economy ever since the industrial revolution will
largely be replaced by new, clean and cheap wind and solar power.
This is a radical reshaping of energy generation. And it is being driven by the economic, as well as
the environmental needs of our planet. It simply doesn’t make sense for investors to invest in new
forms of power generation that aren’t economically competitive.
Let’s take a look at the costs of generating electricity from wind and solar compared to fossil fuel generation. Utility scale wind farms are now producing electricity for between $25 - $60 (USD) a megawatt hour. That’s 2.5 to 6 cents a kilowatt hour. And large scale solar is rapidly catching up – with costs of generation between $40 - $60 a megawatt hour. In comparison coal fired generation is delivering prices of between $60 and $140 a megawatt hour, and gas fired peaking generators between $160 - $220 a megawatt hour. With gas and coal becoming more expensive compared to wind and solar, and without even factoring the costs of carbon pollution on our environment, it is clear where the cheapest, and most competitive, electricity comes from.
This fundamental reset of energy technologies is having a big impact on fossil fuel dependent
economies. In Australia , where 60% of all electricity currently comes from coal or gas fired
generation big changes are on their way.
In a major report released just this year the Australian Energy Market Operator , which is responsible
for running an interconnected grid of over 2500 kms in length, has estimated that by 2050, as old
coal fired electricity plants close at the end of their operational life, their replacements will be
overwhelmingly wind and solar. Australia’s grid operator estimates that 28 gigawatts of solar
(that’s 28 thousand megawatts!) , and nearly 11 gigawatts of wind energy generation along with
energy storage technologies and a small amount of gas fired generation will drive Australia’s
electricity sector by mid-century – dramatically reducing carbon emissions.
Even more significantly even heavy industries like steel and aluminium manufacturing are now
shifting to renewable energy. In South Australia the owner of the Liberty One Steel works is
investing in a $700 Million ( AUD) deal to power the steel manufacturing hub with solar, pumped
hydropower and large scale batteries for energy storage. The reason for this shift is obvious, large
scale manufacturing uses a lot of energy, and it needs it to be both cheap and reliable. Solar, wind
and energy storage are now meeting those challenges.
The march of renewable energy is remaking our economies and communities. The second half of this
century will be powered by solar and wind. These technologies are delivering cheaper electricity
and cutting carbon pollution, while still supporting the industries and communities that rely on
energy supply for jobs and investment. Capturing these global flows of capital for the good of local
communities, and making sure that cheap and abundant renewable energy can be unlocked for the
benefit of all, must be our next goal as this clean energy transformation unfolds.