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Solar, Wind Are Now Cheaper Than Coal In Most Of The World

Haley Zaremba

The world’s premiere authority on global warming, the Intergovernmental Panel on Climate Change (or IPCC for short), announced in an alarming report at the end of last year that the world is running out of time to curb carbon dioxide emissions. In fact, the data they collected found that in order to keep global temperatures from rising more than 1.5 degrees centigrade over pre-industrial averages within this century (the goal set by the Paris climate agreement), the entire world would have to transition to 100 percent clean energy by the middle of the century. This, it goes without saying, is a lofty goal. But up until now, clean energies just haven’t been able to compete in a market flooded with cheap fossil fuels. 

Low- and no-carbon renewable energies like solar and wind power have long been subsidized by governments around the world because while they hold great promise for a clear, more sustainable energy future, they just couldn’t compete with natural gas, coal, and oil when it comes to the bottom line. But now, what was once so prohibitively expensive that governments needed to give financial incentive for these green energy technologies to be adopted at any serious scale, have become extremely cheap--even with no government subsidies at all.

This week Bloomberg reported on the once unthinkable phenomena of solar and wind subsidies disappearing across the world because the industry has outgrown the need for them. “On sun-drenched fields across Spain and Italy, developers are building solar farms without subsidies or tax-breaks, betting they can profit without them. In China, the government plans to stop financially supporting new wind farms. And in the U.S., developers are signing shorter sales contracts, opting to depend on competitive markets for revenue once the agreements expire,” Bloomberg said

Perhaps most importantly, the article goes on to point out, these developments of self-sufficiency and profitability in the renewable energies sector “have profound implications for the push to phase out fossil fuels and slow the onset of climate change.” The importance of our global energy production and consumption in terms of the global community’s impact on greenhouse gas emissions and climate change can’t be overstated. The Bloomberg report continues: “Electricity generation and heating account for 25% of global greenhouse gases. As wind and solar demonstrate they can compete on their own against coal- and natural gas-fired plants, the economic and political arguments in favor of carbon-free power become harder and harder to refute.”

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The reason that wind and solar have outgrown government subsidy programs is not because they never needed them at all--to the contrary, the fact that financial state support of renewables is no longer needed shows that the subsidies did exactly what they were supposed to. They allowed renewables, a young innovative sector, to get past the often-fatal initial stages of a new market sector where the prohibitively expensive first steps of scaling up an industry can often crush a company before it truly begins to function and then stabilize. Now, as JMP Securities equity analyst Joe Osha told reporters, “the training wheels are off.” 

Wind and solar have successfully been able to expand to a level where they can mass-market and standardize, meaning costs go down and efficiency rises, especially as solar and wind technologies become more and more efficient. According to data from BloombergNEF, wind power now costs half of what it did in 2010, and in the same period of time, the cost of solar has plummeted by a jaw-dropping 85 percent, making wind and solar cheaper than building a new coal or gas plant in most of the world.

Now, we just need wind and solar to be more widely adopted. Much, much more widely adopted. Sales are already up, but renewables still account for a very slim proportion of global energy mixes. The profits are there, and the need is most certainly there, but the status quo can be hard to shake. 

There is also the issue of variability with wind and solar--if the wind doesn’t blow or the sun doesn’t shine, production dips, but demand for energy does not. Luckily, there are solutions to this problem, and the market for energy storage, which would help provide a steady energy flow to the grid, is growing rapidly as well. We have a long, long way to go towards reaching the IPCC’s deadline of 100 percent renewables by the middle of the century, but the goal is now more attainable than ever. 

By Haley Zaremba for Oilprice.com

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