Doubts around the ability of renewable energy to solve our climate goals are sometimes still heard, but they are just plain wrong. When it comes to the cost of energy, the supply of energy, and the potential to mitigate climate change, renewables are still the standout winner.
Let’s drill down into each of these. Renewables are already cheaper than most other forms of at-scale generation and costs are continuing to fall, while fossil fuels are getting more expensive. For example, onshore renewables are now cheaper than coal and gas in more than 90% of the world, according to new findings from the Energy Transition Commission, the think tank.
According to research by Lazard, the finance house: “The costs of renewable energy technologies continue to decline globally, albeit at a slowing pace, reflecting reductions in capital costs, increased competition as the sector continues to mature and continued improvements in scale and technology.”
When it comes to supply, renewable energy is also on the winning side. On 6 December, the International Energy Agency published a report on the rate of growth in generation from renewables. The IEA is a stalwart of the fossil fuel sector and has consistently under-estimated renewable deployment. But even it now says: “The global energy crisis is driving a sharp acceleration in installations of renewable power, with total capacity growth worldwide set to almost double in the next five years, overtaking coal as the largest source of electricity generation.”
The fragility of fossil fuel supply chains, meanwhile, is demonstrated by the war in Ukraine. The permanent fault lines under hydrocarbon supply were of course exemplified by the 1970s oil shock. One of the beauties of renewables is their output is a function of the weather, not something that can be controlled by distant nation states. You might say that’s all well and good but what happens when the wind doesn’t blow or the sun doesn’t shine? There’s an easy response. It’s already in hand through the roll-out of energy storage.
Admittedly, fossil fuels are unlikely to become extinct overnight. There are some tasks, for instance air travel and shipping, for which alternatives will take longer to develop. Also in the very short term there may be gaps in supply that need to be plugged, as Germany, among others, is doing through liquid natural gas (LNG) and other fossil arrangements
Integral to the question of supply of energy is the challenge of international dependencies, given stark focus by the Russian invasion of Ukraine. Cross-border collaboration has to be the way to solve problems arising from the cost and security of energy supply, as well as climate change and as investors in climate tech we would argue that it is much easier for Europe to manage energy independence as a bloc rather than at a nation state level. And there are other reasons to embrace our place as part of Europe, notably in industrial policy, as the world order increasingly comprises a small number of major regional blocs, notably: China, Europe and North America.
Sensible and sustainable industrial policies designed to reduce the threats of climate change are already in place in each of those countries. To be sure, much more needs to be done. But the US is going big after clean energy solutions with its oddly named Inflation Reduction Act of 2022. China is pursuing plans to be the world’s supplier of green technologies and is already showing success achieving significant market share in solar panels and batteries. And the European Union has regulations in place, or in the pipeline, promoting greener, more sustainable energy supplies.
The UK, however, is beginning to look isolated. Outside these shores, there is little talk of fracking or further oil exploration. No wonder: pursuing fracking is bonkers in the UK and no solution to the challenges we face. Setting aside any other considerations, the UK’s geology is completely unsuitable.
Reviving old industries that depend on yesterday’s energy landscape makes no sense at all. What we need to do is make sure that renewables are deployed fast enough. Swimming against the obvious imperative to go green will get us nowhere.
Jamie Vollbracht is founding partner of Kiko Ventures, an investor in technology which will have a transformative effect on mitigating the climate crisis.
