The global energy transformation is well underway

From IEEFA:

The global energy sector transformation is a technology‑driven disruption fueled by five compounding factors:

• The economics of renewables are working
• Global capital is fleeing coal
• Government policies are reinforcing the trend away from coal
• Leading corporates are pivoting away from coal
• China plans to dominate this new Industrial Revolution

The economics of renewables are working

The global energy transformation is being driven by the combination of accelerating technology innovation and economies of scale. This has led the cost of electricity generated by wind farms to drop by 50% this decade, while solar costs have declined by well over 80%.

Offshore wind is set to follow a similar deflationary cost trajectory. Lithium ion batteries have likewise dropped in cost by over 50% in the last three years, putting electric vehicles on a path to displace internal combustion engines this coming decade.

Solar costs are also dropping in the four largest electricity markets in the world. While solar costs have diminished 50% in the last four years in Japan, they are still well above grid parity. In contrast, both the U.S. and India saw renewable energy go below grid parity with thermal power in 2017. At the same time, China is on target to achieve grid parity by 2020. With continuing solar cost deflation of some 10% annually, these trends will continue.

Alternative energies are creating a wave of stranded fossil fuel assets. As a leading market for renewables, India is now grappling with some US$60bn of thermal power projects in financial distress, unable to compete with low-cost renewables and hence repay loans.

Global capital is fleeing coal

IEEFA has tracked the number of globally significant financial institutions that have introduced polices to restrict lending, insurance and investing in thermal coal mines and coal-fired power plants.

To date, 113 globally significant financial institutions are exiting coal. Of the top forty global banks, 45% now have coal lending prohibitions.

There is a new announcement occurring on average every week to date in 2019.

This capital flight from the coal sector is resulting in developments like Adani’s proposed Carmichael thermal coal mine in Queensland being unable to find external finance.

Government policies are reinforcing the trend away from coal

In 2015, India set a target to build 175 gigawatts (GW) of renewables by 2022. Three years later, the ambition was lifted to 500GW by 2030. Global capital is endorsing this new low-cost solution.

India is not alone. South Korea recently set a target to build 58GW of renewables by 2030, while Taiwan set a target of 27GW by 2025.

Earlier in 2019, Thailand introduced a new energy plan to 2037, and coal’s market share target was halved to just 12%. That Thailand is also jumping onto the renewables bandwagon is not what the coal industry was expecting.

Increasingly, the low cost of renewables is making more ambitious targets a sensible economic proposition.

Leading corporates are pivoting away from coal

In May 2019, BHP announced it would no longer invest in thermal coal. The technology landscape had moved on, and the need to decarbonise to achieve the Paris Agreement means BHP sees thermal coal as increasingly obsolete.

RIO Tinto completed its global exit from coal in 2018, having taken advantage of buyer interest to exit without significant losses since 2014.

Australia’s leading industrial conglomerate announced acquisition plans in both lithium and rare earths in May 2019, both key inputs into low carbon emission industries. It is no coincidence that Wesfarmers also completed its exit from coal mining in 2018.

China plans to dominate this new Industrial Revolution

China installed 45-50% of all solar globally in both 2017 and 2018. It accounted for half of all electric vehicle sales globally in 2018 and is the world’s largest miner and processor of lithium and rare earths.

China is on a clear path towards decarbonisation and is a world leader in zero emission technologies of the future.

In May 2019, China’s National Development and Reform Commission announced a tender for 21GW of renewable energy, an investment program of US$25bn. This is the largest renewable energy investment in global history, and there is no subsidy support.

With this, China will reach its target of grid parity for both wind and solar by 2020.

[Read more here]


Right-wing denialists have little in common with logic and common-sense, so these facts won't change their dotty opposition to the renewables revolution.  But the denialists are increasingly isolated and ignored.  They will try to prop up fossil fuels with even more subsidies, but this will fail.  I believe there won't be many coal power stations operating in 2030, 90%+ of world car and truck sales will be electric by 2030, and serious steps will have been taken to reduce emissions from burning and clearing forests and from agriculture.  The politics have shifted irreversibly—Greta Thunberg has ensured that.

Will we be in time?  Global temperatures are rising by 0.2 degrees C every decade.  But the transformation taking place will ensure that by 2040, emissions will have halved.  This is a compound rate of decline of 3.2% per annum, which isn't fast enough.  However, at that rate of decline, we will have cut emissions by 75% by 2040, and by 90% by 2060.  So global temperatures will rise by another 0.6 degrees, which is still less than 2 degrees from the second half of the 19th century.  In the meantime, by planting an urban tree canopy and changing agriculture practices, we could remove CO₂ from the atmosphere.

The denialists have shifted their argument from saying "it's not happening" to "it's not us" to "it's too late".  It's not.