Solar and wind replacing the Hormuz gap

 From This is Not Cool

This seems like Good news.

Center for Research on Energy and Clean Air:

Global power generation from fossil fuels fell in the first month since the start of the Hormuz closure, with the fall in gas-fired generation offset by large increases in solar and wind power, rather than coal.

The power generation dataset prepared for this analysis covers countries that disclose near-real-time data. The dataset covers 87% of global coal power generation and over 60% of gas-fired power generation.

Total power generation from fossil fuels in countries with near-real-time data fell 1% year-on-year, with coal-fired generation flat and gas-fired generation falling 4%. The dataset covers the world’s largest power markets: China, the U.S., the EU, and India, among others.

Seaborne coal transport volumes fell 3%, to the lowest levels since 2021. The data contradicts widespread expectations that coal power generation would rise in response to the crisis.

This is the first oil crisis where we *have* alternatives.  We can replace imported gas with wind, solar and storage.  We can replace petrol and diesel vehicles with EVs.  What's more, *everybody* knows it.  Governments, companies, individuals.  

Global emissions have peaked.  Oil demand has plunged, and only some of that demand is coming back, and then only in the short term.  How ironic that this is thanks to Trump.

So yes, emissions will rise again, but the next peak will be lower than this one.

(Caveat:  So-called "AI" data centres.)

Sodium-ion even cheaper than I thought

I wrote a piece a month ago about CATL's new sodium-ion battery.  The video I link to provided more information, suggesting costs are even lower than I said.

The cost at cell level will be $19/kWh vs lithium-ion phosphate (LFP) of $55-$60/kWh.  CATL expects $10/kWh in a couple of years.  $45/kWh at pack level, less than half the cost of LFP.   Production can be carried out on existing assembly lines, so they don't have to rebuild the entire factory.  Any factory making LFP could pivot to sodium-ion at minimal cost and time.   

They will retain 85% after 3.6 million miles.  I said 80% in my earlier piece; so this is even better, meaning that after 50 years, 75% of the battery capacity will remain.  Their life will be 3-6 times longer than the best LFP packs.  Energy density has dramatically improved.  A year ago it was 120-140 Wh/kg, too heavy for EVs. The new energy density is 175 Wh/kg, better than BYD's current blade battery (160 Wh/kg).  They can be charged and used from -40 Celsius to +70 C.  And they use abundant materials: sodium, aluminium and carbon.  They are maintenance free.  They can be safely transported at zero charge, unlike lithium batteries.  CATL has also developed a pack made up of both sodium-ion and lithium-ion cells, combining the best qualities of both. 

Years ago, the rule of thumb was that if battery pack costs fell to $100/kWh, that would make EVs cost the same up-front as ICEVs (petrol vehicles).   (EVs are already much cheaper to run)  We have shot way past that point.  The introduction of sodium-ion batteries means that ICEVs will no longer be cost-effective, and production will cease.  

But this will also transform the grid.  The cost of storage has more than halved, and will halve again.   Solar is already the cheapest electricity for everywhere except high latitudes, and now it can be combined with enough dirt-cheap storage to provide base-load power.   That probably means 8 hours of storage, but storage will be so cheap that even 12 hours will be perfectly feasible and economic.  High latitudes will still need long-term storage, but when your EV dies, the batteries will still have another 50 years plus of life in them, and then they can be shipped to high latitudes to provide completely free long-term storage.

This spells the end of the fossil fuel economy.   Except for air transport and cement making, everything we now do with coal, oil or gas will be doable with cheap electricity from solar plus sodium-ion storage.

Even in the USA, even with 25% tariffs on imported batteries, the plunge in storage costs means that the EV and storage revolutions will continue.

Politicians favouring fossil fuels are idiots

 From Professor Ray Wills:

Only excuse for politicians who

• continue subsidies on costly fossil fuels
• think nuclear power is cheap
• claim clean energy is expensive
• want to end decarbonisation?

Idiots

Only idiots ignore the data

My model projections from 2018, and updated 2025:

Prof Wills wasn't 100% correct in his forecasts back in 2018 (nearly 8 years ago).  On the other hand, he was among the least wrong.  The IEA (International Energy Agency), for example, consistently, year after year, underestimated the growth in renewables, and overestimated the growth in demand for fossil fuels.  I myself thought that emissions from coal peaked in 2018, and instead there was a surge in electricity generation from coal in China.  You can read about my latest forecast that emissions have peaked, here.

2018 forecasts

Wills sees oil peaking in 2027, and coal and gas peaking now.

2025 forecasts

Note that the two charts below show primary energy consumption, which is much more than, say, electricity production, because three-quarters of the fuel burnt to generate electricity or to power an ICEV is wasted as heat.

2018 forecasts

2025 forecasts

You'll notice that Wills doesn't think nuclear will grow:

Most important reason nuclear isn't viable in one graph

Apart from long build, it's expensive electricity, [and] if it's really hot, you need to turn them off

Not to mention that all the lethal by-products. 

Global solar output overtook nuclear output 2025

Global wind output will pass nuclear output early 2028

Now here's where some peeps lose it and call me a loony:

[In] my model projection, renewable[s] will pass fossil fuel primary energy consumption in 2035 

Does that mean that we will have halved emissions by then?  No, because there is still growth in demand.  But each year that the share of renewables rises means that demand growth will be increasingly supplied by renewables.  

Emissions have peaked

Two recent graphs, from different articles, have given me hope that we might yet avoid catastrophic global warming.  The first chart come from Carbon Brief, which I referenced here.

Let's dig deeper into the chart.  

It shows the smoothed year-on-year change in electricity demand in China, and the year-on-year change in the supply of electricity, broken down into fossil fuels (mostly coal, but some gas) and clean energy.  Over the last 20 years, there have been 5 times when production of electricity from fossil fuels has fallen: in 2009 (the GFC); in 2012/13 (the Euro crisis); in 2016 (a global mid-cycle correction which was quite severe in China); in 2022 (Covid lock-downs); and this year.

This year is the first time that fossil fuel production has fallen when electricity demand growth is strong.   Notice how the size of the pale blue bars (renewables) has got bigger and bigger, as China has installed exponetially increasing quantities of wind, solar and batteries.  Second, notice how electricity demand has grown, as (a) the economy grew, and (b) EV sales exploded, with each peak tending to be higher than the previous one.

Right now, an annual expansion in clean energy production of +-600 terawatt-hours (TWh) is enough to more than satisfy demand, causing fossil fuel generation to decline.   The 20-year average annual increase in demand is 400 TWh, while over the last 8 years or so, it looks about 500 TWh.  Obviously, if China's growth accelerates back to the heady rates on the early 2000s (10% a year), given how much richer China is now than then, the increase in demand could easily exceed 800 TWh.  However, growth is unlikely to accelerate back to those levels  The recent GDP trend growth rate is about 7%, and, in my judgment, slowing, as China deals with its property crisis.  (Also, China overstates its GDP growth data, so the real growth rate is lower.  The data for growth in electricity demand and supply are better quality.)  

The second chart came from an article by the ABC,  which I  commented on here.

The projected increase in new clean energy generation capacity for the next 2 years is about 600 TWh.  In other words, it's now more than the average rise in electricity demand.  

Of course, there is an economic cycle, with demand rising at 800 TWh in boom years, and reducing to 200 to 400 TWh in slower years.  So we may have a pattern of  falling emissions during low-growth years, followed by modest rises when the economy is stronger.  Yet this doesn't take into account the exponential growth in new wind and solar output over the last 7 years.   It's risen from 200 TWh to 600 TWh in just five years.  And although the forecast for the next two years is for only limited growth, the costs of solar and batteries contimue to decline rapidly.  The exponential growth will continue.  By 2028, new clean energy output will be increasing by 800 TWh a year, or more, so that even in high growth years, Chinese emissions from electricity generation will be falling.  

China is by far the world's largest emitter of CO2, causing over 25% of global emissions, compared with the US at 18%, and the EU at 17%.   Europe's and the USA's emissions peaked years ago:

Source: Our World in Data

What this means is this: if China's emissions have peaked, global emissions have probably peaked too.

It's true that the Trump administration has embarked on an utterly demented attempt to return the USA to the 1950s,  but cheap Chinese solar panels, batteries and EVs, are persuading the rest of the world (for example, Pakistan)---the other 80% of emissions---to switch to clean energy.  Plus, Trump's high-handed trashing of tariff and trade agreements means that the USA's opposition to carbon border taxes will not be effective.  If the USA can arbitrarily raise tariffs, then so can the rest of the world.  And they will.  Moreover, renewables are much cheaper than fossil fuels.  As electricity prices soar in the USA, cooler heads might prevail.

The peak in global emissions doesn't mean global temperatures will stop rising.  Emissions will have to fall by 90% for that to happen.  But what these devlopments do mean is that emissions are now in secular decline.  And the sustained fall in the costs of clean energy means that the decline will accelerate as renewables and EVs get ever cheaper.  As the impacts of catastrophic global heating worsen, the world will take stronger and stronger measures to slash emissions.

Temperatures will go on rising, but for the first time, it looks as if, by the 2040s, the decade-by-decade increases will start falling.

The climate bathtub

It seems more and more clear that emissions have peaked.  

China, responsible for 25% of global emissions, installed as much solar last year as the rest of the world combined.  It looks as if it's going to do the same this year.  In addition, EVs now make up 48% of China's new car sales, and at the current growth rate, this will reach 60% within a year and 70% within 2 years.  This has led several respected analysts to conclude that Chinese emissions have passed a secular peak, or will do so this year, after a big jump in emissions as growth resumed after Covid lockdowns.  Emissions for Europe and the USA have been falling for a couple of decades now, and the reason global emissions continued to rise was emissions from China.  If Chinese emissions have peaked, even if the year-to-year decline is small, global emissions have prolly peaked too.

The second reason is more general.  Battery prices have halved this year.  Last year, Lazard estimated that adding 4 hours of storage to solar would add $14/MWh to the cost.  With battery prices halving, this means that we add 8 hours of storage to the cost of solar for the same cost (more or less) as we added 4 hours previously.  This will mean that between latitudes 35 or 40 north and south, we can run the grid on solar, more cheaply than on coal.  The plunge in battery costs also means that EVs are now cheaper than petrol cars, not just to buy but to run.  For example, in Australia, BYD plans to introduce an EV which will sell for less than A$30K, about the same as the cheapest Toyota petrol Corolla.  EV sales will, as in China, completely replace petrol (gasoline) sales.

Over the next 15 to 20 years, electricity generation and land transport will mostly transition to carbon-free.   As coal power stations in developed countries age, they'll be shuttered, not just because of environment reasons but because they will be too costly. "Wait a minute," I hear you cry, "what about the extra electricity demand from EVs?"   Because solar plus storage will be cheaper than coal and baseload gas, this extra demand won't be met by building new coal power stations, but by new solar, rooftop and utility scale.  

Since generation and land transport make up roughly 50% of global emissions, that means emissions will halve over the next 2 decades.   If you add in replacing oil and gas heating for homes and offices with electric heat pumps, and efforts to switch to carbon-free steel, the decline over the next 15 to 20 years could be 60 or 70%.

That's good, right?  It means temperatures have peaked and will start falling this year?  Not quite, no.

Imagine the atmosphere as a giant bath.  The level of water in the bath represents the level of CO2 in the atmosphere.  The taps are on full, day and night, filling the bath.  There is a tiny trickle out of the bath, caused by natural weathering (CO2 dissolves in water, and reacts with rock to produce carbonates, which removes that CO2 from the atmosphere).  Even if we turned off the taps completely, the bath would take a 1,000 years or more to empty.  

Global temperatures are proportional to the level of CO2 in the atmosphere.  Or, taking the differential, the rise in temperatures is proportional to the level of emissions.  In other words, using our bath analogy, to the flow of water out of the taps.  So even though the flow of water out of the taps is going to fall from now on (the levl of emissions has peaked), the level of water in the bath will continue to rise, just more slowly (temperatures will keep on rising).   If we halve emissions, we will halve the decadal increase in temperatures.  But they will still be rising (just more slowly).  To stop temperatures rising altogether, we need to stop the level of bathwater rising.  In other words, we need to cut emissions to below the trickle escaping past the bath plug, the trickle caused by natural processes.  

What about "negative emissions" or "carbon offsets"?   These are the equivalent, in our analogy, of taking a scoop of water from the bath, and pouring it into a hole in the ground.  Except, it's not a scoop, but a tiny doll's house teaspoon.  And obviously, if the taps are on full, it's completely pointless.  Once the taps are turned off, then, yes, it starts making sense.  But we'll still need something bigger than a miniature teaspoon to do anything worthwhile.

Yes, it is good news.  The taps are being turned down, and one day, in perhaps 30 or 40 years, will be finally turned off altogether.  But temperatures will go on rising, but the good news is that they will be rising more slowly.  If we do in fact halve emissions over the next 15 to 20 years, we will also halve the decadal rise in temperatures.  And if we halve them again over the next 15 years, we will halve the decade-by decade rise again, and so will avoid a 2 degree rise since pre-industrialisation, taken (for practical reasons) to be the average temperatures from 1850 to 1900.  

A 2 degree rise is bad news.  But it is better than 2.5 or 3 degrees.  Much, much better.  Cautious optimism is in order.

100s of climate scientists expect 2.5 degrees

 From The Guardian

Hundreds of the world’s leading climate scientists expect global temperatures to rise to at least 2.5C (4.5F) above preindustrial levels this century, blasting past internationally agreed targets and causing catastrophic consequences for humanity and the planet, an exclusive Guardian survey has revealed.

Almost 80% of the respondents, all from the authoritative Intergovernmental Panel on Climate Change (IPCC), foresee at least 2.5C of global heating, while almost half anticipate at least 3C (5.4F). Only 6% thought the internationally agreed 1.5C (2.7F) limit would be met.

Many of the scientists envisage a “semi-dystopian” future, with famines, conflicts and mass migration, driven by heatwaves, wildfires, floods and storms of an intensity and frequency far beyond those that have already struck.

Numerous experts said they had been left feeling hopeless, infuriated and scared by the failure of governments to act despite the clear scientific evidence provided.

“I think we are headed for major societal disruption within the next five years,” said Gretta Pecl, at the University of Tasmania. “[Authorities] will be overwhelmed by extreme event after extreme event, food production will be disrupted. I could not feel greater despair over the future.”

But many said the climate fight must continue, however high global temperature rose, because every fraction of a degree avoided would reduce human suffering.

Peter Cox, at the University of Exeter, UK, said: “Climate change will not suddenly become dangerous at 1.5C – it already is. And it will not be ‘game over’ if we pass 2C, which we might well do.”

The Guardian approached every contactable lead author or review editor of IPCC reports since 2018. Almost half replied, 380 of 843. The IPCC’s reports are the gold standard assessments of climate change, approved by all governments and produced by experts in physical and social sciences. The results show that many of the most knowledgeable people on the planet expect climate havoc to unfold in the coming decades.

Younger scientists were more pessimistic, with 52% of respondents under 50 expecting a rise of at least 3C, compared with 38% of those over 50. Female scientists were also more downbeat than male scientists, with 49% thinking global temperature would rise at least 3C, compared with 38%. There was little difference between scientists from different continents.

Dipak Dasgupta, at the Energy and Resources Institute in New Delhi, said: “If the world, unbelievably wealthy as it is, stands by and does little to address the plight of the poor, we will all lose eventually.”

The experts were clear on why the world is failing to tackle the climate crisis. A lack of political will was cited by almost three-quarters of the respondents, while 60% also blamed vested corporate interests, such as the fossil fuel industry.

Many also mentioned inequality and a failure of the rich world to help the poor, who suffer most from climate impacts. “I expect a semi-dystopian future with substantial pain and suffering for the people of the global south,” said a South African scientist, who chose not to be named. “The world’s response to date is reprehensible – we live in an age of fools.”

About a quarter of the IPCC experts who responded thought global temperature rise would be kept to 2C or below but even they tempered their hopes.

“I am convinced that we have all the solutions needed for a 1.5C path and that we will implement them in the coming 20 years,” said Henry Neufeldt, at the UN’s Copenhagen Climate Centre. “But I fear that our actions might come too late and we cross one or several tipping points.”

 Are they right?  

Temperatures are rising by 0.2 degrees C per decade, or possibly more.  If we halved emissions, that increase would fall to 0.1 degree per decade.   (Assuming the rate of increase per decade hasn't accelerated to 0.3 degrees) If we halved them again, the decadal increase would decline to 0.05 degrees.  However, even as (if) we cut emissions, temperatures will go on rising, only stabilising when emissions approach zero.   So the longer we take, the longer and higher temperatures will rise.

To halve emissions over 10 years would require emissions to fall by 6.7% per annum compound.   To halve them over 20 years would require emissions to fall by 3.4% per annum. 

The introduction of CATL's super cheap batteries, at US$56/kWh, and their sodium-ion batteries at around $40/kWh will do two things.  First of all, it will make the EV revolution inevitable.  The standard (60 kWh) EV battery pack cost ~US$10,000 in 2020 and will cost ~$2,500 by the end of this year.  Even with swingeing taxes in the US and Europe, EVs will head inexorably towards 100% of sales, globally.  

The second result will be to make grid storage dirt cheap.  Lazard's latest estimate of the cost of 4 hours of storage for a solar farm is $14/MWh of production.  The halving in battery costs will allow 8 hours of storage, and of course, neither solar panels nor batteries have stopped falling in price.  This will mean that grid operators and utilities will choose batteries plus storage in preference to all other sources of electricity generation, but also to replace gas peaking with batteries.  

Electricity generation contributes ~30% of emissions, and road transport ~15%. Even after EVs reach 100% of car and truck sales, it will take 10-15 years for the whole vehicle fleet to become electric.  What about the additional electric demand from EVs?, I hear you cry.  With solar+8 hours of storage becoming so cheap, no new fossil fuel power stations will be built.  As electricity demand rises, it will be met by solar plus storage.  Though switching electricity generation to solar will also take time because of sunk costs, lethargy, vested interests, etc.  

So, let's assume it will take 20 years for emissions in electricity generation and land transport to halve.  (Governments could make that happen much faster if they chose, and as temperatures rise, I have no doubt they will so choose.)    

Three-quarters of all emissions come from energy.  With the new low battery costs, all of that can potentially be stopped, as fossil fuels are replaced by solar plus storage.   I say potentially, because vested interests.  However, replacing fossil fuels no longer requires altruism.  You no longer have to care about the climate.   You just have to want to save money.  But, if you care about the climate too, you will want a faster shift.  And as temperatures rise, the political push to do something, instead of just pretending and greenwashing, will be unstoppable.  So, there is a chance that we could cut emissions by 75% over the next 20 years, reducing the decade by decade rise in temperatures to 0.05 degrees.  That would still leave hard sectors like agriculture, waste and cement, but it would give us 20 years to find solutions for them.

If all this optimistic stuff happens, temperatures will rise by another 0.8 degrees by 2100.  Assuming 1.5 degrees already since 1850-1900, that means global temperatures will rise by 2.3 degrees.

So, yes, they're prolly right. 

Big batteries smash records in ...... Texas

 From RenewEconomy

The big battery records continue to tumble around the world, the latest coming in Texas – the biggest producer of oil and gas in the US – where the output record from the growing number of big batteries in the local grid was smashed earlier this week.

According to Grid Status, the output of battery storage in the evening peak reached a new high of 3.2 GW, some 47 per cent more than the previous peak of 2.2 GW reached last year. Energy analysts noted that conditions were tight, with unusually hot weather and over 20GW of unforced thermal outages. Prices were also high.

The new benchmark for big battery output in Texas comes after a spring of new records in California, where battery storage has often become the biggest supplier of power in the evening peaks, and has accounted for up to 28 per cent of instantaneous demand. That, in turn, has led to a dramatic reduction in the use of gas in the evening peaks.

On Wednesday, local time, California set a new battery output record of 7.2 GW, up from the new 7.05 GW peak set a week earlier.

The same pattern is now occurring in Texas, although battery storage is still limited to a peak market share of around 5 per cent in what is a much bigger grid. But with the state expected to double its battery storage capacity in the coming year to more than 11 GW, it is likely to follow down the path of California quickly enough.

In Australia, battery storage is also making its mark, particularly in South Australia where the high share of wind and solar (75 per cent average in the past 12 months) has seen batteries regularly deliver more than 10 per cent of the supply in the evening peak.

That share is expected to grow dramatically as more big batteries are added to the local network – there are currently only four operating batteries in South Australia – and as the storage capacity of the battery fleet grows from its current average of one to two hours to around four hours.

The fossil fuel moguls continue to prate about the need for gas as a "transition fuel".    For now, yes, we do need gas for peaking, i.e., to fill the gaps at the morning and evening peaks.  Yet, the rapid decline in batteries is now making battery storage cheaper than peaking gas.  This will lead to a progressive decline in demand for gas.  The "transition" is almost over.

GB fossil fuel share drops to record low

(To be precise, the share of fossil fuels in electricity generation has dropped to a record low)


From The Guardian

The share of Great Britain’s electricity generated by burning fossil fuels plummeted to unprecedented lows this month, ahead of plans to begin running a “zero-carbon grid” for short periods from next year.

Electricity generated by burning gas and coal fell to a record low of just 2.4% for an hour at lunchtime on Monday 15 April, according to an analysis of data from National Grid’s electricity system operator (ESO).

The same data has revealed that earlier this month the share of fossil fuels in the generation mix taken over an entire day fell to a record low of 6.4%, on 5 April.

The findings lend support to the aims of the ESO to begin the “groundbreaking and world-leading” step of running a zero-carbon electricity grid for Great Britain for short periods from next year.

The new records mark a dramatic shift from 15 years ago, when gas and coal power plants made up 75% of the electricity mix, while renewables accounted for only 2%. Last year only a third of Great Britain’s electricity came from fossil fuels, compared with 40% from renewables.

The research, undertaken by Carbon Brief, found a dramatic increase in the frequency of short periods when fossil fuels made up less than 5% of Great Britain’s electricity generation in recent months.

There have been 75 half-hour periods in the year to date when fossil fuels have accounted for less than 5% of the country’s electricity needs, more than four times the number recorded last year. Just five ultra-low carbon half hours were recorded in 2022, the analysis said.

The new record low took place amid a glut of renewable energy, according to the ESO. At the time, wind power made up about half of electricity generation while solar power accounted for just over 30%. Britain’s nuclear reactors generated more than 13%.

Renewable costs plunged again in 2021

 From IRENA

The competitiveness of renewables continued to improve in 2021. Data from the IRENA Renewable Cost Database and analysis of recent power sector trends affirm their essential role in the journey towards an affordable and technically feasible net zero future. 

The global weighted average cost of newly commissioned solar photovoltaics (PV), onshore and offshore wind power projects in 2021 fell. This was despite rising commodity and renewable equipment prices in 2021 given there is a notable lag before these cost increases appear in project total installed costs; and significant improvements in performance in 2021 raised capacity factors, especially for onshore wind. 

The global weighted average levelised cost of electricity (LCOE) of new utility-scale solar PV projects commissioned in 2021 fell by 13% year-on-year, from USD 0.055/kWh to USD 0.048/kWh. With only one concentrating solar power (CSP) plant commissioned in 2021, after two in 2020, deployment remains limited and year-to-year cost changes volatile. Noting this caveat, the average cost of electricity from the new CSP plant was around 7% higher than the average in 2020.

The global weighted average LCOE of new onshore wind projects added in 2021 fell by 15%, year-on-year, from USD 0.039/kilowatt hour (kWh) in 2020 to USD 0.033/kWh. China again dominated new onshore wind capacity additions in 2021 and also experienced, against the trend elsewhere, falling wind turbine prices. The cost of electricity for new onshore wind projects excluding China, fell by a more modest 12% year-on-year to USD 0.037/kWh. The offshore wind market, saw unprecedented expansion in 2021 (21 GW added), as China increased its new capacity additions and the global weighted average cost of electricity fell by 13% year-on-year, from USD 0.086/kWh to USD 0.075/kWh.

Cost reductions were not universal however, the country weighted average total installed costs of utility-scale solar PV increased year-on-year in three of the top 25 markets, while for onshore wind this was true of seven of the top 25 markets in 2021. The period 2010 to 2021 has witnessed a seismic shift in the balance of competitiveness between renewables and incumbent fossil fuel and nuclear options. The global weighted average LCOE of newly commissioned projects utility-scale solar PV projects declined by 88% between 2010 and 2021, that of onshore wind and CSP by 68%, and offshore wind by 60% (Figure ES.2).

Note that the fossil fuel cost range includes cheap gas in the US.
Gas outside the USA is much more expensive.

 In 2021, the global weighted average LCOE of new utility-scale solar PV and hydropower was 11% lower than the cheapest new fossil fuel-fired power generation option and that of onshore wind 39% lower. Geothermal and bioenergy globally remain, on average, more expensive than the cheapest fossil fuel-fired option, but provide secure supply and can be very competitive in non-OECD regions. Rising commodity prices, especially materials prices such as steel, copper, polysilicon and aluminium; saw module and wind turbine prices rise from around Q4 2020. For instance, depending on materials prices and other supply chain pressures over the rest of this year, solar PV module prices might average a fifth more than they did in 2020. Yet, in 2021, the global weighted average cost of electricity from new solar PV and onshore wind fell. There are a number of potential reasons for this, including:

• Overall equipment cost increases were modest in late 2020 and into early 2021, when many projects commissioned in 2021 would have placed orders. 

• Larger projects have greater purchasing power and longer lead times, and are increasingly dominating capacity additions outside Europe. 

• Contingency allowances in many projects will have absorbed some or all of any increased costs. • Technology improvements (e.g. more efficient PV modules and larger wind turbines) and improvements in manufacturing efficiency and scale continue.

• China remains the dominant market for new solar and wind and has lower commodity prices, transport costs, while wind project developers squeezed turbine price reductions from manufacturers in 2021. 

However, the data suggests that not all of the materials cost increases witnessed to date have been passed through into equipment prices, while manufacturer’s margins have also been squeezed. If materials prices remain elevated in 2022, this suggests – when combined with the lag between materials costs increases and project costs – that price pressures in 2022 will be more pronounced than in 2021 and total installed costs are likely to rise this year in more markets. 

The impact on the levelised cost of electricity for solar PV and onshore wind is, however, likely to be modest – in the order of 2-4% for utility-scale solar PV and 4-9% for onshore wind. Increasing profit margins to the more sustainable levels seen in 2017, might increase this figure for onshore wind to an 8% to 12% increase, but it is not clear if all these cost increases could be passed through in 2022 alone. 

More importantly, with the extremely high fossil fuel prices already experienced in 2022 likely to continue, the additional cost is outweighed many times over by the economic benefit of new renewable capacity. 

Indeed, the extent of the benefits from renewables in 2022 will be unprecedented. Assuming average wholesale fossil gas prices in 2022 of USD 0.109/kWh in Europe, the average generated fuel-only cost (excludes carbon dioxide (CO2) prices) of existing fossil gas generators will be in the order of USD 0.23/kWh, or 540% higher than in 2020. The European Union (EU) Emissions Trading Scheme (ETS) emission prices also raises fuel costs to USD  0.27/kWh in 2022, or 645% higher than in 2020, (Figure ES.3). To put this figure of USD 0.27/kWh in context; this is 4 to 6 times more expensive than the new solar and onshore wind capacity added in Europe in 2021 and it exceeds the average retail tariff (excluding taxes and levies) paid by households in 13 EU of the 27 countries in 2020 that covered transmission, distribution, wholesale electricity purchases, marketing and overheads.

 Countries investments in renewables are paying huge dividends in 2022. Globally, new renewable capacity added in 2021 could save USD 55 billion this year alone, given the fossil fuel price crisis. Looking at the benefit of the cumulative stock of renewables draws an even starker picture. In Europe, between January and May 2022, solar PV and wind generation alone have likely avoided in the order USD 50 billion in fossil fuel imports, predominantly fossil gas. The unprecedented extent of the fossil fuel price crisis in 2022 has overshadowed the fact, that without renewables, the situation for consumers, economies and the environment would be much worse. 

Marginal fossil fuel electricity generating costs are so high in 2022, that a new onshore wind plant connected to the grid on 1 January 2022 and operating in the wholesale market might receive revenues in 2022 alone that are between around two (in Mexico) and thirteen times (in Brazil), the required annual return on capital required from the possible marginal avoided costs of fossil fuel generation for the full year. That countries have not prioritised accelerated renewable power generation capacity deployment in this year, but left the response largely to individuals and business, appears likely to have cost society billions of dollars this year and the next in direct energy costs. This is before accounting for the macroeconomic damage that accrues from the fossil fuel price crisis.

My take on this:  

I don't think neither hoi polloi nor politicians are aware of just how cheap renewables are compared with fossil fuels.  Granted, current very high fossil fuels are likely to decline again as we go into recession, globally, but even in 2020, before the recent price surges, renewables were still cheaper.  Also, which everybody, from citizens, politicians, and electricity companies likes, the costs are fixed, once the wind or solar farm is built.  Fossil fuels aren't just more expensive.  They're also more volatile.

We have passed peak coal, that much is clear.  The Russian invasion of Ukraine has shown the dangers of relying on bloodthirsty petro-state dictators, and that means we will see peak gas soon too, as Europe weans itself off Russian gas.  And peak oil is close, as EV sales grow exponentially.  Good news for the climate, bad news for fossil fuel companies.

Cost of capital for different energy technologies

Because the market is very aware that fossil fuels are on their way out, the cost of capital in these sectors is much higher than in renewables.  

Via Nat Bullard of BNEF

Useful encapsulation of energy cost of capital. Long-cycle oil, 20%+ Solar, on/offshore wind 3.1-4.5% https://bloomberg.com/news/articles/

2021-11-09/cost-of-capital-widens-for-fossil-fuel-producers-green-insight?sref=JMv1OWqN