Renewable energy is now the cheapest option, on average, for new electricity capacity around the world — in developed countries like the US as well as developing countries like India, China, Nigeria, and Mexico. As I noted the other day, we need to keep channeling this message to the broader public, and especially decision-makers, but there are other things to do as well in order to increase the rate of renewable energy growth.
The International Renewable Energy Agency (IRENA) has projected that we need to double renewables globally by 2030 (combined with solid progress on energy efficiency) if we are going to keep global warming below 2°C. Clearly, direct governmental investment into renewable energy programs is one great way to do that. As one such example of strong policy action, China just announced that it plans to invest $360 billion into renewables by 2034 and has stopped construction or planning on over 100 coal plants. That’s vision and leadership.
From Abu Dhabi itself, home of IRENA and my home base this past week, the UAE announced a strategy of 70% decarbonization in the electricity sector by 2050, targeting 44% renewables, 6% nuclear, 38% natural gas, and 12% “clean fossil” by that time. The UAE also just started removing fuel and water subsidies, allowing electricity prices to jump and water prices to triple.
But what can be done other than setting long-term renewable energy targets, directly subsidizing or investing in renewables, and finally removing fossil fuel subsidies?
Comments this past week from major companies like Statoil and EDF claimed that there is actually no lack of financing for renewables, but that there’s a need for more “bankable” projects. Glossing over that too quickly misses that there are still issues on the financing side of the equation to resolve, but the general point was one that full-time cleantech leaders agreed was true.
In an interview with IRENA’s Director-General, Adnan Z. Amin, Amin agreed that “there’s a lot of money in the system” but “the question is how to unlock that financing for renewables.”
One problem is simply lack of awareness that renewables have become cost-competitive and mature industries — hence the ongoing work from IRENA to bring that information to more people (particularly via regional reports).
Similarly, the long-term reliability and performance of renewable power projects is still not inserted into the equation properly, raising the cost of financing beyond what it logically should be.
Overall, “the broader issue is risk mitigation,” Amin highlighted. Technology risk assumptions are too high now that the technologies are proven and reliable. Financiers need to get up to date on the effectiveness and reliability of modern renewables. “What we see is the cost of capital for renewable projects worldwide is unrealistically high,” Adnan Z. Amin pointedly stated in response to my probing about this wonky but important topic.
- Reducing the cost of finance and cost of technology for immediate deployment of competitive solar generation assets;
- Supporting industrial capacities, through support for development and implementation of appropriate regulatory frameworks and innovative financial and risk mitigation instruments;
- Developing a systemic approach for the massive integration of renewables, solar in particular, in the energy systems at local, national and regional level, and, paving the way for future solar generation energy storage and technology solutions adapted to each country’s individual needs.
In short, this initiative will help to create a lot more “bankable” renewable energy projects, allowing for money to more easily flow into renewables.
Policy risk is another factor still in need of remedy. Stable, long-term policies that reduce investment/business risk are critical to quicker clean energy installation. Policies that developers and financiers can feel confident will be in place for many years to come and do not obstruct renewables are a fundamental necessity. Some regions have enabling policies already in place. Others need to implement them if they want to benefit more economically and healthwise from the clean energy transition.
In a separate interview with the Executive Director of Masdar Clean Energy, Bader Saeed Al Lamki, the importance of regulatory stability and energy policy was again emphasized as a key method for enabling bankable projects. Bader Saeed Al Lamki knows what’s required from the ground level — a Masdar-led consortium won an 800 megawatt (MW) solar power plant auction in the UAE with a record-low bid price of 2.99¢/kWh*. Masdar Clean Energy also has large stakes in the gigantic London Array offshore wind farm, the world’s first floating wind farm (Hywind), and other solar CSP and PV power plants around the world.
Clearly, carbon pricing is one way to send a strong and clear signal to the investment and development communities. This topic is picking up and the broad business community wants it — Exxon wants it, Total wants it, Shell wants it, and, of course, renewable energy companies want it. A good carbon price provides a “level playing field” and “you begin to understand what the real cost of energy is,” as Adnan Z. Amin summarized. Nonetheless, with certain countries (the USA, Poland, Italy …) engaging in climate action negativity, a global carbon price definitely won’t come about within a year or two. However, perhaps more regional initiatives on this matter will pop up or expand, enabling quicker cleantech growth (and the economic benefits that follow) in those regions.
Chart via IRENA
Amin also noted that there are 9.5 million people working in renewables worldwide, according to IRENA research, and he highlighted independently what the former head of Mexico stated later at the opening ceremony of the World Future Energy Summit — a lot more people now work in renewables than in coal. 85,000 people work in the coal industry in the United States, whereas approximately 400,000 people are employed in renewables in the USA.
Renewables are the future because they are cheaper and because they create a greater number of jobs. Going renewable or taking climate action is no longer a charity. The governments and institutions that most aggressively push the cleantech transition and enable faster flow of capital into their regions for renewable energy projects will see more economic growth and benefit. If I were a policymaker anywhere right now, I’d be examining and having my staff examine specific policies to implement in order to get a bigger portion of the cleantech pie. It’s logical from an economic perspective, a health perspective, a climate perspective, and a moral perspective.
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