Credit Suisse Predicts Renewable Energy That Is “Too Cheap To Meter” By 2025

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Credit Suisse says the Inflation Reduction Act will have such a tremendous impact on renewable energy that the US may see the levelized cost of electricity from renewable sources fall to less than 1 cent per kWh hour by 2025 after factoring in all tax and production credits. Now, before we get all gaga over this news, a couple of important caveats are in order.

First, Credit Suisse is having some problems lately, including a possible criminal investigation in America and probe by the US Congress, according to Bloomberg News (paywall). Second, although this story is all over Twitter and has been picked up by The Atlantic, no one has provided an actual link to the Credit Suisse report. A diligent Google search by yours truly failed to discover one. But Robinson Meyer of The Atlantic seems to have read it and here’s what he has to say.

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“Late last month, analysts at the investment bank Credit Suisse published a research note about America’s new climate law that went nearly unnoticed. The Inflation Reduction Act, the bank argued, is even more important than has been recognized so far: The IRA will ‘will have a profound effect across industries in the next decade and beyond’ and could ultimately shape the direction of the American economy, the bank said. The report shows how even after the bonanza of climate-bill coverage earlier this year, we’re still only beginning to understand how the law works and what it might mean for the economy.

“The report made a few broad points in particular that are worth attending to. First, the IRA might spend twice as much as Congress thinks. Many of the IRA’s most important provisions, such as its incentives for electric vehicles and zero-carbon electricity, are ‘uncapped’ tax credits. That means that as long as you meet their terms, the government will award them. There’s no budget or limit written into the law that restricts how much the government can spend. The widely cited figure for how much the IRA will spend to fight climate change — $374 billion — is in large part determined by the Congressional Budget Office’s estimate of how much those tax credits will get used.

“But that estimate is wrong, the bank claims. In fact, so many people and businesses will use those tax credits that the IRA’s total spending is likely to be more than $800 billion, double what the CBO projects. And because federal spending tends to catalyze private investment, that could send total climate spending across the economy to roughly $1.7 trillion over the next 10 years. That’s significantly more money flowing into green-energy industries than the CBO projected, though it’s unclear if that additional money will lead to more carbon reductions than earlier analyses have projected.

“Second, the U.S. is ‘poised to become the world’s leading energy provider,’ according to the bank. America is already the world’s largest producer of oil and natural gas. The IRA could further enhance its advantage in all forms of energy production, giving it a ‘competitive advantage in low-cost clean electricity and hydrogen production, infrastructure, geologic storage, and human capital,’ the report states. By 2029, U.S. solar and wind could be the cheapest in the world at less than $5 per megawatt-hour, the bank projects. It will also become competitive in hydrogen, carbon capture and storage, and wind turbines.

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Credit Suisse also thought about what might happen if reactionaries and fossil fuel apologists win control of the White House or Congress. They don’t think there’s much of a chance the IRA would be repealed because “Republican-leaning states are likely to see the most investment, job, and economic benefits from the IRA.” That seems like specious reasoning, since people vote against their own best interests all the time.

If there is a stumbling block ahead for the IRA, it is building out America’s energy infrastructure. Powerful business groups are already lobbying to revise the most transmission-friendly sections of the IRA, Credit Suisse says.

The Opportunity Is Huge

Meyer writes that clean energy is now the safe, smart, government-backed bet for conservative investors. It’s really a shocking reversal of the past 40 years. It is such a change that it hasn’t yet been metabolized by the world of people involved in the issue. Then he offers some predictions of his own.

1. The number of Americans working in a climate-relevant industry is going to explode. It is going to undergo what you might call a techification. The opportunity will be too large, the money too persuasive, the problems too intriguing.

2. Managing climate change is a legitimately difficult technical and cultural problem — it’s going to require as many attentive and enthusiastic brains as possible. If you don’t yet work in the industry, but have always cared about climate change as an issue, this is your moment to get involved. These companies are going to need engineers, programmers, accountants, marketers, HR staff, general counsels — there is space for everyone now.

“The fight against climate change is going to change more in the next four years than it has in the past 40. The great story of our lives is just beginning. Welcome aboard,” he concludes.

Others Are Piling Into Renewable Energy

This is once again a 'thanks Putin' moment. The government proposed this plan back in August as a response to high energy prices and the geopolitical risk of being dependent on others for power

— Sam Morgan (@SamJamesMorgan) October 12, 2022

In Europe, most countries are racing to show Putin they can get along without cheap Russian gas. Estonia is the latest example. Late last month, its government approved a plan to use only electricity from renewables by 2030. But there’s more to the story. Estonia’s current goal is for 42% of its electricity to come from wind or solar by 2030. That target will now be raised dramatically and the 40% target is moved ahead to 2025.

The rest will come from burning biomass — trees and wood products. This is a topic that is fraught with controversy. While it is arguably better than burning coal or unnatural gas, it still produces carbon emissions, unlike wind and solar, which generate none. According to ERR News, the government has recently issued a tender for 540 GWh of renewable energy generation, with much more in the pipeline.

“Clearly, the current high electricity prices are due to a lack of generation capacity. High fossil fuel prices and a lack of generating capacity have put all consumers in a precarious situation, which must be dealt with immediately,” Minister of Economic Affairs and Infrastructure Riina Sikkut (SDE) said on Thursday.

“Fortunately, these market signals have prompted companies to make investment decisions to increase renewable energy generation capacity, and the state is doing everything it can to support these efforts. In this climate, it is critical that the government sends a clear signal to encourage investment: by 2030, all of the electricity we consume must be generated from renewable sources,” the minister added.

The Takeaway

We are all witnesses to a tipping point in human history. There is a giant nuclear reactor in the sky that supplies all the energy the Earth needs to meet its needs. All we have to do is harvest it. (Winds are also a product of the energy we get from the sun.) Some may quibble that the US should not be telling the rest of the world what to do and there is merit to that argument, but nevertheless, it does have an outsized influence on other nations.

The Inflation Reduction Act will have knock-on effects that will reverberate around the world, particularly in countries ruled by tyrants like Russia (and China and Saudi Arabia as well). Even if you don’t like the idea of renewable energy, most of us would be happy to see the influence of those countries diminished as the demand for fossil fuels withers away. The clean energy revolution has begun in earnest. There can be no turning back now.

A tip of the hat to CleanTechnica stalwart FreedomEV.