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Renewables Poised to Overtake Fossils Decades Faster Than Forecast

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The world’s renewable energy industries may be poised to overtake fossil fuels decades faster than forecast, as production prices plummet [1] and renewables’ investment returns begin to dramatically outpace [2] oil and gas.

“The climate green shoots have emerged amid a renewable energy revolution that promises an end to the rising demand for oil and coal in the 2020s, before the fossil fuels face a terminal decline,” The Guardian reports. “The looming fossil fuel peak is expected to emerge decades ahead of forecasts from oil and mining companies, which are betting that demand for polluting energy will rise [3] until the 2040s [4].”

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With wind and solar emerging faster as a threat to coal-fired electricity and internal combustion vehicles, “the pace of progress has raised hope that the global groundswell of climate protest could spark fresh political will to accelerate the energy transition, in time to keep global temperatures from rising to levels that could trigger a climate catastrophe,” the UK-based paper adds. Energy industry experts “believe the rapid rise of renewable energy in recent years may soon seem glacial compared with the changes to come.”

“The first 1% takes forever,” said Bloomberg New Energy Finance founder Michael Liebreich. “1% to 5% is like waiting for a sneeze—you know it’s inevitable, but it takes longer than you think. Then 5% to 50% happens incredibly fast.”

The Guardian adds that rapid transformation will happen with or without political support, given the overwhelming economics in favour of carbon-free energy. “Over the next decade we’ll see a far quicker than expected rollout of a number of clean energy technologies, which will almost certainly mean a global emissions plateau,” Liebreich said.

“Even 10 years ago, we were looking at a very different trajectory for global temperatures,” said Chris Stark, head of the UK Committee on Climate Change. “We’ve moved onto a trajectory that today looks like 3.0°C of [average global] warming, but prior to this we were on track for more than that; 4.0°C, possibly even higher.”

Which means that “we’re a lot further on than we were,” said Seb Henbest, author of a BNEF analysis released earlier this year. “And yes, we need to go faster. And yes, it’s difficult and complicated. But at the same time, we now live in a world where two-thirds of the global population live in a country where wind and solar power is the cheapest form of new electricity capacity. We have the tools to do this.”

In a separate analysis released earlier this week, Standard & Poors Global Market Intelligence reports [2] that “the fortunes of renewable energy and fossil-fuel investors have diverged dramatically in the past year, with shares in wind and solar companies boosted by long-term growth forecasts, while oil and gas producers face deep skepticism.” In a year when an index of North American renewable energy producers gained 35.3% in value, the fossil stocks in the S&P Oil & Gas Exploration and Production Select Industry Index fell 53.6%.

S&P says the trend has been building for years.

“Investor interest in clean tech is at its highest since before the 2008 financial crisis, driven by a ‘potent combination’ of technological and political tailwinds,” the analyst agency writes, citing a recent research report by Raymond James & Associates equities analyst Pavel Molchanov. “In the oil and gas market, meanwhile, producers with a history of living beyond their means have tried to assure investors of their commitment to cutting spending and debt and growing free cash flow. But there is a ‘widespread’ belief that the cautious approach may be short-lived.”U.S. gas producers are beset by low prices and falling share values, while the rise of environmental, social, and corporate governance (ESG) investment criteria threatens the fossil industry as a whole. “Renewable energy has policy momentum, and its costs are now competitive with natural gas generation, even at today’s low gas prices and without tax subsidies,” analysts at Morningstar wrote last week. While the agency sees gas still enjoying a “key competitive advantage” in its ability to sustain grid reliability, more and more cost comparisons are favouring renewables plus storage [6] over natural gas as a source of peak-period power generation for electricity grids.

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