Market forces are the most powerful driver of human activity, so it shouldn’t come as a surprise to see that renewable energy adoption rates correlate more closely with cost reductions than the number of people who believe in climate change. A better bottom line makes a great incentive for even the bitterest of skeptics.
Years of falling costs have led to a spike in renewable energy investment and installation. According to Michael Liebreich, founder and chairman of Bloomberg New Energy Finance, who spoke to attendees at the Distributech (DTECH) Conference and Expo Keynote session, at the current pace, the US of 2040 will be deriving 24% of its electricity from renewable energy sources from about 4% today. The key phrase being “at the current pace”. If Liebreich was assuming a simple continuation of current trends, then he was likely seeing future growth in linear terms based on recent advances. His conservative view of the potential of renewable energy is understandable given that the electric power industry is not known for significant short-term changes. That said, sudden shocks like a return to triple digit oil prices or a technological breakthrough that cuts the price of photovoltaic cells by 25% would change projections completely.
The EIA expects electricity from renewables, not including residential solar, to account for 14% of total electricity generation in the US with wind at 5.2% (+16% from 2015) and solar at 0.8% (+28% from 2015)
The modern business world is seeing disruptions like no one could have imagined two decades ago. It seems as though the business world is facing an exponential rise in the number of disruptive innovations facing all sectors thanks primarily to Moore’s law putting cheap electronics in every business, home, and pocket. So why shouldn’t wind and solar be the big the disruption that hits the utilities sector?
A combination of wind and natural gas are already competing coal out of business. Bloomberg New Energy Finance found that the US, even without the Clean Power Plan, is on track to cut power plant emissions by as much as 24% below 2005 levels due to a record number of coal power plant closures. Almost on par with the 26%-28% reduction promised at the Paris Climate Talks. American Electric Power decision to pursue a $10 billion investment in renewable energy over the next 18 years even before considering carbon regulations illustrates the private sector momentum building behind a shift away from coal. Or, in other words, “Coal plants are already struggling due to very poor economics given low gas prices,” Citigroup Inc. analyst Praful Mehta said in a research note. “Our view on the average life of coal assets at around 15 years wasn’t based on the Clean Power Plan but on the weak economics of coal together with environmental regulation in the 5-10 year time frame.”