Innovation and business action drives the cost of renewable power to historic low

Reading time: 6 minutes
20 January 2017

World leaders from business and government have gathered in Davos this week for the World Economic Forum, with action on climate change high on the agenda. In this blog, Damian Ryan, Acting CEO, The Climate Group, looks at how leadership from the private sector is driving the clean energy transition.

The unprecedented speed at which the Paris Agreement on climate change was ratified in November last year signified a global shift from negotiation to action and implementation. With 125 United Nations member states now committed to national climate targets, and that number increasing steadily, the role of business in implementing the clean energy transition that will underpin bold climate action is becoming ever more pronounced.

679 businesses and investors, representing over US$20.7 trillion in assets under management, have now made commitments through the We Mean Business coalition. A prime example of this can be seen in the RE100 campaign, led by The Climate Group in partnership with CDP, which now includes 87 of the world’s leading corporates committed to 100% renewable power.

The newly published RE100 Annual Report 2017 demonstrates that we are on the edge of a global energy transformation, which will radically change how we produce and consume energy and end our use of fossil fuels. Launched to coincide with the climate and energy day at the World Economic Forum, the report also shows how campaign members are creating demand for 107 Terawatt hours (TWh) of renewable electricity annually, about the same as that used by The Netherlands.

This week, we also welcomed three major European businesses to the RE100 campaign; Danske Bank GroupGatwick Airport Limited and Royal Philips, bringing the total number of companies to have made We Mean Business commitments to over 500.

Investment and commitment

This investment from the business world is helping to drive clean technology innovation and uptake to the point where the cost of renewables has fallen dramatically, and is now ready to disrupt the monopoly of fossil fuel-based energy worldwide.

As new research from the International Renewable Energy Agency (IRENA) shows, wind and solar power, which accounted for approximately 90% of investments in renewable power in 2015, are now competitive with conventional sources of electricity, with costs plunging in recent years.

Since 2009, the cost of solar photovoltaic (PV) modules has fallen by 80% and wind turbines by nearly a third, with solar now the cheapest form of new energy.

The world record for unsubsidized power from solar is also now below $30 per megawatt hour (MWh). To put this into perspective, generation costs of most coal-fired power plants range between US$35 and US$60 per MWh, according to the International Energy Agency (IEA).

In 2015, half of the global investment in new energy went towards renewables, and in December last year, the winning bid for a proposed offshore wind farm development in the US provided the federal government with over double what it received for new oil leases in the Gulf of Mexico earlier in 2016.

Here in Davos, the focus on scaling up climate action and transitioning to ‘net-zero emission’ economies has been central to many debates and discussions, with the words of Al Gore, Former US Vice President, being particularly poignant: “We’re seeing continued, stunning declines in the cost of renewable energy, energy efficiency, batteries and energy storage — giving nations and communities around the world dramatic new opportunities to embrace a sustainable future based on a low carbon economy.”

Overwhelming business case

In these turbulent times of shifting political landscapes, and with a new US Administration taking office on Friday, we’ve seen a refreshing reaffirmation of commitment to action on climate change in Davos.

Discussions on climate action and energy have reiterated the overwhelming business case for implementing the Paris Agreement, raising the ambition of national climate targets, and transitioning to a ‘net-zero’ global economy.

When we consider the strength of the business case for the clean energy transition, it is becoming clear that it is market rather than political forces that are increasingly driving momentum. But bad policies could still delay this inevitable transition and the enormous economic and health benefits it will bring.

Smart business leaders know this, which is why the Low-carbon USA initiative that brings together more than 530 companies and 100 investors, is calling on the new US administration and Congress to accelerate a low carbon economy, and continue participation in the Paris Agreement.

The company signatories, which include RE100 members NIKE, HP Inc., IKEA, Johnson & Johnson, Mars, Incorporated, Starbucks, and Unilever, represent over US$1 trillion in annual revenue, and are headquartered across 44 states, employing about 1.8 million people. This represents a potent lobby for bold climate action.

Cleantech breakthroughs

Investment and development of clean technologies is central to this progress. Breakthroughs in energy storage are enabling the integration of larger shares of renewable electricity, with off-grid renewables increasingly complementing grid-based options to expand access to clean energy.

According to IRENA, battery storage for electricity could increase from around 1 GW today to 250 GW by 2030, with the market value of battery storage reaching US$2.2 billion in 2015 and expected to hit US$14 billion by 2020.

With the first truly global climate agreement now up and running, and increasing numbers of leading businesses from around adopting renewable power, we are already on the journey to a better, cleaner future for all.

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