Big Green Bang for renewables
An unprecedented shift to wind and solar power, electric cars and other low carbon systems has defied all predictions and is convulsing the global energy industry. The FT's Pilita Clark explains the impact of the 'Big Green Bang'
Produced by Seb Morton-Clark. Filmed by Richard Topping. Edited by Seb Morton-Clark and Nicola Stansfield.
Donald Trump, the leader of the world's biggest economy, is clearly a big fan of fossil fuels. So could his presidency kill off the shift to green power? Well, not quite-- because something bigger than Mr. Trump is taking place in the global energy system. It's a change so fundamental that some industry leaders think the 21st century could, in fact, be the last for fossil fuels, a Big Green Bang.
Now at first glance, it's hard to see how this could possibly be the case. Because about 86% of the energy that powers the world still comes from fossil fuels, as it has for the last 25 years. In 2015, wind and solar supplied a puny 4% of the world's electricity. Fewer than 1% of all the cars on the road are electric.
But what is significant is the rate at which these new energy sources and technologies are growing. Take electric cars. They may still only represent less than 1% of the total car market. But in 2016, sales were up by 42% on the previous year, meaning electric cars were selling eight times faster than the overall market.
It's a similar story with renewables. 15 years ago, their annual growth rate was around 2 or 3%. In the last two years, that surged to 9%, with solar power jumping by more than 30% last year. These numbers far exceed many expert predictions. So why did they get it wrong?
One reason is the boom in renewable subsidies by governments trying to curb climate change. In 2004, 48 countries backed renewables. But that number has now nearly tripled to 146, all helping to create a clean energy market that companies have rushed to enter.
Countries like Germany got the ball rolling. But who's today's green energy giant? It's China. The world's second biggest economy has more than a third of all installed wind power capacity, a quarter of the solar power, six of the top 10 solar panel makers, and four of the top 10 wind turbine makers.
Last year, it sold more battery only electric cars than the rest of the world combined. China is a big part of the reason that renewable costs have plummeted. In just seven years, the cost of solar panels has fallen by 80%, and wind turbines are down by nearly 30%.
These lower prices have seen green energy spread, in some cases now, without direct subsidies. For the last two years, of all the new capacity built to generate power worldwide, more than half has been made up of renewables. In 2015, green energy overtook coal as the largest source of installed capacity. This growth in capacity has happened a lot faster than expected.
But it is important to remember that it's come from a small base. And because of the intermittency of wind and solar power, when it comes to the actual amount of electricity generated, renewables are likely to be well behind fossil fuels for some time to come. Even so, many in the industry think the transformation is about to accelerate.
That's because batteries, which make it a lot easier to use green power, are about to undergo an unprecedented ramp up in global production for electric cars. That should drive their prices down and make renewable energy much more attractive. So how significant is all of this really?
Well, some historians say it's too early to say whether the current shift amounts to anything like a revolution. They point to past energy transitions which have generally taken 50 to 60 years. But others disagree. And they argue that the threat of climate change will prove a driving force like no other.
Either way it's clear that disruption has already begun for some businesses. In Nevada, for example, the state's power utility is set to lose at least 6% of its customer base-- after three big gaming groups, in a move that some said was driven by cheaper green energy, secured deals to pay a combined $150 million so they could defect and buy electricity elsewhere. The fossil fuel industry is also showing a lot more interest. Seven oil and gas groups have invested almost $15 billion in renewables over the past four years.
So will all of this be enough to put the brakes on the global warming that Donald Trump's critics fear he'll speed up? Experts are doubtful. While the power sector is decarbonising, and the car industry is starting to go electric, there's a lag in other parts of the energy system.
The growth of renewables also poses tough questions for governments. How do they reshape a power system designed for fossil fuels? Who should pay for it, and how? The road ahead for green power is unlikely to be smooth. But its future is fast beginning to look a lot more assured than that of fossil fuels.