Economics |
December 27, 2016

The time is now for renewable energy according to the World Economic Forum (WEF) who released an investors handbook last week. Renewable energy has caught up and passed fossil fuels.

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The WEF conclude that the cost of generating energy through solar and wind sources have dropped to the point of being competitive with coal and natural gas.

The nonprofit foundation assert that this marks a paradigm shift which should attract investors worldwide to the renewables sector.

Investments in renewable energy happen all over the world, with Asia taking the lead.

Solar and wind energy is now cheaper or the same price level as new fossil fuels in more than 30 countries. And the prices of renewables continue to fall.

According to Michael Drexler, infrastructure and development manager at the WEF, renewable energy has reached a tipping point.

WEF outlines that;

    • The cost of generating electricity from renewable sources in the last 3 years fell to levels on par or below that of coal and natural gas
    • Green project bond indices are now returning about 6% per year and equity returns jumped to double digits with lower volatility, while selected investment cases highlight the profitability of green energy

“Solar and wind have just become very competitive, and costs continue to fall. It is not only a commercially viable option, but an outright compelling investment opportunity with long-term, stable, inflation-protected returns.” he adds.

Just 10 years ago, solar costs would be around $600/MWh, much above the widely-used coal and natural gas sources at $100/MWh. However, solar costs were halved five years later and compressed again to around $100/MWh today. Wind costs are around $50/MWh

The tipping point was reached largely thanks to gains in efficiency, WEF mentions that solar panel efficiency has jumped from 15% to 22%, research cells have reached 46%, while wind turbine efficiency grew from 25% to 50%.

These technology factors combined with economies of scale, solar panel costs compressed 80% since 2009, while wind turbine costs dropped 30% in 3 years. Solar power is expected to be half as expensive as electricity from coal and natural gas within ten to 20 years.

WEF concludes, however, that for green energy to fully live up to its potential as a major contributor to combatting climate change, investors worldwide will need to adjust further portions of their portfolio to green energy, as current investments trends still fall about 60 percent short of what is needed to meet the Paris Accord goals by 2030.

Reference:
Renewable Infrastructure Investment Handbook: A Guide for Institutional Investors

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