Renewable energy is riding an enormous wave of success right now. It’s a trend that has been building for decades, but it’s finally reached the point where renewables are not just competitive with fossil fuels; they can outcompete them on cost.
The renewable energy industry is booming, and it’s not just because the planet needs to reduce its carbon footprint. It’s also because renewables are a cost-effective way for households, companies and even governments to power their operations without breaking the bank.
Solar power is now regarded as “the cheapest electricity in history” by the International Energy Agency. The IEA admits that solar is up to 50 per cent cheaper than their estimates from two years ago. This means that more and more people are switching to solar for their energy needs because it saves them money while also being environmentally friendly.
Experts predict that the cost of wind energy will shatter expectations and become a more affordable source of power in a shorter period. Wind power is an abundant renewable resource, and it’s predicted to be 50 per cent cheaper than expected by 2050. More and more hydropower projects are being approved worldwide, and the technology in this space is improving and becoming more affordable.
The cost of electricity from onshore wind and solar PV is increasingly cheaper than from new and some existing fossil fuel plants. Thus, in most countries, renewables are the most inexpensive way of meeting growing demand.
On the surface, the future looks rosy for the renewable energy sector. But there is a potential storm coming. What happens if government investment dries up because of the impacts of COVID-19?
The downward trend of costs won’t shield renewables from an economic downturn
COVID-19 has ravaged economies worldwide across all industries, and renewable energy is not immune from its impacts.
Exact figures on how far-reaching and severe these hits to economic growth globally are hard to determine, but there is no question that the greatest hits are still to come. Even as the world works to control and manage COVID-19, inflation, supply chain disruptions, domestic political conflicts, and high national debt levels continue to soar.
IEA figures show that private sector-led investments make up 23 per cent of all renewable energy projects in the pipeline to be constructed between now and 2025. So there may be some impact as the private sector feels the pinch, but that impact is likely to be minimal compared to government investment.
A further 31 per cent of renewable projects in the pipeline are already contracted, and the vast majority are likely to proceed. However, the issue facing the energy sector is how many projects will be funded beyond 2025? Almost half of all global renewable energy projects are also yet to be implemented under announced government plans. As a result, there is every chance a volume of these projects could fall over in the face of economic uncertainty.
With over three-quarters of all major renewable energy projects relying on government funding and support, the sector faces enormous challenges moving forward during the economic recovery following COVID-19.
We already see real fallout worldwide. For example, Brazil, Chile, China, France, Germany and Portugal have all implemented recent policy changes to delay or postpone renewable energy auctions.
In Australia, we have a government that, to date, has refused to provide a definite date on when we will achieve carbon net-zero. But it might not be all doom and gloom.
How government investment in renewables will be crucial for our economic recovery
In Australia, there are already three renewable energy strategies being deployed which could pave the way for our economic recovery.
The first is plans to export our solar power to Asian nations that don’t have the space required to construct large-scale solar farms. For example, the Australia–ASEAN Power Link has been planned for the Northern Territory, including a 12,000 hectare, 30-gigawatt solar farm and an undersea cable to export the power to Asia.
Secondly, Australia has announced plans to become a global powerhouse for the export of clean hydrogen. For example, there are ambitious plans to use clean hydrogen to create steel without coal, with the only emissions being water. Australia plans to generate this hydrogen using solar and wind projects, and agreements have already been signed to export this hydrogen to major Asian nations.
The final strategy will be the inevitable rollout of electric vehicles in our country. This will create employment opportunities in construction, potentially manufacturing and mining as Australia is rich in the lithium, copper and nickel required to build these EVs.
These three strategies will ensure renewable energy remains a solid pillar of our economic recovery. Still, it remains crucial that our state and federal governments retain their commitment toward constructing renewable energy projects around the country.