As the costs of renewables plummet, are we about to see Technology Justice in the energy sector?

Introduction

IRENA (the International Renewable Energy Agency) has just published a really fascinating report – REthinking energy 2014. It’s the first of a series exploring the changes that are transforming the way we produce and use energy and should be on the reading list of anyone interested in renewables.

The report kicks off by reconfirming that business as usual in the energy sector will not keep us below the CO2 levels necessary to avoid severe climate change, but that doubling the share of renewables in the global energy mix (one of the 3 UN Sustainable Energy for All targets for 2030) would.

That’s not exactly news, but the report then goes on to provide some fairly extraordinary statistics concerning just how rapidly advances are taking place right now in renewable energy. For this blog I thought I’d just pick three really interesting facts, although there are plenty more on offer in the report.

FACT 1: The cost of renewable energy is plummeting

Solar photovoltaic (PV) prices have fallen by 80% since 2008. Moreover they are expected to keep dropping, as the diagram below (from p 35 of the report) shows:

 
In a number of countries, including Italy, Germany and Spain commercial solar power has already reached grid parity – the point at which the price of electricity from renewables equals the price of power from the traditional grid.

The cost of onshore wind electricity has also fallen – 18% since 2009, making it the cheapest source of new electricity in “a wide range of markets”.

The pace of technology development revealed by the IRENA report is staggering. The efficiency of solar PV modules in converting sunlight into electricity has improved by around 3%-4.5% per year for every one of the last 10 years. But that statistic is dwarfed by the one concerning energy storage – in some senses the holy grail of the renewable energy sector. Better storage would allow us to smooth out the peaks and troughs of electricity generated from wind or sunlight and better match supply with demand. Until recently pumped storage (a method where water is pumped up to a reservoir when excess electricity is available and then sent back down through turbines to generate electricity at times of peak demand) has been the only viable large scale energy storage solution. But large scale battery technology is developing rapidly and IRENA expects this to transform the market for energy storage from approximately USD 200 million last year to USD 19 billion by 2017 (a nearly 100 fold increase in just 4 years!).

FACT 2: Financing renewables is getting cheaper, and easier

The report notes that “government financial support has traditionally been critical for promoting renewables” (a comment that chimes with my blog last week). But it seems that private finance is increasingly ready to play a part with “early-mover private developers” attracting USD 11 billion in 2013, up 200% in 12 months.

Total investment in renewable energy rose more than 5 fold from US$ 40 billion in 2004 to US$ 214 billion in 2013 (excluding large hydropower – which accounted for a further US$35 billion in 2013). This is still less than half of the estimated annual investment of US$550 billion needed to achieve the 2030 goal of doubling the share of renewables in the global energy mix however.

IRENA highlights the important role governments have to play here. In the more developed markets they need to be sending clear signals that energy will be a larger part of their national energy mix, so reducing uncertainty and attracting more investors, whilst in emerging markets, according to IRENA, they will still need to provide public finance to develop domestic structures to support the deployment of renewables.

FACT 3: New renewables now outpace new fossils and nuclear.

 
Falling costs and rising availability of finance means, as the diagram here shows (from page 25 of the report) , renewables now add more new generating capacity each year than do fossil fuel and nuclear power, combined.

Are we about to see Technology Justice in the energy sector?

To be fair, with 1.3 billion still without electricity and 2.6 billion still cooking on open fires the prospect of technology justice in the energy sector still looks a good way off. But there are some really interesting positive trends developing that are starting to move us in the right direction.

Renewables are beginning to be the technology of choice for new generating capacity, which has to be good news, albeit the rate of increase in renewables still needs to accelerate to avoid catastrophic climate change goals.

But renewables are also showing how technology could be democratised. IRENA notes that “as the share of renewable energy grows… the nature and role of power producers are undergoing change. A sector once dominated by large utilities is becoming more decentralised, diverse and distributed. In Germany, almost half of all renewable energy is now in the hands of households and farmers, and only 12% of renewable assets are owned directly by utilities”.

It also notes that “in many emerging markets, renewables are already the most economic power source for off-grid and mini-grid systems” and, conveniently, that “decentralised mini-grids are seen as a way to improve grid reliability, by localising generation and reducing the risk of transmission faults – particularly during natural calamities.” IRENA compares the opportunity for developing countries to sidestep national grids and move to a flexible system of interconnected mini grids to the opportunity those same countries have already taken to leapfrog fixed line telephone technology in favour of mobiles.

Innovation is not confined to technology alone though. The report cites examples from Denmark and elsewhere to show how crowdfunding is growing quickly as a source of finance for renewable power infrastructure. “Specifically, in conjunction with decentralised technology, crowdfunding allows individuals and local communities to be the driving force behind the global energy transformation and to simultaneously benefit from the change.”

IRENA concludes that “these and other trends require a different way of thinking about energy, shifting from a system dominated by a few centralised utilities, to a diverse, distributed system, where consumers are also producers, with far more control over how and when they use energy”.

Sounds an awful lot like Technology Justice to me!