Rapid deployment of renewable energy plays a crucial role in limiting global warming to well below 2 degrees Celsius – the limit to avoid catastrophic effects of climate change – a new report from the Energy Transitions Commission indicates.
The 'Better Energy, Greater Prosperity' report, which focuses particularly on energy productivity, demonstrates how the world can halve carbon emissions by 2040. It finds that to achieve this, the share of energy derived from zero-carbon sources – mainly renewables – must grow by at least 1% per annum.
“Renewables are already showing their enormous potential,” said Sam Kimmins, Head of RE100, The Climate Group - which leads RE100 in partnership with CDP.
“Costs are falling dramatically, and deployment is increasing globally. Renewables are particularly attractive to corporate energy buyers, because they allow businesses to achieve cost surety over the long-term – protecting them from price volatility of fossil fuels.
“RE100’s role is to accelerate this energy revolution. This program is showing that if ambitious companies come together and share their success stories and demonstrate to markets and policy makers the huge corporate demand for renewable electricity, we can deliver a healthier, more prosperous future for all.”
Currently, 90 leading corporates are committed to 100% renewable power through RE100. In addition to showing their business leadership on climate change, these companies are also putting themselves on the forefront of the incoming net-zero economy.
Cost effective solutions
Renewables costs have reached record lows. Since 2009, the levelized cost of wind energy has decreased by 65% – with an even more impressive 85% reduction for utility-scale photovoltaic generation, the report shows.
This is a trend that is set to continue. Renewable energy is benefitting from the tipping point reached by batteries – a price decline of a staggering 326% since 2013. This means that renewable energy systems, when combined with increasingly cheaper batteries, could be cost-competitive with gas-powered generation as early as 2035.
The transport and building sectors, focusing on clean electrification, have the potential to reduce fossil fuel use by up to 20% by 2040, while increasing electricity requirements by over 25% by the same year. Clean electrification alone could deliver half of the carbon emissions reductions required by 2040.
Businesses can also play a fundamental role in investing in research and development to support clean technologies that are now only at an early stage – pushing for market design, risk-sharing financing models and procurement practices.
Renewables revolution
Zero-carbon sources - mainly renewables - could account for up to 80% of the global power mix by 2040, while coal-fired power needs to decline steeply as soon as possible, the report states. By 2035, it will be feasible in many geographies to build a near-total-variable-renewable power system providing electricity at a maximum all-in cost of US$70 per megawatt-hour, making renewables fully competitive with fossil duels.
However, a fast-paced scale of renewables’ deployment is central to achieve this goal. The report also indicates how by 2040, intermittent renewables – such as solar and wind – could reach 45% of the global power mix, with other zero-carbon power sources representing about 35%, and unabated fossil fuels the remaining 20%.
The report also warns that increased renewables penetration could lead to a decline of fossil fuel prices, making necessary a carbon tax to continue supporting investments in renewables. To achieve these goals, the investment sector must fund the energy transition, overcoming financial challenges such as the high investment needs in emerging economies.
Therefore, a significant shift in the mix of investment is needed, the report says, lowering fossil fuels investment by US3.7 trillion over 2015-2030 while ramping up investment in renewables and energy efficient equipment by US$6 trillion and US$9 trillion respectively. This would mean an extra US$300-600 billion in annual investment.
The report concludes that governments, investors and businesses must act now to seize the economic, social and environmental opportunities offered by the energy transition. A coherent, predictable and bold policy framework is necessary to drive progress on climate action.
“This is not just another plan; it’s a better plan,” said Ajay Mathur, co-Chair, Energy Transitions Commission. “We show how the world can remove barriers to transform challenges into opportunities, not only in advanced economies, but also in emerging countries.”