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| | = The Energy Transition-Economic Development Correlation<br/> = | | = The Energy Transition-Economic Development Correlation<br/> = |
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| − | The histories of energy transitions, development of economies and industrial civilizations, all go hand in hand<ref name="Bridge, G. Bouzarovski, S. Bradshaw, M. & Eyre, N. (2013). Geographies of energy transition: space, place and the low-carbon economy. Energy Policy 53: 331-340. URL: http://www.sciencedirect.com/science/article/pii/S0301421512009512">Bridge, G. Bouzarovski, S. Bradshaw, M. & Eyre, N. (2013). Geographies of energy transition: space, place and the low-carbon economy. Energy Policy 53: 331-340. URL: http://www.sciencedirect.com/science/article/pii/S0301421512009512</ref><ref name="Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf">Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf</ref>. Going back in time, people only needed to cover their basic needs, such as food, which -at the very beginning- was met by using firewood for cooking and heating<ref name="Bridge, G. Bouzarovski, S. Bradshaw, M. & Eyre, N. (2013). Geographies of energy transition: space, place and the low-carbon economy. Energy Policy 53: 331-340. URL: http://www.sciencedirect.com/science/article/pii/S0301421512009512">Bridge, G. Bouzarovski, S. Bradshaw, M. & Eyre, N. (2013). Geographies of energy transition: space, place and the low-carbon economy. Energy Policy 53: 331-340. URL: http://www.sciencedirect.com/science/article/pii/S0301421512009512</ref><ref name="Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf">Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf</ref>. Further in time, people started <span style="background-color: rgb(255, 255, 255);">practicing agriculture in the first formed human communities, essentially depending on the sun for that practice, in combination with biomass</span><ref name="Bridge, G. Bouzarovski, S. Bradshaw, M. & Eyre, N. (2013). Geographies of energy transition: space, place and the low-carbon economy. Energy Policy 53: 331-340. URL: http://www.sciencedirect.com/science/article/pii/S0301421512009512">Bridge, G. Bouzarovski, S. Bradshaw, M. & Eyre, N. (2013). Geographies of energy transition: space, place and the low-carbon economy. Energy Policy 53: 331-340. URL: http://www.sciencedirect.com/science/article/pii/S0301421512009512</ref><ref name="Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf">Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf</ref>. <br/> | + | The histories of energy transitions, development of economies and industrial civilizations, all go hand in hand<ref name="Bridge, G. Bouzarovski, S. Bradshaw, M. & Eyre, N. (2013). Geographies of energy transition: space, place and the low-carbon economy. Energy Policy 53: 331-340. URL: http://www.sciencedirect.com/science/article/pii/S0301421512009512">Bridge, G. Bouzarovski, S. Bradshaw, M. & Eyre, N. (2013). Geographies of energy transition: space, place and the low-carbon economy. Energy Policy 53: 331-340. URL: http://www.sciencedirect.com/science/article/pii/S0301421512009512</ref><ref name="Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf">Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf</ref>. Going back in time, people only needed to cover their basic needs, such as food, which -at the very beginning- was met by using firewood for cooking and heating<ref name="Bridge, G. Bouzarovski, S. Bradshaw, M. & Eyre, N. (2013). Geographies of energy transition: space, place and the low-carbon economy. Energy Policy 53: 331-340. URL: http://www.sciencedirect.com/science/article/pii/S0301421512009512">Bridge, G. Bouzarovski, S. Bradshaw, M. & Eyre, N. (2013). Geographies of energy transition: space, place and the low-carbon economy. Energy Policy 53: 331-340. URL: http://www.sciencedirect.com/science/article/pii/S0301421512009512</ref><ref name="Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf">Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf</ref>. Further in time, people started <span style="background-color: rgb(255, 255, 255)">practicing agriculture in the first formed human communities, essentially depending on the sun for that practice, in combination with biomass</span><ref name="Bridge, G. Bouzarovski, S. Bradshaw, M. & Eyre, N. (2013). Geographies of energy transition: space, place and the low-carbon economy. Energy Policy 53: 331-340. URL: http://www.sciencedirect.com/science/article/pii/S0301421512009512">Bridge, G. Bouzarovski, S. Bradshaw, M. & Eyre, N. (2013). Geographies of energy transition: space, place and the low-carbon economy. Energy Policy 53: 331-340. URL: http://www.sciencedirect.com/science/article/pii/S0301421512009512</ref><ref name="Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf">Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf</ref>. <br/> |
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| − | '''Scale '''<span style="font-size: 13.6px; background-color: rgb(255, 255, 255);">is also an important issue. This is due to the fact that fossil-fuel technologies have been developed, improved and manufactured on an increasing scale for a century. This is not yet the case for </span><span data-scayt_word="renewables" data-scaytid="20" style="font-size: 13.6px; background-color: rgb(255, 255, 255);">renewables</span><ref name="Griffith-Jones, S., Ocampo, J. A. & Spratt, S., 2011. Financing Renewable Energy in Developing Countries: Mechanisms and Responsibilities. Available at: http://erd-report.eu/erd/report_2011/documents/dev-11-001-11researchpapers_griffith-jones-ocampo-spratt.pdf">Griffith-Jones, S., Ocampo, J. A. & Spratt, S., 2011. Financing Renewable Energy in Developing Countries: Mechanisms and Responsibilities. Available at: http://erd-report.eu/erd/report_2011/documents/dev-11-001-11researchpapers_griffith-jones-ocampo-spratt.pdf</ref><span style="background-color: rgb(255, 255, 255); line-height: 1.5em; font-size: 0.85em;">.</span><br/> | + | '''Scale '''is also an important issue. This is due to the fact that fossil-fuel technologies have been developed, improved and manufactured on an increasing scale for a century. This is not yet the case for renewables<ref name="Griffith-Jones, S., Ocampo, J. A. & Spratt, S., 2011. Financing Renewable Energy in Developing Countries: Mechanisms and Responsibilities. Available at: http://erd-report.eu/erd/report_2011/documents/dev-11-001-11researchpapers_griffith-jones-ocampo-spratt.pdf">Griffith-Jones, S., Ocampo, J. A. & Spratt, S., 2011. Financing Renewable Energy in Developing Countries: Mechanisms and Responsibilities. Available at: http://erd-report.eu/erd/report_2011/documents/dev-11-001-11researchpapers_griffith-jones-ocampo-spratt.pdf</ref>.<br/> |
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| − | | + | = Rationale for Renewables<br/> = |
| − | = Rationale for <span data-scaytid="4" data-scayt_word="renewables">Renewables</span><br/> = | + | |
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| | Reasons which have contributed to the acceleration of both public and private investment in renewable energy<ref name="Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf">Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf</ref><ref name="Meier, P. Vagliasindi, M. Imran, M. Eberhard, A. & Siyambalapitiya, T. (2015). The Design and Sustainability of Renewable Energy Incentives: An Economic Analysis. Retrieved From: https://bit.ly/2MYDllY">Meier, P. Vagliasindi, M. Imran, M. Eberhard, A. & Siyambalapitiya, T. (2015). The Design and Sustainability of Renewable Energy Incentives: An Economic Analysis. Retrieved From: https://bit.ly/2MYDllY</ref>: | | Reasons which have contributed to the acceleration of both public and private investment in renewable energy<ref name="Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf">Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf</ref><ref name="Meier, P. Vagliasindi, M. Imran, M. Eberhard, A. & Siyambalapitiya, T. (2015). The Design and Sustainability of Renewable Energy Incentives: An Economic Analysis. Retrieved From: https://bit.ly/2MYDllY">Meier, P. Vagliasindi, M. Imran, M. Eberhard, A. & Siyambalapitiya, T. (2015). The Design and Sustainability of Renewable Energy Incentives: An Economic Analysis. Retrieved From: https://bit.ly/2MYDllY</ref>: |
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| − | Utilizing <span data-scaytid="2" data-scayt_word="renewables">renewables</span> would help to avoid these problems, create new job opportunities and reduce the drain on hard currency for poorer countries. Because conventional fuels have received long-term subsidies in the past, it is vital that governments support the development of <span data-scaytid="3" data-scayt_word="renewables">renewables</span> in the form of financial incentives that can create a level playing field <ref name="United Nations Environment Programme Finance Initiative (UNEP FI), 2004. CEO briefing - Renewable Energy, Geneva, Switzerland: United Nations Environment Programme Finance Initiative (UNEP FI).">United Nations Environment Programme Finance Initiative (UNEP FI), 2004. CEO briefing - Renewable Energy, Geneva, Switzerland: United Nations Environment Programme Finance Initiative (UNEP FI).</ref>. | + | Utilizing renewables would help to avoid these problems, create new job opportunities and reduce the drain on hard currency for poorer countries. Because conventional fuels have received long-term subsidies in the past, it is vital that governments support the development of renewables in the form of financial incentives that can create a level playing field <ref name="United Nations Environment Programme Finance Initiative (UNEP FI), 2004. CEO briefing - Renewable Energy, Geneva, Switzerland: United Nations Environment Programme Finance Initiative (UNEP FI).">United Nations Environment Programme Finance Initiative (UNEP FI), 2004. CEO briefing - Renewable Energy, Geneva, Switzerland: United Nations Environment Programme Finance Initiative (UNEP FI).</ref>. |
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| − | The future of the <span data-scaytid="8" data-scayt_word="renewables">renewables</span> industry depends on finance, risk-return profiles, business models, <span style="background-color: rgb(255, 255, 255);">lifetime's </span>investment and a sum of other economic, policy and social factors. Many new [[Portal:Financing and Funding|sources of finance]] are possible such as insurance funds, pension funds and sovereign wealth funds along with new mechanisms for financial risk mitigation. Many new business models are also possible for local energy services, utility services, transport, community and cooperative ownership, and rural energy services <ref name="Appleyard, D., March 2013. The Future of Renewables: Economic, Policy and Social Impications - Renewable Energy World International. Available at: http://www.renewableenergyworld.com/rea/news/article/2013/03/from-the-editor20">Appleyard, D., March 2013. The Future of Renewables: Economic, Policy and Social Impications - Renewable Energy World International. Available at: http://www.renewableenergyworld.com/rea/news/article/2013/03/from-the-editor20</ref>. | + | The future of the renewables industry depends on finance, risk-return profiles, business models, <span style="background-color: rgb(255, 255, 255)">lifetime's </span>investment and a sum of other economic, policy and social factors. Many new [[Portal:Financing and Funding|sources of finance]] are possible such as insurance funds, pension funds and sovereign wealth funds along with new mechanisms for financial risk mitigation. Many new business models are also possible for local energy services, utility services, transport, community and cooperative ownership, and rural energy services <ref name="Appleyard, D., March 2013. The Future of Renewables: Economic, Policy and Social Impications - Renewable Energy World International. Available at: http://www.renewableenergyworld.com/rea/news/article/2013/03/from-the-editor20">Appleyard, D., March 2013. The Future of Renewables: Economic, Policy and Social Impications - Renewable Energy World International. Available at: http://www.renewableenergyworld.com/rea/news/article/2013/03/from-the-editor20</ref>. |
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| | + | == Global Investements in Renewables == |
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| | In 2011, the global investment in renewable power and fuels increased to a new record. Significantly, developing economies made up 35% of this total investment <ref name="Frankfurt School UNEP Collaborating Centre for Climate & Sustainable Energy Finance, 2012. Global Trends in Renewable Energy Investment 2012, Frankfurt am Main, Germany: Frankfurt School UNEP Collaborating Centre for Climate & Sustainable Energy Finance.">Frankfurt School UNEP Collaborating Centre for Climate & Sustainable Energy Finance, 2012. Global Trends in Renewable Energy Investment 2012, Frankfurt am Main, Germany: Frankfurt School UNEP Collaborating Centre for Climate & Sustainable Energy Finance.</ref>. In addition, the whole period 2004-2017 has witnessed a remarkable increase in investments in renewables, either in different sectors, or for different technologies, in different countries with different economic systems, as illustrated in the following figures<ref name="Frankfurt School & United Nations Environment Programme (FS-UNEP Collaborating Centre). (2018). Global Trends in Renewable Energy Investment 2018. Retrieved From: https://europa.eu/capacity4dev/search?text=Renewable%20energy%20investment">Frankfurt School & United Nations Environment Programme (FS-UNEP Collaborating Centre). (2018). Global Trends in Renewable Energy Investment 2018. Retrieved From: https://europa.eu/capacity4dev/search?text=Renewable%20energy%20investment</ref>. However, recent years have seen investments in renewable energy in the power sector stagnate. Yet, renewable power generation capacity continued to be installed at record pace mainly thanks to continuously falling technology cost. Notable trends for 2018 were that investments continued to be geographically more widely spread, with 29 countries now recording USD 1bn or more in investments (25 countries in 2017), and an additional 14 countries exceeding USD 500m.<ref name="Frankfurt School of Finance & Management – UNEP Collaborating Centre (2019). Global Trends in Renewable Energy Investment 2019. http://fs-unep-centre.org/research/report">Frankfurt School of Finance & Management – UNEP Collaborating Centre (2019). Global Trends in Renewable Energy Investment 2019. http://fs-unep-centre.org/research/report </ref> 2018 also marked the fourth year in a row, where investments in developing countries were higher than in developed countries.<ref name="Frankfurt School of Finance & Management – UNEP Collaborating Centre (2019). Global Trends in Renewable Energy Investment 2019. http://fs-unep-centre.org/research/report">Frankfurt School of Finance & Management – UNEP Collaborating Centre (2019). Global Trends in Renewable Energy Investment 2019. http://fs-unep-centre.org/research/report </ref><br/> | | In 2011, the global investment in renewable power and fuels increased to a new record. Significantly, developing economies made up 35% of this total investment <ref name="Frankfurt School UNEP Collaborating Centre for Climate & Sustainable Energy Finance, 2012. Global Trends in Renewable Energy Investment 2012, Frankfurt am Main, Germany: Frankfurt School UNEP Collaborating Centre for Climate & Sustainable Energy Finance.">Frankfurt School UNEP Collaborating Centre for Climate & Sustainable Energy Finance, 2012. Global Trends in Renewable Energy Investment 2012, Frankfurt am Main, Germany: Frankfurt School UNEP Collaborating Centre for Climate & Sustainable Energy Finance.</ref>. In addition, the whole period 2004-2017 has witnessed a remarkable increase in investments in renewables, either in different sectors, or for different technologies, in different countries with different economic systems, as illustrated in the following figures<ref name="Frankfurt School & United Nations Environment Programme (FS-UNEP Collaborating Centre). (2018). Global Trends in Renewable Energy Investment 2018. Retrieved From: https://europa.eu/capacity4dev/search?text=Renewable%20energy%20investment">Frankfurt School & United Nations Environment Programme (FS-UNEP Collaborating Centre). (2018). Global Trends in Renewable Energy Investment 2018. Retrieved From: https://europa.eu/capacity4dev/search?text=Renewable%20energy%20investment</ref>. However, recent years have seen investments in renewable energy in the power sector stagnate. Yet, renewable power generation capacity continued to be installed at record pace mainly thanks to continuously falling technology cost. Notable trends for 2018 were that investments continued to be geographically more widely spread, with 29 countries now recording USD 1bn or more in investments (25 countries in 2017), and an additional 14 countries exceeding USD 500m.<ref name="Frankfurt School of Finance & Management – UNEP Collaborating Centre (2019). Global Trends in Renewable Energy Investment 2019. http://fs-unep-centre.org/research/report">Frankfurt School of Finance & Management – UNEP Collaborating Centre (2019). Global Trends in Renewable Energy Investment 2019. http://fs-unep-centre.org/research/report </ref> 2018 also marked the fourth year in a row, where investments in developing countries were higher than in developed countries.<ref name="Frankfurt School of Finance & Management – UNEP Collaborating Centre (2019). Global Trends in Renewable Energy Investment 2019. http://fs-unep-centre.org/research/report">Frankfurt School of Finance & Management – UNEP Collaborating Centre (2019). Global Trends in Renewable Energy Investment 2019. http://fs-unep-centre.org/research/report </ref><br/> |
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| | [[File:Acquisition transactions RE by sector 2004-2018.jpg|thumb|center|500px|alt=Acquisition transactions RE by sector 2004-2018.jpg]][[File:Renewable energy investments in developed and developing countries 2004-2018.jpg|thumb|center|500px|alt=Renewable energy investments in developed and developing countries 2004-2018.jpg]]<br/> | | [[File:Acquisition transactions RE by sector 2004-2018.jpg|thumb|center|500px|alt=Acquisition transactions RE by sector 2004-2018.jpg]][[File:Renewable energy investments in developed and developing countries 2004-2018.jpg|thumb|center|500px|alt=Renewable energy investments in developed and developing countries 2004-2018.jpg]]<br/> |
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| − | [[File:Renewable energy investments 2019 by region.jpg|thumb|center|500px|alt=Renewable energy investments 2019 by region.jpg]][[File:Renewable energy investments by technology 2019.jpg|thumb|center|500px|alt=Renewable energy investments by technology 2019.jpg]]<br/> | + | [[File:Renewable energy investments 2019 by region.jpg|thumb|center|500px|alt=Renewable energy investments 2019 by region.jpg]][[File:Renewable energy investments by technology 2019.jpg|thumb|center|500px|alt=Renewable energy investments by technology 2019.jpg]] |
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| − | <br/><br/> | + | == Barriers for Renewables<br/> == |
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| − | Renewable energy technologies (<span data-scaytid="12" data-scayt_word="rets">RETs</span>) continue to face a number of '''[[Barriers and Risks to Renewable Energy Financing|barriers]]. '''However, the major challenge is mainly economic, as the issue of renewable energy technologies' costs is vital and central for the prediction of how rapidly the current energy transition will be taking place<ref name="Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf">Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf</ref><ref name="Meier, P. Vagliasindi, M. Imran, M. Eberhard, A. & Siyambalapitiya, T. (2015). The Design and Sustainability of Renewable Energy Incentives: An Economic Analysis. Retrieved From: https://openknowledge.worldbank.org/bitstream/handle/10986/20524/922240PUB0978100Box385358B00PUBLIC0.pdf?sequence=1">Meier, P. Vagliasindi, M. Imran, M. Eberhard, A. & Siyambalapitiya, T. (2015). The Design and Sustainability of Renewable Energy Incentives: An Economic Analysis. Retrieved From: https://openknowledge.worldbank.org/bitstream/handle/10986/20524/922240PUB0978100Box385358B00PUBLIC0.pdf?sequence=1</ref>. The costs include: infrastructure investment, day-to-day operations, market costs of supply and the environmental costs of the different energy sources<ref name="Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf">Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf</ref><ref name="Meier, P. Vagliasindi, M. Imran, M. Eberhard, A. & Siyambalapitiya, T. (2015). The Design and Sustainability of Renewable Energy Incentives: An Economic Analysis. Retrieved From: https://openknowledge.worldbank.org/bitstream/handle/10986/20524/922240PUB0978100Box385358B00PUBLIC0.pdf?sequence=1">Meier, P. Vagliasindi, M. Imran, M. Eberhard, A. & Siyambalapitiya, T. (2015). The Design and Sustainability of Renewable Energy Incentives: An Economic Analysis. Retrieved From: https://openknowledge.worldbank.org/bitstream/handle/10986/20524/922240PUB0978100Box385358B00PUBLIC0.pdf?sequence=1</ref>. | + | Renewable energy technologies (RETs) continue to face a number of '''[[Barriers and Risks to Renewable Energy Financing|barriers]]. '''However, the major challenge is mainly economic, as the issue of renewable energy technologies' costs is vital and central for the prediction of how rapidly the current energy transition will be taking place<ref name="Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf">Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf</ref><ref name="Meier, P. Vagliasindi, M. Imran, M. Eberhard, A. & Siyambalapitiya, T. (2015). The Design and Sustainability of Renewable Energy Incentives: An Economic Analysis. Retrieved From: https://openknowledge.worldbank.org/bitstream/handle/10986/20524/922240PUB0978100Box385358B00PUBLIC0.pdf?sequence=1">Meier, P. Vagliasindi, M. Imran, M. Eberhard, A. & Siyambalapitiya, T. (2015). The Design and Sustainability of Renewable Energy Incentives: An Economic Analysis. Retrieved From: https://openknowledge.worldbank.org/bitstream/handle/10986/20524/922240PUB0978100Box385358B00PUBLIC0.pdf?sequence=1</ref>. The costs include: infrastructure investment, day-to-day operations, market costs of supply and the environmental costs of the different energy sources<ref name="Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf">Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf</ref><ref name="Meier, P. Vagliasindi, M. Imran, M. Eberhard, A. & Siyambalapitiya, T. (2015). The Design and Sustainability of Renewable Energy Incentives: An Economic Analysis. Retrieved From: https://openknowledge.worldbank.org/bitstream/handle/10986/20524/922240PUB0978100Box385358B00PUBLIC0.pdf?sequence=1">Meier, P. Vagliasindi, M. Imran, M. Eberhard, A. & Siyambalapitiya, T. (2015). The Design and Sustainability of Renewable Energy Incentives: An Economic Analysis. Retrieved From: https://openknowledge.worldbank.org/bitstream/handle/10986/20524/922240PUB0978100Box385358B00PUBLIC0.pdf?sequence=1</ref>. |
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| − | | + | = <span style="font-size: 19px; line-height: 23px">Economic Rationale for Renewables</span> = |
| − | = <span style="font-size: 19px; line-height: 23px">Economic Rationale for Renewables</span> = | + | |
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| | While by 2014 the world was getting about 80% of its electricity supplies from fossil fuels<ref name="Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf">Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf</ref>, that percentage has gone down 3.5-4% only within 3-4 years<ref name="Meier, P. Vagliasindi, M. Imran, M. Eberhard, A. & Siyambalapitiya, T. (2015). The Design and Sustainability of Renewable Energy Incentives: An Economic Analysis. Retrieved From: https://openknowledge.worldbank.org/bitstream/handle/10986/20524/922240PUB0978100Box385358B00PUBLIC0.pdf?sequence=1">Meier, P. Vagliasindi, M. Imran, M. Eberhard, A. & Siyambalapitiya, T. (2015). The Design and Sustainability of Renewable Energy Incentives: An Economic Analysis. Retrieved From: https://openknowledge.worldbank.org/bitstream/handle/10986/20524/922240PUB0978100Box385358B00PUBLIC0.pdf?sequence=1</ref><ref name="International Renewable Energy Agency (IRENA). International Energy Agency (IEA). & Renewable Energy Policy Network for the 21st Century (REN21). (2018). Renewable Energy Policies in a Time of Transition. Retrieved From: http://www.ren21.net/wp-content/uploads/2018/04/17-8622_Policy_FullReport_web_.pdf">International Renewable Energy Agency (IRENA). International Energy Agency (IEA). & Renewable Energy Policy Network for the 21st Century (REN21). (2018). Renewable Energy Policies in a Time of Transition. Retrieved From: http://www.ren21.net/wp-content/uploads/2018/04/17-8622_Policy_FullReport_web_.pdf</ref>. In 2017/18 fossil fuels contributed approximately 76.5% to the global electricity supply, reflecting the rise in the global renewables' market<ref name="Meier, P. Vagliasindi, M. Imran, M. Eberhard, A. & Siyambalapitiya, T. (2015). The Design and Sustainability of Renewable Energy Incentives: An Economic Analysis. Retrieved From: https://openknowledge.worldbank.org/bitstream/handle/10986/20524/922240PUB0978100Box385358B00PUBLIC0.pdf?sequence=1">Meier, P. Vagliasindi, M. Imran, M. Eberhard, A. & Siyambalapitiya, T. (2015). The Design and Sustainability of Renewable Energy Incentives: An Economic Analysis. Retrieved From: https://openknowledge.worldbank.org/bitstream/handle/10986/20524/922240PUB0978100Box385358B00PUBLIC0.pdf?sequence=1</ref><ref name="International Renewable Energy Agency (IRENA). International Energy Agency (IEA). & Renewable Energy Policy Network for the 21st Century (REN21). (2018). Renewable Energy Policies in a Time of Transition. Retrieved From: http://www.ren21.net/wp-content/uploads/2018/04/17-8622_Policy_FullReport_web_.pdf">International Renewable Energy Agency (IRENA). International Energy Agency (IEA). & Renewable Energy Policy Network for the 21st Century (REN21). (2018). Renewable Energy Policies in a Time of Transition. Retrieved From: http://www.ren21.net/wp-content/uploads/2018/04/17-8622_Policy_FullReport_web_.pdf</ref>.<br/> | | While by 2014 the world was getting about 80% of its electricity supplies from fossil fuels<ref name="Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf">Timmons, D. Harris, J. M. & Roach, B. (2014). The Economics of Renewable Energy. Retrieved From: https://ase.tufts.edu/gdae/education_materials/modules/RenewableEnergyEcon.pdf</ref>, that percentage has gone down 3.5-4% only within 3-4 years<ref name="Meier, P. Vagliasindi, M. Imran, M. Eberhard, A. & Siyambalapitiya, T. (2015). The Design and Sustainability of Renewable Energy Incentives: An Economic Analysis. Retrieved From: https://openknowledge.worldbank.org/bitstream/handle/10986/20524/922240PUB0978100Box385358B00PUBLIC0.pdf?sequence=1">Meier, P. Vagliasindi, M. Imran, M. Eberhard, A. & Siyambalapitiya, T. (2015). The Design and Sustainability of Renewable Energy Incentives: An Economic Analysis. Retrieved From: https://openknowledge.worldbank.org/bitstream/handle/10986/20524/922240PUB0978100Box385358B00PUBLIC0.pdf?sequence=1</ref><ref name="International Renewable Energy Agency (IRENA). International Energy Agency (IEA). & Renewable Energy Policy Network for the 21st Century (REN21). (2018). Renewable Energy Policies in a Time of Transition. Retrieved From: http://www.ren21.net/wp-content/uploads/2018/04/17-8622_Policy_FullReport_web_.pdf">International Renewable Energy Agency (IRENA). International Energy Agency (IEA). & Renewable Energy Policy Network for the 21st Century (REN21). (2018). Renewable Energy Policies in a Time of Transition. Retrieved From: http://www.ren21.net/wp-content/uploads/2018/04/17-8622_Policy_FullReport_web_.pdf</ref>. In 2017/18 fossil fuels contributed approximately 76.5% to the global electricity supply, reflecting the rise in the global renewables' market<ref name="Meier, P. Vagliasindi, M. Imran, M. Eberhard, A. & Siyambalapitiya, T. (2015). The Design and Sustainability of Renewable Energy Incentives: An Economic Analysis. Retrieved From: https://openknowledge.worldbank.org/bitstream/handle/10986/20524/922240PUB0978100Box385358B00PUBLIC0.pdf?sequence=1">Meier, P. Vagliasindi, M. Imran, M. Eberhard, A. & Siyambalapitiya, T. (2015). The Design and Sustainability of Renewable Energy Incentives: An Economic Analysis. Retrieved From: https://openknowledge.worldbank.org/bitstream/handle/10986/20524/922240PUB0978100Box385358B00PUBLIC0.pdf?sequence=1</ref><ref name="International Renewable Energy Agency (IRENA). International Energy Agency (IEA). & Renewable Energy Policy Network for the 21st Century (REN21). (2018). Renewable Energy Policies in a Time of Transition. Retrieved From: http://www.ren21.net/wp-content/uploads/2018/04/17-8622_Policy_FullReport_web_.pdf">International Renewable Energy Agency (IRENA). International Energy Agency (IEA). & Renewable Energy Policy Network for the 21st Century (REN21). (2018). Renewable Energy Policies in a Time of Transition. Retrieved From: http://www.ren21.net/wp-content/uploads/2018/04/17-8622_Policy_FullReport_web_.pdf</ref>.<br/> |
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| − | Onshore wind is already one of t<span style="background-color: rgb(255, 255, 255);">he most competitive sources for generation capacity. Recent auctions in Brazil, Canada, Germany, India, Mexico and Morocco have resulted in LCOE as low as USD 0.03/kWh<ref name="International Renewable Energy Agency (IRENA). (2017). Renewable Power Generation Costs in 2017. Retrieve From: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Jan/IRENA_2017_Power_Costs_2018.pdf">International Renewable Energy Agency (IRENA). (2017). Renewable Power Generation Costs in 2017. Retrieve From: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Jan/IRENA_2017_Power_Costs_2018.pdf</ref>.</span> | + | Onshore wind is already one of t<span style="background-color: rgb(255, 255, 255)">he most competitive sources for generation capacity. Recent auctions in Brazil, Canada, Germany, India, Mexico and Morocco have resulted in LCOE as low as USD 0.03/kWh<ref name="International Renewable Energy Agency (IRENA). (2017). Renewable Power Generation Costs in 2017. Retrieve From: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Jan/IRENA_2017_Power_Costs_2018.pdf">International Renewable Energy Agency (IRENA). (2017). Renewable Power Generation Costs in 2017. Retrieve From: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Jan/IRENA_2017_Power_Costs_2018.pdf</ref>.</span> |
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| | |+ Table.1: Costs' Fall Indicators for Solar & Wind Technologies<ref name="International Renewable Energy Agency (IRENA). (2017). Renewable Power Generation Costs in 2017. Retrieve From: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Jan/IRENA_2017_Power_Costs_2018.pdf">International Renewable Energy Agency (IRENA). (2017). Renewable Power Generation Costs in 2017. Retrieve From: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Jan/IRENA_2017_Power_Costs_2018.pdf</ref> | | |+ Table.1: Costs' Fall Indicators for Solar & Wind Technologies<ref name="International Renewable Energy Agency (IRENA). (2017). Renewable Power Generation Costs in 2017. Retrieve From: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Jan/IRENA_2017_Power_Costs_2018.pdf">International Renewable Energy Agency (IRENA). (2017). Renewable Power Generation Costs in 2017. Retrieve From: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Jan/IRENA_2017_Power_Costs_2018.pdf</ref> |
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| | |+ Table.2: The rise of installed RE total capacity (MW) during the past decade worldwide<ref name="International Renewable Energy Agency (IRENA). (2018). Renewable Capacity Statistics. Retrieved From: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Mar/IRENA_RE_Capacity_Statistics_2018.pdf">International Renewable Energy Agency (IRENA). (2018). Renewable Capacity Statistics. Retrieved From: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Mar/IRENA_RE_Capacity_Statistics_2018.pdf</ref> | | |+ Table.2: The rise of installed RE total capacity (MW) during the past decade worldwide<ref name="International Renewable Energy Agency (IRENA). (2018). Renewable Capacity Statistics. Retrieved From: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Mar/IRENA_RE_Capacity_Statistics_2018.pdf">International Renewable Energy Agency (IRENA). (2018). Renewable Capacity Statistics. Retrieved From: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Mar/IRENA_RE_Capacity_Statistics_2018.pdf</ref> |
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| | == Costs of Fossil Fuels == | | == Costs of Fossil Fuels == |
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| | <u>Costs relative to fossil fuels are also important particularly because:</u> | | <u>Costs relative to fossil fuels are also important particularly because:</u> |
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| − | '''1. Fossil-fuel energy does not reflect its full social costs. '''<br/> | + | '''1. Fossil-fuel energy does not reflect its full social and environmental costs. '''<br/> |
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| | *Climate change has been described as the "biggest market failure in history" (Stern Review, 2006) because the environmental costs associated with carbon emissions are not included in market prices.<br/> | | *Climate change has been described as the "biggest market failure in history" (Stern Review, 2006) because the environmental costs associated with carbon emissions are not included in market prices.<br/> |
| | *Furthermore, fossil fuels are [[Subsidies|subsidized]] for about US$300 billion per year. Removing theses subsidies and incorporating externalities into fossil fuel costs would dramatically change relative costs<ref name="Griffith-Jones, S., Ocampo, J. A. & Spratt, S., 2011. Financing Renewable Energy in Developing Countries: Mechanisms and Responsibilities. Available at: http://erd-report.eu/erd/report_2011/documents/dev-11-001-11researchpapers_griffith-jones-ocampo-spratt.pdf">Griffith-Jones, S., Ocampo, J. A. & Spratt, S., 2011. Financing Renewable Energy in Developing Countries: Mechanisms and Responsibilities. Available at: http://erd-report.eu/erd/report_2011/documents/dev-11-001-11researchpapers_griffith-jones-ocampo-spratt.pdf</ref>. | | *Furthermore, fossil fuels are [[Subsidies|subsidized]] for about US$300 billion per year. Removing theses subsidies and incorporating externalities into fossil fuel costs would dramatically change relative costs<ref name="Griffith-Jones, S., Ocampo, J. A. & Spratt, S., 2011. Financing Renewable Energy in Developing Countries: Mechanisms and Responsibilities. Available at: http://erd-report.eu/erd/report_2011/documents/dev-11-001-11researchpapers_griffith-jones-ocampo-spratt.pdf">Griffith-Jones, S., Ocampo, J. A. & Spratt, S., 2011. Financing Renewable Energy in Developing Countries: Mechanisms and Responsibilities. Available at: http://erd-report.eu/erd/report_2011/documents/dev-11-001-11researchpapers_griffith-jones-ocampo-spratt.pdf</ref>. |
| | + | *An IMF working paper analysing 35 countries also found that fossil fuel subsidies are inefficient in supporting the poor with 93% of subsidies going to the top 60% of income groups.<ref name="Coady, D., Flamini, V. & Sears, L. (2015) IMIF Working Paper: The Unequal Benefits of Fuel Subsidies Revisited: Evidence for Developing Countries. https://www.imf.org/external/pubs/ft/wp/2015/wp15250.pdf">Coady, D., Flamini, V. & Sears, L. (2015) IMIF Working Paper: The Unequal Benefits of Fuel Subsidies Revisited: Evidence for Developing Countries. https://www.imf.org/external/pubs/ft/wp/2015/wp15250.pdf </ref><br/> |
| | *Also the external costs which are related to the use of fossil fuels, stemming from different causes: pollution and environmental degradation as a consequence of extraction of resources, indoor and outdoor air pollution, resulting from direct fuel combustion, as well as non-combustion emissions (e.g. industrial processes)<ref name="Markandya, A. Saygin, D. Miketa, A. Gielen, D. & Wagner, N. (2016). The True Cost of Fossil Fuels: Saving on the Externalities of Air Pollution and Climate Change. Retrieved From: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2016/IRENA_REmap_externality_brief_2016.pdf">Markandya, A. Saygin, D. Miketa, A. Gielen, D. & Wagner, N. (2016). The True Cost of Fossil Fuels: Saving on the Externalities of Air Pollution and Climate Change. Retrieved From: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2016/IRENA_REmap_externality_brief_2016.pdf</ref>. | | *Also the external costs which are related to the use of fossil fuels, stemming from different causes: pollution and environmental degradation as a consequence of extraction of resources, indoor and outdoor air pollution, resulting from direct fuel combustion, as well as non-combustion emissions (e.g. industrial processes)<ref name="Markandya, A. Saygin, D. Miketa, A. Gielen, D. & Wagner, N. (2016). The True Cost of Fossil Fuels: Saving on the Externalities of Air Pollution and Climate Change. Retrieved From: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2016/IRENA_REmap_externality_brief_2016.pdf">Markandya, A. Saygin, D. Miketa, A. Gielen, D. & Wagner, N. (2016). The True Cost of Fossil Fuels: Saving on the Externalities of Air Pollution and Climate Change. Retrieved From: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2016/IRENA_REmap_externality_brief_2016.pdf</ref>. |
| | + | *Fossil fuel subsidies act as a negative price on carbon. Their removal has the potential to reduce CO<sub>2</sub>e-emissions by 6.4 to 8.2% by 2050 while resulting in significant fiscal savings.<ref name="International Institute for Sustainable Development (June 2019) Raising Ambition Through Fossil Fuel Subsidy Reform: Greenhouse gas emissions modelling results from 26 countries. https://www.iisd.org/library/raising-ambition-through-fossil-fuel-subsidy-reform ">International Institute for Sustainable Development (June 2019) Raising Ambition Through Fossil Fuel Subsidy Reform: Greenhouse gas emissions modelling results from 26 countries. https://www.iisd.org/library/raising-ambition-through-fossil-fuel-subsidy-reform </ref><br/><br/> |
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| | == Market Competition - Renewables V.s. Fossil Fuels == | | == Market Competition - Renewables V.s. Fossil Fuels == |
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| | |+ Table.3: Cost Development of RE different technologies<ref name="REN21. (2017). Renewables Global Futures Report: Great Debates towards 100% Renewable Energy. Retrieved From: http://www.ren21.net/wp-content/uploads/2017/10/GFR-Full-Report-2017_webversion_3.pdf">REN21. (2017). Renewables Global Futures Report: Great Debates towards 100% Renewable Energy. Retrieved From: http://www.ren21.net/wp-content/uploads/2017/10/GFR-Full-Report-2017_webversion_3.pdf</ref><ref name="Fraunhofer ISE. (2018). Levelized Cost of Electricity Renewable Energy Technologies. Retrieved From: https://www.ise.fraunhofer.de/content/dam/ise/en/documents/publications/studies/EN2018_Fraunhofer-ISE_LCOE_Renewable_Energy_Technologies.pdf">Fraunhofer ISE. (2018). Levelized Cost of Electricity Renewable Energy Technologies. Retrieved From: https://www.ise.fraunhofer.de/content/dam/ise/en/documents/publications/studies/EN2018_Fraunhofer-ISE_LCOE_Renewable_Energy_Technologies.pdf</ref><ref name="International Renewable Energy Agency (IRENA). (2017). Renewable Power Generation Costs in 2017. Retrieve From: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Jan/IRENA_2017_Power_Costs_2018.pdf">International Renewable Energy Agency (IRENA). (2017). Renewable Power Generation Costs in 2017. Retrieve From: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Jan/IRENA_2017_Power_Costs_2018.pdf</ref> | | |+ Table.3: Cost Development of RE different technologies<ref name="REN21. (2017). Renewables Global Futures Report: Great Debates towards 100% Renewable Energy. Retrieved From: http://www.ren21.net/wp-content/uploads/2017/10/GFR-Full-Report-2017_webversion_3.pdf">REN21. (2017). Renewables Global Futures Report: Great Debates towards 100% Renewable Energy. Retrieved From: http://www.ren21.net/wp-content/uploads/2017/10/GFR-Full-Report-2017_webversion_3.pdf</ref><ref name="Fraunhofer ISE. (2018). Levelized Cost of Electricity Renewable Energy Technologies. Retrieved From: https://www.ise.fraunhofer.de/content/dam/ise/en/documents/publications/studies/EN2018_Fraunhofer-ISE_LCOE_Renewable_Energy_Technologies.pdf">Fraunhofer ISE. (2018). Levelized Cost of Electricity Renewable Energy Technologies. Retrieved From: https://www.ise.fraunhofer.de/content/dam/ise/en/documents/publications/studies/EN2018_Fraunhofer-ISE_LCOE_Renewable_Energy_Technologies.pdf</ref><ref name="International Renewable Energy Agency (IRENA). (2017). Renewable Power Generation Costs in 2017. Retrieve From: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Jan/IRENA_2017_Power_Costs_2018.pdf">International Renewable Energy Agency (IRENA). (2017). Renewable Power Generation Costs in 2017. Retrieve From: https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Jan/IRENA_2017_Power_Costs_2018.pdf</ref> |
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| | ! scope="row" | Wind Power | | ! scope="row" | Wind Power |
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| − | *<span style="font-size: 13.6px;">Has been the most competitive renewable technology against fossil fuels technologies since 2015</span><br/> | + | *<span style="font-size: 13.6px">Has been the most competitive renewable technology against fossil fuels technologies since 2015</span><br/> |
| | *50% price drop 2010-2017 | | *50% price drop 2010-2017 |
| | *Onshore wind electricity costs have dropped by approximately 25% since 2010 | | *Onshore wind electricity costs have dropped by approximately 25% since 2010 |
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| − | = <span style="line-height: 30px; font-size: 22px;">Economically Accelerating the Energy Transition to Renewables</span><br/> = | + | = <span style="line-height: 30px; font-size: 22px">Economically Accelerating the Energy Transition to Renewables</span><br/> = |
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| | Though renewables' market is inclining, and most probably will do so for the coming decades, most of the recent reports suggest that it would still not be enough to meet the global goals by 2030. Therefore, the following section presents some strategies that can push and encourage investment in the sector. | | Though renewables' market is inclining, and most probably will do so for the coming decades, most of the recent reports suggest that it would still not be enough to meet the global goals by 2030. Therefore, the following section presents some strategies that can push and encourage investment in the sector. |
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| | #Reducing institutional barriers''':''' experience has shown that institutional dysfunction always leads to delays, consequently having a major impact on the economic value of the projects in hands. | | #Reducing institutional barriers''':''' experience has shown that institutional dysfunction always leads to delays, consequently having a major impact on the economic value of the projects in hands. |
| | #Grounding renewables in the economic analysis and applying market principles. | | #Grounding renewables in the economic analysis and applying market principles. |
| − | #Enhancing transmission grids and supporting transmission integration.<span style="font-size: 0.85em;"> </span> | + | #Enhancing transmission grids and supporting transmission integration.<span style="font-size: 0.85em"> </span> |
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Renewable energy (RE) technologies' market is on the rise, and the world is witnessing a new energy transition with many factors and drivers pushing it.
To properly understand this phenomenon, it is vital to apprehend the correlation between the development of economies and the different energy transitions through history. It is also important to understand the rationale behind the current transition to renewables and their economy, This article presents and discusses both points.
The histories of energy transitions, development of economies and industrial civilizations, all go hand in hand[1][2]. Going back in time, people only needed to cover their basic needs, such as food, which -at the very beginning- was met by using firewood for cooking and heating[1][2]. Further in time, people started practicing agriculture in the first formed human communities, essentially depending on the sun for that practice, in combination with biomass[1][2].
As economies evolved and developed into complex forms, firewood and other biomass were no lonager able to meet the increasing demand in energy[1][2].So people started turning into hydropower, then to coal during the 19th century, oil and natural gas in the 20th, in addition to nuclear that was introduced in mid-20th century as well[1][2].
Therefore, it is apprehendable that each critical change in the economic system -along history- was always accompanied with a major energy transition -and vice versa-, shifting from one major energy source to another[1][2]. Currently, while fossil fuels (coal, oil and natural gas) are the dominant energy sources, the transition is already taking place from these sources into renewables (solar, wind, hydro... etc.)[1][2].
Considering the added costs to mitigate, adapt to or fight the environmental side effects of using fossil fuels, renewables might be the only option that people/societies/governments have to adopt, in order to reform the current economic system –at least in the energy sector- into a new one.
Assuming that renewable energy sources will actually be able to take hold in the near future, then a few questions need to be argued and discussed beforehand: What renewable energy sources are available? How to determine an optimal renewable energy mix? How will optimum mixtures of renewable-energy sources differ based on location? How to determine and calculate the direct and external costs of renewable energy sources? How will the existing achievements of the renewable-energy sector affect the way energy is processed in current economy? What kind of changes in sectors as engineering, economy and policy would be needed to adapt to renewable energy sources?[2]
Economically, projections of energy sources’ prices and their technologies are vital for forecasting the economic options of the energy supply, also with few critical questions in mind: Should the choice of a technology be based on its current market price or because of its potential future cost reductions? Which technologies offer the most effective outcomes for specific applications? If the current technology is too expensive, should governmental subsidies help to achieve cost reduction for economic viability or is it better to wait for market forces –Smith’s invisible hands- to do the job?[4]
Reasons which have contributed to the acceleration of both public and private investment in renewable energy[2][5]:
Utilizing renewables would help to avoid these problems, create new job opportunities and reduce the drain on hard currency for poorer countries. Because conventional fuels have received long-term subsidies in the past, it is vital that governments support the development of renewables in the form of financial incentives that can create a level playing field [6].
The future of the renewables industry depends on finance, risk-return profiles, business models, lifetime's investment and a sum of other economic, policy and social factors. Many new sources of finance are possible such as insurance funds, pension funds and sovereign wealth funds along with new mechanisms for financial risk mitigation. Many new business models are also possible for local energy services, utility services, transport, community and cooperative ownership, and rural energy services [7].
In 2011, the global investment in renewable power and fuels increased to a new record. Significantly, developing economies made up 35% of this total investment [8]. In addition, the whole period 2004-2017 has witnessed a remarkable increase in investments in renewables, either in different sectors, or for different technologies, in different countries with different economic systems, as illustrated in the following figures[9]. However, recent years have seen investments in renewable energy in the power sector stagnate. Yet, renewable power generation capacity continued to be installed at record pace mainly thanks to continuously falling technology cost. Notable trends for 2018 were that investments continued to be geographically more widely spread, with 29 countries now recording USD 1bn or more in investments (25 countries in 2017), and an additional 14 countries exceeding USD 500m.[10] 2018 also marked the fourth year in a row, where investments in developing countries were higher than in developed countries.[10]
While by 2014 the world was getting about 80% of its electricity supplies from fossil fuels[2], that percentage has gone down 3.5-4% only within 3-4 years[11][12]. In 2017/18 fossil fuels contributed approximately 76.5% to the global electricity supply, reflecting the rise in the global renewables' market[11][12].
The cost advantage that fossil fuels used to have over renewable energy sources has been decreasing recently, with some renewable technologies (Solar PV, wind, hydropower) already competing fossil fuels directly on the financial frontier[2]. Furthermore, renewables' costs are expected to decline even further, and those of fossil fuels will incline[2]. The following two figures show that -while on one hand- the oil prices are on the rise during the 2000s, on the other hand, investments in renewables are on the rise during the same period, thus reflecting its competitiveness against oil in recent years.
The renewables' market development during the past 10-15 years had few moving factors, which can be summarized as follows:
According to the most recent reports on renewable energy technologies, from IRENA, REN21 and IEA, electricity costs from almost all the renewable projects that were commissioned in 2017, have continued to decline[13][17][4]. Projects of bioenergy power, hydropower, geothermal and onshore wind, which were commissioned in that year, have widely fallen into the generation costs' range of fossil-generated electricity, and furthermore, some of these projects have actually undercut those of fossil fuels-based ones[17].
The most common methodology for comparing different energy sources, is to calculate the Levelized Cost Of Energy (LCOE). LCOE measures lifetime costs, including building and operation of a power plant, divided by lifetime energy production/output[15][17][2].
As shown in the figure above, Global weighted LCOE of utility-scale solar PV has witnessed a remarkable drop (approximately 27%) since 2010, reaching USD 0.10/kWh for the new commissioned projects in 2017[17]. Under the right conditions, it will potentially decline to USD 0.03/kWh from 2018 onward[17].
On the other hand, many auctions predict that by 2020, both Concentrated Solar Power (CSP) & offshore wind would have the potential to provide electricity with LCOE within the range of USD 0.06 - 0.10/kWh[17].
The varying fall ranges in LCOE for solar and wind power in particular have been mainly driven by the reduction in total installment costs, which is affected by three main forces[17]:
Based on current installed projects and auction data, in combination with mass production increase and specific investment costs, electricity from renewables -sooner rather than later- will be cheaper than that from fossil fuels[15][17]. All the renewable power generation technologies are expected to fall within the fossil fuel cost range, with the majority having the potential to undercut it[15][17]. This will significantly lower the LCOE of all technologies, eventually leading to a market potential increase and development for renewables[15][17].
As the markets develop, the costs normally do as well, as both developments go hand in hand[4][2]. The previously mentioned factors push the market to increase its renewables' volume, leading to economies of scale. On one hand, this reduces the price and later the actual costs of the technology, while on the other hand, reduced prices increase market volumes, again producing economies of scale, eventually resulting in a feedback loop, that either way paves the path for renewables[4][17].
The continuous pressure on market prices and its margins is rapidly forcing the market to change, as renewables' costs have considerably declined and are still on the decline[4]. Their costs are expected to go down even further over the coming few years[12][4]. Furthermore, adding to renewables' economic evolution, both public commitments and the maturing technologies, investments in renewables have rapidly increased turning the renewables industry to a very competitive sector against other energy resources[4]. However, the competition is not only limited within the energy or power sector itself, but different renewables are even starting to compete against each other within the renewables' sector itself[12][4].
With costs of renewables are continuing to fall, drastically in solar PV, followed by wind and concentrated solar power closely behind, the global installed capacity has exponentially grown[12][4]. A world record amount of recently installed renewables' (especially solar PV, wind, CSP & hydro) capacity has been added in the past few years[12][4]. Thus adding up to almost two thirds of the all new generating capacity installed globally in 2016[12][4].
Renewables' power capacity investments have by far surpassed those of fossil fuels in the year 2017[12]. The renewable energy market has been catalyzed by increasing innovation, competition and policy support[12]. Hence, radical technological advances and sharp cost reduction in renewables' sector have been achieved, pushing renewables to outpace any other technology source[12].
Though renewables' market is inclining, and most probably will do so for the coming decades, most of the recent reports suggest that it would still not be enough to meet the global goals by 2030. Therefore, the following section presents some strategies that can push and encourage investment in the sector.
The following points provide a set of requirements and recommendations for a successful and more efficient cost reduction policies for renewables[11]:
A survey conducted by REN21 in their 2017's Renewables Global Future Report, resulted in a noticeable uncertainty regarding future projections of fossil fuels costs' development[4]. One third of the participating experts expected a rise from the 2015's recorded average of USD 52, to over USD 1000 in the near future while the second third completely disagreed with the first, and the final third remained uncertain and neutral with both opinions[4].
On the other hand, with the current market changes in the energy sector, and the remarkable technological achievements, especially for solar PV and wind technologies, the estimates of future renewables equipment cost were found to be more predictable, less risky with a significantly higher certainty than fossil fuels, as about 3/4 of the survey participants agreed that renewables' costs will continue to fall and in more accelerated fashion than that of fossil fuels[4].
Furthermore, the majority of the survey participants believed that the investments in renewables will continue rising along the coming decades, at least until 2050[4].
