Sources of renewable energy such as solar power and wind are getting just as cheap or even cheaper than the traditional carbon-intensive alternatives such as coal.
Morgan Stanley has released new research that suggests renewable energy will rise to be the most cost effective power source available in the world by the year 2020.
“Numerous key markets recently reached an inflection point where renewables have become the cheapest form of new power generation,” said the bank.
“A dynamic we see spreading to nearly every country we cover by 2020. The price of solar panels has fallen 50 per cent in less than two years (2016-17).”
Regardless of whether President Trump is successful in withdrawing the country from the Paris Climate Agreement made in 2015, the US could potentially still reduce more emissions than past agreed to with the other 194 countries.
According to the bank, “notwithstanding President Trump’s stated intention to withdraw the US from the Paris Agreement, we expect the US to exceed the Paris commitment of a 26-28 per cent reduction in US 2005-level carbon emissions by 2025,”.
Why has the cost in renewable energy suddenly dropped?
The lengths of wind turbine blades have dramatically increased over recent years due to the use of stronger material and more efficient designs.
Just a small increase in the length of the windmill blades can exponentially increase the output.
This is because the ‘swept area’ is a part of the square of the turbine’s radius. Maybe that geometry in high school was useful!
In terms of solar power, Morgan Stanely stated there is an oversupply of solar panels that is subsequently pushing prices of production down.
Last year solar installation grew 50 per cent, but the capacity still sits 28 per cent above installations.
There are two potential benefits other than being environmentally friendly for power companies to make investments in cost effective renewables.
“First, the ability to lower customer bills from utilising low-cost renewables can improve utilities’ regulatory environment and provide related investment opportunities in grid modernisation initiatives,” says the bank.
“Second, for utilities with large, competitive renewable development businesses, investment in renewable energy projects can generate attractive risk-adjusted returns.”