Our demand for energy is huge. Our requirements include basics such as energy for heat, air conditioning and refrigeration. This rising electricity demand that was one of the key drivers for global Carbon Dioxide emissions (CO2e) from the power sector reaching a record high in 2018.
In addition, with digitally connected devices and the growing popularity of other new technologies such as electric vehicles (E.V.s) our electricity requirements are set to rise.
In anticipation of this one of the United Nations Sustainable Development Goals (7.2) aims to “substantially” increase the share of renewable energy in the global energy mix by 2030 [1].
For the last decade, renewable energy such as wind and solar power has played a key role in providing energy as well as reducing greenhouse gas emissions.
The International Renewable Energy Agency (IRENA) noted in 2017, that across 130 countries, total electricity generated from renewables was 6,191 terawatt-hours (TWh) - a 5.0% increase on the previous year [2].
But let’s provide some context about how strong our growing demand for power will be. If we maintain the level of carbon emissions from the power sector at its 2015 level and focus solely on renewable energy, it would have needed to grow more than twice as quickly than it actually did: by over 1,800 TWh over the past three years, rather than its actual growth of a little over 800 TWh [3].
A staggering number: that additional renewable generation of around 1,000 TWh is roughly equivalent to the entire renewable generation of China and the US combined in 2018 [4].
Instead, here’s a more realistic estimated breakdown by power source:
The International Energy Agency (IEA) anticipate global electricity demand grows at a minimum of 2.1% per year up to 2040 - that’s twice the rate of primary energy demand [5]. If we add to that lower carbon solutions, such as E.V.s, we’d be looking for a whopping 38,000 TWh (in total approximately 7% more, between now and 2040, than the minimum 2.1% growth per year).
So in order to fuel our energy consumption and decrease our CO2e we need to further develop, and scale, renewable energy technologies.
You could assume the USD12t divestment from fossil fuels would go into supporting, and expediting, the development and scale of renewable technologies. Unfortunately, the World Economic Forum indicated that global investment in renewable energy has actually been declining for the last two decades. In 2018 it fell, from its 2017 peak of USD326.3b, by 11.5% to USD288.9b, according to Bloomberg New Energy Finance. More recently, global investment in renewable energy dropped 14% in the first half of 2019 compared to the same period in 2018 [6].
The slower growth in renewable energy investment is mainly due to lower investment requirements for installing the same level of wind or solar power capacity, globally. So, despite the 11.5% decline in global investment in renewable energy in 2018 from the previous year, the newly installed capacity remained the same in both years at 171GW [7]. This is good news.
But while the fall in renewable energy investment isn’t a major cause for concern we should be worried that 2018 was the first time, since 2001, that growth in renewable power capacity failed to increase year-on-year. According to the International Energy Agency, new net capacity from renewable power sources increased by about 180 Gigawatts (GW) in 2018, the same as the previous year. That’s only around 60% of the net additions needed each year to limit global temperature rise well below 1.5 degrees [8].
You could also assume, given the size, infrastructure and money available in oil and gas companies that they would have seen the change in demand for alternative fuels and jumped on the band-wagon to support research and development in this area. In fact, oil companies do seem to be increasing their low-carbon investments each year. While they’re starting from a low baseline, rapid growth rates suggest that with sustained commitment, they could be quite large within a decade. For example, Total and BP each are prepared to spend USD500m per year on renewables over the next several decades. Total expects to grow its low-carbon business to 20% of its asset base over the next 20 years. But there has been criticism that they’re not doing enough at a speed that would enable us to mitigate climate change in the time we have left.
As you well know, expected returns will always be integral to an investment strategy. If available oil and gas investments have an expected return of 15% and low-carbon investments are only expected to make 7%, it’s likely more money will flow towards fossil fuels. Changing this reality will require major market and pricing shifts, which may have to be driven by government policies such as carbon taxes.
Failing this might be opportune for the lower socio-economic population who may be negatively impacted by the decrease in demand for electricity and resulting in increased prices. These higher costs might not be enough to justify a more costly move to renewable energy use, and may contribute to inhibiting this segment of the population’s conversion to renewable sources.
But the overwhelming consensus is that it’s clear that we need to do more.
Personally, we can affect changes in our own lives to promote this – an obvious choice is using public transport, or cycling, instead of driving.
It’s also important to continue to invest in all forms of renewable energy generation, as well as invest in the development and proliferation of smart electricity networks, clean heating and cooking, and other forms of energy efficiency.
New renewable technologies, once proven feasible, should be scaled up, and coupled with our fossil fuel divestment from our KiwiSaver savings and reducing our demand for products such as plastics made from fossil fuels, may help bring the world back on track to achieve long term climate goals.
[1] SDG.iisd.org, IRENA Report Finds 5% Increase in Renewable Energy Compared to 2016, August 2019
[2] Ibid.
[3] BP.com, BP statistical review of world energy 2019, June 2019
[4] Ibid.
[5] Iea.org, World energy outlook 2019, November 2019
[6] Weforum.org, Investment in renewable energy is slowing down. Here's why, September 2019
[7] Ibid.
[8] Ibid.
[9] Greenbiz.com, Oil companies aren’t making big investments in a low-carbon future yet, October 2019
