World energy mix may shift towards renewables faster than expected

Renewable energy is making headway in ways unanticipated just 5 years ago, according to a report from Citi Research. Some of the key details of Citi’s report–provocatively titled ‘Energy Darwinism–the evolution of the energy industry‘–were reported on by RenewEconomy‘s Giles Parkinson last week. The report comes with a confluence of other reports and news backing up the basic premise of Citi’s view: renewable energy uptake will accelerate faster than previously predicted. Importantly, Energy Darwinism was compiled with the view to guiding investment decisions for the estimated $37 trillion that will be invested in electricity infrastructure over the next 2 decades.

Citi Research is just one of a number of organisations recognised for their hard-nosed thinking and generally conservative dispositions about economic matters that have produced reports arriving at a similar conclusion: Renewable energy technology is not simply a green pipe dream. McKinsley’s ‘Darkest before dawn‘ projected that there will be huge growth in renewables (particularly wind and solar) thanks to the changing comparative value propositions between the burgeoning generation of ‘fuel-free’ technologies and the fossil fuel (and nuclear) plants that are the status quo. Even Goldman Sachs speculates that coal has a dwindling future in coal-dominated Australia. Meanwhile, as another sign of solar power’s bright future, Deutsch Bank anticipates that new solar PV capacity will exceed new wind in the US for the first time ever this year.

Across Australia, electricity demand is falling (down 7% from its 2008 peak) and renewable energy is taking up an increasingly part of the pie (South Australia already gets 30% of its electricity from renewable sources). Coal plants are shutting down, and RenewEconomy speculates that it may only be a matter of time before there is sufficient aggregate solar & wind power will be reliable to more or less serve the function that coal plants currently serve–providing base load power–much as Beyond Zero Emissions, UNSW’s Mark Diesendorf, and even the Australian Electricity Market Operator (AEMO) have shown is technologically possible.

Among the most noteworthy quotes that Mr Parkinson has extracted from the report highlights Citi’s view that the clean energy revolution has already begun:

This is not a ‘tomorrow’ story. We are already seeing utilities altering investment plans, even in the shale-driven U.S., with examples of utilities switching plans for peak-shaving gas plants, and installing solar farms in their stead. … The same is true for other fuels, for example the reluctance on the part of utilities to build new nuclear in the UK, or the avoidance of coal in some markets due to uncertainty over pricing, likely utilisation rates and or pollution. … Even in China, we believe that coal demand is likely to peak this decade as its generation mix starts to shift.

Distributed generation such as rooftop solar panels (already prolific and expected to continue expanding) and energy storage (currently almost nonexistent but poised for explosive growth) will play an important part in the world’s future energy mix, allowing more and more homes and businesses to generate and store their own electricity on-site. These technologies may harm the profitability of utilities, whose business models are threatened by such this shift. But they will also provide an alternative to grid electricity, which may suffer from price volatility stemming from growing global competition for conventional generation’s staple fuels–namely, coal and gas.

© 2013 Solar Choice Pty Ltd

James Martin II