Category : Opinion, Commentary, Featured
As the community of nations scrambles to limit climate change to below 2 degrees Celsius, one question looms large: Can we scale up and mainstream renewable energy in a world addicted to fossil fuel?
The simple answer is yes, we can. But how do we get there and how fast can we make the transformation?
It is plainly clear that transitioning to a greener model of growth without renewables is not possible. Even though we expect that fossil fuels will continue in the short and medium terms to dominate world energy consumption — around 80 percent of world demand – there is plenty of room for renewable energy to grow.
Indeed, worldwide trends suggest that green energy is making very promising gains.
First, we are already seeing considerably greater production of renewables, compared to, say, 1990. In 2013, for the first time around the world there were more new plants for renewable electricity capacity than new plants for fossil fuels, leading Bloomberg to say that "fossil fuels just lost the race against renewables."
This is not a one-off anomaly. There are structural factors that will sustain this trend. If we keep this up, there is a likelihood that by 2030, new capacity from renewables will be 400 percent more than fossil fuels.
The challenge is how to make renewable energy sources spread out more evenly across regions and within regions. Take wind power, for example. According to one estimate, Asia Pacific will see annual wind power capacity more than double by 2025. But most of this growth will take place in Japan, Australia and India. Certainly, we need to see more developing countries in the Asia-Pacific region adopt wind power.
Most of the recent growth in solar power has been driven by China, and more recently, India. Countries such as Indonesia are next in line to ramp up solar capacity.
A new Global Green Growth Institute (GGGI) report that analyzed the conditions under which renewable energy investments were being made in Asia, suggests that the total available potential in this part of the world is equal to the total globally installed power capacity.
Second, we are seeing that the costs of renewables have dropped significantly. Cost and competitiveness have always been cited as key reasons NOT to go renewable. Yet in recent years, entrepreneurs and innovators have found ways to make renewables cheaper to produce and thus, cheaper to sell. New innovations have sprung up and they have become more accessible to more business, including in the developing countries. As a result, almost across the board, the costs of renewables have dropped — solar, hydro, wind and biomass. The most significant drop is perhaps solar.
A German photovoltaic rooftop system used to cost €14,000 ($15,700) per kilowatt in 1990. Nowadays, the price is less than one 10th that amount, which reminds me of a similar trend in the price of cellular phones and personal computers.
If this trend continues, it is entirely possible that in China, which is one of the world's most prolific coal energy users, solar power can become as cheap as coal very quickly in less than a decade.
Third, we are seeing more investment in renewables. Much more investment. This is in line with the rising trend of sustainable investing. Last year, for example, was a good year for renewables, which witnessed record a number of investments globally in renewables — almost $200 billion. What is interesting within that figure is that, for the first time ever, investments in renewable energy in developing countries were greater than those in developed countries.
It is also interesting that there is now more investment in renewables than in fossil fuels. According to one report, wind, solar and biomass, as sources for electricity, attracted $187 billion in investment worldwide, $30 billion more than fossil fuels. Given this, it is estimated that renewables will overtake fossil fuels by around 2040.
Fourth, we are seeing more jobs being created by emerging renewing industries. The number is still relatively small, but it is bound to grow, and grow faster. Globally, about 8 million people are now employed in the renewable energy sector. Significantly, renewables keep producing more jobs, despite the fact that they receive far less subsidies compared to fossil fuels, which in fact are experiencing considerable job losses. Here, I particularly like the fact that, according a report, 35 percent of those employed in renewables are women, which is a considerably larger proportion compared to the energy sector in general. So although perhaps unintended, renewables also have positive social impact.
In short, we are looking at a bright future in renewables. We are seeing more production, more variety, more innovation, more competitiveness, more investment, more cooperation, more markets and lower costs. Things are moving at a faster speed and in unpredictable ways. In Texas, long known as a diehard oil state, about half of the electricity now comes from wind turbines, something unimaginable just a decade ago.
How do we sustain the shift to renewables? How do we accelerate it?
My simple answer is political will. Policies to promote renewable energy must come from the top leadership, because in many instances the shift will need sensitive adjustments — bureaucratic, budgetary, economic — that will require political cover.
Political will from the top is also necessary, because the shift will involve mobilizing the government, energy players and consumers out of their comfort zone, and that comfort zone is usually saturated with vested interests. Political leaders would be comforted in knowing that in developed and developing countries, the move to renewable energy is becoming increasingly popular among the general public. This is especially true for the middle class, who wants cheap electricity but also wants to save the world along the way.
In my view, with some exceptions, that political will is abundant today in both developed and developing countries.
The challenge for many governments is how to choose the right renewable energy given their limited investment options. Many factors are at play here.
There is also the challenge of how to come up with the right business models — the public-private partnership model — to attract the abundant private capital from investors who need to see stability, predictability and profitability in their investment decisions.
Closely related to this is how do we promote policies that can stimulate more research and development in renewables.
According to one recent estimate, the world's top 2,000 companies spent around $15 billion in research and development on oil and gas production, while research and development for "alternative energy" received only one billion. We must find ways to increase research and development spending on renewables and keep up the momentum on innovation and new means of harnessing renewable energy.
And finally, there is the challenge of determining what kind of policy tools will effectively help increase renewables and make the transition to green energy. There is no set formula here. In the GGGI analysis, there is a wealth of experience from different countries that can be picked up and used. For example, power purchase agreements can be aligned with local as well as international financial conditions. This is a very specific policy instrument, but getting the model right can produce enormous gains.
Mainstreaming renewable energy is entirely possible and though the pace is uneven, the world seems to be heading in the right direction. But we can still lose the race to limit climate change to below 2 degrees Celsius by 2045, so we need to get there a lot faster.
Susilo Bambang Yudhoyono is the sixth president of the Republic of Indonesia (2004-2014) and president of the assembly and chairman of the council of the Global Green Growth Institute (GGGI)