Today, the shift toward green energy is driven by a number of factors. In 2018, global demand for electricity rose by 4 percent. Green or renewable energy fulfilled 45 percent of this demand.
The primary push behind the shift toward green energy is environmental, but economic factors have a major role to play as well. Doug Healy discovers how environmental and economic factors play into the increasing demand for renewable energy.
The increasing environmental push to change from polluting fossil fuels to green energy sources is exacerbated by today’s dangerous shifts in weather patterns. According to climate scientists, Western wildfires and Southern hurricanes are increased by the global warming caused by an increase in greenhouse gases. Even doubters may soon realize the paramount importance of reducing global warming.
Global temperatures have risen at the fastest rate in recorded history in the past 50 years. Of the 16 hottest years on record, all but one has happened since the year 2000.
Global warming is caused by the increased presence of greenhouse gases like methane and carbon dioxide in our atmosphere. These gases trap sunlight that should have been reflected off the Earth’s surface, artificially increasing the global temperature. Ecosystems and water levels are at a high risk of change.
If society significantly reduces the discharge of greenhouse gases, it may not be too late to stop global warming. It will require a large-scale reduction in the use of fossil fuels and a major shift toward green energy.
Economic Drivers of Green Energy
While the environmental situation is dire according to many climate scientists, it is not the only reason why the world is beginning to turn its attention from fossil fuels and toward green energy. Douglas Healy explores the surprising rise in the cost of fossil fuel energy and the corresponding drop in renewable energy prices.
Lower Generation Costs
Historically, the cost of generating renewable energy was a barrier against adoption. Fortunately, the cost has reduced significantly in the last 20 years. Along with less expensive generation, the intermittency of green energy sources is being mitigated by improved equipment.
By the year 2025, solar energy in the range of 2 to 4 cents per kilowatt hour will be widespread. This cost is compared to the cost of energy generation from fossil fuels in the range between 5 and 17 cents per kilowatt hour. This presents a significant savings and points the way toward an increased adoption of solar energy around the world.
Loans for Green Energy
As the cost of solar and wind power generation decreases, it will become easier for developers to secure funding for these projects. Investors will come to realize that solar and wind power are not as risky as they once thought. As projects become easier to fund, prices will continue to fall.
The Lure of Free Energy
One of the biggest economic drivers for the rise in renewable energy is the unbeatable fuel cost. Once renewable energy producers cover their capital costs, the energy itself is free. In markets with a significant adoption of solar energy, like Southern California, it may be possible to set the marginal price of renewable energy at zero. This makes it difficult for fossil fuels to compete.
The state of Indiana has committed to an early exit from the coal powered generation of energy. In the Southeast, there is ample sun and wind, but it is not being used to its fullest. Many Southeastern states have preexisting commitments to coal energy and markets where there is little competition between energy sources.
Coal plants are expensive to run and highly polluting. As the world shifts away from coal, oil, and gas, the increasing importance of renewable energy will be at the forefront.
Increasing Cost of Fossil Fuel Energy
Surprisingly, the cost of fossil fuel energy is on the rise around the world. The demand for oil, gas, and coal is stalling due to the lower cost of renewable energy.
As renewable energy increases, the demand for fossil fuel energy is going down. The cost of renewables is plummeting while the cost of fossil fuels is on the increase. According to the Bloomberg New Energy Finance research group, the cost of coal jumped from $66 to $75 per hour over a six-month period in 2015, the latest year available. Combined natural gas plants have increased to $82 per hour. This compares favorably with the cost of renewable energy.
Exciting Changes Ahead
Environmental activists and business owners alike are optimistic about the potential of green energy. Lower costs and better efficiency are driving a shift toward solar and wind power. The increasing adoption of solar and wind power may have the effect of halting the rise in global temperatures, preserving the environment, and avoiding major problems that could occur in the future.
Doug Healy underscores the importance of green energy going forward. Companies that are looking into expanding their power generation capabilities should carefully consider the use of renewable energy.