Wind and solar power were on the fringes of the energy world only a couple of decades ago, idyllic sources mostly supported by earnest activists.
Today, renewable energy is big business, with traditional utilities like those in Germany getting in on the act as they leave behind coal and nuclear-fired power.
The fact that renewables have become a bona fide big industry is a little bittersweet for those enthusiastic backers from its early days — a feeling familiar to any parent whose child leaves for university.
“This is now pure business,” a European Commission official said. “When we were pushing [renewables] in 2008, it was a utopian kind of idea. Now we have created a nice monster.”
This “nice monster” will be a critical component of meeting the goals of the Paris climate agreement to keep global warming to well below 2 degrees Celsius — on the agenda as delegates gather for the COP22 climate summit in Morocco in November.
The cultural shift around renewables was evident at a WindEurope event earlier this year. Gone were the sandals and rucksacks. Instead, sharply dressed executives nibbled on canapés and sipped champagne as a harp glissando gently echoed in the gilded ballroom of the 19th-century Concert Noble palace in Brussels.
“Wind energy in Europe has transformed completely,” said Giles Dickson, CEO of WindEurope. “We used to be a small, niche thing. Now we are large and mainstream.”
That doesn’t mean the industry has forgotten its roots.
“Don’t judge me on my suit,” said Lars Bondo Krogsgaard, the CEO of Nordex, a wind turbine-maker. He still has a lot in common with green activists, he said. “Not only the interest in wind energy but also the thinking about where the world should be going.”
Solar and wind are finally being treated seriously because both technologies have become much more competitive.
“It’s not just about climate change — very important though that is,” said Michael Lewis, the CEO of Germany’s E.ON Climate & Renewables, part of German utility E.ON. “It’s now become mainstream because it competes on an even footing.” The company recently spun off its conventional energy units into a new company called Uniper, leaving E.ON to focus on renewables, electricity grids and customer services adapting to Germany’s Energiewende green energy transition.
Between 2010 and 2015, generation costs for new onshore wind plants fell by an average of 30 percent. Costs for utility-scale solar photovoltaics fell by two-thirds, the International Energy Agency (IEA) found. It forecasts generating costs for onshore wind will fall another 15 percent by 2021, while solar is expected to drop by 25 percent. Offshore wind costs will also fall by more than 40 percent over the medium term.
“There’s an inevitable trend toward more renewables because the economics dictate it’s going to make financial sense,” said Richard Chatterton, an analyst with Bloomberg New Energy Finance.
Renewables — a category that includes wind, solar and biomass — accounted for more than half of new power capacity added around the world last year, reaching a growth record thanks to favorable government policies and steep cost reductions, according to the IEA.
It also found that costs and contract prices for onshore wind, utility-scale solar photovoltaic and some bioenergy technologies can be “increasingly comparable” in some markets with costs from new natural gas plants, even taking into account lower oil and gas prices.
Bloomberg New Energy Finance forecast that by 2040, “zero-emission energy sources will make up 60 percent of installed capacity” around the world. Wind and solar will come out the winners, making up 64 percent of the 8.6 terawatts of new power generating capacity added over the next 25 years, and almost 60 percent of the $11.4 trillion invested.
The path from Paris
Even that combination of technological advancement and increased investment isn’t enough to reach the objectives set out in the Paris agreement, according to the IEA. The clean energy shift will require trillions in investment, as well as an unprecedented overhaul of the world’s energy system.
“We’re talking about … an economic transition of the likes we’ve never seen on this planet,” said Rachel Kyte, the CEO and U.N. secretary-general’s special representative for the global initiative Sustainable Energy for All.
Europe, home of some of the world’s most ambitious renewable energy projects, is taking a breath. The push in Europe now is to ensure that upcoming European Commission proposals to update the EU’s energy rules and redesign its electricity market help promote more renewables.
Pressure for clear investment signals is not just a European issue. A crucial job of the upcoming climate talks is getting countries to flesh out the promises made ahead of last year’s Paris summit. Regulation remains “critically important to attract investment in capital-intensive renewables and further drive their costs down,” according to the IEA.
“The private sector was looking for signals that government meant business about climate change,” said Jo Tyndall, co-chair of the Ad Hoc Working Group on the Paris Agreement, the U.N. body that oversees negotiations on the deal. “Paris gave that signal and, in return, business is starting to send the signal back to government: ‘We’re up for the challenge.’”
That means solar and wind power will become even bigger businesses.
“If you’re going to build out the Energiewende, you need companies,” E.ON’s Lewis said. “An offshore wind farm is not something a mom-and-pop shop can do. It’s a highly industrial process and you need big companies.”
This is part of a POLITICO special report, COP22: Acting on climate promises.