It’s amazing that we’ve arrived at the middle of 2016, and renewable energy is still a minor topic, relatively speaking. We still talk about renewable energy as if it is a fringe player. And we do so, mostly because we’re looking at the wrong statistics.
But the truth is that renewable energy is shaking up the world’s energy markets. And it’s making deep inroads into an industry previously dominated by natural gas and coal. These trends combine to make the future of the industry look very different from what most people are imagining.
Let’s start with a simple fact. Almost all new energy capacity coming online this year is renewable. Countries like the US, China, and Argentina, aren’t bothering with the alternatives, like coal. And it’s because it’s the fossil fuel alternatives that are too expensive.
Renewables have crossed a significant threshold. In many parts of the world, they’re actually cheaper than traditional sources of fuel. And that’s driving their adoption at the margin.
In some ways, it’s rather amazing that any of this has happened at all. Many people assumed that if the economy did transition to renewables, it’d require massive subsidies. After all, the price of a unit of energy from solar was once hundreds of times that of a unit of energy from coal.
But that’s all changed, thanks to the exponentially decreasing price of solar and wind technologies. We’re now at a point of transition. These technologies are finally as cheap or cheaper than traditional energy technologies in many parts of the world.
But it doesn’t end there. These technologies are continuing to get cheaper. This brings profound implications for business, as discussed at the Argentinian Renewable Energy Conference.
Projections indicate that on the current learning curve, solar will halve in price again by 2020 and then again by 2025. That would make solar the cheapest way to produce energy is practically every part of the world.
The knock on effects in the industry will be enormous. In 2025, it will be possible for businesses to avoid paying at the margin for electricity. They will be able to source energy from solar, relatively cheaply. And this, in turn, will mean that less money is spent throughout the value chain on energy overhead.
Potentially, it could mean that companies avoid paying high marginal costs for each unit of energy. After all, every new unit of energy from a solar panel is free, once the solar panel is installed.
In 10 years time, energy production is also going to be far more local. We see this already, with solar panels on roofs and wind turbines next to industrial sites. But in the future, with battery technology, self-sufficiency will become the name of the game.
And it won’t just be a consumer phenomenon. Businesses will also choose to disconnect from the grid because it will be cheaper for them to do so.
Given the enormous changes expected in the energy market, it’s important that businesses get ahead of the curve. They need to plan how they’re going to take advantage of the coming energy revolution. And they need to change how they perceive renewables.
Image Credits: Google
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