The rise of clean energy technology - is this the end for conventional energy?

Fossil fuels still remain an essential part of our everyday lives, but more people are now looking for alternative energy sources that are less damaging to the environment. Research suggests that today’s society favors clean energy development and welcome stricter regulations on carbon emissions in support towards tackling climate change. This is particularly true with the younger generation who have a wider knowledge of climate change and truly understand the negative impacts of fossil fuel derived energy generation. Younger people tend to be more connected with technology and understand what value this could play in the transformation of the energy industry.

Skeptics of the clean energy industry suggest that renewables are only competitive with fossil fuels due to the support from Government subsidies and policies aimed at expanding the development of this sector. Historically speaking the fossil fuel industry have received similar support from government and favorable policies, yet the key distinction between the two is that whilst the renewables sector is experiencing significant change, time seems to be running low for the fossil fuel market.

Cost and innovation is driving the transformation

The cost has always been a major challenge within the renewables industry and as previously described earlier in this report, oil and gas businesses that did invest in renewables ten years ago found little in the way of profit. However, prices have fallen considerably and at a pace that even preceded the expectations of experts within clean energy. Forecasts now suggest the rate of pricing change will make renewables more cost effective than utilising fossil fuel generation, based on the lack of pricing change in the oil market. According to Bloomberg New Energy Finance (BNEF), the clean energy market is set to rapidly replace fossil fuels as associated costs with renewables continue to fall.

The rise of solar and wind technology

Innovative technology is reducing the costs associated with wind and solar projects and inevitably making the renewables market more economically viable than fossil fuels in many places worldwide.

Reduced costs and improvements in technology have resulted in a significant increase in solar projects

One of the most notable advances has been seen within the sheer development and scale of wind turbines. A key reason why offshore wind costs have reduced and become so competitive without supporting subsidies is linked to the improvements and the scale of new technology in the wind industry. This is a similar trend found in the solar market, where production and manufacturing have become more efficient, allowing for lower pricing models for PV panels. BNEF refers to a tipping point, suggesting that there will be a time when the cost of renewables will reach a level that makes energy generation from fossil fuels completely unimaginable.

Research has already suggested that wind and solar will surpass the development of fossil fuel sites in the coming years. Studies indicate that the construction of a new solar PV plant in Japan will be cheaper than a coal-powered plant by 2025. A secondary tipping point mentioned by the BNEF refers to when the operational costs decrease to a point that is lower than the costs for current coal and gas plants. BNEF studies suggest that this is likely to happen within the next five to ten years in leading renewable nations such as China and Germany.

Many renewable supporters believe the rate of development is so powerful that it’s unlikely coal will remain in its current position for much longer, even with supporting incentives implemented by US President Trump. However, other industry experts suggest that Government support is critical for continued momentum within the industry. Whilst most nations are showing their support towards the renewables sector, the US has recently made decisions that are less favorable for the development of the clean energy market.

The US is experiencing a surge in the shale industry and consists of an administration which has made it quite clear they are keen to revive the coal industry. Recent tariff changes have also caused concern over the future of the solar industry. The support towards fossil fuels, combined with a presidential leader that seems to disregard the critical challenge of climate change could prove to be a significant barrier to clean energy development and technology innovation in the US.

Other nations, however, are taking a more progressive approach towards renewables. China, Japan, India and Europe have made significant plans to expand their markets in the renewables sector.

Replacing coal with clean energy in China

The government of China has recently committed to investing in excess of $350 billion in clean energy projects over the next three years. This bold move will create over 13 million jobs and solidify China as a leader in renewable energy investment. With a supportive Government and favorable policies, China has made it quite clear they are making a transition away from the coal industry.

The Government of China is planning a transition away from the coal industry

China also announced its plans to develop a ‘megaproject’ which will include a floating solar farm situated ironically on top of a former coal plant. The solar site, consisting of over 150,000 panels and with a capacity of 40 MW will be the largest floating solar project in the world. Energy professionals suggest that the decision to replace an abandoned coal mine with a solar plant highlights the gradual demise of the reliance on fossil fuels. This transition is happening globally, with many nations looking to phase out fossil fuels and replace existing projects with clean, alternative energy sources. In just the last year, China cancelled the planned development of over 100 coal facilities due to be constructed this year. China is a key part of this transition and any changes or reductions in fossil fuel consumption will likely have a significant impact on the global energy industry.

The alternative opinion - renewable energy will not replace fossil fuels

The energy theorist and author of ‘The moral case for fossil fuels’ Alex Epstein explains that oil being a finite material is not the problem. Alex Epstein believes that our life is about taking finite, limitless resources in nature and creatively transforming it into valuable resources. Epstein states this is actually what the oil industry does, whereas the renewables does not involve this process.

Supporters of fossil fuels do, however, believe we are over-dependent on fossil fuels and based on the current rate of global energy demands, cannot be replenished quick enough to match the rate of our expansion. Global demands are expected to surge by approximately a third in the next 15 years. Combine this with the added pressure of an increasing population means our energy requirements will continue to increase dramatically.

Taking this into consideration, supporters of oil, coal and natural gas believe that until the renewable energy industry becomes significantly more viable as a major energy source, the only alternative in meeting these increasing energy demands from a growing global population is to continue extracting fossil fuels.

Skeptics of the renewables industry suggest that it is unrealistic to make the assumption we can substitute renewable energy sources for fossil fuels and allow our society to continue to develop and progress at the current rate. Whilst skeptics admittedly agree that renewables have a part to play in the energy industry, it is believed that we cannot simply substitute the existing oil, coal, and gas industries with a sector that may have experienced massive growth, but still has a long way to go. It is not a simple case of taking one energy resource and replacing it with another. Critics believe that rising demand levels and continued population growth mean renewables cannot grow quick enough to satisfy this increase and at the same time replace the existing oil and coal industries.

Other critics point towards the continued issues of intermittent energy supplies that make the renewables industry unreliable and unpredictable. This situation creates a requirement for further energy storage which is suggested as not being cost-effective or efficient enough to replace fossil fuels.

Skeptics of renewables highlight the equivalent land and projects required to compensate for the oil industry i.e. 1 cubic mile of oil is the equivalent to developing over 90M solar panels (Source: IEEE Spectrum). The issue of land use, along with efficiency and storage challenges are typical concerns that are raised by skeptics of the clean energy market.

Clean technology professionals, however, would disagree citing the rate of progression within the industry and the rapid growth of new technology, particularly within the energy storage industry.

The Rapid growth of the energy storage industry

The International Energy Association has forecasted that average annual renewable energy installations will be nearly 80% higher than oil, coal and natural gas sectors combined between 2017 and 2040. This rapid growth, however, can cause challenges to the grid, particular in areas with aging grid structures. Energy storage is being viewed as a crucial growth market that will become a substantial focus of future renewable energy projects.

Energy storage has the ability to support renewable energy integration and can alleviate any issues that affect regular and consistent power to the grid. Energy experts believe the future is now about the integration of renewable energy projects with energy storage and is likely to be a significant growth area in the short term. A range of storage projects are now in operation or being developed to serve small communities and larger businesses. The future is looking promising for the energy storage market.

A key driver for combining renewables and energy storage is the reduced electricity costs. Furthermore, the reduction in incentives for solar, such as feed-in tariffs has actually improved the energy storage market. These systems usually reward projects for sending additional solar energy back to the grid, rather than storing it. As incentives are reduced or removed, energy storage ensures the solar market remains financially viable by enabling customers to maximize energy consumption and provide a backup energy source during potential outages. In other words, Solar PV combined with storage technology magnifies the economic benefits of the solar market.

The falling prices of solar will allow for larger solar projects but it also increases the economic potential for developing solar combined with storage as the solar segment can be scaled up, or the focus can be placed on investing into a larger battery storage system. Energy storage costs continue to drop and experts suggest this trend will continue with further improvements in applications and technology.

Storage systems provide the resilience that some standalone solar facilities cannot provide. Most solar sites are tied to the grid which means they are directly affected by the impacts of an outage. A separate energy storage system has the capability of providing backup in this instance. Many markets worldwide are now implementing programs that will support and incentivize the development of energy storage facilities.

The renewables industry is progressing quickly and supporters believe the future is undeniably focused on the clean energy industry. Combining energy storage with the renewables market will result in a powerful end product that has the potential to dominate the global energy industry.

Our energy future.

Despite the disruption to the fossil fuel market and growth of renewables, the support for the oil, coal and gas industry still remains, at least to some extent. Supporters of fossil fuels however admittedly understand that renewables are going to be a major part of our energy future but still believe fossil fuels will also play an equally important role. There is a clear difference of opinion on how efficient and cost-effective clean energy is and whether it is capable of replacing the existing energy projects driven by fossil fuels.

Granted that some of the concerns from renewable skeptics that the industry is not capable of replacing fossil fuels may have some truth. This perspective of the renewable market, however, lacks a clear vision of how rapidly the industry has developed, and how quickly the associated costs with clean energy projects have declined. This is highlighted by the resurgence of oil and gas businesses investing (or reinvesting) into the renewables market. The price drop has even taken renewable energy experts by surprise, surpassing the expectations of many clean energy supporters. The concept of a clean energy future was viewed by many as more of a vision, but market changes suggest this is now becoming more of a reality.