Renewables Are Reaching Grid Parity and Businesses Are Stepping Up to Demand Them

by | Jan 3, 2017

solar-panelsGreen energy is becoming just as competitive as fossil fuels, giving businesses further incentives to push their providers to up such offerings. That’s the conclusion of the World Economic Forum, which says that those enterprises provide the most leverage to combat climate change.

“Renewable energy has reached a tipping point – it now constitutes the best chance to reverse global warming,” said Michael Drexler, Head of Long Term Investing, Infrastructure and Development at the World Economic Forum. “Solar and wind have just become very competitive, and costs continue to fall. It is not only a commercially viable option, but an outright compelling investment opportunity with long-term, stable, inflation-protected returns.”

Its analysis shows that the cost of generating electricity from renewables has fallen over the last three years to levels on which it is equal to that of coal and natural gas. A decade ago, solar costs would be around $600 per megawatt hour — or six times the cost of coal and natural gas, it says. Now, the two are on par, although wind even less.

A big factor is efficiency, or the the ability to create more energy with each unit of fuel input. As for solar, it has jumped from 15% to 22% while wind turbines have climbed from 25% to 50%. Meantime, solar cost have fallen by 80% while wind has dropped by 30%, all over three years.

The compounding effect is noticeable, not just with the improvement in technologies but also the attention it is drawing among those willing to supply the capital, including businesses. In 2015, $286 billion flowed through to renewable technologies, which is more than what was invested in the fossil fuels, says the United Nations Environmental Program. That’s 5% more than the year before. Asia was the leader.

“A catalyst for this process has been and will continue to be the 2015 Paris Agreement, which will further press for global changes welcome to the sector,” says the forum’s report. “Investors that understand the magnitude of the change will be able to capitalize on the rising trend while enjoying stable, infrastructure-like returns from renewable energy investments.”

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