Wind turbines in front of a coal-fired power plant in Germany.
Renewables soon could be the world's cheapest source of electricity, but the prospects for rapid reductions in carbon emissions from the power sector remain discouraging.
The International Renewable Energy Agency on May 29 said the vast majority of wind and solar capacity it is tracking with online dates in 2020 should produce electricity more cheaply than coal, oil or natural gas, without direct subsidies, feed-in tariffs or tax breaks. Throw in lower-cost energy storage, better management of the power grid and electric vehicles, and renewables will "underpin an energy sector transformation to 2050," the agency said.
"Solar and wind power have emerged as the most affordable power source for many locations and markets, with cost reductions set to continue into the next decade," Francesco La Camera, director-general of the International Renewable Energy Agency, wrote in a forward to the agency's recently released report on renewable energy pricing trends.
Yet even with significant cost declines, growth in the renewables industry flattened last year, raising concerns at the International Energy Agency that the global power sector will be unable to add enough new capacity in time to curb carbon emissions in line with international targets.
"The society as a whole is actually finding it very difficult to get its act together and to make sure that we are irrevocably on that route to [being] significantly below 2 degrees C," Royal Dutch Shell PLC CEO Ben Van Beurden said May 21 at the oil company's annual shareholder meeting, referring to the goal of the Paris Agreement on climate change.
Global carbon emissions rose by 1.7% last year as energy consumption jumped.
Adding new renewables is only a piece of the puzzle. Companies and governments also must find a way to cost-effectively integrate the variable resources.
A 'societal issue'
The International Renewable Energy Agency said experience from Germany, Spain and Scandinavia "shows that low-cost integration is possible." The agency's 2019 estimate of the amount of investment needed to accommodate 86% renewables penetration fell by 30% from a year earlier. However, German steelmaker Salzgitter AG on May 23 said the costs associated with the country's energy transition, including network charges, "are currently nearly impossible to forecast."
Customers, meanwhile, "have shown little willingness so far to appropriately reward the efforts of industry entailed in complying with the obligations assumed under the climate policy," Salzgitter Chairman and CEO Heinz Jörg Fuhrmann said at the company's shareholder meeting.
In an investor presentation on May 28, BNP Paribas SA said its environmental goals include "mitigating the business risks linked to the energy transition" while hastening the change. The French bank plans to double renewable energy financing to €15 billion in 2020 while reducing exposure to thermal coal and unconventional oil and gas. It also plans to invest €100 million by 2020 to support startups to help drive the transition.
Part of the challenge is the speed at which the energy transition evolved into a "societal issue," Isabelle Kocher, CEO of French energy company Engie SA, told shareholders on May 17.
"[There] are thousands of young people who were protesting in the streets, just a few months ago, asking for the energy transition process to be sped up," Kocher said. "Now it has demonstrated, if there was a need for it to be demonstrated, that this energy transformation has to take place."
Shell Chairman Charles Holliday echoed Kocher, telling shareholders, "we can't go at the speed we have in the past."
Shell, which aims to become the world's biggest electricity company by 2035, is attempting to "maintain a strong societal license to operate" in a "world that will look completely different" than today's, Van Beurden said. "So what we are trying to do here is to actually set up a business in the image of something that doesn't exist yet."
If the company cannot find a profitable way forward, the whole energy transition could be in jeopardy, he added, "because the trillions of dollars that the world is going to need to invest ... [are] not going to come forward by government subsidies, [or] by loss-making companies."