In 2016, two thirds of what the world spent on new electricity generators went to renewable energy instead of coal, natural gas and nuclear power plants.
Why? Part of the answer is that innovation and economies of scale are driving down the costs of solar and wind tech. So renewables are now the cheapest option even without subsidies.
This has pushed us over another tipping point – the FUD factor. That is fear, uncertainty and doubt. Pension funds underwrite most electricity developments. The fund managers who make the investment decisions are very sensitive to risk. The one thing fund managers fear more than anything is that an investment they make doesn’t pay back what they thought it would. Any uncertainty in terms of payback leads to a lot of doubt. The FUD factor forces fund managers to lean towards the projects that are the cheapest. Now renewables are the cheapest solution.
So now, pension fund managers view coal and natural gas as the highest-risk second choice. It has nothing to do with climate concerns. Nor is there any consideration given to respiratory health. All of those risks are secondary to the financial risk. Renewables are now the least expensive, which makes renewables the lowest risk. And there is a huge amount of pension fund capital that managers are looking to invest.
Do these numbers only work in places like India and China and Chile, where labor and lives are cheap and they have hand-me-down coal fired tech that it is not state of the art? No.
Even in high-labor-cost Canada, in the Albertan heart of coal-fired electricity, renewables are now the cheapest solution according to the Wall Street Journal.
“An auction in Alberta in December (2017) awarded four wind contracts for an average of $37 a megawatt hour, subsidy-free.” Big deal, except that the report goes on to say that “the Albertan government planned to award contracts for only 400 megawatts, but bumped it up to 600 megawatts when it saw the prices offered, which were below the average price for electricity on the province’s grid in 2018.”
That muffled thud you hear is the sound of change. It’s the sound of the financial FUD factor kicking coal out and renewables in.