- By Ron Pernick, Clean Edge; Efram Slen, Nasdaq
A Convergence of Renewables, Energy Storage, Electric Vehicles, and Digitization is Reshaping the Energy Landscape
The past two decades have seen a significant change in how the U.S. and the world powers its homes, businesses, factories, and vehicles. At the forefront of this dramatic shift has been the growth of renewable energy (primarily solar and wind), the recent rise of energy storage and EVs, and the advent of smart and connected electric grids.
Technology, capital, and policy-related developments driving this significant change include:
Declining Costs: Utility-scale wind and solar power are now the most cost-effective forms of new electricity generation, beating out new nuclear, coal, and even natural gas plants. Technological innovation has enabled entirely new economies of scale for renewable sources that were unthinkable by most market players just a decade earlier.
Investment Shift from Fossil Fuels to Clean Energy and Smart Grid: Global investments in renewable energy capacity expanded from $32 billion in 2004 to $282.2 billion in 2019, according to Bloomberg New Energy Finance.1 By comparison, just $100 billion was invested in new coal and natural gas globally last year.2
Electrification of Everything: With energy storage and electric vehicles continuing to experience cost declines similar to renewables, the concept of the “electrification of everything” is emerging. The cost of EV batteries – the largest component of overall vehicle cost – is expected to decline by 8.3% annually through 2030, according to Guidehouse Insights.3 And it’s not just transportation that’s ripe for disruption. Fossil fuels have historically provided 90% of the energy for residential space heating and 80% for water heating in the U.S., according to the Energy Information Administration (EIA).4 The move to electric heat (powered by renewable sources) alone represents perhaps the single largest potential for expanding residential electrification. Also underlying these trends is the digitization of energy, from smart meters to connected IoT devices, and the smart grid backbone that supports it.
Low-Carbon Policies: A vast number of both national and subnational governments have signed commitments to reduce their carbon footprints. Although the Trump administration formally withdrew the U.S. from the 2015 Paris Climate Agreement, the withdrawal will not take effect until after the next presidential election. Regardless, governments across the globe are enacting policies that support renewables and clean transportation. These policies include renewable portfolio standards (up to 100% targets in some cases), energy storage mandates, and incentives. Many U.S. states are continuing to raise their targets for clean energy use, and a dozen states now have either goals or mandates to achieve 100% clean energy, including California, Hawaii, New Mexico, New York, and Washington.
Public Demand: The demand for low-carbon sources of energy is coming not only from governments, but also from corporations and individuals. A 2019 Pew Research Center survey found that 77% of Americans give priority to developing clean energy sources, compared with just 22% who would emphasize expanded production of fossil fuel sources (with both Democrats and Republicans favoring clean energy).5 Contributing to this increased public and corporate support has been the international attention brought to climate change by Swedish teenage activist Greta Thunberg. Often called the “Thunberg effect,” this broadening awareness has resulted in private companies increasing their efforts to become carbon neutral. More than 230 multinational corporations including Apple, Nestle, Bloomberg, and GM, have committed to getting 100% of their electricity from renewables as part of the RE100 campaign, a global initiative uniting businesses committed to 100% renewable electricity.6