Sat. Sep 23rd, 2023
    Renewable Energy Growth and the Challenge of Phasing Out Fossil Fuels

    Wind and solar energy are rapidly becoming the fastest-growing sources of electricity worldwide, with a combined contribution of 12% in 2023. This figure is expected to rise even further as the capacity of wind and solar power expands.

    Despite this significant growth, the United Nations (UN) reported in its first global stocktake that the phase-out of fossil fuels is not progressing fast enough to limit global warming to 1.5°C. The use of coal and natural gas, the most carbon-intensive forms of electricity generation, has actually increased by 22% and 37% respectively since 2010.

    While coal and gas continue to dominate the global energy landscape, there are indications that the phase-out of coal is gaining momentum. The number of new coal power plants being built annually has decreased significantly over the past decade. In countries belonging to the Organisation for Economic Co-operation and Development (OECD), no new coal plants are planned or being constructed, thanks to national policies prohibiting coal use in power generation.

    The United States has retired many aging coal plants due to the availability of cheaper shale gas. This trend will continue as 99% of coal projects are more expensive than new clean energy technologies.

    The situation in Asia, particularly in China, is different. These countries heavily rely on coal to fuel their economies, although signs of change are emerging. The global pipeline for new coal power plants is shrinking, and China and India have pledged to “phase down coal.”

    One of the reasons renewable energy has not replaced coal and gas consumption at the same rate is the significant increase in electricity demand, particularly in Asia, where it has tripled in the last two decades. In contrast, electricity demand in Europe and North America has remained largely constant.

    However, there has been progress in Western economies in replacing fossil fuels with renewable energy sources. Wind has become a crucial energy source in Europe and North America, especially during periods of high demand. Solar energy, combined with battery storage, has also proven to be a cheaper option than gas and coal in some regions.

    Despite the growth of wind and solar energy, the rise in energy demand, particularly in countries like China, has outpaced their contribution. This poses a challenge to effectively replace fossil fuels on a global scale. However, cooling economic activity in Asia may reverse this trend and enable a replacement pattern similar to Europe and North America.

    Sources: UN, Bloomberg NEF, Australian Clean Energy Council