Electric vehicles are conquering streets, and industry is switching to electricity for more processes. As more sectors electrify, demand for power supply will increase. It is all the more important that this electricity be clean. Fortunately, renewable power—especially wind and solar—is the least expensive form of electricity in a growing number of countries. Yet not all policymakers understand the new normal; some retain a misguided belief that renewables are inferior when it comes to power reliability and other issues. Setting the record straight is thus crucial in removing fossil plants from project pipelines.
The cost of solar and wind power continues to drop worldwide, making these two renewable energy sources the least expensive options for additional capacity. In particular, they are already far cheaper than coal power. Solar and wind have free fuel; nearly all of the costs are incurred at the outset. The calculation is thus different than for fossil plants. To facilitate comparisons, LCOE expresses the cost across the lifetime of plants—and shows clearly how competitive wind and solar have become relative to fossil fuel.
A decade ago, photovoltaics and wind systems largely were built only where favorable policies were in place, but as their business case improves, these two technologies are dominating more markets. Indeed, in 2018 the installed capacity of wind and solar crossed the 1,000 GW threshold worldwide. Nonetheless, PV and wind will continue to need policy support. For instance, power markets designed for dispatchable fossil fuel may require restructuring—and market entry barriers may need to be eased to allow small companies and even households to participate. Other issues include redesigning power grids, rolling out power storage, and setting price signals for new market segments such as electric vehicle charging.
Despite skyrocketing amounts of renewable energy, emissions from power continue to increase in Asia. One reason is that the business case for renewables still needs to be made clear; another is that too many coal plants were already in the planning pipeline to meet growing power demand. Solar and wind can more easily offset fossil power in countries with stagnant power demand, including in Europe and North America. Meanwhile, renewables have not always been able to match rising power demand in emerging economies—though their potential to do so looks much better this decade.
In Germany, policies early on created a sustained push for renewables. In 2000, Germany adopted modern feed-in tariffs for renewable electricity. By the end of that decade, new wind and solar were beginning to make planned coal plants seem redundant. Indeed, most of the coal plants planned in that period were either not built at all or were closed shortly after going online. Wind and solar have eroded the business case of coal in Germany not only in terms of price, but also because the 2000 Renewable Energy Act prioritizes renewable power, forcing fossil power plants to ramp down when there is sufficient wind and solar electricity—a policy called “priority dispatch for renewables.” As a result, emissions from electricity in Germany dropped from 2010 to 2019.
In the 1990s, Germany mandated priority dispatch for wind and solar power, but the two (then still fledgling) technologies really took off in 2000 when the remuneration level was changed. Payments for renewable electricity were no longer pegged to retail rates, but to the cost of investments in wind and solar. And the market was opened to everyone from small business to new developers and households. Since then, solar and wind generation has risen roughly 19-fold in Germany, from under 10 to nearly 190 terawatt-hours in 2020. That year, these two clean sources alone covered just over a third of domestic power demand in the industrial powerhouse. Today, large wind and solar plants must place winning bids in auctions, which include a maximum bid price.
Coal’s demise in Germany is underway. Over the past decade, the focus has largely been on preventing new coal plants from being completed; the last permit for a new coal plant was awarded in 2009. In 2020, Germany passed its Coal Phaseout Act, which requires the last coal plant to close by 2038, with a review in 2030 investigating whether that deadline can be moved up to 2035. But Germany needs to phase out coal by 2030 to stay within its carbon budget. Clearly, more political action is needed. The Act also focuses on a just transition for the communities affected.
The perfect fit: Shaping the Fit for 55 package to drive a climate-compatible heat pump market, by RAP, Agora Energiewende, CLASP and GBPN.