Last year’s UN climate summit (COP28) included the call to “transition away from fossil fuels” in its official resolution for the first time. The growing global consensus on energy transition has driven growth and opportunities in the renewable energy sectors.
In this article, we unpack two key driving forces behind the new energy developments and highlight three key macro trends that have emerged. For users lookng to dive deeper, we’ve also included all the relevant data in our latest New Energy chart section for you to further explore!
Two Forces Accelerating Growth in Renewable Energy
In recent years, renewable energy sources and solutions in wind, solar, hydrogen, and energy storage have all garnered significant public interest, with a trend of growth gradually taking shape. The driving forces behind this encompass both environmental and economic aspects:
1. Environmental perspective: The earth simply won’t be able to sustain the development of high-carbon societies.
The synthesis report of the Sixth Assessment Report (AR6) by the Intergovernmental Panel on Climate Change (IPCC) has concluded that “human activities, principally through emissions of greenhouse gases, have unequivocally caused global warming,” and that the global temperature is likely to rise and surpass the 1.5°C threshold above preindustrial levels between 2030-2050 if the current rate of global warming continues. Once past that tipping point, temperatures will continue to rise persistently. That is, achieving net zero emissions afterward will not be able to reverse the temperature increase. This spells devastating impacts on the environment, including rising sea levels, increased frequency of storms and floods, etc.
Simply put, it’s a matter of survival, so humanity has no choice but to transition from high-carbon lifestyles to a low-carbon society that is more sustainable.
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2. Economic perspective: The cost of renewable energy continues to decline and is now competitive with fossil fuels.
As energy transition becomes a consensus, governments around the world have introduced relevant policies to encourage investment in renewables. The European Green Deal, the US Inflation Reduction Act, and China's 14th Five-Year Plan & Long-Range Objectives through 2035 all included targets for emissions reduction and increasing share of energy consumption from renewable sources.
With the influx of capital, technologies in renewables continue to advance. As shown in the chart below, the levelized cost of energy (LCOE) of many renewable sources has dropped to the same range as fossil fuel costs, at around US$0.05~0.1 per kilowatt-hour, eliminating the economic disadvantage of high costs in the past. Competitive costs will continue to attract capital into the renewable energy sector, allowing technology to further mature, creating more room for further cost reductions, forming a virtuous cycle.
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