Renewable Energy is On a Roll

Since everything we build in this industry either runs on, stores or produces electricity, we should have a more than passing interest in how we get that power. A couple of organizations, confusingly named the IEA (International Energy Agency) and the EIA (Energy Information Administration – a US agency) provide lots of interesting information in this area.

I’ll start with the EIA who published an analysis of how energy was used in 2014 in the US, by source and by sector. The report covers energy in general, but I’ll just focus on generation of electricity. Electric power accounted for about 38% of all power consumed, of which 22% came from natural gas, 42% from coal, 13% from renewables and 22% from nuclear.

Telling even at that point was that over 90% of the market for coal was in power generation. A primary rule in business is never, ever let your business drift into high concentration with one customer or one market. Because if you do and markets shift, you’ll be in trouble, as coal seems to be now.

Now over to the IEA report, which looks at worldwide use for 2015, but primarily focused on renewables. Total renewable capacity grew by 153 GW thanks in particular to growth in wind power and solar power installations. Renewable installations in 2015 accounted for half of total capacity growth, also cumulative renewables capacity moved ahead of coal for the first time. The cost of new installations is also dropping significantly. Offshore wind power plant install cost is expected to drop ~40-50% within 5 years, onshore wind by ~15% and solar is expected to drop 25% in the same period driving, it would seem, a virtuous cycle for these technologies. Overall, worldwide renewable capacity is expected to grow 42% in the next 5 years.

Earlier in the year I posted a thread on how solar is quickly moving to utility-scale production, running at $50-70 per MWh which compares well with the best natural gas plants at $52-78 per MWh. But still, it’s worth putting this in perspective. In 2015, all renewable sources (including hydroelectric) contributed 13% of total capacity versus 20% for nuclear and 33% each for coal and natural gas (another EIA report).

We’re still a long way from an all-renewables world, if indeed that will ever be possible. The IEA projects that by 2040, 37% of worldwide power will come from renewables, natural gas demand will have grown by 50% (which would put US use at around 50%) and coal demand will essentially remain static, therefore declining quite a bit as a percentage of total demand, a trend already apparent when comparing the 2014 and 2015 stats for coal and natural gas. In other words, it isn’t just renewables that are ringing down the curtain on coal, it’s a combination of natural gas and renewables, and natural gas is the bigger threat to coal producers.

The EIA report is HERE and the IEA report is HERE. The other EIA report is HERE and the IEA 2040 projection is HERE.

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