Renewable energy sources, like solar and wind, are quickly becoming as cheap-even cheaper-than their carbon-intensive counterparts like coal.
New research from Morgan Stanley estimates that renewables will be the cheapest source of power in the world in less than three years.
“Numerous key markets recently reached an inflection point where renewables have become the cheapest form of new power generation,” the bank said in a note.
“A dynamic we see spreading to nearly every country we cover by 2020. The price of solar panels has fallen 50% in less than two years (2016-17).”
Even if President Trump succeeds in withdrawing the US from the 2015 Paris climate agreement, the country could still cut more emissions than it had previously pledged to alongside 194 other countries.
“For example, notwithstanding President Trump’s stated intention to withdraw the US from the Paris Agreement, we expect the US to exceed the Paris commitment of a 26-28% reduction in US 2005-level carbon emissions by 2025,” the bank said.
What’s behind the sudden drop in renewable costs?
Wind turbine blade lengths have increased dramatically in recent years thanks to stronger materials and design. Even a small lengthening of the windmill blades can increase output exponentially, as the “swept area” is a function of the square of the turbine’s radius. Remember that high school geometry?
On the solar front, Morgan Stanley says there has been oversupply of solar panels, which is pushing production prices down. Solar installation grew 50% last year, but capacity is still 28% above installations.
The bank sees two possible benefits (beyond helping the environment) for utility companies that invest in low-cost renewables:
“First, the ability to lower customer bills from utilizing low-cost renewables can improve utilities’ regulatory environment and provide related investment opportunities in grid modernization initiatives,” writes the bank.
“Second, for utilities with large, competitive renewable development businesses, investment in renewable energy projects can generate attractive risk-adjusted returns.”