1. The cost of fossil fuels is going up…
Russia’s invasion of Ukraine has had an unprecedented impact on global energy supply lines, particularly natural gas. This has caused gas and coal prices in Asia and Europe to reach record highs in 2022, and exceptionally high levels across the world generally. According to the IEA’s latest Electricity Market Report 2023, prices are expected to remain high until at least 2025, making renewable energy increasingly attractive from an economic point of view.
2. …while prices of renewable fuels are coming down
The decade between 2010-2020 saw the cost of renewable fuels plummet, for example solar power fell by 85 percent. And prices are still falling. A study conducted by Oxford University, which modelled the likely price projections for both fossil fuels and renewable energy in the coming decades, estimated that making the transition could reduce the world’s energy costs by up to US$12 trillion by 2050.
3. The need for energy security is accelerating the green transition
Another consequence of Russia’s invasion of Ukraine is that many countries, particularly in Europe, are being forced to end their dependence on Russian gas and oil. This has led many governments to accelerate their transition to green energy. For example, the EU has responded to the crisis with its REPowerEU Plan, where large-scale investments in renewable energy are seen as a key to ending the continent’s dependence on Russia.
4. Carbon pricing is contributing to making fossil-fuels more expensive and renewable energy cheaper
In 2022, 68 carbon pricing mechanism were in place globally, usually in the form of either carbon taxes or emissions trading systems. To help future-proof themselves for the low-carbon economy, many multinational companies are also introducing their own internal carbon pricing schemes too. As the price of carbon increases, the incentive for carbon-intensive industries to seek renewable alternatives grows. And in many countries, the revenues raised through carbon pricing is being reinvested in renewable energy research and development.
5. Governments are continuing to incentivize clean energy
In August 2022, the US government passed the Inflation Reduction Act (IRA), which aims to boost economic growth by investing around US$369 billion in renewable energy. Meanwhile the EU’s REPowerEU and Fit for 55 initiatives, as well as China’s 1+N policy, all include mechanism for encouraging investment in clean energy.
6. Rapid growth in battery storage capacity will make solar and wind power more reliable
One of the limitations of wind and solar power is their inability to delivery continuous and reliable power 24/7 due to their reliance on weather conditions. However, this can be overcome if the energy generated in peak times could be stored for later use. In 2022, battery capacity for energy storage grew by over 80 percent in the US, nearly 100 percent in China, around 35 percent in Europe and 90 percent in OECD Pacific countries (Japan, Korea, Australia, etc).