The Great Transition

THE GREAT TRANSITION FROM FOSSIL FUELS TO SOLAR AND WIND

The worldwide transition from fossil fuels to renewable sources of energy is under way.

As fossil fuel prices rise, as air pollution worsens, and as concerns about climate instability cast a shadow over the future of coal, a new world energy economy is emerging. The old economy, fueled largely by coal and oil, is being replaced with one powered by solar and wind energy.

The Evolving Energy Transition

In the United States, the energy transition can be seen in the hundreds of utility-scale power plants under development or construction in the Southwest. Iowa and South Dakota are each generating at least 26 percent of their electricity from wind farms. The share in Iowa could reach half by 2018.

Texas, which now gets 10 percent of its electricity from wind, is building huge wind farms and the long-distance transmission lines that will enable it to sell low-cost wind-generated power in Louisiana and Mississippi.

In 2013, Denmark got 34 percent of its electricity from the wind. Portugal and Spain each got over 20 percent, and Ireland got 17 percent of its electricity from wind power. Indeed, on some days wind power supplied half of Ireland’s electricity.

During several days in August 2014, electricity generated from wind in the United Kingdom eclipsed that from coal. In South Australia, wind farms now supply more electricity than coal plants.

In China, electricity from wind farms has eclipsed that from nuclear power plants. And water for 170 million Chinese households is heated by rooftop solar water heaters.

The worldwide use of solar cells to convert sunlight into electricity is expanding by over 50 percent a year. Early photovoltaic (PV) installations were typically small-scale—mostly on residential rooftops. Now, in addition to millions of rooftop installations, thousands of utility-scale solar projects are under development or construction. At peak power, the solar systems installed worldwide by 2014 could match the output of at least 100 nuclear reactors.

Falling Costs

The costs of both solar- and wind-generated electricity are falling fast, undercutting fossil fuels in more and more electricity markets. A July 2014 study by the government of Denmark projects that new wind farms coming online there in 2016 will supply electricity at half the cost of that from coal and natural gas plants.

In parts of Australia, which is experiencing a solar boom, the cost of producing electricity from the sun has fallen well below that from coal.

    Falling costs for solar and wind energy are opening the door for massive investments in Africa. Bloomberg New Energy Finance reported that there would be more renewable energy installations in Africa in 2014 than during the preceding 14 years.

Drivers of the Transition

Several concerns are driving the great transition from fossil fuels to renewables. One of these is concern about climate change and its effect on our future. Another is the health impact of breathing air polluted by burning fossil fuels, as seen in the three million people who die each year from illnesses related to outdoor air pollution. A third is the desire for local control over energy production and overall energy security.

In response to these broad-based public concerns, government policies—including emissions controls, official renewable energy targets, and financial incentives—are encouraging the shift to solar and wind.

And as the need for clean alternatives to coal and oil becomes apparent, there is growing interest in solar and wind energy within the investment community. This includes not only investment banks but also several billionaires, including Warren Buffett and Ted Turner, who are plowing vast sums of money into renewable energy. The influx of “smart money” into this relatively new segment of the energy economy suggests that much more investment will likely follow.

Winners and Losers

In this transition, homeowners are the big winners because they can use their rooftops to generate their own electricity. From a business vantage point, the companies that manufacture and install solar panels are expanding rapidly. And similarly for wind turbines. Annual growth rates in wind and solar installations will likely range from 10 to 20 percent in the years ahead as the energy transition brings unprecedented investment and employment opportunities. In the broadest sense, though, everyone who breathes cleaner air and benefits from a more stable climate regime will come out on top as the energy transition proceeds.

Among the losers are the big independent oil and gas companies, including Chevron, ExxonMobil, and Shell—three of the giants in the field. These three firms combined spent a half-trillion dollars between 2009 and 2013 to expand oil and gas production, but even with this hefty investment their production declined in 2013. Each company suffered a drop in profits.

A New Worldview

The energy transition will change not only how we view the world but also how we view ourselves. With rooftop solar panels to both power homes and recharge car batteries, there will be a personal degree of energy independence not known for generations. We will also be dramatically reducing carbon emissions, setting the stage for stabilizing the earth’s climate.

    Our relationship with the natural world will change from one where we are in conflict with nature to one where we are again in sync with it. Instead of seeing ourselves apart from nature, we will see ourselves as an integral part of the natural system. Smokestacks that dirty the air and alter the climate will be replaced by solar panels residing on our rooftops and fields of wind turbines turning gracefully in the wind.

This century, as the world shifts to solar and wind, we are witnessing the localization of the energy economy. Instead of coming from halfway around the world, our energy will be as close as the rooftops over our heads. Instead of a few countries producing and controlling most of the world’s energy, homeowners everywhere will be in the energy business, producing and managing their own energy supply.

Lester R. Brown is author of The Great Transition: Shifting from Fossil Fuels to Solar and Wind Energy with Janet Larsen, J. Matthew Roney, and Emily E. Adams (W.W. Norton & Co., NY: 2015).