The green power revolution is here

Wind, solar, hydro and distributed power are now an integral part of the global energy supply. What does that mean for utilities and the future of the grid?

By WP BrandStudio

For years, renewable power was seen as a niche, albeit promising, source of energy—an environmentally friendly way to add capacity to the grid, but not a feasible solution to the world’s increasing demand for energy. Not anymore.

In recent years, renewables have come into their own. Wind turbines, solar photovoltaics and hydropower are increasingly reliable and able to produce greater amounts of energy with smaller devices. Plus, their prices have also fallen sharply over the last decade. Together, these generation sources play an ever more important role in the global power supply.

And while the renewables industry is not immune to the effects of the covid-19 pandemic—construction of wind and solar systems have paused as social distancing protocols are in effect—the upward trend of renewable power is predicted to return to normal by 2021, according to the International Energy Agency (IEA). Over a longer time span, this delay in production and temporary supply chain disruption should not affect the trajectory of renewables.

The rise of residential solar

Globally, solar photovoltaic averages 9 cents per kilowatt hour (kWh), while onshore wind costs less than 6 per kWh. Fossil fuel-fired power, by comparison, ranges from 5 to 17 cents per kWh, according to IRENA.

And prices are expected to fall further still. The National Renewable Energy Laboratory projects that the cost of solar will fall by 60 percent by 2050 and onshore wind could decline by 30 percent. With technological breakthroughs, such as cheaper storage and transmission, those costs could fall even more.

“Ten years ago, no one was forecasting this level of cost decline,” says Megan Mahajan, policy analyst with Energy Innovation, a research group.

With the economics so favorable, consumer preferences are heading in the direction of renewables. Take for example, solar installations, which have grown 50 percent a year on average in the last decade. Community solar projects, too, are booming. These solar arrays extend access to solar power to customers who rent their residences, don’t live in homes with suitable rooftops or face financial hurdles.

Corporate demand is surging

Even more significant is that corporations are upping their procurement of renewables. “At the end of 2019, corporations had signed enough renewable power contracts to power over 8 million homes,” says Andy Redinger, Group Head, Utility & Alternative Energy with KeyBanc Capital Markets.

Yet corporations are also in the position to leverage their procurement practices to create a virtuous cycle. Companies like General Motors, IKEA, Google and Wal-Mart have undertaken major initiatives to get their energy from renewable sources. “If I’m bringing a data center to a state, I can say to the state, ‘You need to provide me with renewable power at a rate at or below what I would have paid with traditional power,’” says Dan Brown, Managing Director, Utilities, Power & Renewable Energy with KeyBanc Capital Markets.

Aside from the savings, renewables also allow corporations to lock in long-term rates that aren’t subject to commodity price swings.

Two-thirds of the Fortune 100 and almost half of Fortune 500 companies have set clean power targets, according to a report from the World Wildlife Fund, Calvert Investments, CDP and Ceres. And corporate clean energy buying was at an all time high in 2019, up 44% from 2018.

“Certainly, companies are coming from a place of wanting to be pro-climate, but they wouldn’t be making the decision on renewables if it was putting them out of the money,” says Mahajan.

Cities are also playing a major role. More than 150 mayors of major U.S. cities have committed to the goal of reaching 100 percent renewable energy sourcing by 2035. As of 2020, six of those cities have already hit their targets, including Aspen, Georgetown and Burlington.

Investments power charge renewables

Much of the growth in renewables is powered by the institutional funding, and there’s been a surge in investment over the past decade. According to the UN Environmental Program and the Frankfurt School, $2.6 trillion flowed to the renewable energy industry in the decade ending 2020.

With oil prices dropping during the pandemic, renewable energy has proven to be a more viable long-term energy investment. And the diversity of renewable energy sources only contributes to the flexibility of the system, making this investment more stable amid recession. Today, renewables draw some $300 billion in investment a year, nearly triple the amount going to traditional energy sources.

Investment in renewables may in fact be more vital now than ever. In an April 2020 study by The International Renewable Energy Agency (IRENA), it is estimated that the transition to clean energy could create 100 million jobs by 2050, providing a boost to the economy in a post-covid landscape. And perhaps most prescient is renewable energy’s promise of reduced air pollution, which will make people less vulnerable to disease.

A distributed energy future

The emergence of distributed power is also helping renewables take root. As it’s currently constructed, the power grid relies on centralized power plants and one-way power flows, which keeps power far away from the point of use. Distributed power resources (DER) integrate technology within the power grid to increase efficiency, reliability and access to renewables.

“We’re seeing a fundamental shift in the electric grid of the U.S., moving away from historically centralized generation with one-way power flows,” according to Brett Simon, senior analyst for energy storage with Wood Mackenzie Power & Renewables, a research and consulting firm. “We’re seeing distributed solutions, where customers will be generating their own power.”

With more technological breakthroughs, renewables can add even more power to the grid. For example, next-generation wind turbines create more energy from the same amount of wind than they did just a few years ago; solar panels can squeeze out more energy from the same amount of sunlight than they did in the past.

“And the supply chain has improved, as well as the advancements in the technologies themselves, which has all moved the cost much, much lower,” says Redinger.

Renewables, sustainable energy consumption and distributed power are all converging to create a brighter and potentially healthier future for consumers—and the planet as a whole.

Learn more

This article is for general information purposes only and does not consider the specific investment objectives, financial situation, and particular needs of any individual person or entity.

KeyBanc Capital Markets is a trade name under which corporate and investment banking products and services of KeyCorp^® and its subsidiaries, KeyBanc Capital Markets Inc., Member FINRA [key.com]/SIPC [key.com], and KeyBank National Association (“KeyBank N.A.”), are marketed. Securities products and services are offered by KeyBanc Capital Markets Inc. and its licensed securities representatives, who may also be employees of KeyBank N.A. Banking products and services are offered by KeyBank N.A. 

This content is paid for by an advertiser and published by WP BrandStudio. The Washington Post newsroom was not involved in the creation of this content. Learn more about WP BrandStudio.