INSIGHTS

If we are to meet the Paris 2050 ambition of holding global warming to well below 2 degrees Celsius, renewable energy is going to have to play a crucial part. However, to this day, coal remains the dominant form of power generation around the world. So, are we on track with the build out of renewable energy?

Coal still the dominant form of power generation

According to the International Energy Agency, coal remains by far and away the dominant form of power generation in the world today, with 38 per cent of global electricity generation coming from coal. This percentage has stayed roughly flat over the past 30 years.

Meanwhile, natural gas, which is cleaner than coal but a high emitting fossil fuel nonetheless, comprises 23% of generation, having seen strong growth over the past three decades.

Renewable energy (predominantly made up of hydro, wind, solar, and biofuels) has seen a somewhat modest increase since 1990. Its share has increased from around 20 per cent in 1990, to around 26 per cent now. So, while renewable generation capacity has grown, it hasn’t really displaced coal and gas that much – rather it has grown alongside it.

Coal provides 38% of the world’s electricity – little changed over the past three decades

This doesn’t paint an overwhelmingly positive picture, however, there are some reasons to be optimistic. Solar photovoltaic (PV) and wind are the two forms of renewable generation that will need to do the heavy lifting in the decades ahead, with new hydro projects very difficult to justify given their local environmental impact. Fortunately, the growth in both wind and solar has been exceedingly strong.

Between 2010 and 2018, the total output from solar PV increased by 1630 per cent, or 43 per cent per annum. However, this growth was off a small base and solar still only accounts for just over 2 per cent of total power generation. The growth in wind, while not as impressive as solar, has been strong nonetheless. Over the same time period, wind generation has increased by 272 per cent, or 18 per cent annually.

Renewables are by far the fastest growing electricity source

This strong growth means that the picture is changing. By 2025, the share of renewables in total electricity generation is expected to be 33 per cent, surpassing the coal-fired generation whose influence continues to wane.

Demand for renewable energy continues to grow

More and more companies are committing to use 100 per cent renewable energy, with many having already made the leap. Large companies already sourcing 100% renewable electricity include Apple, Microsoft and Google. Meanwhile, large electricity users with global operations such as 3M, Nestle, Johnson & Johnson, Nike, and Unilever, all have in place targets to reach 100% renewable energy use.

All of this, in concert with government policy and investor pushback against polluting utilities, will continue to send a strong investment signal to the electricity market. For instance, facing increasing demands from customers such as Apple, Sony has threatened to move factories out of Japan should the Government not speed up the role out of renewables in the Japanese power supply. In Australia, large utility AGL is demerging its coal-fired generation business, largely in response to lack of appetite from investors for coal generating assets. Coal is the new tobacco.

Two key markets are the US and China, which together account for around 45 per cent of global electricity use. The actions of both countries will, therefore, have a very large impact on future emissions from electricity generation.

In China, a whopping two thirds of electricity comes from coal, with renewable sources (mainly hydro) contributing 26 per cent. The burning of coal in China is estimated to be responsible for 15 per cent of global greenhouse gas emissions on its own. The Chinese Government has shown a new-found urgency to de-carbonise its economy with the Chinese Energy Regulator recently proposing a goal for 40 per cent renewables by 2030 driven by a build-out of solar and wind. This is a step on China’s new climate pledge for greenhouse gas emissions to peak before 2030 and for the country to reach carbon neutrality by 2060.

The US generates 24 per cent of its electricity from coal, and 37 per cent from natural gas. 19 per cent of the US’ electricity is generated from nuclear energy. 18 per cent comes from renewable sources. As it stands, all but 13 US states have some form of renewable energy or carbon-free target, though these vary widely. Joe Biden has re-joined the Paris Accord which Trump withdrew from and set a goal of 100% ‘carbon pollution free’ electricity by 2035 – to be achieved largely through renewables.

How green is renewable energy?

The rollout of solar and wind generation is only going to accelerate in the years ahead. But while having zero operating emissions, both require vast amounts of natural materials to construct - including steel (which itself is estimated to account for around 5 per cent of total global greenhouse gas emissions). However, even taking into account the entire lifecycle emissions, solar and especially wind are much, much, greener alternatives than fossil fuels.

Total lifecycle greenhouse gas emissions of electricity sources (gCO2e/kWh)