Four Trends Driving Profitable Climate Protection

Amory B. Lovins   Contributor  forbes.com  Sep 21, 2015 @ 11:15 AM

Consultant, designer, and Chief Scientist of Rocky Mountain Institute.

Opinions expressed by Forbes Contributors are their own.

Four years ago Rocky Mountain Institute’s Reinventing Fire predicted that “climate protection…will be led more by countries and companies than by international treaties and organizations, more by the private sector and civil society than by governments, more by leading developing economies than by mature developed ones, and more by efficiency and clean energy’s economic fundamentals than by possible future carbon pricing.” As Climate Week NYC kicks off today, it’s a good time to ask, how are those four shifts going?

Clean energy’s economics looking better and better

In 2013 alone, renewable energy other than big hydropower received $254 billion of global investment; energy efficiency, $310–360 billion; and cogeneration of electricity with useful heat, about $70 billion. These three carbon-savers thus attracted about $650 billion of capital in one year.

Long-term fixed-price contracts to sell new U.S. windpower and utility-scale solar power have lately averaged below $0.025 and $0.04 per kWh, respectively. Those are net of federal subsidies, but wind’s has expired, solar’s will drop by two-thirds at the end of next year, and both will still win (though not as quickly in as many places) despite fossil fuels’ larger, decades-old, permanent subsidies. Unsubsidized wind and solar will still average below $0.04 and $0.06 per kWh respectively, beating new fossil-fueled plants by two- to three-fold and closing many as simply uneconomic.

That’s exactly what’s happening. In the next 15 years, fossil-fueled plants are expected to halve their capacity growth (not counting bigger retirements), renewables to double theirs. A simultaneous shift of scale to what the Economist calls “micropower”—renewables minus big hydro, plus cogeneration—now has half the new generation market and produces one-fourth of the world’s electricity.

Cheaper still is energy efficiency, with utilities’ programs averaging $0.02–0.03 per kWh and optimally designed investments often much less—even below zero. Moreover, efficiency dwarfs even the quarter-trillion-dollar and 80-billion-watt annual additions of global renewable energy (other than big hydro dams). U.S. energy savings since 1975, mostly from smarter technologies, have cut cumulative energy use 31 times more than renewable growth raised supplies. Yet efficiency remains invisible while the renewables sprouting on roofs and landscapes enjoy the limelight. Despite U.S. renewables’ rapid growth, savings’ growth in 2014 was three times bigger.

Developed countries start to share energy leadership

As developed countries’ buildings, factories, and mobility get efficient faster than they grow, they’re using less energy. America’s and Europe’s electricity and gasoline use has been falling since 2007. Australia’s electricity use has plummeted while its solar adoption per capita reached about ten times California’s. Since Fukushima, Japan’s lost nuclear output has been half displacedby efficiency, frugality, and renewables. And last year, renewables provided 10 percent of Britain’s electricity consumption, 13 percent of America’s, 20 percent of Ireland’s, 27 percent of Germany’s, 33 percent of Italy’s, 46 percent of Spain’s, 50 percent of Scotland’s, over 50 percent of Denmark’s, and 64 percent of Portugal’s. Germany’s fossil-fueled generation hit a 35-year low, renewables were its biggest power source, and its wholesale power prices were half those of 4½ years ago, with April on-peak prices below off-peak.

Yet over half the world’s renewable installations and investments last year were in developing countries, led by China. China keeps cutting its energy intensity 4–5 percent a year, adding fewer coal plants and running them less, and burning less total coal. China added more solar PV capacity in 2013 than the U.S. added since inventing it 61 years ago. In each of the past three years, China produced more windpower than nuclear power. India did the same for the past two years, has quadrupled its renewable targets, and aims to build a world-class solar industry. Both countries also have immense efficiency potential, partly because they’re building so much infrastruc­ture and can more easily build it right than fix it later.

Renewable leadership is also emerging in Argentina, Brazil, Chile, Costa Rica (100 percent renewably powered for the first 75 days of this year), Guatemala, Nicaragua, Caribbean and Pacific islands, Ethiopia (nearly 100 percent and aiming to electrify the other three-fourths of its 100 million people while reducing carbon emissions 40 percent), rich Middle Eastern nations (Bahrain recently bid the world’s cheapest solar power, under $0.05 per kWh unsubsidized), and several African countries.

Coal is thus in terminal decline; Peabody’s stock is down 97 percent.

Private-sector and civil-society leadership supplements and may supplant governments’

With few exceptions, such as Denmark, Iceland, Norway, and usually China, government energy policies are variable in quality and erratic over time. American energy legislation has been nearly paralyzed for over a decade, leaving only executive-branch opportunities and state and local initiatives (which fortunately are far more important and often vibrant, as are military initiatives). National policy in Australia, Britain, Canada, Hungary, Japan, Poland, and Russia usually undercuts efficiency and renewables despite contrary rhetoric. The clean-energy star is rising through clouds in France, India, Korea, Mexico, and Sweden while it dims in Italy and Spain. German policy remains broadly consistent, and so successful that a major disinformation campaign claims the opposite, but has lately shifted market power from citizens back to big firms.

This fluctuating policy environment raises cost and risk for private firms, which need clarity, transparency, and consistency to invest effectively in decades-long change. Yet major firms are increasingly proposing and promoting sensible policies. Europe’s top six oil companies, led by Shell and BP, called for carbon pricing despite vehement protests from ExxonMobil and Chevron. Global firms aren’t waiting for carbon pricing; most have long used it internally. Utility giants E.ON, RWE, GDF Suez, and NRG are shifting to efficiency, renewables, and distributed, customer-centric strategies. Commerzbank, M&S, Microsoft, and SAP are already 100-percent renewably powered. Walmart, IKEA, Infosys, and others target 100 percent by 2020 or sooner, followed longer-term by Amazon Web Services, Apple, Facebook, Google, Interface, Nestlé, Philips, Swiss Re, Unilever, and many more. Now American firms are buying renewable power not just by contracts but by direct project investments—1.2 GW last year, 1.4 GW through July this year—often with the help of RMI’s Business Renewables Center or RMI’s spinoff Black Bear Energy.

Countries’ and companies’ actions pull ahead of diplomats’ negotiations

 Five years ago, most pundits opined—and activists despaired—that nothing could be done about climate change without a binding global treaty. Today, spurred by ever-starker evidence of climate perils, and with leadership from Pope Francis to The New Climate Economy and from the grassroots to the pinnacles of finance and industry, disparate interests are converging on a Paris agreement in December. China–U.S. climate cooperation makes this far more likely. However it turns out, the world’s climate conversation seems to have passed a tipping point toward a constructive direction led by popular demand, national example, and corporate purpose.

If RMI’s Reinventing Fire (2011)—for which the U.S. is essentially on track—is potentially a model for developed countries and Reinventing Fire: China (2016) for developing countries, both together could start to provide a model for the world. The U.S. synthesis showed how to raise 2010 energy and carbon productivity 3- and 16-fold respectively by 2050, and preliminary results from the China synthesis showed 7- and 12-fold, both trillions of dollars cheaper than business-as-usual. That’s a winning formula for a clean, secure, prosperous, low-carbon energy future for all.

Corporate purpose combines serving customers and employees, expanding markets, making profits, building brands, and sustaining the conditions that prosperity and life itself require. Investors and directors are focusing on these imperatives. Six years ago, the Copenhagen climate conference reminded us how hard it is to price carbon and craft international cooperation if policymakers assume, as many still do from misapplied economic theory, that climate protection must be costly. RMI has been pointing out for more than a third of a century that this assumption is empirically wrong (e.g., Least-Cost Energy: Solving the CO2 Problem, 1981). Business practitioners prove daily that saving fuel costs less than buying fuel, let alone burning fuel; that’s how Dow already returned $9 billion on a $1-billion efficiency investment. As such business experience gets noticed, eminent groups are now starting to accept they got the sign wrong, so we must focus on turning market failures into business opportunities. If that meme spreads, Paris may mark the crucial shift of the climate conversation from cost, burden, and sacrifice to wealth creation, jobs, and competitive advantage. That recognition of market realities could so simplify and sweeten the politics that any remaining resistance can melt faster than the glaciers.

Now more than ever, the biggest levers for energy transformation—business logic, smart policy, public demand, and an insistent Mother Nature—can build on each other at that critical moment when, as Dana Meadows said, we have exactly enough time, starting now.

http://www.forbes.com/sites/amorylovins/2015/09/21/four-trends-driv...

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Yet the companies that actually have to pay to create the renewable energy are leaving the business.

NRG to Split Off Renewable Businesses, Pay Down Debt

NRG’s focus now is ‘good and near-term returns’; power producer aims to conserve $1 billion

NRG Energy Inc. NRG -2.74 % is scaling back its ambitious renewable-energy plans to focus on its traditional power-generation business in hopes of bolstering its balance sheet and slumping stock.

The company on Friday announced a broad reorganization that it said would conserve $1 billion of capital in 2016, money it could use to begin reducing its almost $20 billion in long-term debt. The plan includes moving its consumer-focused solar-power business into a separate unit that will have limited access to NRG’s cash and may eventually become a stand-alone company.

The announcement represents a setback for NRG Chief Executive David Crane, one of the most passionate advocates of renewable energy in the electricity business. In the past, he has promoted solar panels, wind turbines and electric cars as the future of the energy industry.

But on a call with investors on Friday he said the intent now is to get away from initiatives whose success depends on the public’s appetite for new technologies. Instead, the company, which is based in Princeton, N.J., will focus on “good and near-term returns.”

rest of article

http://www.wsj.com/articles/nrg-energy-unveils-moves-to-reduce-debt...

IMO, the global momentum of renewables is little effected by isolated instances such as NRG.

With a Chinese & European depression and 8 years of a Republican controlled US government we will see if the momentum is sustainable.  Lets see how the momentum lasts when instead of tax credits, renewables have to pay taxes at the same rate as fossil fuels.  How many people are going to buy green cars when instead of a tax credit they have to pay extra taxes to equal the gasoline tax that pays for roads?

One of the points made in the article that caused me to post it was in regards to increasing cost competitiveness of renewables regarding expired and expiring subsidies.  I'll decline to speculate as to whether Rs or Ds are calling the shots domestically in 2017.  Like so many issues the dynamics can change quite a bit before a new president or Congress is in office.  Renewables are finding greater greater public support as they become more efficient and affordable.  Once they pass a certain point of acceptance no party can put that genie back in the bottle.

'Long-term fixed-price contracts to sell new U.S. windpower and utility-scale solar power have lately averaged below $0.025 and $0.04 per kWh, respectively. Those are net of federal subsidies, but wind’s has expired, solar’s will drop by two-thirds at the end of next year, and both will still win (though not as quickly in as many places) despite fossil fuels’ larger, decades-old, permanent subsidies. Unsubsidized wind and solar will still average below $0.04 and $0.06 per kWh respectively, beating new fossil-fueled plants by two- to three-fold and closing many as simply uneconomic.

Renewable energy is the energy of the future. but the central question is - how far in the future? Renewables attract a great deal on investment, but a fair question is if those investments are "sustainable" over the near term (10 years). In ideal locales, solar is a money maker. in less than ideal locales, it becomes marginal. Wind is geographically constrained. Are there any cost-sustainable wind farms between I-20 and I-40 from Dallas to Birmingham,, Baton Rouge to Nashville?

Energy efficiency is also a money maker, but once you get past the low hanging fruit, the economics become less attractive.

Here in California, there is a huge surge in renewables, with a significant part of that driven by CA laws and requirements. China has driven down the cost of solar, but the tax credits are a huge part of the solar leasing market growth.

The theme of the RMI article is that renewables are the better investment. Over the next 20 years, i agree. Next 10 years? Maybe, but I'm not ready to sell my Exxon-Mobil to invest in wind or solar companies.

I find it interesting to occasionally view what is happening outside the U.S. regarding renewables.  A lot of countries don't have the energy options that we do.  And a lot of third world and emerging economies don't have power grids nor do they have the kinds of large scale power needs required in industrial nations.  Much of their power needs can be met with solar.  The arc of scale for both solar and wind are largely dependent on battery technology.  I agree that I wouldn't swap XOM for any renewable company stock at this time.  And I think it will be a decade before renewables constitute a meaningful percentage of U.S. power generation however from a global perspective renewables seem to be making significant progress. 

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