Transition to renewables likely to accelerate after COP26 despite cost and technology challenges, experts say
- Natural gas spot prices have more than quadrupled in Europe and Asia due to surging demand, creating ripple effects in coal and oil markets
- Renewables accounted for almost 30 per cent of global electricity output in 2020, according to the International Energy Agency
“This round of fossil fuel price increases has made the cost advantages of renewable energy even more apparent,” said William Wang, founding partner of Primavera Capital. “However, the development of green energy does face many challenges … rising prices and shortages of key resources such as lithium, cobalt, nickel, and silicon have been hot topics in the renewable energy industry.”
Spot prices for natural gas have more than quadrupled in Europe and Asia due to surging demand worldwide, and ripple effects are being felt in coal and oil markets, with prices of both reaching record highs. Volatile energy prices also prompted some power companies in China to cut back on electricity production to try and stem their losses, leading to power crises in more than half of all Chinese provinces since September.
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Meanwhile, investments in fossil fuel infrastructure are being called into question, raising doubts about the net-zero emission pledges of a number of Asian economies ahead of the climate talks that kicked off in Glasgow on Sunday. According to a new report by Global Energy Monitor, a US NGO which catalogues fossil fuel projects globally, the planned US$379 billion expansion of gas infrastructure in Asia risks becoming “stranded assets” as the world turns away from fossil fuels.
“Coal is likely to be the elephant in the room at COP26. [It] has long been considered cheap and plentiful, with no supply chain issues, but in 2021 it is none of those things,” said Matt Gray, analyst at climate think tank TransitionZero. To meet the 1.5 degree Celsius target set out in the Paris Agreement the world must shut down 3,000 coal plants, or one a day from now until 2030, according to TransitionZero.
In the meantime, the production costs of renewable energy, including wind and solar, have continued to fall in recent years. Renewables accounted for almost 30 per cent of global electricity output in 2020, according to the International Energy Agency (IEA). Further, the cost of renewable energy projects has been cheaper than the cheapest coal-fired power plants since 2019, according to the International Renewable Energy Agency (IRENA).
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“The recent coal shortage reinforces the worries of risks of over relying on fossil fuel. This will inject further momentum into renewables development,” said Yan Qin, lead carbon analyst at data provider Refinitiv.