Faster Than Expected

Some experts are expecting that solar will eventually take over as the king of the energy mix. And it may come sooner than anticipated. Soon,  solar power, as well as renewable energy (RE), will dominate the power basket according to a Bloomberg New Finance outlook released last June.

The solar photo voltaic panels cost for one is expected to drop by 66 percent by the year 2040 while onshore wind power will dip by 47 percent after 2040.

The report noted that solar costs are now already just one-fourth of its prices in 2009 while onshore wind has seen a 30 percent decrease in the last eight years. Off shore wind prices are also expected to drop by 71 percent, making this RE technology more attractive.

Presently, solar costs are already comparable to new coal power plants in the United States and Germany. By 2021, the same will happen to emerging markets like India and China. By 2020s, both countries are expected to have lower power prices with the countries’ aggressive investments in solar energy. The BNEF report noted that close to 39 percent or some $4 trillion of RE investments of the world are to be poured in China and India.

“These tipping points are all happening earlier, and we just can’t deny that this technology is getting cheaper than we previously thought,” said Seb Henbest, the lead author of the BNEF research.

Due to the falling costs of the two technologies, the BNEF outlook stressed that in 2040, solar and wind power combined will account for close to half of the world’s installed generation capacity, more than four times the current 12 percent share.

Naturally, the greater share of these renewable sources will displace coal and natural gas plants. The estimate showed that roughly 369 gigawatts (GW) of coal plants projects would likely be canceled, an amount that’s equivalent to the combined generation capacity of Brazil and Germany.

IMG_0005.JPG

At present, solar costs are already comparable to new coal power plants in the U.S. and Germany

Even the United States where President Trump signed an executive order to “start a new era of production and job creation” especially in the coal sector, will see coal capacity drop by half in 2040.

Europe’s coal capacity is also expected to slide by 71 percent given the region’s environmental laws that will make fuel burning cost more.

The new king of the renewable mix is indeed coming.

Unfortunately, for us Filipinos, we still yet have to see a dramatic increase in the renewables’ share in our power mix. While India, has already embraced technology and the benefits that a nation can reap from harnessing its resources properly, our country has remained in the same position for years. In the last two years, the share of renewables— solar and wind combined– only accounts for one percent.

As I have been saying, our energy planners remain fixed in their incorrect thinking about how expensive RE is. While the rest of the world have been sensitive to the development of the RE sector, we still insist on having our ‘quick fixes.’ We favor the least cost in terms of capital outlay for power plants but refuse to look at the additional cost that consumers will shoulder for our heavy dependence on fossil fuels.

We only need to look at the devastating impact on energy prices from history to see the risks of relying heavily on either coal or oil plants. In the 1990s, the Gulf War, for example, brought roughly 30 percent increase in the average spot price for crude oil.  According to the average unit price of crude oil increase in the country was approximately 56.1 percent.

We don’t even have to go as far as the 1990s. Just last year, our Energy Department officials warned of a possible disaster with the news that Indonesia has extended its imposed moratorium on coal exports to the Philippines due to the kidnapping of several Indonesian sailors in the Sulu sea by the Abu Sayaff.  We, after all, get 70 percent of our coal or 15 million tons for 2015 from Indonesia. A few years before that, Indonesia also changed its rules about coal exports which led to an even higher cost of generating power from coal.

A necessary consequence to all these is this: coal and other similar fossil fuel-based technologies will increasingly have difficulties in getting financing. Not only because financial institutions will institute policies to avoid fossil fuel technologies, but if at all, banks will have to shorten the tenors it will give to coal plants. Because of the expected decline in costs of RE technologies, the competitiveness of coal plants will increasingly decline.  Therefore, banks will have to lend, if at all, at much shorter maturities.  With shorter maturities come higher annuities.  This will make financing coal plants extremely difficult and uncompetitive.

All these points to one thing: Let us be like other countries, like our Asian neighbors India and China that have embraced and capitalized on developments of the RE. And part of it is welcoming fixed contracts in our energy mix to take advantage of the falling prices of RE technologies and having the maximum levels allowed in our Renewable Portfolio Standard (RPS), where power players are required to either source or produce a specified percentage from RE

Given that our Power Sales Agreements (PSAs) are ‘floating’ where risks such as price escalations of fossil fuel and foreign exchange rates are passed on to consumers, we need to have our fixed priced contracts to at the very least soften the blow on the negative impact of the ‘pass-on costs.’ Fortunately, renewables are in a good position to hand out those much needed fixed contracts.

While the rest of the world are embracing the lower costs of RE generation, we are still stuck in the old ways of thinking that fossil fuels and fixed price contracts are the correct formulae to our power rates woes.  Let us see the economic sense in investing and helping renewable energy flourish in our rich country.

If we want to maximize our abundance of RE sources in the country, which as many have said is the key to lower energy prices, then we must consider those fixed priced contracts for RE. And if we want to truly embrace and benefit from the falling costs of RE technologies such as what the recent BNFF report has noted, then we must be quick in adopting my above proposals. Otherwise, we will be left wondering years from now how and why we failed to find a solution to what seems to be never ending high electricity prices in the country, when in fact, the answer had been quite obvious.

References:

https://www.bloomberg.com/news/articles/2017-06-15/solar-power-will-kill-coal-sooner-than-you-think

http://www.philstar.com/headlines/2016/06/27/1597092/philippine-power-supply-jeopardized-indonesian-ban

Oil Price Shocks and Devefoping Countries: A Case Study of the Gulf Crisis by Sarah Ahmad Khan

Jobs, Jobs and More Jobs

Renewable energy development creates jobs. Recent figures from the International Renewable Energy Agency shows that. The growing investments on RE in recent years are resulting in more work for many nations.

The report, Renewable Energy and Jobs Annual Review 2017 showed that in 2016, the RE sector provided jobs to as many as 9.8 million individuals. This amount was higher by 1.1% posted in 2015. Leading the pack is solar photovoltaic, employing some 3.1 million people, a number that is up by 12 percent from 2015. Wind energy also saw a jump in the number of people it employed, providing jobs to some 1.2 million people.  The report stressed that wind and solar PV have been consistent in providing more jobs in recent years as work from these two subsectors have more than doubled since 2012.

As government’s in Asian countries take notice of the potential of RE, Asia accounted for the largest contribution to job generation in the sector, accounting for 62% of the total globally. Growth in RE jobs in this continent has been significant with its 12% increase from 2013 to 2016.

Asia has been on the rise with its new installed capacity accounting for 46% of the global growth in 2016 from a mere 40% in 2013. Thanks to China, which the study noted as one of the top countries in producing the most number of jobs along with Brazil, the United States, India, Japan, and Germany. Given China’s pivot to cleaner energy, it now provided some 44% of the total RE jobs worldwide last year. China has been employing more people as it only posted 41% in 2013.

Traditional sources of energy, on the other hand, is suffering a different fate.  Several developments such as growing use of automation in extraction, overcapacity as well as the shift to greener forms of energy of nations are causing the decline of jobs in the sector. Jobs generation from this sector has been declining all over the world for decades.

Developments in China alone are hurting traditional power industry, particularly, coal. China, the producer of almost half of the world’s coal, have already closed 5,600 mines due to the slowdown of its economy and excess supply. It is predicted that some 1.3 million coal mining work will be reduced in the country. Similarly, the world’s largest coal producer, Coal India has already decreased the number of jobs by 36% as the number of its employees are down to 326,000 in 2015-2016 from 511,000 workers in 2002-2003.

Similarly, coal-mining in Germany only employs roughly 30,000 jobs, which is a mere tenth of what it used to hire 30 years ago. The US coal mining work, too have dwindled to 55,000 jobs from 174,000 three decades ago.

And we can expect more of this trend in the coming years. Russia, for one, has recently announced its largest-ever purchase of renewable energy as it aims to award contracts to buy 1.9 gigawatts of clean energy in a bid to attract more jobs through foreign investments.

Director-general of the International Renewable Energy Agency Andan Amin has noted that this move “can significantly contribute to the country’s economic objectives such as economic growth and employment.”

RussiaRussia now joins other power nations that are seeking to invest more in renewables. Just a few months ago, the Organization of Petroleum Exporting Countries, or OPEC’s top producing country, Saudi Arabia announced that it will invest some $30 to $50 billion in renewables starting with the construction of wind and solar power plants.

As I have been saying, there are many benefits of investing in renewables. And job generation is one of them. As some of the world’s most advanced countries shift to greener forms of energy, with the exception of US, (which is a different story, by the way), we can only expect more jobs and a better (and cleaner) future, hopefully for all.

 

References:

Renewable Energy and Jobs Annual Review 2017

https://www.bloomberg.com/news/articles/2017-05-29/russia-starts-largest-renewable-energy-auction-in-bid-for-jobs

Let’s Not Forget Wind and Natural Gas

So much has been said about the potential of renewable energy especially on solar power in the news lately. But there’s another renewable energy source that could significantly help us reduce our greenhouse gas emissions: Wind Energy.

Similar to other renewable energy source, wind power does not emit greenhouse gas emissions, and of course, the resource is free.

But this form of energy has one advantage over other renewable sources: its low carbon foot print. According to energy specialist James Conca wind energy has the smallest carbon footprint (along with Nuclear), only emitting 15 grams per kilowatt hour (kWh). Its emissions are largely from the manufacturing, installation and the maintenance of the wind turbines.

Development in solar energy has overshadowed the good news about wind power. But we should also take note of the progress wind energy has made.

In 2016, a total of 54.6 gigawatts (GW) was installed globally, bringing the world’s total installed wind capacity at 487 GW according to the Global Wind Energy Council (GWEC). China alone has installed 23.3 GW of wind power last year, and now has the largest share of wind power in the world with 42.7%. US also added more wind energy last year after installing a total of 8.2 GW.

Analysts at the Bloomberg New Energy Finance notes that “wind is now one of the main workhorses in power markets around the world.” And the BNEF predicts that wind power’s growth will continue as some 59 GW will be commissioned this 2017, beating the additional installed capacity in 2016.

Apparently, wind power’s potential must not be ignored.

In the Philippines, the World Wide Fund notes that our grid can accommodate up to 500 MW of wind power without hurting the grid. Plus, there are new technologies, which could make the Philippines a leader at least in the South East Asia (SEA) for wind power.  While we have as much wind as our neighbor countries, the Philippines’ is friendlier to the generation sector, particularly on research and development compared to other SEA countries. Our restrictions on connecting to the grid are much less.

However, our government should be more supportive of the feed-in tariff for wind energy because, without it, development of wind power could be stunted. That’s a shame because developing this renewable source could help us shift faster to cleaner energy just like in the cases of other countries.

Last year, the wind power in the United King made waves as it generated more electricity than coal. This is a first in the country’s history.  Coal power generation in the UK declined from 22.6 percent of the country’s overall energy mix in 2015 to 9.2 percent in 2016 with the shutdown of three major coal power plants.

Just last February, Denmark was able to generate sufficient energy from the wind to supply the power needs of the entire country.  WindEurope reported that the country produced a total of 97 GW from wind, with onshore wind providing 70 GW and offshore wind at 27 GW. The volume generated was enough to supply to some 10 million average households in the European Union.

wind_turbines_denmark

Wind turbines off of Skovshoved, Denmark. Photo c/o http://www.euractiv.com/

As of 2015, wind energy combined with solar only accounted for less than 0.1 percent of the Philippines’ energy mix. There is obviously more room for wind power just like with other renewable sources if we want to meet the country’s goal of cutting our emissions by 70 percent by the year 2030.  And the best way to move forward in achieving our committed emissions is to shift our dependence on fossil fuels to liquefied natural gas or LNG for our ancillary needs.

Wind and solar energy are intermittent sources of energy. Thus, we need to beef up on our ancillary services to maintain the correct direction and flow of power as well as to address the imbalance on the supply and demand on the grid. Currently, we rely on traditional sources of energy for the security of our grid, which unfortunately, creates havoc in our environment and health.

On the other hand, natural gas is less harmful to the environment since its main component, methane, results in lesser carbon emission. Its carbon dioxide emissions are 30 percent less than oil and 45 percent lesser than other conventional fuels. Natural gas also produces less sulfur dioxide and nitrogen, which are precursors of acid rain and smog, respectively.

The benefits of depending on LNG rather than coal are undeniable. In fact, a study conducted by researchers at the University of Texas shows that natural gas and wind are the lowest-cost technology choice for power generation in the United States when cost, environmental effects and impact on public health are taken into consideration.

In the last two years, natural gas accounted for some 15 to 16% of our energy needs while coal dominated our power mix at 32 %. If we are committed to reducing our carbon emissions and saving our environment, then we should work harder in shifting away from coal and instead look at natural gas, solar and wind as viable options.

References:

https://about.bnef.com/blog/10-renewable-energy-predictions-2017/

http://www.cnbc.com/2017/02/13/china-and-us-lead-way-with-wind-power-installations-says-global-energy-report.html

https://cleantechnica.com/2017/02/24/denmark-generated-enough-wind-energy-power-power-needs-wednesday/

http://www.wwf.org.ph/stories/rp-grid-can-accommodate-500-mw-additional-wind

https://www.theguardian.com/business/2017/jan/06/uk-wind-power-coal-green-groups-carbon-taxes

https://news.utexas.edu/2016/12/08/natural-gas-and-wind-are-the-lowest-cost-for-much-of-us

 

More Reasons to Shift: Health and Death Print

Recently, the Senate voted to concur the ratification of the Paris Climate deal after President Rody Duterte signed the ‘Instrument of Accession,’ signifying the Philippines’ commitment to Paris Agreement.

To recall, the Paris Agreement on Climate Change seeks to reduce carbon emission and was signed by 194 countries. Our country has pledged to cut 70% of its carbon emissions by 2030 with the help of the international community.

The Senate’s concurrence signifies that we are now legally bound to the agreement. This means it is time for us to double our efforts in reducing our carbon emissions.  One way of doing that is to add more renewable energy in our energy mix.

This shift has sound economic reasons, and more importantly, it has even more profound rationale: its impact on the health of our people.

Data from the Department of Energy reveals that we are still reliant on oil and coal for our energy needs. In 2014, we sourced our power from imported coal and oil by as much as 13.9% and 29.8%, respectively. The figures are even higher for 2015 as imported oil and coal accounted for 14.92% and oil was 32.79% of our energy mix.

Aside from the monetary consequences relying heavily on imported products, reliance on coal and oil for our energy needs has an impact on health of our countrymen, and therefore death rates. Coal, for one, has the largest carbon footprint among all energy types. One kilowatt-hour (kWh) of power produced from coal emits roughly 900 grams of carbon dioxide. And this has health consequences.

Data shows that shifting to renewable energy will pave the way for lesser carbon emissions. Just recently, a study revealed that in the United Kingdom, carbon emissions decreased by 5.8 percent in 2016 compared to previous year as the country’s use of coal dropped by 52% for the same period.

Aside from having a large carbon footprint, experts are now talking about another measure: “death print.”.  Both oil and coal have large death prints. According to James Conca, an energy expert, and geochemist, “death print is the number of people killed by one kind of energy or another per kilowatt hour (kWh) produced”.

Conca explains that coal, oil, and biomass are carbon particulates that result from burning and cause respiratory problems. Our internal organs, particularly the lungs, don’t respond well to these particulates.  Using them has the same result as inhaling cigarette smoke: black lungs.

Just how bad are the death prints of coal and oil?

Conca’s research shows that on global average, the mortality rate of coal –computed as death divided by trillion kWh of use–is 100, 000 when 50% of energy needs are sourced from coal.  It’s even worse in China, which sources 75% of electricity from coal as its mortality rate is 170,000.  The US sources 44% from coal, and its coal’s mortality rate is 10,000. Conca says that China has unfortunately ramped up the building of coal in the last decade with plants that usually do not have exhaust scrubbers thus the higher death print.

Oil has a large death print, too, as its mortality rate is 36,000 for every 8% energy it supplies.

On the other hand, solar rooftop and wind power, with each contributing roughly one percent to the global energy supply, has mortality rates of 440 and 150, respectively.

In the United States, Practice Greenhealth points out that a typical 200-bed hospital that uses coal-powered energy is responsible for $107,000 a year in direct healthcare costs associated with asthma attacks, chronic bronchitis, and other health problems. The organization is the leading membership and networking organization in the US for organizations in the healthcare community that have made a commitment to sustainable, and environmentally preferable practices.

Clearly, these numbers point that adding more renewable energy to the mix will both save the environment, as well as lives.

Again, as I have been saying in the past, I do not have problems with coal plants per se. In fact, I have built some of them during my days with the NAPOCOR. But I also believe in responding to the needs of our time. And studies suggest that the world needs more clean energy if we are to save the world for the succeeding generations.

References:

http://edition.cnn.com/2017/01/18/world/2016-hottest-year/

https://www.forbes.com/sites/jamesconca/2012/06/10/energys-deathprint-a-price-always-paid/#16e2ea1b709b\

https://qz.com/925294/carbon-emissions-in-the-uk-have-fallen-to-a-120-year-low/

http://www.rappler.com/nation/162865-duterte-signs-paris-agreement-climate-change

http://www.rappler.com/nation/162865-duterte-signs-paris-agreement-climate-change

https://practicegreenhealth.org/topics/leaner-energy

Harnessing the Sun to Empower Farmers

Agriculture is the single sector that employs the most number of individuals. According to the United Nations, 40% of the world’s population rely on agriculture for their livelihood. Unfortunately, the world’s poorest are from the sector.

The United Nations Environment Programme (UNEP) says that increasing the productivity of the sector is one of the most effective means to combat poverty. The UNEP noted that a 10 percent growth in farm production reduces poverty by five percent is Asia and seven percent in Africa. And one of the measures to improve production is to ensure proper irrigation. This was the focus of the International Renewable Energy Agency (IRENA) in its report “Solar pumping for irrigation: Improving livelihoods and sustainability, stressing the benefits of solar pumps for irrigation.”

The report noted that food is produced mostly on rainfed lands and the majority of farmed land in South Asia and Sub-Saharan Africa are reliant on seasonal rains to meet water needs since only 20% are irrigated agriculture. Agrarian economies developed irrigation particularly groundwater structures (wells and tube wells) to boost agricultural productivity. Unfortunately, this has increased water consumption and electricity consumption. In India, for example, irrigation comprises 18% of electricity consumption and five percent of diesel consumption. And globally, energy use of electric irrigation pumps is roughly 62 terawatt-hours per annum, which is equal to Singapore’s annual power consumption in 2014.

The report stressed that there are consequences on depending heavily on electric power pumps. There is the impact on public spending given that electricity or fuels for irrigation are often subsidized by governments, which also results in the inability of utilities and distribution firms to recover their full costs. This hampers the utility companies to fund new power projects. On the other hand, utility businesses that are unconcerned on cost recovery have little incentives to address the inefficiency of water and energy consumption practices in the sector. Plus, there is also the impact on the environment. Naturally, high energy consumption for pumping contributes to greenhouse gas emissions. For example, in India, fuel groundwater pumping accounts for eight to 12 percent of the country’s greenhouse emission. Likewise, in China, energy consumption for irrigation equals roughly 45 metric tons of C02 or equivalent 50 to 70 percent of all the energy activities of its agricultural sector.

Given the above consequences of relying heavily on energy for pumping, it would then be beneficial to harness the sun’s power for irrigation purposes.  The report emphasized that solar power can provide cost-effective, reliable and environmentally-friendly irrigation services. Harnessing the sun’s power to irrigate farmland can substantially help increase farmer’s productivity and incomes, as well as help government’s reduce public expenditure on fossil fuel subsidies. The report highlighted examples to prove that such outcomes are possible.

domrep-solarpanel

photo c/o irenanewsorg

In Little Rann of Kutch in Gujarat, India where 70 percent of India’s salt are produced, most of the salt farmers use inefficient diesel-powered water pumps in the salt harvesting. Farmers’ income are reduced given that they spend 40 percent of their annual revenues to buy diesel for their next harvest season.  Two pilot projects were carried out in the area to replace diesel-powered pumps with solar-powered pumps. The projects showed that annual savings of farmers increased by $1,277 or 161% compared to farmers who were using diesel-powered ones.

Likewise, in Zimbabwe, the Ruti Dam Irrigation Scheme of Oxfam, added solar pumps to irrigate more lands and solar rooftop panels to provide cold storage and solar charging. Such actions resulted in an increase of household incomes by 287% for the very poor and a 47 percent income increase even for middle-income families.

Solar irrigation pumping could pave the way for lessening CO2 emissions, too. In the case of Little Rann, estimates showed that reduction of 115,000 tons of CO2 is possible when diesel water pumps are replaced with solar or hybrid solar or diesel pumps in the area. Similarly, research by the World Wild Fund showed that the deployment of 5 million solar pumps could save 10 billion liters of diesel or 23 billion kWh of power. Also, in Bangladesh, studies showed a reduction of one million tons of emissions yearly or 450 million liters of diesel with the installation of 50,000 solar irrigation pumps.

I, for one, is a believer of solar pumps. In fact, almost a decade ago, we implemented a solar pumping project in Butong, Ronda, Cebu. We installed the Aquameter system that employs a controller that can covert 2,700 watts of photovoltaic power and solar-powered tap stands where consumers simply need to draw water using their rechargeable pre-paid cards.  Water is sourced from an underground river where a well was drilled. Unfortunately, the project didn’t last long as the community became less cooperative with the project.

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Solar water pump of the Aquameter system

So, it is good news that the DA is now considering solar pumps again. Last August, Agriculture Secretary Emmanuel Piñol announced that the department is installing five prototypes of solar powered irrigation pumps in different areas. The prototypes are US-assembled where the design allows drawing of water from underground or catchment basins. The government expects that installation of such can provide potable water supply, generate excess power for isolated areas as well as provide other sources of livelihood.

It is my hope that this project becomes successful especially since our farmers, just like in other parts of the world, remain the poorest. Surely, we can help our countrymen get out of poverty if we put to good use technology along with our natural resources. Giving solar-powered pumps a chance is a step in the right direction.

References:

http://www.bworldonline.com/content.php?section=Economy&title=solar-powered-pumps-readied-for-installation-to-boost-crop-yields&id=132706

International Renewable Energy Agency (IRENA): Solar pumping for irrigation: Improving livelihoods and sustainability, stressing the benefits of solar pumps for irrigation

Inaction vs. Action: The Cost of Choosing “Cheap”

Quite a number of articles I have written on this blog discussed the portfolio theory, which essentially debunks the myth that choosing traditional forms of energy are more economical.  As I have been saying, our penchant for choosing the energy source based on current market prices or what we term as the least cost method for energy planning, may, in fact, be more costly in the long run.

However, what I have written focused on the cost of building the power plants and energy generation. There is one aspect that makes traditional sources of energy more costly for everyone: the impact on the environment.

Perhaps, it is still unclear to many what the relationship between climate change and the use or non-use of traditional sources of energy. To put things in better perspective, we should illustrate why we must choose renewable energy with the following numbers:

According to the report ‘Energy Darwinism: Why a Low Carbon Future Doesn’t Have to Cost the Earth’, published by Citi, the power sector contributes roughly two-thirds of the total greenhouse gas emissions. On the other hand, other sectors such as land use, agriculture, and forestry, as well as other industrial processes combined only contribute a third of the overall greenhouse gas emissions.

To make matters worse, 90 percent of the greenhouse emissions of the energy sector are carbon dioxide emissions or CO2 since most greenhouse emissions are C02.  However, 65 percent of CO2 emissions from the sector are from fossil fuels and other industrial processes.

Given the above figures, surely, we can no longer say that the fossil fuel powered plants are the cheaper options.

Fortunately, the report of the third largest bank in the US also includes an analysis of the cost implications of continuing with the world’s current heavy reliance on fossil fuel versus the cost of changing the energy mix to include more renewable energy.

What Citi did in its report is to analyze two scenarios: the cost of inaction and action. Under the inaction scenario, the world will continue its energy consumption patterns that are heavily reliant on fossil fuels. Under this assumption, there would be a slight pick-up in renewable energy investment, but the penetration rate of RE will stay at 6% by 2040 and fossil fuels will compose of two-thirds of the power mix. This scenario also assumes zero investments in energy efficiency, which will result in a compound annual growth rate (CAGR) of 2.4% of electricity generation from 2015 to 2040.

On the other hand, the Action scenario assumes that the energy mix favors renewable energy as solar and wind will contribute 22% of the energy mix while fossil fuels are reduced to 28%. The penetration rate of RE also increases to 34% from a mere 6% in 2012.

Is there a difference in costs of the Action and Inaction scenarios? The report says yes, one scenario costs more than the other. Contrary to popular belief, though, the cost of taking the Action scenario is cheaper than the Inaction scenario: the business as usual energy mix is at $192 trillion while the low carbon option will only cost $190.2 trillion from 2015 to 2040.  Citi notes that the falling costs of renewable energy coupled with less dependence on fuel usage account for the cheaper costs of the Action scenario. The report stressed that “Yes, we have to invest more in the early years, but we potentially save later, not to mention the liabilities of climate change that we potentially avoid.”

 

action-vs-inaction

Cost of Action vs Inaction. Source: Citi Research

What would it cost the world if we choose the Inaction route?

 

A report written by Lord Stern with the title “The Economics of Climate Change” in 2006 warned us of the possible overall costs of failing to act on the risks of climate change. The report, widely known as the Stern Review, concluded that losses from effects of climate change would be five percent of the world’s gross domestic product (GDP) per year between ‘now and forever.’ It could even be as high as 11% when we include other effects on the environment and health, which, unfortunately, are hard to quantify.

There are also other research papers that tackled the potential losses in GDP due to damages from climate change. The Citi research noted that a temperature increase of 2.5°C could result in loss of 0.9 to 2.5 % of the world’s GDP.  A loss of 0.7% to 2.5 % of the GDP is roughly % $44 trillion, the report said.

Aside from losses because of climate change, there are also losses in GDP due to heavy reliance on traditional sources of energy.  In a study, Professor Shimon Awerbuch noted that the oil price spikes in the years 2000 to 2004 cost the European Union €700 billion. The prominent advocate of portfolio theory in energy planning further noted that the world would avoid losses of $95 to $176 billion for at least an addition of 10 percent renewable energy in the mix.

The findings of these reports may vary in their calculations, but it is clear that it’s time to do away with thinking only of short-term prices in energy planning. What we should do is plan our energy needs with the future in mind since our penchant for looking at the current and short term costs are and will cost us more. And unfortunately, the costs are not purely monetary

We favored what we thought was cheap. Sadly, what we thought would save us money is making us pay more. The Citi report summed the situation best “A simple reason why atmospheric concentrations of greenhouse gases has grown is that they have been put there as a result of our using historically the cheapest, easiest, or most readily available solutions to a requirement, such as energy. To look at it another way, adopting a lower carbon path is (at least superficially) more expensive, otherwise all things being equal we would logically have gone for a cleaner option.”

References:

Energy Darwinism: Why a Low Carbon Future Doesn’t Have to Cost the Earth by Citi

The Role of Renewables in Enhancing Energy Diversity and Security: Portfolio Approaches by Shimon Awerbuch

Not All Talk

No doubt that climate change is attracting attention from various sectors—the church, governments, private firms and successful individuals.

And Climate Change is taking center stage once more as with the case of the US Presidential Elections. Based on the report of New York Times, the topic of climate change is the focus of the US presidential elections, unlike previous ones where the topic was rarely discussed. The Democrats with its party nominee Hillary Clinton is pushing for taxes on carbon pollution and Bernie Sanders who lost to Clinton for the Democrats’ nomination said that “this election is about climate change.”  The report also quoted the president of the League of Conservation Voters, Gene Karpinski saying “The elevated conversation about climate change in this election is truly historic,” adding that “In 2012, no one asked about it, and the candidates didn’t talk about it.”

Awareness, too, about climate change, is apparent among consumers. Cone Communications, a US-based public relations firm reported that consumers list climate change as the top complex CSR topic that they can both define and explain.  Related topics such biodegradable, renewable resources and greenhouse emissions, follow climate change as topics that consumers can extensively discuss.

However, climate change is not merely a subject of conversation since actions match the discourse with many familiar big brands leading the way to cleaner energy consumption. We have seen large firms increase their commitment to using renewable energy through signed purchase power agreements to 3.23 GW in 2015, tripling their commitment from 1.18 the previous year. And 2016 is off to a good start since companies have already committed to 0.59 GW of RE as of July 15 according to Business Renewables Center.  Not surprising since influential global businesses and their leaders are united in pushing 100 percent use of renewable electricity by the private sector, which accounts for roughly half of the globe’s power consumption.

For example, a global initiative of influential businesses called RE100 and committed to using more renewable energy in businesses was launched in 2014.  Big brands such as Google, Hewlett-Packard, Coca Cola, H&M, Goldman Sachs Group, Johnson & Johnson and Astra Zeneca, to name a few are part of this initiative. Google, the biggest corporate consumer of renewable energy has committed to buying 2.2 gigawatts of RE and investing some $2.5 billion for renewable energy development projects. It intends to use 100 percent renewable energy for its operations in the future.

Last year, the world’s billionaires, including Mark Zuckerberg of Facebook, Microsoft founder Bill Gates and Virgin’s Group Richard Branson, among others, launched the Breakthrough Energy Coalition. The coalition that’s composed of more than 25 investors will fund clean energy companies in their infancy stage as its members agree that: “The world needs widely available energy that is reliable, affordable and does not produce carbon. The only way to accomplish that goal is by developing new tools to power the world.”

mission-innovation

Business leaders and politicians share the same stage at the launch of Mission Innovation. photo c/o The Guardian

 

Along with the launch of the Breakthrough Energy Coalition is the birth of Mission Innovation, a union of the European Union and 20 other countries that intend to double state-funded research initiatives on clean energy. Mission Innovation’s goal is simple: “Accelerate the pace of clean energy innovation to achieve performance breakthroughs and cost reductions to provide widely affordable and reliable clean energy solutions that will revolutionize energy systems throughout the world over the next two decades and beyond.”

Clearly, climate change is a problem that everyone is eager to address. And there is hope that we can head towards a greener and cleaner future with the actions of our leaders from various sectors.

References:

 

http://www.nytimes.com/2016/08/02/us/politics/climate-change-divide-bursts-to-forefront-in-presidential-campaign.html

http://www.iea.org/publications/freepublications/publication/KeyRenewablesTrends.pdf

http://www.bloomberg.com/news/articles/2016-04-07/google-to-provide-seed-funding-for-renewable-energy-in-asia

http://www.conecomm.com/research-blog/2015-cone-communications-ebiquity-global-csr-study

http://www.businessrenewables.org/corporate-transactions/

https://www.theguardian.com/environment/2015/nov/30/bill-gates-breakthrough-energy-coalition-mark-zuckerberg-facebook-microsoft-amazon

http://www.breakthroughenergycoalition.com

http://mission-innovation.net

http://there100.org/re100

http://blog.rmi.org/blog_2016_08_31_community_scale_solar_can_power_corporations_too