In May of 2016, the steam turbines at the Northern Power Station shut off for the last time. The hulking power plant 6 kilometers south of Port Augusta in South Australia had been running for 31 years, powered by coal that arrived on rail cars from a mine 280 kilometers to the north. As the state’s sole coal-fired power plant, for several years it had been running only during the summer.
The Northern Power Station would not start up again the following summer, but another massive device would. Elon Musk had wagered only a few months before the coal plant closed that Tesla could install a 100-megawatt battery in the state within 100 days of the signing of a contract, or the battery would be free.
Musk won that bet, and on December 1, the Hornsdale Power Reserve went online next to the 99-turbine Hornsdale Wind Farm to support the region’s grid as it moves to higher levels of renewable energy. At the time of writing, it is the largest operational battery system in the world, although larger batteries are under development.
On the Rise
The global transition in the electricity sector is not a theory. It is happening now. From Germany to the deserts of Western China to the savannas of Brazil, wind turbines are going up, solar panels are being placed on racking, and batteries are being installed at an ever-increasing pace. And in Australia and other parts of the developed world coal, nuclear, and, in some cases, gas plants are being run less and less, and eventually shuttered.
This transformation is full of contradictions. Solar represented only 2.4 percent of global electricity generation during 2018. However, the rate of growth is dizzying. The output from solar grew around 50 percent annually from 2007 through 2017, meaning that on average, its contribution to the power supply more than doubled every two years. Wind is further along, representing 5.5 percent of generation in 2018. However, it has been growing more slowly, with generation from wind increasing an average of only 21 percent each year from 2007 through 2017.
These relatively small portions of overall power belie much more significant progress in certain nations and regions. According to its grid operator, Denmark’s wind turbines and solar panels produced slightly more than half of all the electricity generated in the nation last year. Other nations have also made significant progress, with Ireland getting 30 percent of its power from wind alone and Germany receiving more than a quarter of its electricity from wind and solar.
And this progress is not limited to Europe. Solar and wind together also make up around a quarter of California’s electricity. Uruguay generated one-third of its power from wind and solar, with hydroelectric power making up nearly all the rest, and Costa Rica has been running for months at a time without fossil fuels in its electricity generation by adding wind to its hydro dams and geothermal plants.
One of the highest penetrations of wind and solar that has been integrated to date has been in Southern Australia. Over the last 12 months (to mid-October 2019), wind and solar made up 53 percent of the net generation on the state’s grid, with small-scale solar arrays, including those on rooftops, contributing more than 10 percent on their own.
The rise of solar and wind in the state has been nothing short of revolutionary. While Denmark has been slowly building its wind fleet over decades, only a few years ago, renewables were just a minor player in South Australia’s grid.
Simon Holmes á Court, senior advisor at Melbourne University’s Energy Transition Hub, cites a combination of factors for the rapid rise of wind and solar in South Australia. Among these are excellent natural wind and solar potential contrasted with a lack of cheap local coal and gas. “South Australia had the perfect storm of high wholesale costs with the increase of gas, high distribution costs, and a perfect resource,” explains Holmes á Court.
“South Australia had the perfect storm of high wholesale costs with the increase of gas, high distribution costs, and a perfect resource.”
Another factor that helped the rise of wind in South Australia is the quirks of national renewable energy programs. The renewable energy targets implemented by the federal government in 2001 and increased in subsequent years did not specify where these renewables needed to be built. “The capital flowed to where it made the most sense,” states Holmes á Court.
South Australia, which had struggled to attract investment compared to neighboring states, jumped at this opportunity. “They made sure it was an easy place to develop renewables,” confirmed Holmes á Court. “Other states were at times quite ambivalent towards wind.”
While national targets helped South Australia build out its wind capacity, rooftop solar has been more widely deployed throughout the entire nation as the result of a variety of programs, including a national grant program and state-level feed-in tariffs. Holmes á Court says that this has created its own feedback loop and that the number of Australians with rooftop solar has helped to fend off regressive policy changes. “Australians just love distributed energy,” observes Holmes á Court.
This does not mean that there have not been struggles, and a blackout in South Australia in 2016 has been cited by opponents of wind as an argument against the energy transition. But even before Tesla’s massive battery was installed, changes to software settings meant that the state’s wind farms would behave very differently if such an event were to occur again. In addition, new grid investments are reducing the need for large spinning masses to slow frequency deviation on the grid. In general, in South Australia, as in Denmark and other regions, previous concepts of the limits of renewable energy are being proven false.
Impact on Conventional Generation
In Australia and other parts of the developed world where growth in electricity generation has been stagnant for more than a decade, every new plant that goes online eats into the market share of existing power plants. This means that wind and solar are putting pressure on coal, gas, and nuclear power.
This transition has been dictated by policy in some places; Belgium, Germany, Spain, and Switzerland are phasing out their nuclear power plants, as these nations have chosen other priorities over the most rapid route to decarbonization.
In nations where the market has played a larger role, the most expensive and least competitive resources—particularly those with the highest marginal costs—have been the first to go. While most of the coal retirements in the United States are the result of cheap natural gas, in states like California, coal and even gas plants have been pushed offline. And while coal prices rallied in 2017 and 2018, over the last three years, at least nine major US coal firms have gone bankrupt.
In the developing world, things are more complicated. While coal use in China may have already peaked, it has been continually rising in India and other developing nations. In many of these nations, solar and wind are adding to the existing fleet to meet new demand and not replacing fossil fuels (see our associated article, “The Power of Finance,” for more on this).
Price or Policy?
At the same time that more and more wind and solar have been deployed every year, these two resources have seen ongoing price declines, which have been particularly dramatic for solar.
In late 2012, The Economist cited a theory by Richard Swanson, the founder of solar manufacturer SunPower Corporation, that for every doubling in global manufacturing capacity, the cost of solar cells falls 20 percent. Technologist and science fiction writer Ramez Naam described a similar concept in a 2011 article for Scientific American, and data on solar costs bears out this relationship.
In the last few years, solar and wind have become the least expensive forms of new electricity generation in many nations. But that isn’t all. They are now cheaper than the cost of operating many fossil fuel plants. For coal plants in particular, this means that it is often more economical to shut down these plants and replace them with wind and solar than to keep them running.
But while falling prices and rising deployment have created a self-reinforcing feedback loop, looking at these two metrics alone obscures the role of policy. Just as a combination of capital grants and later a feed-in tariff kick-started the global wind industry in Denmark in the 1980s, the German feed-in tariff essentially launched the modern solar market and industry.
The demand created by policies that provide stable, long-term payments for solar and wind well above the cost of wholesale electricity also spurred large-scale manufacturing. Wind deployment policies led to the development of a manufacturing industry in Denmark and Spain in the 1980s; China, inspired by the demand created by the German feed-in tariff, moved to dominate global solar production in the first decade of the 21st century.
“There is a virtuous cycle of policies that support renewable energy deployment, and this drives down costs and creates consumer benefits.”
These policies are part of the feedback loops. “Demand-driving policies tend to have a price suppressing effect on future deployment,” states Michael O’Boyle, the director of electricity policy at the research and analysis firm Energy Innovation. “There is a virtuous cycle of policies that support renewable energy deployment, and this drives down costs and creates consumer benefits.”
Is it Fast Enough?
One year ago, the Intergovernmental Panel on Climate Change (IPCC) warned that we need to dramatically reduce emissions by 2030 to be on a path to keep the global average surface temperature below 1.5°C. This stark warning gave the world a deadline and echoed the warning that Bill McKibben made in 2016: “winning slowly is exactly the same as losing.”
Electricity generation is one of the largest sources of greenhouse gas emissions globally; many analyses link electricity and heat production and list this as the largest source. However, it is not the only sector that will have to reduce emissions dramatically to meet this goal. Pathways to reducing emissions meaningfully will require contributions from multiple sectors, including transportation, buildings, and heavy industry.
But what makes the decarbonization of electricity even more central is that many of the strategies to reduce emissions in these other sectors, including transportation and heat, include electrification (see our companion article, “Electrify Everything,” for more on this). This also means that as more electric vehicles come online and more heating is electrified, this will create additional demand for electricity.
The volume of wind turbines, solar panels, batteries, and other equipment that will need to be deployed is a moving target. We need to not only be able to meet the needs of today but also of the future. And with growing populations and economies in the developing world, this task becomes even greater.
Forecasts from globally recognized authorities, including the US Department of Energy, DNV GL, and the “scenarios” presented by the International Energy Agency (IEA) indicate that fossil fuels will still represent a major portion of the world’s energy supply into 2050. However, such forecasts often assume that annual solar and wind deployment will stay at roughly the same rate as the present, and not grow.
This is in direct contradiction to the track record of wind and solar markets. On the global scale, the amount installed has almost always grown from one year to the next, with some periods exhibiting exponential growth.
The bad track record of these forecasts is causing them to be openly mocked by academics, such as Auke Hoekstra, an electric mobility researcher at the Eindhoven University of Technology in the Netherlands. Hoekstra has made multiple charts illustrating the clear, obvious, and repeated gap between the IEA’s scenarios and actual deployment patterns.
But while the basic pattern of growth in wind and solar contradicts the standard narrative of international authorities, this still does not answer the question about whether this transition is fast enough to avoid an increase in temperatures above 1.5°C. And here even the most bullish of advocates admit that time is running out and acceleration is needed.
All of the Above
The research and analysis firm Energy Innovation argues that either counting too much on market transformation or ascribing too much of a role to policy can be misleading. “You don’t have to make it all policy on one hand or all market on the other,” states O’Boyle. “If you are serious about getting below 2°C, that is going to require 100 percent clean energy, then make that the law. But you can still use market-based approaches to solve that problem.”
In addition to a number of nations in Europe, five US states, two territories, and more than 100 cities have made commitments to get to 100 percent renewable and/or zero-carbon electricity by 2050 or sooner. However, many large states have not joined, and the more distant targets may not meet the timelines that are implied by the latest IPCC report.
“If you are serious about getting below 2°C, that is going to require 100 percent clean energy, then make that the law. But you can still use market-based approaches to solve that problem.”
There are also real challenges to the integration of very high levels of renewable energy, particularly in northern regions that will depend more on wind in the winter due to the seasonal variation of solar. However, most of the limits on wind and solar integration that have been presented by critics have been proven overstated at best, if not outright false.
There is ample land to deploy wind and solar, and energy storage prices have come down faster than anticipated. Even before we consider low-cost storage, flexible demand, and expanded transmission networks, regions like South Australia have been able to integrate higher levels of renewable energy than were previously considered possible.
Much of the problem comes down to vision. In order to decarbonize to meet IPCC targets, there is not only a need for policies to support this transition but also more fundamentally, there is a need for a vision of a rapid transition. And such leadership is particularly important in the developing world, where we are in a race not only against time but also against a growing demand for power.
We can learn a lot from the experiences of leading regions like South Australia about what challenges lie ahead and how to deal with them. And while price dynamics, technical challenges, and intricacies of policy all play important roles, how quickly we decarbonize is still largely a choice.