Credit to the Renewables Learning Curve

In 2009, as the debacle of the COP15 Copenhagen Climate Summit was coming to an unproductive close, a handful of diplomats stepped away from the main negotiating tables to discuss practical strategies to scale up renewable energy in the developing world in way that would also bring prices down to affordable levels. In contrast to the swirl of enormous egos and conflicting opinions at the official Summit, the renegade diplomats came to a common agreement on a plan they called, The Big Push. The idea for this Big Push had originated with Tariq Banuri, a brilliant policy innovator from Pakistan. Dr. Banuri had seen something like the Big Push work while serving as the U.N.’s director for sustainable development, albeit on a much smaller scale:

  • set ambitious price and scheduling targets to generate renewable energy at unprecedented levels;
  • invest heavily in renewables in poor countries using a globally coordinated system of price guarantees (aka “feed-in tariffs”);
  • concentrate investments on solar panels and wind turbines by pumping vast sums of money into the participating countries;
  • act quickly; otherwise, developing countries would get locked into cheaper fossil fuels.

Word of The Big Push leaked to the rest of the COP15 delegates who roundly embraced Dr. Banuri’s concept of a “Global Green New Deal” for renewable energy – one of the few bright spots to emerge from Copenhagen.

Net power generating capacity added in 2016, globally, by main technology, in gigawatts. Source: Bloomberg New Energy Finance, in “Global Trends in Renewable Energy Investment 2017,” Frankfurt School-UNEP Centre/BNEF

It turns out there was no need to sell governments and investors on the idea of scaling up renewable energy. Much to the surprise of most energy professionals, including the delegates who authored The Big Push, the world has already achieved the affordability targets well ahead of schedule — without the implementation of The Big Push as an official scheme. It is important to underscore that the proposed targets and schedule — bringing the price of solar and wind energy down to about 3 cents per kilowatt-hour, within 10 to 20 years — seemed wildly, even unrealistically ambitious back in 2009. But by 2017, just eight years after Copenhagen, the achievement of those targets is already in the rear-view mirror.

For five years running, solar and wind have outpaced coal and gas by a wide margin. Indeed, in 2016, over half of all the new electricity capacity installed globally came from solar and wind. While there is a long way to go before the world is driven principally by renewables, the energy transformation is well under way.

THE LEARNING CURVE

REN21, Renewables 2017 Global Status Report

REN21, Renewables 2017 Global Status Report

A key factor driving this transformation is the price of renewables, which has dropped like a stone. Why? Peel-back all the opinions and theories and basically it all comes down to a simple economics concept called the “learning curve”: The more you make something, the more you learn how to make it cheaply and efficiently.

Economists can predict declines in price by plotting learning curves on a graph, relating price to the quantity of a thing produced. It doesn’t matter how much time it takes to produce the thing; quantity is the key variable. The faster you produce that quantity, the faster you slide down the learning curve towards the associated lower price.

When delegates were drafting The Big Push plan in 2009, the learning curves for renewable energy they used had been drawn in 1992, and no one had thought to update them. Given how fast China (among other actors) was coming online with solar panels and wind turbines, the basic economic assumptions were dramatically pessimistic. Even the most optimistic estimates understated the transformation underway. One of Dr. Banuir’s associates, Alan AtKisson, suggested that it would take about 2,000 gigawatts of installed solar and wind power to bring the price down to a global “affordability target” of 3 cents per kWh, but was summarily rejected as “unrealistic.”  It turns out, by 2016 world the world reached that target price (in India, Mexico, Chile and Morocco) with half of the projected necessary total installed global capacity (800 gigawatts).

Bear in mind, 800 gigawatts of solar and wind energy is still a huge number, compared to where things started in 2009. Back then, the world’s wind turbines, if they were spinning at full capacity, could generate just over 150 GW. By 2016, that number had swelled to nearly 500 GW. The growth in solar photovoltaics was even more rocket-like: from 23 gigawatts of capacity in 2009 to more than 300 in 2016.

Even the world’s top energy experts call this rapid fall in prices astonishing. How did the price fall so much faster than anyone expected?  Simple: All expectations were plain wrong. Similar to Moore’s Law (which describes how the power of computing chips doubles every 18 months) renewable energy seems to be guided by “Swanson’s Law” (First used in an Economist article in 2012 to describe a similar pattern for solar panels; Swanson’s Law was basically a revised learning curve for renewable energy.)  There is just one problem with Swanson’s Law: it, too, has proven far too pessimistic. Current prices for solar-electric panels are less than half of what Swanson’s Law would have predicted.

In reviewing these historic developments, perhaps the Big Push strategy was implemented after all? Renewable energy scaled up rapidly in developing countries, pushing down renewable energy prices globally. But this market revolution never needed a massive effort to mobilize international aid or trillion-dollar investments from the world’s rich countries. It happened because market forces in “developing” economies – especially China and India – work faster than any “learning curve” Western experts could draw. The Big Push was never implemented as an official scheme, and yet it offers several important lessons, none more significant than this:  transformative change is possible. It’s happening all around us, all the time — and usually faster than anyone expects.

***

The original article can be found here at GreenBiz.com.

Pin It on Pinterest