How clean technology is accelerating low-carbon prosperity
By Henry McLoughlin, director, corporate development, and Dipender Saluja, managing director, Capricorn Investment Group
Not a day goes by without a headline on the rapid increase of renewable energy. The transition to a low carbon economy is already under way, and new technologies are about to accelerate it dramatically.
Renewables now produce 15% of electricity in the US, and this is projected to reach 25% by 2030. In Europe, the proportion will be at least 27%, with 20% achieved by 2020.
Globally, the International Energy Agency projects that renewables will be the world’s primary power source by 2030. In India and China, where the mix of renewables in electricity generation is currently 25% and 16%, projections for 2030 are as high as 50% and 40% respectively.
These increases are driven by economics. The cost of wind energy, and in many places solar energy, is now lower than gas, coal and nuclear – before any subsidies. In fact, the costs are so low for wind in some areas that it is actually cheaper to build a new wind farm than to continue operating an existing coal plant. At the same time, ground transport is seeing an unprecedented shift to electric vehicles (EVs), ride sharing and automation, leading to smarter, safer cars, with significantly lower carbon footprints than internal combustion engine vehicles.
Other enabling technologies also occasionally catch the headlines. Batteries are the key to both renewable energy and electric vehicles. Their storage capacity can provide a solution to the intermittency of solar and wind energy and so enable these renewable sources to provide electrical baseload - the basic minimum demand over a long period – to the grid. Better and cheaper batteries will lead to longer range, faster charging and affordable EVs.
Investment is scaling up around the world. It is estimated that two dozen gigafactories – the size of one already being built by Tesla, in Nevada – will be needed to meet EV demand alone in the next decade, an investment of tens of billions of dollars. Add the need for energy storage from wind and solar farms and a massive industrialisation programme is clearly beginning around battery production.
New developments are improving the outlook on cost and storage capacity. Lithium-ion batteries have gone from $1,000 (£773) per kWh in 2010 to $125 today – with $100 and below projected by the end of the decade. This dramatic drop is enabling rapid price reductions in EVs while their range is doubling every few years. Solid state batteries, manufactured with processes similar to those used in the semi-conductor industry, could drive costs down even further. This will lead to faster adoption of EVs and to even more deployment of solar and wind energy as the intermittency issue is addressed.
Other changes, of potentially even greater scale, are less well understood. Nuclear fusion is advancing rapidly as a realistic pathway to energy generation, without the risks – from waste, accidents and proliferation – associated with fission. Several teams around the world are pursuing commercially viable fusion reactors which, if successful, hold the promise of unlimited clean energy at a very low cost. The implications for our climate, and the world economy, would be immensely positive.
Relying on oil for transport is also being challenged by new pathways to electrifying aircraft. Short haul electric air transport – with a range and capacity similar to that of a helicopter, and costs equivalent to operating a car – is just years away and will revolutionise short haul air travel, and even personal transport within cities.
Take another step back, and consider our understanding of the planet, the climate, the oceans and the global commons. The miniaturisation of technology and rapid improvements in distributed sensors are opening up innumerable possibilities for data collection. The ability to reuse rockets is causing the cost of accessing space to plummet, potentially a hundred times over. This will mean more satellites in orbit and, in the near future, many more humans traveling into space.
Thus our ability to monitor, and understand the planet will improve significantly. Progress in automation and sensors will also allow us to gain real time understanding of what is happening at and below the surface of the oceans that cover four fifths of the planet.
A world in which we have a better understanding of the climate, the environment and the global commons as a whole will also be one in which electricity is cheap, plentiful and clean, and where people and goods move safely and without pollution. Deploying such exciting new technologies at scale will turn dreams of a low carbon future and a new wave of economic prosperity into reality.
Henry McLoughlin is director, corporate development, at Capricorn Investment Group; Dipender Saluja is managing director