Interview with Jeremy Leggett: Why renewables are winning the ‘carbon war’

Interview with Jeremy Leggett: Why renewables are winning the ‘carbon war’

“It’s an existential battle of belief systems,” Jeremy Leggett told a packed audience at Oxford University’s Environmental Change Institute, describing the raging ‘carbon war’ between the respective proponents of renewable energy (the ‘insurgents’) and fossil fuels (the ‘incumbents’). The social entrepreneur and renewable energy expert, who founded solar business Solarcentury and charity SolarAid, went on to share, in an electrifying manner, why he believes that finally, the insurgents are on ‘the winning side’. Hurling fact after fact at a relentless pace, he described three major trends in what he said was an epic drama: society mobilising for climate action, the exponential growth of renewables, and the steady decline of the fossil fuel industry.

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Catching up with him for Renewable Energy Focus, I asked him about key turning points, the risks and opportunities of the global energy transition, and why he is cautiously optimistic.

“The net sum of these trends is what’s encouraging,” says Leggett. “Taken together, they are mutually reinforcing. The transition [to clean energy] is also increasingly being called ‘irreversible’. Politicians used the word ‘irreversible’ in Marrakech [to describe global momentum on climate action]. Business leaders, too, including utilities, are increasingly using that word.”

After nearly 25 years in climate change and energy, it was only during the 2013-2015 period that transformational change began to unfurl, he believes. Prior to that, hoping for a breakthrough had felt like “banging your head against a brick wall”. Vested interests in fossil fuels had made for a prolonged conflict on what Leggett describes as a “brutal battlefield”, allegedly resulting in the active sabotage of the renewable energy sector by fossil fuel companies. But now, the tables are turning. World leaders have unanimously agreed to move away from fossil fuels this century, a commitment enshrined in the Paris Agreement, the most ambitious global agreement on climate action to date. In this new political landscape, replacing fossil fuels with renewables will be vital in limiting global warming to 1.5°C.

And with climate risks escalating, air pollution on the rise, and a UN Sustainable Development Goal to ensure that everyone has access to clean energy by 2030, renewables stand poised to take the lead.

So how is the drama unfolding?

Global society mobilising for climate action

The unanimous position among political leaders to accelerate progress towards decarbonisation is momentous, Leggett believes. And the stance of the new US President has only served to galvanise their resolve, with China emerging as a potential leader in the race to secure renewable energy.

“Politicians are normally unwilling to move ahead of the curve,” says Leggett. “They’re favourable towards climate action now because they understand the dynamics of the trends at play.”

The action is not limited to politics. All over the world, states, cities, businesses and communities are taking a stand. States are expected to lead climate action in the US, with 33 states cutting carbon emissions while expanding their economies. Cities account for more than 70% of the world’s carbon emissions, and with two thirds of the global population predicted to be living in cities by 2050, there is a growing need for change. Urban priorities include renewable energy in buildings, sustainable transport and smart, integrated energy systems, according to the International Renewable Energy Agency (IRENA). Five major cities have vowed to ban diesel vehicles by 2025, while Copenhagen aims to become the world’s first carbon neutral capital by 2025. Additionally, community energy is going from strength to strength, with citizens investing in local, community-owned renewables projects to promote greater self-sufficiency.

In the business world, the RE100 initiative (whose members include Google, Unilever and IKEA) is uniting business leaders in pursuit of 100% renewable energy. Google expects to hit 100% renewable power in 2017, while Ikea has made renewable energy part of its core offering – selling solar panels for residential homes. The furniture giant has vowed to become a net exporter of renewable energy by 2020.

Unprecedented legal cases are also pushing businesses – and governments – to up their game. The Volkswagen emissions scandal triggered legal action from multiple stakeholders including governments, investors and motorists, plunging the disgraced carmaker into its biggest ever loss, with tens of billions of dollars paid out in fines and compensation. Elsewhere, a Dutch citizen-led group won a landmark case against its government, arguing inadequate climate targets, creating a blueprint for citizens around the world.

Importantly, the ‘translation’ of climate change impacts into measurable financial risks is shining a light on the long-term viability of fossil fuel investments. For example, the ‘Carbon cost curves’ tool, created by financial think tank Carbon Tracker, helps investors identify the risks involved in oil and coal investments, and avoid ‘stranded assets’ (fossil fuel resources that lose their value as projects are cancelled to curb global warming). In 2014, Carbon Tracker identified $1.1tn of potential capital expenditure on oil projects up to 2025 that will never see a return, if governments act on their climate pledges. Despite this progress, far greater transparency is needed across the board in order for investors to make pro-climate decisions, according to the G20 Financial Stability Board’s Taskforce on Climate-Related Financial Disclosures. Its findings echo the World Bank’s and Bank of England’s calls for greater disclosure of climate risks and clearer data for investors.

But change is underway, with fossil fuel divestments doubling in just over a year to reach $5.2tn in 2016. High profile ‘divestors’ include Deutsche Bank and Norway’s $900bn sovereign wealth fund, the world’s largest. Elsewhere, one of Sweden’s largest pension funds has committed to decarbonising its $14.7bn global equity portfolio by 2020. In the academic world, Glasgow University became Europe’s first university to divest from fossil fuels in 2014.

Exponential growth in renewables and clean technology

  • Solar becomes the cheapest form of electricity

Solar and wind overtook fossil fuels as the cheapest form of power for the first time in 2016, according to the World Economic Forum. Indeed, unsubsidised solar is increasingly outperforming coal and natural gas in energy ‘auctions’, finds Bloomberg New Energy Finance, with solar now the cheapest form of new electricity. Importantly, it has fallen below the cost of wind in 58 emerging markets including China, India and Brazil ($1.65 per MW compared to $1.66 per MW), providing a potential springboard for developing countries to leapfrog heavy investment in fossil fuel infrastructure. Among the record deals struck in 2016, Spain’s Solarpack clinched a $29.10 per MWh deal in Chile, while Swedish developer Vattenfall set a new record for the cheapest offshore wind farm €60 (£51) per MWh in Denmark.

“The economics [of the situation] will revolutionise energy markets,” says Leggett, adding that the dramatic cost down in solar and wind is simply “maths at work”. This, he says, coupled with the “encouraging technology growth trend”, will help catalyse a shift away from fossil fuels to more economically viable options.

The world is now adding more capacity for renewable power each year than coal, natural gas, and oil combined, accelerated by the falling cost of solar and wind. Renewables overtook coal as world’s largest source of installed power capacity in 2015, with 500,000 solar panels installed daily in 2015, and two wind turbines going up every hour in China. And in 2016, solar power capacity rose by 50% year-on-year to reach 305 GW globally. While fossil fuels still generate more electricity overall, some predict that solar dominance could be achieved in just over a decade.

Renewables are also forming an increasingly important part of countries’ energy mix, with Germany deriving almost one-third of its electricity from renewables in 2016, for example, and all China’s new power demand in 2015 met with wind and solar. Even in the OPEC countries, political leaders are setting ambitious renewable energy targets, with Dubai’s ruler targeting 75% energy from clean sources by 2050.

And as the renewable industry grows, so it is creating more employment. In 2015, some 8m were employed by the sector, up 5% year on year, according to IRENA. In the US, there are now more jobs in the solar industry than in oil and gas combined.

  • Gaining a foothold on the energy ladder

In the developing world, the growing affordability of solar is displacing costly, polluting kerosene oil, paving the way for sustainable energy at scale. For example, SolarAid has sold 1.8m solar lights since 2010 (largely in Kenya and Tanzania), during which time the retail price per light has fallen by 80% (from $25 to $5).

Importantly, buying an ‘entry level’ solar lamp helps people in rural, off-grid communities to get a foothold on the energy ladder, gradually moving up to home solar kits and mini-grids. In Africa, this journey is being further accelerated by the growing ‘mobile money’ trend, with many people opting for ‘pay as you go’ solar power. Replacing a kerosene lamp with a solar lantern helps families save around 10% of their annual household income and cuts CO2 emissions by 200kg. Saving money on fuel allows people to invest in starting and growing businesses, and save towards their children’s schooling and healthcare. Using solar lighting also allows children to study an hour more each night, and improves families’ health by lowering their exposure to smoky fumes.

Looking ahead, energy storage will be increasingly important in supporting the clean energy transition across the developing world, highlights Leggett. The World Bank has predicted that energy storage capacity in developing countries will increase 40-fold within the next eight to nine years, rocketing from 2 GW to more than 80 GW.

  • EVs and solar could halt fossil fuel growth by 2020

Batteries and electric vehicles (EVs) are heading the same way as solar and wind. In February 2017, the Guardian reported that cheap solar and EVs combined could halt fossil fuel growth as early as 2020Some 2m EVs are now on the world’s roads, with EV sales rising by 60% in 2016, despite low oil prices. Their success could also hasten the disappearance of diesel cars within as few as ten years, according to a report by financial services firm UBS.

Carmakers including Nissan, BMW and Tesla are leading the way, and technology giant Apple has announced its intention to start producing EVs in the next five years. Tesla is expected to double production volumes of its new mass market car, the $35,000 Model 3 within just two years of launch. And as the cost of lithium ion batteries continues to decrease, the company may reach its $100 per kWh goal sooner than expected.

Vehicle manufacturers are not stopping at EVs. Bentley, BMW and Nissan use renewable energy to power their factories, while companies including Mercedes, Nissan and Tesla are diversifying into energy storage products. Meanwhile, new charging innovations are gathering speed, with China’s first expressway fast-charging EV network running between Beijing and Shanghai (1262km), and a new ‘high power charging corridor’ planned to link Oslo, Stockholm and Helsinki.

A fossil fuel industry in decline

“The willingness of fossil fuel companies to build up mountains of debt…while ignoring the global move towards climate action and the surge of renewable energy, is quite remarkable,” says Leggett, highlighting that ExxonMobil, Shell, BP and Chevron had a combined debt of $184bn in August 2016, double their 2014 level. Energy analysts referred to a ‘doomsday market’ for oil giants, in the wake of substantial profit losses. In particular, the 2016 slump in crude oil prices resulted in losses of $67bn among prominent US oil companies. Even when oil prices rise, it is uncertain how willing investors will be to finance further drilling, particularly as the financial risks of fossil fuel investments become clearer. Shell lost $7bn when it abandoned its most recent Arctic drilling project, for example. And investments in oil and gas declined by 25% in 2015, while energy produced from renewables rose by more than 30%.

Similarly, the shale gas industry could be ‘swallowed by its own debt’, according to Bloomberg. The coal industry, too, continues to face deepening debts as global demand for coal continues to decline. Among prominent bankruptcy filings, the world’s largest coal producers, Peabody Energy, filed for bankruptcy in 2016.

A further “existential crisis” looms for the embattled fossil fuel industry in the form of worker shortages, Leggett explains, with few young workers joining the ranks and the average age of an oil industry worker standing at 49. In 2016, an estimated 350,000 oil industry workers were laid off, as well as 60% of fracking workers. Moves from countries such as Germany and Scotland to ban fracking may serve to intensify this trend.

The fossil fuel industry is responding in different ways to the challenge. Some companies, such as Statoil, are diversifying by establishing renewable energy divisions and developing ambitious renewables projects. Others, such as Denmark-based DONG Energy, are transforming their businesses to embrace clean energy. Some 55% of DONG’s heat and power is now derived from renewables, up from 15% in 2006. However, others, such as Exxon, are “determined to go down fighting,” says Leggett, pointing to the ongoing investigation into Exxon’s alleged downplaying of climate change risks. In February 2017, the Guardian revealed that Shell had known about the dangers of climate change for more than 25 years, and yet had continued to invest in fossil fuel extraction.

Utility companies are taking a more progressive approach, according to Leggett, with EON becoming the first major utility to focus on renewables, and companies including RWE’s Innogy, acquiring renewable energy businesses.

Looking ahead

As the clean energy transition continues apace, “solar will be at the heart of the action,” says Leggett. Advances in renewable energy technology will play an important role in catalysing further progress. Meanwhile, the rise of digitalisation, ‘big data’ and the ‘internet of things’ could accelerate the transition by allowing energy and utility companies to maximise the efficiency of renewable energy assets, reduce downtime, predict performance and maintenance needs, respond more effectively to electricity demands, and help consumers monitor their energy use.

In March 2017, energy management specialist Schneider Electric and utility giant Engie announced a collaboration to remotely monitor and optimise Engie’s solar PV and wind assets. Similarly, Danish wind turbine manufacturer Vestas is using big data to optimise the performance of 27,000 wind turbines worldwide. In Kenya, technology start-up SteamaCo is harnessing the ‘internet of things’ to help solar micro-grid companies monitor performance remotely, with consumers paying for power via their mobile phones.

“There’s excitement on the front lines,” Leggett says. However, there is no room for complacency. In particular, populist movements, demagogues and autocratic world leaders could pose serious challenges, he believes, citing the example of the potential new law in the US state of Wyoming that would effectively ban renewable energy. In this light, staying true to the Paris Agreement has never been more important.

So how can we maintain momentum? Above all, significant investment is needed to continue humanity’s epic journey toward clean energy. In 2015, global clean energy investment reached $329bn. The UN’s climate chief has called for this to be tripled in order to reach the $1tn a year required by 2030.

“This is the great unwritten part of the drama,” says Leggett. “There are plenty of dynamics pushing in the right direction, not least the $5tn divested from fossil fuels, and the findings of the G20 taskforce report…There is all to play for.”

This article was originally published on the Renewable Energy Focus website.