In recent years, we have seen a reduction in dependency on electricity generated from fossil fuels, and an increase in investments in renewable In 2016, twice as much was spent on renewables than on fossil fuels, with $297 billion on renewables and $143 billion on fossil fuels. The increased investing in renewables is propelled by the falling costs of producing wind and solar power.
According to the International Energy Agency (IEA), half of the power generating capacity around the world in recent years has been produced by renewable sources. The IEA projects that 56% of the net generating capacity added around the world will come from renewable resources through 2025.
“Wind and Solar now represent the lowest-cost option for generating electricity,” says Francis O’Sullivan, research director of the Massachusetts Institute of Technology’s Energy Initiative.
Renewable power investments have been increasingly competitive since they have received heavy support from cash-back incentives, tax credits, and other government incentives that have allowed renewable energy production costs to consistently drop for the past decade.
Traditional power plants have many challenges that hinder production. Nuclear power plants are often troubled by technical delays, and fossil fuel burning power plants are challenged with regulatory uncertainties due to climate change. “It is just easier to get renewables built,” said Tony Clark, former member of the Federal Energy Regulatory Commission. “There is that much less opposition to it.” Long term stable returns, such as renewable energy, have been heavily invested in by pension funds, allowing developers to obtain cheap financing.
The U.S. is seeing more renewable energy generation than any previous year before. Last year, only about 17% of the country’s electricity came from renewables, according to federal data. This year, the government said that last year, just under half of the country’s large-scale power generation added was renewable. The renewable sources include wind, solar, and hydroelectric dams.
According to the International Renewable Energy Agency, in 2017, the global average costs of electricity from wind production was $60 per megawatt hour and $100 per megawatt hour for solar, while new fossil fuel facilities range from $50 to $170 in developed nations.
Developing countries are also moving towards renewable energy production due to falling costs and large pools of available capital. Danielle Merfeld, the chief technology officer of GE’s renewable energy unit, says, “In most places, it is cheaper and other technologies have become more expensive.”