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Wednesday , 22 February 2017
Solar energy good for investors, good for the environment: World Economic Forum

Solar energy good for investors, good for the environment: World Economic Forum

When home owners, businesses, and institutions of all kinds install solar panels on their roofs, they do so for two reasons: to save money on their electricity bills and to somehow “help” the environment by slowing global warming. These are the arguments usually put forward by advocates for the environment to appeal to people’s self-interest at the personal level (their money) and at the global level (the health of the planet). But are they valid arguments? Does solar power really save people money on electricity? Does its use make any difference to the climate change dilemma? Is the guy who sets up a small array of solar panels on his roof wasting his time and money, or is he actually doing something good for himself and the planet?

Who better to address the concerns of the little guy and answer these questions than the organization that speaks to the world’s biggest, richest, hardest-nosed investors, the World Economic Forum? And it says yes, renewable energy is a good investment, getting better all the time, and it is good for the environment.

Source: WEF

The renewable energy sector provides an excellent opportunity for investors to advance the deployment of clean energy, says the WEF, though investment remains relatively small: just 0.4 per cent of assets under management by the world’s top 500 asset owners are identified as low-carbon ($138 billion out of $38 trillion). What the world needs to be investing is $1 trillion a year in renewables by 2030 if we’re to keep global warming to 2 degrees as agreed at the Paris climate talks  in 2015. What is holding investors back?

According to WEF, two things: size and risk. Until now the renewable energy sector has not been large enough—an “incipient” industry—to attract large investors, who look for opportunities to deploy “meaningful” amounts of capital. Further, renewables have always been considered “frontier technology” and therefore risky. Lack of standardization and regulation, as well as the lack of a long-standing, publicly available track record, also deter investors from viewing renewables as an attractive asset class.

What big investors need to understand today, says the WEF, is that the technology of renewable energy has made “exponential gains” in efficiency, making it more and more competitive economically. In many countries, renewable energy has already achieved “grid parity,” meaning that the cost of electricity from renewables is equal to or less than the cost of grid electricity. The evolution of renewable energy technology has reached an inflexion point with respect to cost-effectiveness, with further improvements expected to come even faster. Improving technology and economies of scale encourage greater adoption, which stimulates demand, in a self-reinforcing process which is “relatively low-risk” for investors.

With the costs of producing solar panels having fallen by 20 per cent in the last five years, the WEF forecasts that by 2020 electricity generated from solar photovoltaic sources will cost less, worldwide, than coal-or gas-generated electricity. Renewable energy, in short, no longer presents “frontier technology” risks for cautious investors. It has become solidly mainstream, and will grow even more so. As for the meaningful deployment of capital that investors seek, the need for $1 trillion per year invested in renewable energy provides the opportunity.

Source: WEF

One factor that augurs well for solar photovoltaics is their growing efficiency at converting sunlight into usable electricity. For years, the efficiency rating of most PVs was 15–22 per cent, meaning that they could convert only that amount of sunlight into electricity. Now researchers have managed to achieve up to 46 per cent efficiency in lab tests. With greater efficiency, solar panels become even more attractive and adoption rates will increase, as fewer solar panels will be needed to achieve the same electricity output.

Even though the renewables proposition has always had environmental appeal, technology has historically been subpar in delivering appropriate returns to investors without an impact mandate. Inefficiencies in incipient solar and wind technologies have perpetuated a global energy matrix that still features coal and natural gas accounting for 62 per cent of total generation. Nonetheless, exponential improvements in renewable technology, both in efficiency and cost, have made renewable energy competitive in the past few years.

Solar panel production becoming more environmentally friendly

There is more good news on the environmental aspects of solar power from researchers at the University of Utrecht in the Netherlands.

While solar panels provide environmental benefits in that they create no greenhouse emissions when used, the production of solar panels has always been extremely emissions intensive. Typically, electricity generated by fossil fuels is used to power the furnaces that melt the silicon, at 1,414 degrees Celsius, that coats the solar panels. Every new solar panel thus begins its life with a huge carbon debt. This has become a big concern. If the production of solar panels creates more emissions than the use of them can prevent, what is the point? For solar energy to have a  net positive effect on emissions, the energy payback of solar panels must be short, and their life must be long.

Melting silicon for use in solar panels requires huge amounts of energy, mostly from fossil-fuel sources.

The Dutch researchers have found that the breakeven point for solar panels—the point at which the disadvantages of photovoltaics, as measured by total worldwide emissions created in producing them, and their benefits, mainly the emissions saved by using them, converge—may already have occurred. According to their research, the average solar panel used today is responsible for 95 per cent less carbon dioxide emissions per kilowatt-hour of energy than in 1975. Further, each time the world’s solar capacity doubles, the energy and CO2 emissions associated with making them fall by up to 24 per cent.

How much solar power is the world using now? According to the German Solar Association, total installed solar power capacity has reached 300 gigawatts. In 2016 alone, 70 gigawatts of new solar power was installed, enough to supply 25 million households with 3600 kilowatt hours of electricity. Canada is ranked in the top ten countries around the world for its attractiveness to investors in renewable energy. In 2014, Canada was ranked fourth in the world for renewable electricity capacity.

About Josephine Nolan

Josephine Nolan is the chief editor of Condo.ca—Canada's Condominium Magazine. You can reach Josephine via our contact form. She reads all her mail.

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