(UR) According to a report just published by a multinational consulting firm, the price of producing renewable energies like wind and solar is falling dramatically. So much so that renewables may soon reach “grid parity” — the point at which the cost to produce them is equal to or less than that of traditional energy sources. When that happens, the firm claims, the game could change forever.
“We are now in an era where policymakers and regulators must shift their focus on market access and fair play; where technology improvements and cost curves will lead to a level of renewables deployment not even imagined,” writes Ben Warren, Global Power and Utilities Finance Leader for Ernst & Young (EY), the firm that published the report.
One of the biggest barriers to progress in the renewable energy field is lack of investment. Because these are developing technologies that have thus far failed to generate substantial economic incentives, many would-be investors have shied away. But as technological advancements are achieved and more cost-effective methods of producing renewables are standardized, EY foresees that attitudes will inevitably begin to change.
“Once it becomes economic over the long term to install renewable energy and storage technology without subsidies,” the report claims,“uptake will accelerate beyond the control of incumbents and the authorities as the free market takes over.”
A section of the report ranks countries by their attractiveness for investment. To this end, EY created RECAI — the renewable energy country attractiveness index — which uses several determining factors and is refreshed each year based on global trends.
In this year’s ranking, the U.S. took the top spot with China coming in second and India third. All three countries held those same positions in last year’s index.
The report also points out that some countries have already reached grid parity. South Africa, Chile and Mexico, for instance, use large-scale utility generators that “can output electricity to the grid at a more competitive price than large thermal generation.”
Australia, whose rooftop solar panels are producing energy on par with the biggest power turbines, could be the next country to reach grid parity. Spain, despite significant losses in renewable energy subsidies, is likely to become the first European country to achieve the feat.
But EY also shines the light what it calls “heel-draggers” — those utilities outfits clinging to outdated models of both business and energy production. As examples, the report cites state-owned power monopolies in Mexico, Nevada, South Africa, and Japan.
Despite the reluctance — or downright stubbornness — of some to engage the renewable energy industry, EY’s Ben Warren says that type of thinking will only bring pain.
“We have reached the final frontier,” writes Warren, “and there is nowhere to hide for those markets or companies who don’t deliver — developers and investors will simply go elsewhere.”
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