Renewable energy investment predicted to surge
Countries are realising the cost of their dependence on oil and coal. Countries such as Mexico and Indonesia, long dependent on cheap home-produced oil and coal, are realising that a solar panel on every roof can reduce poverty by lowering energy costs as well as minimising the destabilising weather effects from higher CO2 emissions.
As the International Energy Agency (IEA) says in its World Energy Outlook 2015, the tumbling cost of installing photovoltaics, as much as a commitment to limiting climate change, is persuading these populous countries to switch to renewables. It predicts a cumulative $7.4trn global investment in renewable energy by 2040.
Indonesia has forged ahead by limiting investment subsidies that have underpinned coal, oil and gas production for decades. China is also beginning to make the switch to renewables while moving away from dirty, energy-intensive industries. The result, says the IEA, could limit the demand for oil and keep the price relatively low for the rest of the decade.
By 2030, the share of low-carbon power generation could grow to almost 45%, putting a lid on power emissions and containing a 40% rise in energy demand. But global investment in renewable energy may not be as large as it seems. The IEA’s $7.4trn figure represents only 15% of the total investment in global energy supply by 2040. So oil, coal and gas are still a major part of the energy mix 25 years from now.
And predictions of a low oil price, possibly no more than $80 a barrel stretching beyond 2020, could be upset by India. By 2040, the IEA says, the country’s energy demand will almost match that of the US, even though demand per head will remain 40% below the world average. Without a push to adopt renewables, India’s galloping demand for energy could send oil and gas prices spiralling up and scupper any hopes of limiting CO2 emissions.
Should it invest in solar farms, India must persuade hundreds of millions of car drivers to ditch their petrol vehicles and thousands of road hauliers their diesel trucks, a stumbling block that could be beyond its democratically elected leaders.