Twenty years ago, renewable energy was a fledgling venture, regarded as fringe and experimental by many. Now it is a trillion-dollar industry.
Meanwhile many fossil-fuel firms are mired in debt and facing a rapidly falling market share, while others have gone out of business altogether.
It’s a dramatic turnaround that couldn’t have happened without global action by governments to work towards CO2 reduction, and inevitably, therefore, heavy subsidies – initially, at least.
But the dramatic scale of the growth in renewables has seen costs tumble and margins soar to the point where they have taken on life of their own.
In a sign of the times, five solar plants came on stream in Italy at the start of June, producing 63 megawatts of energy without any subsidies. Battery prices fell 35% last year, while electric car sales rose by 60%.
Additional renewable power capacity installed in 2016 set new records, with an extra 161 gigawatts – increasing global capacity by 9% compared with 2015, according to REN21, the Renewable Energy Policy Network.
In the UK, new government figures released on June 29 show renewable energy generated more than 25% of the UK’s electricity in the first quarter of this year – with onshore wind setting a quarterly record high, providing 8.3% of power.
Collapse of coal
The Carbon Clean 200 list – compiled in a bid to promote ‘clean capitalism’ – ranks the 200 largest companies worldwide by their total clean-energy revenues.
Its latest report (Q1 2017) makes stark reading for oil and coal investors. It claims that over the past six years, institutional and individual investors representing more than $5tn in assets under management have divested a portion of their fossil fuel investments – and are committed to divesting the balance in the next five years.
Coal, which accounts for more than 40% of global greenhouse gas emissions, is declining fast, especially in the US. Peabody Energy, the largest private sector coal company in the world, filed for Chapter 11 bankruptcy protection last April, following in the footsteps of Arch and Alpha. The Dow Jones Coal Index has dropped 82% over the past five years.
Oil companies are facing similar problems, according to the Carbon Clean 200 report. More than 50 have filed for bankruptcy since 2015, and more than a third of the world’s biggest oil and gas companies have huge debt burdens of more than $150bn. ExxonMobil has experienced a 45% drop in company revenue over the past five years.
Facing potential extinction, some are diversifying. In 2016 Royal Dutch Shell set up a New Energies division with $1.7bn of capital investment, which will be used for a new drive into wind power. BP is also diversifying into wind – it is one of the top wind energy producers in the US, operating 14 wind farms across eight US states.
By comparison, the world is currently adding twice as much clean power capacity as coal, oil, and gas combined, according to Bloomberg New Energy Finance (BNEF). Wind’s market share of power generation has doubled four times in the past 15 years, and solar has doubled seven times.
Companies that derive a significant amount of their revenue from environmental solutions now make up 5% of global investment indices, and the Clean200 companies have a collective value more than $1trn.
In its first live performance period from August 15, 2016 to January 31, 2017, the Clean200 generated a 2.9% total return, underperforming the S&P 1200 by just 1.26%. In the run-up to the US election from August to November, when a Trump win was viewed as unlikely, the Clean200 outperformed the S&P 1200 by one percentage point.
“Divesting from fossil fuels in favour of a clean energy future does not have to come at a sacrifice to long-term investment returns,” say Clean 200 report authors Toby Heaps and Andrew Behar.