"The transition that's going on in the electric sector in the United States has been phenomenal," said Research Analyst Dennis Wamstead.
April 2019 may be remembered as a pivotal point in the rise of renewable energy in the US. According to a new report from the Institute of Energy Economics and Financial Analysis, the month will be the first on record where the renewable energy sector generated more electricity than coal-fired plants.
“The future of the US electricity generation industry may have arrived, and it is not good news for struggling coal-fired generating plants,” the report says.
Including hydroelectricity, biomass, solar, wind and geothermal energy generation plants, the sector is also projected to produce more energy than coal in May 2019. The sector is expected to outperform coal on a sporadic basis over the next two years.
The US renewable energy sector is projected to generate more electricity than coal during the month of April, according to a recent report. That’s never happened before. https://t.co/C1OiyaBwcZ pic.twitter.com/ByIJUr64qT
— CNN (@CNN) April 29, 2019
Numerous factors have seen renewable energy eclipse coal
“Five years ago this never would have been close to happening,” Dennis Wamstead, Research Analyst at Institute for Energy Economics and Financial Analysis (IEEFA) said.
The breakthrough suggests that economies of scale have allowed the renewable sector to achieve greater cost efficiency.
Cheaply available natural gas procured through hydraulic fracturing (or ‘fracking’) has also eaten into the market share of coal. In 2016, natural gas plants overtook coal plants as a source of electricity generation in the US.
Another factor at play is that some coal plants closed for maintenance during the US spring, when demand for electricity dips. Hydro and wind power plants also tend to be especially productive during the season.
Wamstead also said that many coal plants were being aged out. The average facility is around 40 years old, he said, and the plants are generally taken out of commission when they are between 40 and 60 years old.
“Renewables are just a better bet at the moment,” he said.
Some countries have raced ahead of the US in embracing renewable energy. In Costa Rica, an incredible 95% of electricity has been generated by the renewable sector over the past four years.
As of 2016, Iceland, Norway, Ethiopia, Albania, Namibia, Kenya, Tajikstan, Uruguay and Zambia had all achieved more than 90% of their total generation through renewable sources. Some countries are able to draw on their advantageous geography to produce renewable energy.
In 2017, solar power attracted far more investment, at $160.8 billion, up 18%, than any other technology. Learn more from the latest Global Trends in Renewable Energy Investment 2018 report here: https://t.co/oeq4r2CyiX#Renewables pic.twitter.com/rCceGgApGs
— UN Environment Programme (@UNEP) April 8, 2018
Coal is declining in the US despite political support
Investment dollars have flowed strongly towards the renewable energy sector. Some US$12 trillion (around a quarter of all funds professionally managed in the US) is now invested in sustainable assets.
Conversely the Stowe Global Coal Index fell from a value of US$1,945 to US$1,486 throughout 2018, an overall decline of around 24% for the year.
In 2010, coal accounted for 45% of all power generation in the US but by 2018 it was down to 28%. Despite this, US President Donald Trump has been an enthusiastic advocate for the coal industry. He has vowed to increase the ease of business for the industry through deregulation. At some rallies, he was even photographed with a ‘Trump loves coal’ sign.
In July 2017, he announced the US would withdraw from the Paris Agreement. That month also saw the launch of the Etho Climate Leadership Index Exchange Traded Fund. Comprising 400 low carbon footprint equities and no fossil fuel producers, it has returned a cumulative 44%, easily outperforming the Standard & Poor SPY ETF.
“The most efficient and sustainable companies are simply making investors more money” Etho Founder Ian Monroe said.
Joe Biden, who recently officially entered the 2020 race for the Democrats, has been more receptive to change in the industry. “We must turbocharge our efforts to address climate change that threatens communities across the country,” he tweeted on 29 April local time. “Through clean, renewable energy and cleaner, safer, faster transportation, America will not only help the environment but provide millions of good-paying middle-class jobs.”
Header image credit:Adam Śmigielski