Sun, Dec 13, 2015 - Page 9 News List

The renewable energy revolution

While the economic benefits of renewable energy are attractive to advanced economies, the advantages for emerging industrial giants are overwhelming

By John Mathews

Illustration: Kevin Sheu

In the US and Europe, the benefits of renewable energy are predominantly seen as environmental. Energy from the wind and sun can offset the need to burn fossil fuels, helping to mitigate climate change.

However, in China and India, renewable energy is viewed in a remarkably different fashion. The relatively rapid transition away from fossil fuels in both countries is driven not so much by concerns about climate change as by the economic benefits renewable energy sources are perceived as conveying.

Indeed, while the economic benefits of renewables can be attractive to advanced economies such as Germany or Japan — both of which are rapidly moving away from fossil fuels — the advantages for emerging industrial giants are overwhelming. For India and China, an economic trajectory based on fossil fuels could spell catastrophe, as efforts to secure enough for their immense populations ratchet up geopolitical tensions. Aside from increased energy security, a low-carbon economy would promote domestic manufacturing and improve local environmental quality by, for example, reducing urban smog.

To be sure, fossil fuels conferred enormous benefits on the Western world as it industrialized over the past 200 years. The transition to a carbon-based economy liberated economies from age-old Malthusian constraints. For a group of select countries representing a small slice of the global population, burning fossil fuels enabled an era of explosive growth, ushering in dramatic improvements in productivity, income, wealth and standards of living.

For much of the past 20 years, China and India led the charge in claiming the benefits of fossil fuels for the rest of the world.

However, recently, they have begun to moderate their approach. As their use of fossil fuels brushes up against geopolitical and environmental limits, they have been forced to invest seriously in alternatives — most notably, renewables. In doing so, they have put themselves in the vanguard of a planetary transition that in a few short decades could eliminate the use of fossil fuels altogether.

The economic arguments advanced against renewable sources of energy — that they can be expensive, intermittent, or not sufficiently concentrated — are easily rebutted. In addition, while renewables’ opponents are legion, they are motivated more by interest in preserving the “status quo” of fossil fuels and nuclear energy than by worries that wind turbines or solar farms would blot the landscape.

In any case, those wishing to halt the expansion of renewables are unlikely to triumph over simple economics. The renewable energy revolution is not being driven by a tax on carbon emissions or subsidies for clean energy; it is the result of reductions in the cost of manufacturing that is soon to make it more cost-effective to generate power from water, wind and the sun than from burning coal.

Countries can build their way to energy security by investing in the industrial capacity needed to produce wind turbines, solar cells and other sources of renewable energy at scale. As China and India throw their economic weight into the renewables industrial revolution, they are triggering a global chain reaction known as “circular and cumulative causation.”

Unlike mining, drilling, or extraction, manufacturers benefit from learning curves that make production increasingly efficient — and cheaper. Investments in renewable energy drive down the cost of their production, expanding the market for their adoption and making further investment more attractive. From 2009 to last year, these mechanisms drove down the cost of solar photovoltaic energy by 80 percent and reduced the cost of land-based wind power by 60 percent, according to Lazard’s Power, Energy & Infrastructure Group.

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