#REthinking Renewables: Interrogating Misconceptions around Renewable Energy Technologies

By Mark Moreno Pascual and Andri Prasetiyo

If we are to achieve a just transition and limit global warming to 1.5 degrees Celsius (1.5°C), a whole economy development of renewable energy sources is essential. Public finance in this context plays a catalytic role by ensuring its energy sector investments are aligned with a 1.5°C trajectory, by not relying on false solutions and untested technologies, and by ensuring communities do not bear the cost of the transition.

Despite the breath-taking cost reductions of renewable technologies and their growing share in the global energy mix, misconceptions and myths continue to be pushed to question their viability to replace fossil fuels completely and to attempt to justify fossil-fuel based solutions in the name of the energy transition. Below, we interrogate these misconceptions and propose solutions for Multilateral Development Banks (MDB) to consider:

MISCONCEPTION #1: Renewable energy sources are more expensive compared to fossil fuels.

The International Energy Agency’s (IEA) World Energy Outlook shows for a significant majority of countries worldwide that solar photovoltaic (PV) and onshore wind are the cheapest options for new electricity generation. This is backed up by the International Renewable Energy Agency (IRENA) which shows that almost two-thirds or 163 GW of newly installed renewable power in 2021 had lower costs than the world’s cheapest coal-fired option. IRENA estimates that renewable energy added in 2021 saved around USD 55 billion from global energy generation costs in 2022. This reflects not only the cost reduction potential in renewables, but also the sky-rocketing prices of fossil fuels (with gas increasing tenfold by August 2022 compared to 2017-2019), and underlines the importance of avoiding investments that lock countries further into the rollercoaster of fossil fuel prices. 

MISCONCEPTION #2: Wind and solar energies are intermittent and cannot reliably meet all demand.

Solar energy is only produced when the sun is shining and wind energy is dependent on the ebb and flow of air currents. This need not be an obstacle however. First, breath-taking cost reductions allow for massive deployment potential, and clever optimising in combination of wind and solar power sources and diversifying their locations can smooth out the power supply and can address productivity lulls in particular locations. Second, possibilities to convey that energy over large distances, to store that energy in large volumes and for long periods – potentially through transformation into different forms of energy like heat energy in underground water pits – and to make energy consumption more efficient and responsive to moments of scarcity can be exploited and combined to support a balanced and reliable grid. This requires supportive infrastructure, careful planning for operation of the electricity system, and supportive policies and regulations. Third, other sustainable options such as geothermal energy can complement the energy mix. Finally, renewable energy production based largely on wind and solar is already happening in countries like Denmark and Uruguay where almost half of the power share comes from wind and solar.

MISCONCEPTION #3: Hydrogen is the future.

In response to concerns that the transition is not happening fast enough, oil and gas companies have propagated a vision of a ‘hydrogen economy’ which provides a profitable exit route for businesses in a context of increasing pressure to decommission fossil fuel-based facilities. 

Blue hydrogen (produced from fossil fuel sources) production depends on carbon capture and storage technology and has been shown to emit more than it captures, effectively amounting to an expensive greenwashing exercise to extend the lifetime of gas networks. And green hydrogen (generated with renewable sources) takes more energy to produce and transport than it can provide when converted into useful energy. This makes carbon-free hydrogen expensive and a scarce resource best directed to hard-to-decarbonise sectors such as fertilisers, glass, plastics and steel. There is little evidence to suggest that hydrogen is the future. Investments in fossil fuels in the name of hydrogen simply postpones the energy transition and wastes precious funds.

MISCONCEPTION #4: Current technology is not ready to deliver 100% renewable energy deployment.

A study from Stanford University, which analysed energy transition scenarios in individual countries and regions, concludes that the technology exists to help the world transition to a fully sustainable and renewable energy system by 2050. The study looked at different situations and geographies including small island states, and sub-Saharan countries. In each case, the report found energy for major sectors such as transport and electricity can be supplied reliably with 100% or near-100% renewable energy. This can be achieved through cheap and bountiful solar and wind energy sources with integration of grids, enabling storage and demand-side changes. Other studies reach similar conclusions – noting there are in fact many feasible ways to deliver a zero carbon system based on renewables.

In this context, MDBs should not allow these misconceptions to distract from the energy transition, and consider the following:

1. MDBs are uniquely positioned to work with governments to create a suitable policy and finance environment through direct and indirect investments chiefly by ensuring sufficient financing flows to renewable energy projects in developing economies, as well as by addressing systemic barriers to large-scale deployment of renewable energy technologies. 
2. In countries with limited energy access, MDBs can support electrification investments that can overcome challenges in the reliability of solar and wind energy sources such as grid enhancements, storage and enabling smart consumption.
3. MDBs should prioritise core sectors of the economy to shift to renewable electricity, renewable heating and cooling, and low carbon transportation modes. At the same time, MDBs must mitigate the potential impact this shift will have on communities especially in the Global South.
4. MDBs must shift finance away from fossil fuels to renewable energy projects, and make sure investments and technical assistance projects are aligned with the Paris agreement and a 1.5C trajectory. This is essential to avoid carbon lock-in.
5. MDBs should approach hydrogen investments with cautious skepticism – hydrogen will be expensive to produce and demand potential may be limited to a few hard-to-decarbonise sectors like fertiliser or steel production.

Accelerating the transition to renewable energy economies demands fundamental shifts in the policy and practice that govern public finance. At the same time, it is important to address misconceptions and myths promoted by the fossil fuel industry to sustain their profits and ultimately delay the deployment of renewable energy technologies. 

The call for a just energy transition has never been more urgent. And while it is important to implement this transition quickly, it is equally important to do it right.

#JustTransitionNow

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