Falling renewable costs and intermittency solutions drive a tipping point for the Inevitable Policy Response

The Inevitable Policy Response (IPR) is a landmark project which aims to prepare financial markets for a wave of policy moves as governments worldwide are forced to address climate change. More about this collaboration between PRI, Vivid Economics and Energy Transition Advisors can be found here.

This work focussing on renewable energy costs makes a compelling case for policy makers to enable and force the energy transition.

In this note we focus on the growth in the supply of electricity from solar and wind (renewables) in a system dominated by electricity from coal and gas. As renewable costs fall, it becomes economically rational to deploy renewable energy in more and more areas, a remarkable change from only a few years ago.

Cost tipping points

The below chart illustrates the cost per MWh and the four main tipping points for renewable energy:

New renewables are cheaper than new fossils. New renewables are cheaper than the operating cost of existing fossil plants. New dispatchable renewables are cheaper than new fossils. New dispatchable renewables (with a battery) are cheaper than the operating cost of fossils.

Renewables are now an industry driven by economic gain, technological revolution and provide pathways to reach the goals of the Paris Agreement. The reward to successful policymakers will be greater wealth, cleaner air, reduced global warming, energy independence and electoral success.