SINGAPORE (July 31): The support for green energy is often dampened by its prohibitive price tag but that may change soon, according to European fund management group Schroders.
Over the next 10 years, the cost to produce renewable energy is expected to decrease, putting downward pressure on energy prices, says Simon Webber, lead portfolio manager at Schroders, in a July 19 note.
That may seem impossible at present, says Webber, given 30% of power production in Europe that comes from renewables is still funded substantially with taxpayer money.
"However, a powerful combination of technological development and manufacturing scale advances has brought unsubsidised wind and solar power costs to below the average wholesale power price across the European continent," adds the manager.
Webber expects more companies to add renewables to their energy generation mix and this will bring down overall power prices down and squeeze out more costly fossil fuel generation from the system.
Indeed, a Goldman Sachs research has predicted solar energy prices in the United Kindgom to hit £33 ($50.4) by 2030. In contrast, non-blended wholesale power prices would cost as much as £58 at that time.
One positive outcome of lower prices of renewables is that electric vehicles (EVs) will become a cheaper alternative to fuel-powered ones in the coming decade.
"As power prices fall, so will the cost of EVs. Battery costs are declining rapidly, and cheap power will further support the total cost of ownership for EVs to decline below their combustion engine equivalents within a few years," says Webber.
More importantly, the push for renewables today has often been accused as a move that punishes the poor.
This is because lower-income households spend more on heat and electricity than higher-income household as a portion of their income.
But when renewable energy prices come down, this argument may no longer hold true, says Webber.
The manager says those arguing against renewables are largely driven by "vested interests to protect profit pools of existing assets."
So, he expects big shifts in social and economic policies to eventually steer the markets away from fossil fuels.
However, lower renewable power prices alone may not be able to eliminate all sources of greenhouse gas emissions by 2050 and solve the climate change problem. That is because industries such as cement making, aerospace and livestock farming have no viable technological solution for eliminating emissions from their operations.
Meanwhile, although solutions for industries such as the chemicals and consumer products are available, “they are expensive and inflationary to implement," says Webber.
