MYTH The electricity that comes from renewables is more expensive than energy from coal.
BUSTED. The energy produced by new wind and solar projects is much cheaper than that from new coal-fired power plants. Renewables are already a cheaper source of energy in many cases both in Australian and around the world, and ongoing technology advances and growing scale will further drive costs down.
A 2018 report by Bloomberg New Energy Finance (BNEF) found that the levelised cost of electricity from renewables is falling so quickly that it will be cheaper than fossil fuels within the next five years. And that’s just looking at cost of producing the energy, independently of any subsidies.
There is widespread agreement that renewables with suitable storage will be able to deliver cheaper electricity than fossil fuels, at least by 2030 – and that’s not surprising in Australia given that there’s plentiful sun, wind, tides and (most of the time) rainfall. The only thing standing in the way of renewable energy developments is dysfunctional energy policy like the policy we have in Australia. The uncertainty this lack of policy creates is stopping the investment which will deliver a lower carbon, lower pollution and lower cost world. And this policy paralysis on renewable energy is preventing investment too often.
Policy can also be used to ensure that energy remains affordable for vulnerable members of the community, while at the same time increasing renewable energy production.
MYTH Changing to renewables isn’t worth the cost of setting it up.
BUSTED. There is no escaping the fact that upgrading the whole world from dirty fossil fuel generators to clean technologies will cost a lot of money. Transitioning to 100% renewable power is a mammoth infrastructure project. Huge amounts of investment are required to ensure the transition happens with the speed needed to avoid dangerous climate change. You’re helping by investing your money with Australian Ethical through our investments in renewable energy.
While these power upgrades will be expensive in the short term it will reduce the cost of power in the long term. Once installed solar and wind provide many years of zero-emissions, low-cost electricity.
Positively, the cost of renewable energy has fallen far quicker than expected – making the transition easier. The cost of solar energy has fallen by 73% between 2010 and 2018. The cost of solar photovoltaic (PV) and wind power are rapidly getting cheaper and being more abundant, they are on track to take over fossil fuels worldwide in the next 20 years. The cost of wind and solar has been in decline for many decades and now cost as low as $50 megawatts per hour in Australia, making it cheaper than electricity from new-build coal and gas.
Costs have fallen so rapidly that renewable energy is becoming cost competitive with fossil fuels.
It’s important to remember that while there are large costs involved in cutting emissions, the costs of doing nothing is far higher. Doing nothing about emissions could see young people alive today handed a US$535 trillion debt to try to fix the problem. Critically the cost of the transition can be managed through planning and policy to ensure the transition is equitable and power remains accessible to everyone.
It’s also interesting to note that in most markets, subsidies for the fossil fuel industry exceed any support provided to renewables. The Overseas Development Institute found that “investment in fossil fuel exploration, extraction and electricity production in Australia are supported by an average of $5 billion in national subsidies annually”.
MYTH Renewables can’t provide reliable, baseload power.
BUSTED. Australia doesn’t need new coal for base load. That’s not just us saying that, that’s also what current coal power generators AGL, Origin and EnergyAustralia have said. Other countries have different needs and capacities and will have different energy transition paths to meet their obligations under the Paris Agreement to limit warming to well below two degrees Celcius.
Early on, renewables struggled to provide on-demand power, but recent years have seen exciting developments and it’s no longer the case. Clean technologies in use around the world are proving it’s possible to deliver reliable power 24/7 with renewable energy.
For some technologies this is simple. Renewables like geothermal, biofuel and hydropower are similar to fossil fuel generators and can be dispatched on demand. Other renewables like wind and solar follow nature’s cycles and require us to work around periods of high and low energy production. In the past this was done using fossil fuel generators as back up. However, exciting developments in energy storage, like batteries, pumped hydro and molten salt towers, have opened up a whole new world of power possibilities. Energy storage enables solar and wind to provide steady, on-demand power without any fossil fuels.
Large battery storage projects have been flourishing around the world. Battery storage has made it possible for SolarCity (now owned by Tesla, who we invest in) to help islands like Ta’u in American Samoa switch to being completely solar powered. Tesla also installed the world’s largest lithium ion battery in South Australia at the end of 2017, and it’s already proven to provide fast response to emergency energy trips. This battery is so efficient that it can pay for its purchase and installation costs within a year – and that’s not to mention its reliability and value in the long term.
The challenge is no longer that the technology doesn’t exist – we just need to roll it out.
MYTH Renewables don’t even work – just look at wind in South Australia.
BUSTED. We like wind power at Australian Ethical because it can generate safe, low-carbon electricity at market-competitive prices. We invest in wind power in South Australia as this is where some of the best wind resources in the country are located. Ongoing technological development of both wind and grid technology is needed as we increase the renewable share of generation, but with proper planning around energy storage and transmission Australia’s energy system can be transitioned to a zero-emissions future. We see this happening in South Australia with Tesla’s battery and the Port Augusta Renewable Energy Park.
MYTH Wind and solar manufacturing releases more emissions than is saved over a lifetime of operation.
BUSTED. We get this question all the time and it is simply not true. While manufacturing plants for wind turbines and solar panels often use dirty fossil fuel electricity from the grid, even taking this into account they save more emissions than they release.
To know the true emissions savings from an energy source, researchers use a technique called ‘life cycle analysis’. Life cycle analysis looks at all the emissions released and avoided by a product over its entire lifetime of operation. Using this approach a typical wind turbine with a working lifespan of 20 years ‘pays back’ all of the emissions produced in its manufacturing after less than a year of operation after which all power produced is truly emissions free. For solar panels the payback is a little longer, up to two years after which the panels will provide over 20 years of emissions free power.
Once we have a renewables-based electricity system then manufacturing turbines and solar panels will be much cleaner.
MYTH You need coal to make renewables anyway.
BUSTED. It’s true that currently a lot of steel manufacturing uses coking coal. However, this is not required for steel recycling and will likely not be required at all in the future as we advance to new means of steel manufacture using electricity or hydrogen.
In any case the net reduction of greenhouse gas emissions from renewables is clear: the more renewable electricity we generate, the less we need to burn fossil fuels for electricity, and the greater the mitigation of dangerous climate change.
We also agree there’s an important difference between coking or metallurgical coal used to create steel and thermal coal used for power generation. We need to transition from thermal coal to the many cleaner alternatives urgently. As to the need for coal for steelmaking, that transition will be more challenging. But there are also alternatives in use and under development such as electrolysis using renewables and plants using hydrogen.
We can also reduce the need for ‘new steel’ with higher recycling rates for scrap steel, a process which does not require metallurgical coal and which would at the same time reduce much unnecessary waste.
MYTH Coal is booming around the world.
BUSTED. Coal plants are rapidly closing around the world. The UK announced in January 2018 that it will close all its remaining coal plants by 2025. Likewise, Germany and China, with large economies, are closing more coal plants than they’re opening. Plants are also being closed in the US; more coal capacity was closed in the first 45 days of 2018 than in the first three years of the Obama administration. In fact there are now more jobs in renewables (even under Trump) than at any other time in US history. This will accelerate as crazy fossil fuel subsidies are eliminated – as called for by investors around the world.
Meanwhile, subsidies for the fossil fuel industry are four times bigger than renewable subsidies.
Solar and wind energies are growing at such a rapide rate that the installed generation capacity of the two has reached half of what coal produces and are on track to pass coal by the mid 2020s. In 2018, solar and wind comprise 60% of net new electricity generation capacity around the world. Wind and solar are growing at 13% and 28% per year respectively, while the growth rate of coal and gas is slow or non-existent.
However, while renewables are on the rise, we need to ensure this momentum continues to build, and quickly. In order to meet the global Paris Agreement, we need to see coal power projects under development cancelled, and a quick retirement of aging coal fleets.
MYTH Nuclear is cheaper.
BUSTED. At this point, we’ve decided that nuclear energy isn’t yet safe enough for us to support. The three primary risks we’ve identified are the risk of catastrophic failure of nuclear power stations, the challenges involved in safely mining uranium and the potential for misappropriation of nuclear technology and materials for weapons manufacture. Because we can reduce warming with non-nuclear zero emissions sources (like renewables and energy storage), we’ll concentrate on those alternatives, which are in the strongest growth position they’ve ever been. For more info on our position on nuclear, see our article, The nuclear risk matrix.
Furthermore, the cost of nuclear can average between US$112-183 per megawatt/hour, compared to the cost of solar and wind at US$30-60 per MWh. This includes the build of a new plant, which is what makes nuclear so expensive.
82% of Australia’s biggest super funds don’t consider climate risks. Does yours? If not, you might like to consider switching your super to Australian Ethical. We exclude all investments in fossil fuel companies, instead investing in renewable energy (solar, wind, tidal, geothermal and sustainable hydro), as well as energy efficiency and battery storage. Get competitive returns and help build a clean energy future by joining now. *
* This information is general information only and does not take into account your individual investment objectives, financial situation or needs. Before acting on it, consider seeking independent financial advice.
Please refer to our Financial Services Guide, Product Disclosure Statement, Additional Information Booklet and Insurance Guide before making a decision about your super. Please consider the effect a switch on any insurance benefits you may have. Past performance is not a reliable indicator of future performance.
We exclude all fossil fuel company investments. This means we exclude all companies whose main business is fossil fuels, as well as diversified companies that earn some fossil fuel revenue and aren’t creating positive impact with their other activities. We may invest in a diversified company which is having a positive impact in other ways such as producing renewable energy, provided its fossil fuel revenue is below our thresholds.