Oxford is pushing back at the notion that the world’s renewable energy transition must be expensive. University researchers released a report this September that flies in the face of the commonly held belief that, while necessary, replacing our energy needs with solar panels and wind farms is an enormous financial undertaking.
This concern isn’t irrational, no matter what side of the political spectrum one finds themselves on.
However, the report’s analysis of cost curves between renewables and fossil fuel technologies over time indicates that executing a full-scale replacement operation is more than economically feasible – such a move could save the world a collective $12 trillion within the next few decades.
The team says the report’s findings illustrate how growing technological advances are slowly beginning to erode many of the longstanding rhetorical responses of the traditional energy sectors. Fossil fuel companies have long been able to straddle both sides of the fence, freely acknowledging the environmental impact of oil and coal production while reminding the public that no cost-feasible alternative existed. If the financial impact of a renewable transition were no longer a question, that equation would start to change significantly, irrespective of one’s beliefs on the climate.
“Even if you’re a climate denier, you should be on board with what we’re advocating,” says Prof. Doyne Farmer. “Our central conclusion is that we should go full speed ahead with the green energy transition because it’s going to save us money.”
The team looked at more than 100 years of historical price data for fossil fuels, making sure to account for factors like inflation and market volatility. The data was then compared to the price data for renewable sources, particularly solar and wind. They say they found a stark difference between how the two categories progressed over their timelines. While it obviously had the largest sample, the cost of fossil fuels barely changed over time. Comparatively, solar and wind technologies have improved significantly in just a few decades, resulting in the overall cost of each power source decreasing by roughly 10% each year.
The researchers then used a form of statistical analysis called probabilistic modeling to determine cost curves for each power source in the near and long term.
Their data analysis showed that, though fossil fuels would likely remain stagnant as they had for a century, solar and wind technologies will almost certainly continue to improve their efficiency for years to come.
“Our latest research shows scaling-up key green technologies will continue to drive their costs down, and the faster we go, the more we will save,” says Dr. Rupert Way, lead author of the report. This conclusion reflects an understanding of renewable costs that must constantly be updated with each year of innovation. Just in 2019, the Intergovernmental Panel on Climate Change concluded that a worldwide renewable transition would come at a loss of global gross domestic product, a statement in contrast to the Oxford team’s findings.
Oxford’s study is not the first to question the idea of a transition bringing guaranteed economic loss, though it is the first to find such a significant cost gap. A 2020 report from the nonprofit Rewiring America found that households in the U.S. would save a total of $321 billion in annual energy costs from a transition, or around $2,500 per household.
“Too often we are told doing the right thing for the environment requires sacrifice and costs more,” said Adam Zurofsky, who works as executive director for the organization. “No one is talking about the upside — we can actually make a better economy and save people money, and a byproduct will be to cut emissions from residential buildings.”