The Race to Net Zero — Renewable Energy Sources

We are like tenant farmers, chopping down the fence around our house for fuel, when we should be using nature’s inexhaustible sources of energy—sun, wind, and tide.

I’d put my money on the sun and solar energy. What a source of power! I hope we don’t have to wait until oil and coal run out before we tackle that.

The quote is from Thomas Edison, in conversation with Henry Ford in 1931.

Not too much’s changed since, fossil fuels are still the dominant source of energy worldwide.

But the tide is turning…

Last week the International Energy Agency (IEA) released a surprising report in support of renewable energy.

I say ‘surprising’ because the IEA has been criticised in the past for being quite supportive of fossil fuels and underestimating the growth of wind and solar. The IEA was set up back in the ‘70s, at a time of oil shortages, and their mission is to provide policy recommendations and solutions for energy security.

While governments are making all these ambitious commitments to reach net zero, the IEA remarked the reality is quite different.

Many governments are making commitments to bring their emissions to net zero by 2050. Very encouraging. But at IEA we believe in numbers. Our numbers show this year global emissions will increase substantially, second largest increase,’ said Fatih Birol, IEA’s executive director, during the presentation.

Worried that we won’t make it, the IEA decided to provide their own roadmap on how to get there, including measurable milestones that we need to hit along the way. And, as Birol continued, there is a sense of urgency (emphasis added):

This pathway is a narrow one, but still achievable if the governments take bold and immediate action.’

The race to zero ‘is not between countries, but the race is against time.

This is quite a turnaround for the IEA.

As they see it, for the world to reach net zero by 2050, three things need to happen.

One, we need to make the most of our already existing clean energy options like solar and wind.

Second, need more innovation and technology to reduce emissions.

And, of course, we need to reduce the use of fossil fuels ‘substantially’.

I mean, 80% of our energy still comes from fossil fuels.

But in IEA’s pathway coal demand needs to fall by 90%, gas to drop by 55%, and oil demand to fall from 90 million barrels per day today to 24 million, or a 75% decline…all by 2050.

Birol was quite adamant, as he told The Guardian:

If governments are serious about the climate crisis, there can be no new investments in oil, gas and coal, from now — from this year.

This wasn’t the only recent blow to fossil fuels.

Last week the seven largest economies in the world agreed to stop international funding of coal projects by the end of the year and to phase out government support for fossil fuel energy.

And earlier this week, on Wednesday, in a landmark ruling, a Dutch court ordered Royal Dutch Shell Plc to cut emissions by 45% from their 2019 levels by 2030. It could open the gate for similar rulings.

The tide is changing…quick.

But I want to focus on the opportunities here.

So, back to IEA and its report.

Yep, pledging net zero by 2050 seems like decades away. But the report is a stark reminder of how much work needs be done in the decades before to reach net zero by 2050, today.

We will need to scale up wind and solar.

We will need more EVs. The IEA envisions EVs will need to make up 60% of all new car sales by 2030, up from just over 4% in 2020…and we will need to ban petrol cars by 2035.

We will need to build infrastructure. Not only EV chargers, but also prepare our ports for hydrogen exports.

We will need batteries for electric vehicles.

And, for the transition, we will need money…lots of it.

The IEA expects yearly investments in clean energy will need to triple by 2030 to about US$4 trillion…a tide of money coming into clean energy.

This should prick Australian investors’ ears up. Australia not only has plenty of land, sun, and wind. It also has critical minerals we will need like copper, nickel, and lithium for batteries. And, Australia has the chance to become a leader in hydrogen production in our corner of the world.

As Edison mentioned 90 years ago, renewables make sense and even more so as costs of renewables are coming down.

The energy transition is accelerating, and there are plenty of opportunities coming from it.


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Selva Freigedo,
For Money Morning

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Selva Freigedo is an analyst at Money Morning. She has a background in financial economics, but what makes Selva´s experiences different to many are the places she has lived and worked. Born in Argentina, she has also lived in Brazil, the US, Spain, and now Australia. She has seen up close many of the economic phenomena that worry Fat Tail Investment Research readers, like hyperinflation, bank bail-ins and governments burdened with so much debt it cannot possibly be repaid.

Every week, she goes through each article, research note and recommendation produced by our experts around the world to give you information on how to build and protect your wealth. Selva packages the week’s best ideas into one easy to read report: Port Phillip Insider Extra.

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