Fast transition to renewables will save the world $18 trillion, says Oxford study

A new study has found it is not only possible to fully decarbonise the global energy system within a few decades, it will be profitable and save the the world at least $US12 trillion ($A18 trillion) if it reached the target by 2050.

The new study led by Oxford University, and including Australia’s Monash University and published in the journal Joule, features a “fast transition” scenario that ramps up investment in solar, wind, batteries, electric vehicles and green hydrogen

It notes that the conversation around the costs of transition to zero carbon energy, because of the plunging cost of renewable and storage technologies, and also the soaring cost of fossil fuels.

“Accelerating the transition to renewable energy is now the best bet, not just for the planet, but for energy costs too,” says lead author Dr Rupert Way, a postdoctoral researcher at the Smith School of Enterprise and the Environment.

“Past models predicting high costs for transitioning to zero carbon energy have deterred companies from investing, and made governments nervous about setting policies that will accelerate the energy transition and cut reliance on fossil fuels.

‘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.”

The study analysed thousands of transition cost scenarios produced by major energy models, and used data on 45 years of solar energy costs, 37 years of wind energy costs and 25 years for battery storage.

It found that the cost of key storage technologies, such as batteries and hydrogen electrolysers, are likely to fall dramatically in the same way as the costs of wind and solar have fallen over the last two decades – twice as much as even the most ambitious forecast in the case of solar.

But the cost of nuclear had increased consistently over the last five decades and the technology is unlikely to be competitive with renewables and storage. Carbon capture and storage is also unlikely to show any improvement.

It also says most projections have and continue to underestimate the continued cost reductions in the key technologies – wind, solar and electrolysers – and this has affected projections and policy guidance from key international bodies such as the IPCC and the International Energy Agency.

For instance, a histogram of all 2,905 projections of the annual rate at which solar PV system investment costs would fall between 2010 and 2020, found that the mean value of these projected cost reductions was 2.6 per cent. All were less than 6 per cent. Solar PV costs actually fell by 15 per cent per year.

“This makes it clear that it would have been a bad idea to treat these projections as conditional forecasts,” the report says. The Oxford study seeks to prove that low costs can and should be dialled in.

“There is a pervasive misconception that switching to clean, green energy will be painful, costly and mean sacrifices for us all – but that’s just wrong,’ says Professor Doyne Farmer, who leads the team that conducted the study at the Institute for New Economic Thinking at the Oxford Martin School.  

“Renewable costs have been trending down for decades. They are already cheaper than fossil fuels in many situations, and our research shows they will become cheaper than fossil fuels across almost all applications in the years to come.

“And, if we accelerate the transition, they will become cheaper faster. Completely replacing fossil fuels with clean energy by 2050 will save us trillions.”

The findings of the Oxford research echoes that of the Australian-based Climate Council released on Tuesday, which showed that a rapid switch to renewables could offset or even negate the crippling impacts of inflation from surging fossil fuel costs, not to mention national security issues.

Of the three principal scenarios, the “fast transition” gets the world close to the Paris climate target of 1.5°C, assuming emissions from agriculture and land use change are also brought under control.

Short-term storage and electrification of most transport are achieved with batteries, whereas long-duration energy storage (LDES) and all hard-to-electrify applications are served by power-to-X (P2X) fuels, such as hydrogen electrolysis and using hydrogen itself or to make other fuels such as ammonia and methane as needed.

Farmer says the world has become increasingly dependent on “high cost, insecure, polluting” fossil fuels that also came with volatile prices.

“This study shows ambitious policies to accelerate dramatically the transition to a clean energy future, as quickly as possible, are not only urgently needed for climate reasons, but can save the world trillions in future energy costs, giving us a cleaner, cheaper, more energy secure future.’

The study was based on more than a century of fossil fuel price data and was actually completed before Russia’s invasion of Ukraine, which have caused an even more dramatic surge in the cost of fossil fuels, and inspired many governments to accelerate the transition towards renewables.

The research is a collaboration between the Institute for New Economic Thinking at the Oxford Martin School, the Oxford Martin Programme on the Post-Carbon Transition and the Smith School of Enterprise & Environment at the University of Oxford, and SoDa Labs at Monash University.