The Path to Drawdown: Solar and Wind
If we want to solve climate change and remain below 1.5ºC of global warming, the world needs to switch from fossil fuels to using 100% emissions free sources to generate power by 2050.
One of the largest source of this clean energy is the sun (barring advances in nuclear fusion). Photovoltaic or PV solar panels have emerged as the predominant way of capturing the sun's energy and converting it into electricity.
The industry has been growing fast and, as of 2020, solar panels are now the cheapest source of electricity in most places on earth.
Solar produces ~2% of global electricity today. According to Project Drawdown, to be on track to remain under 1.5ºC of warming, utility scale solar (as opposed to rooftop solar) will need to generate a combined ~26% of global electricity by 2050.
To get there, the PV solar industry is going to need to continue to massively scale over the few next decades:
- <::marker> 720 TWh of solar electricity generated in 2019
- <::marker> 28,200 TWh needed by 2050
- <::marker> CAGR of 12.56% from 2019 - 2050
Another analysis from the IEA forecasts that in order to reach a 100% clean electricity grid by 2050, annual solar panel manufacturing capacity will need to scale from 134 GWs in 2020 to 630 GWs in 2030 (p. 74).
Onshore wind turbines account for 4.36% of global electricity generation in 2020.
Global wind capacity has been growing steadily, increasing around 20% per year for the past decade, including an 11% capacity growth in 2019-2020. Thanks to this expansion and advancements in turbine design, the cost of electricity generated from onshore wind continues to fall, even in areas with low wind speeds.
According to Project Drawdown, to be on a path to remain under 1.5C° of warming, onshore wind turbines will need to be generating a combined 28.85% of global electricity by 2050.
To get there, the onshore wind industry will need to continue to scale over the next few decades
- <::marker> 1,150 TWh of onshore wind electricity generated in 2018
- <::marker> 19,460 TWh needed by 2050
- <::marker> CAGR of 9.38% from 2019 - 2050
The IEA forecasts (p. 74) that, to reach a 100% clean electricity grid by 2050, annual onshore wind capacity additions will have to increase from 109 GWs in 2020 to 310 GWs in 2030.
Importance of Yieldcos in Financing Renewable Energy
Yieldcos play a crucial role in financing renewable energy developers. Developers of utility-scale renewable energy navigate significant uncertainties when building new solar or wind plants. Yieldcos were established to give developers a steady source of capital for future projects and to protect investors in renewable energy stocks from these uncertainties.
Yieldcos are publicly traded corporations that own and operate renewable energy assets. Their assets generate long-term, low-risk cash flows, which are then distributed to investors as dividends. Sustained investor interest in yieldcos could continue to channel capital into renewable energy developers, making them competitive against high-carbon alternatives.