For several years, researchers have been advising a shift to clean energy to avoid the worst effects of climate change. However, fears that such a shift would be expensive and detrimental to the economy have impeded progress.
Nevertheless, a study from the Oxford Martin Programme on the Post-Carbon Transition published in Joule recently illustrated the reverse: an ambitious, pivotal shift to green energy technologies, such as wind, solar, and batteries, will likely save the world substantial amounts of money.
The study demonstrates that a shift to approximately 100% clean energy by 2050 translates to lower energy system costs than a fossil fuel system while simultaneously delivering more energy to the international economy and increasing energy access to more people worldwide.
This outcome is based only on the economics of various energy technologies, even without considering the costs of damages caused by climate and climate adaptation that such an energy changeover would evade.
Fossil energy costs have risen steeply, causing inflation worldwide. This research, carried out before the present crisis, considered such variations using fossil fuel price data compiled over a century.
The current energy crisis emphasizes the study’s results and shows the hazards of continuing to depend on costly, uncertain fossil fuels. The study verifies that the reaction to the crisis should include fast-tracking the shift to economic, clean energy in the short term, as this will deliver advantages for the planet and economy.
“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.
Renewable costs have been trending down for decades. They are already cheaper than fossil fuels in many situations, and our research shows that 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 around 2050 will save us trillions.
Professor J. Doyne Farmer, Researcher, University of Oxford
For several years, customary models consistently delivered incorrect clean energy costs. The scientists examined thousands of transition cost situations generated by key energy models. They learned that the actual cost of solar energy fell twice as rapidly as the most ambitious estimations in these models. Over two decades, all of these models constantly overestimated the future expenses of major clean energy technologies as opposed to reality.
The Oxford researchers used a different method, creating a “probabilistic model” to predict the expenses of probable future energy platforms more precisely based on historical data. Probabilistic models are used extensively across industry and research to predict the probability of future events.
The betting industry, for instance, employs probabilistic models to make predictions that, while never faultless, on average obtain the odds accurately and that allowed them to reap £5.8 billion in UK profits in just 2020.
In a previous study, the researchers demonstrated accuracy in their probabilistic predictions of energy technology expenses. It tested the prediction method against several years of past data for 50 diverse technologies, using a technique known as backtesting, which is routinely used in the financial sector. The data in this research comprises 45 years of solar energy expenses, 37 years of wind energy expenses, and 25 years of battery storage.
This research, using probabilistic models, demonstrates that the probability of additional cost reductions in major green energy technologies is currently very high and that implementing the energy shift swiftly is necessary.
A standard objection to scenarios for a fast transition to net-zero carbon is the requirement for large quantities of energy storage to tackle intermittent renewables. The study illustrated that the costs for main storage technologies, such as hydrogen electrolysis and batteries, are also anticipated to drop markedly.
In the meantime, the costs of nuclear have steadily increased over the last 50 years, rendering it highly implausible to be cost-competitive with declining renewable and storage costs.
The “Fast Transition” scenario illustrated in the study reveals an accurate future of a near fossil-free energy platform by 2050, offering 55% more energy services internationally than the present, with large quantities of solar, wind, electric vehicles, batteries, and clean fuels like green hydrogen (produced from renewable electricity).
The study also illustrates that this net-zero carbon future is not only technically possible but will cost the world $12 trillion less than the current polluting fossil fuel-based system.
Lead author Dr. Rupert Way said, “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 green transition and cut reliance on fossil fuels. But past models have overestimated key green technology costs again and again, leaving modelers to play catch up as real-world costs plunged over the last decade.”
Dr. Rupert Way continued, “Only a few years ago, net zero by 2050 was believed to be so expensive that it was barely considered credible, yet now even the most pessimistic models concede that it’s entirely within reach.”
Our research goes further and shows that scaling up key green technologies is likely to drive their costs down so far that overall they generate net cost savings, and the faster we go, the more we will save. Accelerating the transition to renewable energy is now the best bet not just for the planet, but for energy costs too.
Dr. Rupert Way, Study Lead author, University of Oxford
Professor Farmer said, “The world is facing a simultaneous inflation crisis, national security crisis, and climate crisis, all caused by our dependence on high cost, insecure, polluting, fossil fuels with volatile prices.”
This study shows that ambitious policies to dramatically accelerate 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.
Professor J. Doyne Farmer, Researcher, University of Oxford
The study is a partnership 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.
Way, R., et al. (2022) Empirically grounded technology forecasts and the energy transition. Joule. doi.org/10.1016/j.joule.2022.08.009.