Disaster at the Madrid Climate Negotiations, but the Impending Energy Transformation Provides a Ray of Hope

The plummeting cost of alternative energy technologies is a bright spot in an otherwise bleak outlook for global action on climate change

Ryan Wilson
Dec 15, 2019 · 7 min read
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The 25th annual UN climate negotiations wrapped up in Madrid today. There was no cause for celebration though, no opportunity to take comfort in our ability to come together as a global community to face this greatest of challenges. On the contrary, after the longest UN climate negotiation ever held, there was still a dismal lack of progress on key issues like formalising the rules for trading international carbon credits, and providing a guarantee to small and developing countries that rich countries will help them pay for losses and damages occurring due to climate change.

The can has been kicked down the road to next year’s talks on rules for international carbon markets and on efforts to set up a financial instrument to pay for such losses and damages in developing countries. The US in particular has thrown a spanner in the works, preventing any language that could hold rich countries liable for these impacts, despite the fact it is leaving the Paris Agreement and will therefore not be affected by such a mechanism.

It’s hard to see this lack of urgency at this critical time, in the face of mounting evidence that we are running out of time to act, and not succumb to a crushing sense of pessimism and cynicism. However, there is one big reason to remain hopeful: the cost of alternative energy technologies continues to plummet, and the necessary transformation of our global energy system is underway and rapidly gaining steam.

While wind energy has been a mature technology for many years and has seen healthy increases in investment since the early 2000s, global investment in large scale solar photovoltaic (PV) plants has exploded just in the last few years. In addition, according to the International Renewable Energy Agency (IRENA), global solar PV capacity is expected to increase sixfold over the next decade and continue growing rapidly thereafter.

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Figure 1: Projected increase in global solar PV capacity to 2050

You might think this is a story that would cut through the constant barrage of negative news of the world’s climate change intransigence. One reason it hasn’t is the fact that the International Energy Agency (IEA), the world’s premier institution for providing energy market analyses, has consistently underestimated solar PV’s potential. The latest World Energy Outlook (WEO) released by the IEA in November has once again continued this tradition.

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Figure 2: The IEA’s continued failure to predict the rise of solar PV

Where countries have intransigent governments, captured by climate denialist ideology, or vested fossil fuel interests, the plummeting costs of renewable energies has simply prevented them from stifling the recent explosion in renewable energy investment. The cases of the US and Australia are instructive here. There are possibly no two governments more actively opposed to the rising tide of renewable energy technologies than those currently holding the reins in these two countries. Both Donald Trump and Scott Morrison have done their very best to prop up their respective coal industries, but have both failed spectacularly.

Coal-fired power plants continue to close at a rapid pace in the US, despite Trump rolling back costly regulations that prevented such plants from dumping toxic coal ash into waterways, and watering down emission reductions required under the Clean Power Plan. The largest privately owned US coal mining company also recently filed for bankruptcy thanks to plummeting domestic demand resulting from these closures.

Meanwhile, despite Morrison ramming through environmental approvals for a giant coal mine in northern Australia, there are serious questions as to whether it will ever be finished. The mine is primarily intended to supply Indian coal power plants, but the soaring rate of cancellations for these very plants in India, makes the viability of this mine anything but guaranteed. Morrison has gone so far as to effectively try and bribe the owners of a soon-to-shutdown coal power plant in Australia to keep it operating, but to no avail. The market has spoken: renewables are king.

Now, the number of coal plants planned in developing countries, in particular China and India, is still enormous, and if those currently planned are all built, it would be a disaster for the climate. However, the large and increasing number of these plants that have been cancelled in developing countries across the world is definitely a cause for optimism. Especially considering the fact that the full impact of plummeting solar PV prices appears not yet to have been fully incorporated into future projections (I’m looking at you IEA).

So the situation with global coal demand looks promising, but what of global oil demand, you might rightly ask. In this sector, there is considerable cause for optimism too. Over 40% of global oil demand comes from road transport, and this sector is undergoing a transformation of its own. Electric Vehicles (EV) currently make up a small percentage of total vehicle sales in most countries around the world, but in the last few years, their sales growth has been astronomical, with a global growth rate of 63% between 2017 and 2018, according to the IEA. This includes battery electric vehicles (BEV) and plug-in hybrids (PHEV).

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Figure 3: Global demand growth for EVs (2013–18)

This trend is expected to continue, and by 2030, the IEA expects there to be fifty times the number of electric vehicles on the road than there was at the end of 2018. This will make a solid dent in global oil demand, and makes the prospects of increasing global oil demand growth highly uncertain. This is extremely important, as without growth, companies rapidly become unprofitable and are susceptible to bankruptcy. The exodus of finance for coal mining and power plants in many countries is not due to declining overall demand, but because banks can see the writing on the wall, and anaemic or stagnant growth is the most important harbinger of doom in this regard.

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Figure 4: Projected global EV demand growth to 2030

Having worked in a firm providing market analysis to the oil and gas sector, I can share with you that the oil industry is banking on oil demand growth continuing past 2030 purely thanks to a projected increase in the demand for plastics. They acknowledge demand from transport is set to fall over the next decade, and have been pouring money into new petrochemical-based refineries in anticipation of this rising wave of plastic demand. The prospects of this eventuating, however, are increasingly uncertain, as the public in many countries continues to demand bans on single-use plastics and increased efforts on recycling.

The one fossil fuel sector that does indeed provide cause for concern, however, is the natural gas industry. Global demand for natural gas is also increasingly rapidly, and while this has helped to fast-track the death of the coal industry, especially in the US, the projected growth in global demand is in no way compatible with preventing catastrophic levels of global warming.

Many governments have seemingly drunk the Kool-Aid being served up by the natural gas industry, believing that natural gas is a viable transition fuel that will help get us to a sustainable global energy system. This is simply untrue, and the current global plans for new gas-fired power stations, if realised, would lock in devastating levels of CO2 emissions, not to mention the fugitive methane emissions that are produced in natural gas extraction and processing. Methane is thirty four times more potent a greenhouse gas than CO2, and the level of fugitive emissions resulting from the gas extraction implied by projections of future global demand will be devastating.

A popular argument for constructing new gas power plants is that the intermittency of solar and wind energy requires stable backup power. This is true, however, on this front too, alternative energy technologies are increasingly looking able to provide the solution. Grid-scale batteries are now starting to become cost-effective for providing such backup power, while pumped hydropower is a currently viable technology that can be rolled out now where suitable sites are available. The plummeting cost of batteries is also leading to a rapid uptake from households with solar PV installed. Managed in a systematic way, these battery units can form a “virtual power plant” whereby they are able to provide the grid with power when clouds roll in, when the wind stops blowing, or when a gas or coal plant breaks down unexpectedly. Indeed they are already being used in this way in some places.

We can take solace from the fact that solar, wind, batteries, and electric vehicles will deliver heavy body blows to the coal and oil industries over the coming decade, regardless of whether we have proactive governments in power pushing their uptake. Here, the power of markets will ensure the transformation of our global energy continues at pace throughout the next decade. However, we have very little time left to make the deep emission cuts necessary to prevent catastrophic global warming. It is for this reason that we must step up the pressure on our governments and demand an even faster uptake of these technologies, the expedited closure of coal power plants, and a halt to plans for new natural gas infrastructure and extraction. Handing off a habitable planet to our children and their children may just depend on it.

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Ryan Wilson

Written by

Economist, Climate and Energy Policy Analyst. Pondering the path to a socio-ecological transformation.

Climate Conscious

Building a collective vision for a better tomorrow

Ryan Wilson

Written by

Economist, Climate and Energy Policy Analyst. Pondering the path to a socio-ecological transformation.

Climate Conscious

Building a collective vision for a better tomorrow

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