Fossil fuels are reaching their consumption peak. By way of example, the United States has a surfeit of coal, but coal use is on the decline as natural gas and renewable resources replace the dirty fuel for generating electricity. Similarly, oil and natural gas are on the same decreasing consumption trajectory as recent data and modeling suggest.
Consider the following market facts that directly impact coal and reveal its consumption peak:
Those projections indicate that by the mid-2020s, solar and wind will constitute 6 percent of all energy produced in the United States and will account for 14 percent of the country's electricity consumption, far surpassing the magic 3 percent penetration level.
Such market trends should send a clear signal to fossil fuel investors. If those market trends prove to be insufficient warnings, then price information should be more convincing because it confirms the downward trend. Solar, wind, and energy storage firms find that with each doubling of production, they realize a corresponding 20 percent reduction in costs. These resources are the go-to resources for new electric capacity rather than a continued reliance on the use of coal or even natural gas.
To better understand cost comparisons between clean resources and fossil fuels, we should look at what is known as the levelized cost of energy (LCOE). LCOE is the all-in cost of construction, operation, and maintenance over the life of an energy plant. LCOE analysis demonstrates a worrying trend for fossil fuels for two reasons. First, as noted, the cost of clean resources continues to decline and, second and more significantly, the cost is declining to the point at which clean energy resources are cost-competitive with even the cheapest fossil fuels.
The financial firm Lazard estimates LCOEs in terms of megawatt hours. To put these numbers in perspective, 1 megawatt is sufficient to serve 700 to 1,000 homes. Lazard compared wind, solar, natural gas, and coal and derives the following LCOEs for those resources.
Based on those estimates, wind and utility-scale solar power are becoming cheaper than coal and natural gas to generate electricity, thus lowering not only the cost of production but also consumer bills. More promising for a clean energy transition is that the market share for clean energy resources is expanding. In 2017, solar and wind contributed just 6 percent of global electricity. Yet, those two resources constituted 45 percent of the growth in supply. Remember the innovation mantra: It's all about market share growth and direction; it's not about market size.
Government estimates of the declining costs for clean energy resources underscore the trend toward a clean energy future. Regarding solar power, the Department of ...