Oxford University: Wind and Solar Will Exceed UK Energy Demands by 2050

Oxford Smith School for Enterprise and the Environment

  • Research shows that moving to a clean energy system by around 2050
    in line with global climate commitments is expected to save the world
    at least £10 trillion ($12 trillion) in energy costs, compared to continuing our
    current levels of fossil fuel use. This equates to savings of approximately
    £1,200 per person, based on a population of 8 billion. Additionally, it is
    expected to save hundreds of trillions of pounds globally by reducing the
    severity of climate change and associated impacts such as heatwaves,
    wildfires, storms, and floods.
  • Analysts have consistently and systematically overestimated the future
    costs of key green energy technologies. But solar and wind are now the
    cheapest new sources of electricity in the UK, and globally, and evidence
    shows that the faster we decarbonise, the faster the costs of clean energy
    will continue to fall, the larger the savings will be, and the sooner they will be
  • For the UK, as a country with significant net fossil fuel imports, the
    savings from a fast transition to a decarbonised and largely domestic
    energy system could be proportionately higher, while also improving
    resilience to supply chain shocks. Realising these savings would require
    policies to focus on ramping up modern clean energy technologies rather
    than propping up fossil fuels.
  • As the penetration of renewables in the energy system increases,
    investments in energy storage and flexibility technologies will be
    required; however, progress in these technologies is well underway, and
    integration costs will likely be more than offset by large savings due to
    electrification elsewhere in the economy. The same innovation and learning
    dynamics that drive down solar and wind energy costs also apply to
    batteries, power grid technologies, and some energy storage technologies,
    including green hydrogen, underscoring the need for investment in these
    technologies now.
  • The UK, like every other country racing to decarbonise, faces policy
    challenges this decade. But if the skills transition for UK workers is
    managed well, the evidence suggests that green jobs can add higher
    economic value, may carry a wage premium, may not be as spatially
    concentrated as high-carbon ( non-green) jobs, and that for some
    technologies green jobs could be more resilient to automation than nongreen
    SSEE-PB-1/23 2
    The clean energy revolution has been picking up
    pace for some time now. Solar energy has fallen in
    cost by a factor of 5,000 since photovoltaic cells
    were first used to power satellites in 1958.1 Wind
    energy and battery costs have fallen by over 90%
    since they were commercialized in the 1980s and
    1990s. Solar and wind are now the cheapest sources
    of new electricity generation in most places on
    earth,2 and Electric Vehicles (EVs) are now cheaper
    to run than petrol or diesel cars.3 In contrast, fossil
    fuel prices have not improved in the long run – all
    fossil fuels now cost around the same as they did
    a century ago.4 They are also subject to extreme
    short run fluctuations due to global events, such as
    the skyrocketing prices following Russia’s invasion
    of Ukraine, leaving importing countries vulnerable
    to severe economic disruption. The data shows
    that modern clean energy technologies experience
    strong improvement trends due to innovation and
    technological progress, but fossil fuels, nuclear
    energy, carbon capture and storage, and blue
    hydrogen do not.5
    Standard energy system models have failed to
    capture these technological progress trends, and
    have systematically overestimated the future costs
    of key clean energy technologies. For example,
    in 2010 the IEA projected that solar energy would
    cost $260 per megawatt-hour in 2020.6 In 2020
    the actual cost was $50 per megawatt-hour, well
    below the global average cost of gas- or coal-fired
    electricity7. Most of the models used to inform the
    Intergovernmental Panel on Climate Change have
    similarly overestimated key green technology costs,
    and there is now an urgent need to update policy
    makers’ and the public’s beliefs around the low costs
    of clean energy technologies. By underestimating
    clean energy cost declines, conventional models
    have acted as a brake on the pace and efficiency
    of the net-zero transition. This is because they fail
    to fully consider ‘learning effects’, also known as
    ‘experience curves’, which describe a well-known
    pattern in which cost declines are associated
    with increasing cumulative production, as each
    element of the production value chain accrues more
    Way et al (2022), at the Institute for New Economic
    Thinking (INET), Oxford University, developed a
    new, empirically-grounded forecasting method for
    incorporating this effect into estimates of renewable
    energy deployment costs and rates, applying it
    to historical data for solar, wind, batteries, and
    electrolysers used to produce hydrogen from
    electricity. This shows that clean energy costs
    will very likely continue to fall and the more widely
    used these technologies become, the faster this will
    occur.9 Analyses from three scenarios for meeting
    global energy needs until 2070 ( ‘fast’ transition
    transition, ‘slow’ transition, and ‘no transition’, all
    from the current fossil fuel based energy system),
    show that a ‘fast’ transition scenario10 – generates savings of US$12 trillion (around £10 trillion) compared to ‘no’ transition, or US$8 trillion more than a slow’ transition. A fast transition is cheaper at all reasonable discount rates;*11 and cheaper
    energy input costs would also be expected to raise
    future GDP – cheaper factors of production (such
    as energy) create greater production possibilities
    and expand the overall size of the economy. Higher
    associated green infrastructure costs (which include
    more jobs) in the short-term are more than offset by
    fast-forwarding to cheaper renewable energy.12
    Clean energy can similarly accelerate the UK’s
    net zero transition
    What does this imply for the UK? With the country
    now well into the critical decade that could make or
    break its legally binding goal of reaching net zero by
    2050, legislated by the Climate Change Act fifteen
    years ago, and also facing a cost-of-living crisis,
    policymakers should look to the science to guide
    policy direction. New analysis shows that out of over
    60 countries, cost declines for solar PV and onshore
    wind in the UK have closely tracked global average
    costs (and cost declines) (see Figure 1).
    For example, between 2010 and 2020, solar PV
    costs in the UK dropped 87%, exceeding the global
    average cost decline of 85%. Similarly, the cost
    decline for onshore wind in the UK (despite a de facto
    ban) between 2010 and 2020 (52%) closely aligns
    with the global average (54%). This suggests that
    the global forecasts of savings from a fast transition
    from Way et al. (2022) could inform outcomes for
    the UK, in terms of its own savings potential from a
    fast transition to net zero. In a fast global transition,
    we expect an additional cost reduction of ~50% for
    solar PV and ~20% for onshore wind by 2030, with
    respect to today’s costs.

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