Cleaner energy hits tipping point

If industries don’t make a transition to renewables they could be punished by investors and go bankrupt in asset values of fossil fuel companies as government regulations bite.

A renewables record was set in the United Kingdom in the third quarter this year, with more electricity from wind farms, solar panels and renewable biomass plants being provided than from fossil fuels, a first since the first power plant fired up in 1882, The Guardian reported, adding that “it is a marked change from only 10 years ago, when gas and coal generated more than 70% of the UK’S electricity”.

The shift from fossil fuels has been enabled by the rapid fall in cleaner energy prices, according to Bloomberg New Energy Finance. It reported that renewable energy is not only cheaper than building a new gas or coal plant, but it would soon also be more cost effective than using existing thermal plants.

South African analysts concur. The only difference, they say, is this is already the case in this country.

This economic tipping point, The Guardian said, means it would save money to shut down coal-fired plants and build new renewable energy projects from scratch. (Abundant clean electricity could help remove the emissions from the world’s transport and heating systems too.)

This means South Africa can continue to protect and support Eskom’s belching emission and pollution megafactories, or switch to technologies that harness natural resources such as solar and wind.

Carney told The Guardian that disclosure by companies of the risks posed by climate change to their business was key to a smooth transition to a zero-carbon world, because it enabled investors to back winners.

“There will be industries, sectors and firms that do very well during this process, because they will be part of the solution,” he said. “But there will also be ones that lag behind and they will be punished.”

Carney, who earlier in the year warned that “companies that don’t adapt will go bankrupt without question”, said US coal companies had already lost 90% of their value, adding that banks were also at risk. “Just like in any other major structural change, those banks overexposed to the sunset sectors will suffer accordingly.”

Shareholder activist Tracey Davies, of Justshare, says the overall investment picture regarding fossil investments in South Africa has changed, particularly in the past year. She says, though, the extent to which asset managers assess climate as a risk varies.

By first putting pressure on banks to account for these risks, government has been forced to acknowledge the issue. Government leaders are now “talking about a just transition [to a climate resilient economy]”, she says.

“But this doesn’t mean they are doing anything about it. Both the public and private sectors are very good at words, less good in action.”

Changing investor sentiment to fossil investments has seen Anglo American and South32 exit their South African thermal coal interests, but global asset managers are not universally divesting these interests.

Just three such managers — Black Rock, the largest such manager globally, State Street and Vanguard — have a combined $300-billion in fossil investments, using money from people’s private savings and pension contributions, The Guardian reported.