The risks associated with climate change are proliferating – with the number of extreme weather events climbing steadily over the past four decades. In 1980, for instance, there were almost 250 recorded extreme weather events. By 2018 that number had risen to 848.
Although the Trump White House has been sceptical about climate change, in the US, policy is largely driven at the regional level and several states have actually sought to accelerate their clean energy targets. Even so, economics are very much in the driving seat when it comes to determining the pace of adoption of renewables.
While the cost per megawatt-hour (MW) of electricity derived from coal or gas is expected to flat-line in the coming three decades, the same can’t be said for onshore wind and utility-scale photovoltaics. Here, costs are forecast to drop from around US$60 per MW-hour at present to around US$20 per MW-hour by 2050, making both far more cost-effective than established fossil fuels generation methods.
For investors, as ever, the challenge is to find the right way to access the opportunities formed from this change in the cost of renewables.
Paul Flood, portfolio manager. Newton, a BNY Mellon company