December 6, 2023 $20 Trillion Needed to Expand Renewable Power Capacity

Governments and industry talk about reaching net zero by 2050, but that work must start today with investment in renewable energy.

By Thomas Fritz and Dennis Manteuffel

Heavy industries can talk about decarbonizing, but for most of the biggest carbon emitters, insufficient renewable energy capacity — along with outdated electrical grids — stand between them and net zero. That’s because many of the industrial alternatives to fossil fuel, such as green hydrogen, depend on a much more substantial supply of renewable energy to reach commercial scale.

To halve emissions by 2030 — the first target of the 2015 Paris Agreement — governments and the business community need to invest around $20 trillion in renewable energy and the electrical grid systems over the next six years.  That amounts to 20% of the global gross domestic product and would produce enough renewable energy capacity, storage, and extensions to put the world on a path to a temperature rise of below two degrees Celsius over pre-industrial levels.

But expanding the supply of renewable energy is also what’s necessary to allow the decarbonization effort to start in earnest. Without this kind of investment, other industry efforts to decarbonize will stall because there is simply not enough renewable energy to satisfy existing demand as well as an increase from industries looking to decarbonize through electrification. A significant buildup of renewable capacity would be necessary to avoid this new demand from industries ironically leading to growth in the use of coal and natural gas to make up the supply shortfall. In a very real way, the lack of renewable energy is holding up decarbonization in a whole host of industries and making it unlikely we will reach net zero by 2050.

The current outlook

As things stand today, the global economy is not on track to come close to 2015 Paris Agreement’s target of keeping the Earth’s temperature rise to about 1.5 degrees C. In fact, current calculations put us on track for an increase of between 4.1 and 4.8 degrees C — global warming that would likely doom millions of people and species.

Even if countries were to live up to their pledges to cut emissions, which they haven’t so far, the best possible outcome would be an increase between 2.5 and 2.7 degrees C. That would significantly amplify the frequency and severity of global warming effects, such as heatwaves, droughts, extensive melting of polar ice, and wildfires already plaguing the planet today at only 1.1 degrees C higher than pre-industrial times.

Why can’t we solve the problem? The global economy’s lack of progress is in large part because government and industry are demonstrating insufficient urgency and failing to prioritize those solutions that will produce the biggest reduction in emissions the soonest. They are failing to address climate change the way they took on the COVID-19 pandemic, maybe because the solution is far more complex. Where development of vaccines provided a silver bullet to attack COVID globally, climate change has no one solution applicable to the entire global economy or any region.

But we could prioritize our most productive options, providing both regulation and incentives to ensure adequate capacity is built and commercially sustainable. At the top of that list should be an expansion of renewable energy technologies and the rapid phase out of the biggest polluters — coal and lignite being prime examples — in electricity generation.

The major source of emissions

In almost every country today, electricity and heat generation are responsible for the largest share of emissions — 43% of the global total. In 2022, just short of 30% of total electricity generated globally is from renewable sources.

While utilities have made progress in recent years incorporating more renewable and clean energy sources, there currently is not enough renewable generation capacity to allow most electricity to be produced from renewable sources. Quite the contrary, more than 40% of global electricity is still produced by burning coal, which is only a few percentage points below what it was in 2010.  

Renewables only fill in the gaps to cover higher electricity demand. In places like India, China, and Europe, coal use rose in 2022 in response to rising natural gas prices — with India’s use up 10% and Europe’s and China’s up 5%,  according to the World Bank.

The cost of decarbonization      

The $20 trillion investment would expand low-carbon power generation capacity by 340% by 2030 and phase out coal and lignite that same year. Those changes would mean that the bulk of global power generation would be from green sources. That would include an increase of about 730% in solar capacity, 410% in wind, and 48% in hydro.

Three of the largest emitters would have to make the biggest investments: China would need to invest almost $6.8 trillion; the United States, $1.9 trillion; and the European Union, almost $2 trillion. But the potential savings in GHG emissions from these three regions could amount to a little over 7.4 billion tonnes of CO2 equivalent a year. CO2 equivalent, or CO2e, refers to the number of metric tons of CO2 emissions with the same global warming potential as one metric ton of another greenhouse gas, such as methane or nitrous oxide.

No doubt, it is a sizable investment: The yearly spend would need to increase six times beyond what we are spending annually today. But without a significant increase in spending on renewables — primarily on wind and solar — there’s no hope of reaching net zero or keeping the temperature rise below two degrees. 

Known technologies

Similarly, the International Energy Agency (IEA) has also called for a tripling of renewable energy capacity recently as well as scaling up clean energy technologies to drive down demand from the global economy for fossil fuels. The intergovernmental organization added that doubling progress on energy efficiency efforts would also be necessary.

The good news: Some of the key technologies to replace fossil fuels are already out there and well-established, such as hydro, wind, nuclear, and solar power. And there are other technologies in the wings, such as green hydrogen, still trying to find a workable business model. In 2022, the rise in CO2 emissions would have been 550 million tonnes bigger had it not been for the increased deployment of clean energy technologies, the IEA noted in 2023.

The next seven years will be critical. Governments and industry talk about reaching net zero by 2050, but that work must start today with investment in renewable energy.

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