Renewables are at the head of a global transformation in the energy markets. While fossil fuels are still producing more electricity than renewables, they are losing ground to their green rival. In terms of global electricity capacity, renewables are an increasing source and coal could be the first casualty, followed by oil and gas.

Concerns about global warming strongly support renewables while for fossil fuel producers they are a cross to bear. In December 2015, representatives of 195 countries gathered in Paris for the United Nations Climate Change Conference (COP21). They agreed on reducing global greenhouse gas emissions to limit the temperature rise to around 2.7 degrees Celsius by 2100. To come close to this target, oil demand would have to peak in 2020 at 100m barrels per day. Moreover, oil use in passenger transport, half the global consumption, would have to fall rapidly to be replaced by electricity. It is four times the level of commitment of the Kyoto Protocol (1997), the first international treaty that aimed to reduce the global carbon footprint by cutting developed countries emissions. Even if the US President, Donald Trump, withdraws from the Paris agreement, the fossil fuel industry would still suffer if large consumers like Europe, India and China continue to embrace renewables. Maroš Šefčovič, a Vice-President of the European Commission leading the project team Energy Union, told the Financial Times that Europe was “clearly ready to continue the global leadership on the fight against climate change”. Moreover, the demand for low-carbon energy is growing. The U.S. President will not be able to fight the market forces if renewables become cheaper, more reliable and accessible than fossil fuels.

In the past, these technologies were expensive. Electricity produced via wind turbines or solar panels could not compete with gas-produced electricity in terms of price. Environmental issues have provoked a shift of investment from fossils fuels to wind and solar power technologies. These significant investments allowed research & development and mass production of solar panels and wind turbines driving down unit price and therefore energy production cost. The International Energy Agency (IEA) says that globally, 2.5 wind turbines and 30,000 solar panels will be installed every hour over the next 5 years. China, a key market for renewables, will represent 37% of this growth.

In China, where 60 % of electricity is still produced by coal, smog levels have exploded over the past few years. This phenomenon has provoked serious health issues and forced the Chinese Government to react, says Professor Zhang Xiliang from Tsinghua University. It has implemented an investment plan to support the solar industry and quickly achieved impressive results. Ten years ago China had almost no domestic solar power. In 2015, China overtook Germany by installing 40 gigawatts of solar capacity. 20 more gigawatts were installed in the first 6 months of 2016 and solar installations are set to continue growing on a long-term basis. Currently, more than a million people are working in the solar industry in China.

Paradoxically, the United Arab Emirates, a major oil-producing nation, has achieved what was deemed impossible: a photovoltaic power station whose electricity costs less than 6 US cents/kWh. The Emirati Minister of State, Sultan Ahmed Al Jaber, is an enthusiastic advocate of clean energy. In 2016, the United Arab Emirates decided to expand their Mohammed bin Rashid Al Maktoum Solar Park, which was initially a 13MW photovoltaic power plant, to produce electricity more cheaply than gas plants. After a first expansion of 200MW, a second one of 800MW is now in the pipeline. Production costs could decrease to 5.84 US cents/kWh according to Michael Liebreich from Bloomberg New Energy Finance, but the Emirati ambition goes further. They expect production costs to fall under 5 US cents/kWh.

Many countries have reached the tipping point for the production of sustainable energy and solar energy is not the only winner in the renewables revolution. Wind energy is a fast-growing sector in the European Union where it provided 10.4 % of electricity demand in 2016 and 51% of total power capacity installations. To finance its development, €27.5bn were invested in 2016, 5% more than in 2015 according to Wind Europe. As with solar panels, wind turbines are subject to manufacturing economics: the more you make them, the less they cost. Fossils fuels are resource-oriented, increased demand for their finite supply drives up their value. Inevitably, these two curves will cross, and Mike Eckhart from Citigroup suggests they have in fact already crossed. In the UK, in 2025, onshore wind energy could drop to £61/MWh while electricity produced from coal would still cost at least £110/MWh as reported by the Department for Business, Energy & Industrial Strategy.

This progress does not mean that renewables have already won the fight. A number of questions remain on how to store renewable electricity to return it to the grid when its cyclic production falls below consumption. Moreover, the well-established model of providing energy will have to change. Fossil fuel producers and utilities’ business models will be transformed and Governments will have to continue to prove their willingness to achieve their climate goals.