• Major transformation is going on without major policy initiatives in place yet. Energy transition kicked off around 2010, pushed first by policy support then by declining costs. Any new green deal can take advantage of more favourable costs.
• Wind and solar have high upfront costs, but then run with low operational costs. By contrast, existing coal plants have high ongoing costs and are now uneconomic.
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Summary (You can listen to the podcast by clicking here)
• Major transformation is going on without major policy initiatives in place yet. Energy transition kicked off around 2010, pushed first by policy support then by declining costs. Any new green deal can take advantage of more favourable costs.
• Wind and solar have high upfront costs, but then run with low operational costs. By contrast, existing coal plants have high ongoing costs and are now uneconomic.
• Storage costs have not dropped as fast as operational costs, but it’s now more affordable than in the past. US is already finding ways to plug demand-supply gaps.
• Chinese electric vehicle (EV) market slowed last year as earlier subsidies were reduced. But EVs still accounts for almost 5% of the new car market. Small EVs are affordable and cheaper to run than petrol vehicles. Popular in China’s smaller cities, whereas Tesla concentrates on higher-income cities.
• EV ecosystem in Europe waiting for existing auto industry to reconfigure/retool.
• US EV market is over-concentrated (Tesla dominates). Lack of consumer choice is one reason behind sluggish growth. A slow regulatory process is another.
• Policy should be geared towards providing financing, issuing green bonds or taking minority stakes in new infrastructure. Nudging transport systems towards renewables (upgrade trainlines), building out bike lanes and upgrading power grids.
Why does this matter? China’s EV sales account for around half of those globally and several homegrown electric carmakers are known internationally (think BYD and NIO). Cutting policy support weeds out unviable companies but at the same time jeopardises China’s ambitions to become a leader in the fight against climate change. But by forcing companies to have a sustainable business model this reduces the risks of widespread inefficiencies bodes well for future productivity gains.