A new report by DNV (a research body based in Norway) is great news for Canadian consumers. Canadians’ energy bills will decline by 50% by 2050 due to the increasing use of renewables in the electric sector. Energy bills will decline as cheaper electricity generated by renewable energy sources becomes more prevalent.
However, the report also highlights that North America is likely to fall short of its net zero targets.
Despite the dominance of the oil industry, DNV emphasizes that the cost efficiencies of renewable power are increasingly attractive.
The report suggests that over $12 trillion will be spent on renewables investment in North America between now and 2050. With renewables being inherently more efficient than fossil fuels, overall energy expenditure will decrease from 4% of GDP to 2.5%.
The Inflation Reduction Act (IRA)
The US Inflation Reduction Act (IRA), which became law in August 2022, marked a turning point for clean energy legislation. The report estimates that the IRA has caused a 15-fold increase in US solar investment and an eight-fold growth in wind investment.
Moreover, the IRA’s incentives for clean hydrogen and carbon capture, utilization, and storage (CCUS) are expected to accelerate their development significantly.
The trend toward clean investments in the US has set a strong foundation for further growth. The IRA has already stimulated $240 billion in renewable energy investments.
According to DNV CEO Remi Eriksen, North America is positioned to be “at the heart of technologies essential to the global energy transition, such as hydrogen e-fuels, whilst reducing energy bills for households.”
However, according to Recharge, the current state of renewable energy in North America tells a different story.
Offtake contract awards are becoming more expensive, and projects in offshore wind are seeking to renegotiate previously bid projects due to last year’s inflation surge. The Beacon Wind project in New York, for example, is requesting offshore renewable contract pricing at $190/MWh. This makes it one of the most expensive sources of power in the country.
In Canada, the development of solar and wind energy on a significant scale is struggling. The lone province driving expansion was Alberta. Last month, Alberta halted permit approvals for seven months to assess the impact of deregulation.
Despite near-term challenges, DNV believes that greater efficiencies resulting from electrification, combined with falling costs of renewables and battery storage, will significantly reduce energy intensity in economic activity. This suggests that North America should aim for an even faster transition.
Missing the mark
However, DNV also notes that despite accelerated progress, the continent is projected to fall short of its target of net zero CO2 emissions by 2050. Fossil fuels, particularly natural gas, will still have a role in the energy mix. Moreover, emissions from hard-to-electrify industries like cement production will remain significant.
To meet the global targets set by the Paris Accord of 2016, North America would need to decarbonize even earlier than pledged.