Renewable Energy Is Becoming Less Expensive. So Why Do We Think The Opposite Is True?

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If I told you renewable energy was less expensive than fossil fuels, would you believe me?

No? Neither would most people, mainly because they’ve been so expensive for so long.

But the truth is, renewable energy is becoming much less expensive than projected — and in some cases it’s even falling below the price of fossil fuels. That’s according to a report from Oxford University, which I saw written about in this piece by the author and environmentalist Bill McKibben.

To be clear, this doesn't mean your home heating bill is going to suddenly change. We're looking at production and technology here, and there are no overnight solutions to rapidly scaling renewables. But consider the long-term implications: We could be chipping away at the climate crisis by growing our investments in sustainable energy, and maybe saving a whole bunch of money in the process. But in part because decision-makers in this arena believe that renewables are too expensive, these investments look less attractive than they may actually be.

There’s a lesson here: We can only make meaningful change if we’re willing to move on from our old narratives.

But wait, renewables are getting cheaper?

Yes! Again, not for the average person. And we are far from having the proper infrastructure to support a sudden growth. But we are technologically able to produce renewable energy at a much more affordable cost than people tend to think, and this poses an interesting problem. It means that when renewable energy advocates talk about the high cost of renewables, they're potentially telling a counterproductive story about the thing they want to support. McKibben writes:

"The public debate hasn’t caught up to the new reality—Bill Gates, in his recent bestseller on energy and climate, laments the “green premium” that must be paid for clean energy. But he (and virtually every other mainstream energy observer) is already wrong—and they’re all about to be spectacularly wrong, if the latest evidence turns out to be right."

The implications here are large. Are major forecasts wrong? Have we been under-investing in promising technologies, locking in higher energy costs, and holding back innovation? McKibben again:

“That is, if economists don’t figure out that solar is going to get steadily cheaper, you’re going to waste big bucks building gas plants designed to last for decades. And indeed we have."So what should we do?

I am no climate expert, so I’ll leave those next steps to the likes of McKibben and my fellow Bulletin writer Andrew Revkin. But I feel confident about the broader lesson to draw from this:

When we question our old narratives, we open up the possibility of innovation.

I see this happen almost every day. And it’s at the core of so many of the stories I edit at Entrepreneur. I’ll give you two examples:

1. When people pay rent, they almost always do it with cash or a check. Because that’s so common, nobody seemed to wonder whether renters could pay by credit card, thereby helping them build good credit. Or whether that credit cart’s points could then be put towards their future mortgage. But when the entrepreneur Ankur Jain questioned those sets of assumptions, he created a revolutionary new credit card called Bilt.

2. Most people assume that insiders know more than outsiders. This means that people with information can make better judgments than people without that information. But… what if the wisdom of the crowd could be smarter than the insiders? That simple question led to a fascinating government study, which then spawned a forecasting company called Good Judgment that tests everyday people, identifies which of them are unusually amazing at predicting the future, calls them “superforecasters,” and uses them to help organizations anticipate future economic and geopolitical events.

Of course, many of us are also the beneficiaries of some shift like this. Look at how, for example, working from home once seemed impossible — until our narrative was forced to shift, and we’ve since discovered all its many benefits. Now imagine if our perspectives hadn’t shifted during the pandemic. We’d be stuck in an old narrative that we now know was bunk.

When we stick to our old narratives, we can miss out on real benefit. But we don’t have to.

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