Note: This thread is related to #Coronavirus #COVID19

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Ramez Naam+ Your Authors @ramez Books: Nexus Series / The Infinite Resource. Faculty @SingularityU. Energy, climate, & innovation wonk. Optimist. Mar. 19, 2020 1 min read + Your Authors

How will coronavirus affect clean energy? One point I haven't seen made: By lowering interest rates (and probably keeping them low for years to come), coronavirus will help the competitiveness of clean energy. Brief thread. 1/7

Low interest rates are a blessing to renewables and storage. Why? Because fossil electricity costs are a mix of capital cost (building the powerplant) and fuel costs (the coal or gas going into the plant).

Renewables, with no fuel, are almost entirely capital cost. 2/7

Fuel costs are something you pay as you operate the plant.

But to build a powerplant, you have to borrow the capital to construct it. Interest rates matter.

Thus, the cost of solar, wind, & storage (all capital, no fuel) are much more sensitive to borrowing costs. 3/7

A study in Nature Sustainability last year found that, in Germany, if long-term interest rates rose to 4% (the red, "extreme" scenario below), the cost of solar would go up 11% and the cost of wind power would go up 25%. 4/7

Now, with the coronavirus pandemic, and the associated economic crisis, central banks are dropping rates to stimulate economies. They'll likely keep these rates low, possibly for years to come. This, in turn, will benefit solar, wind, and storage vs gas & coal. 5/7

More on how interest rates affect solar and wind prices here:  6/7

And if you want to go deeper, the Nature Sustainability paper with more detailed analysis of interest rate effects on solar & wind costs is here:  7/7

You can follow @ramez.


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