The economic case for the clean energy transition is the constant during this time of global instability
The theme for Earth Day 2025 is Our Power, Our Planet, inviting everyone around the globe to unite behind renewable energy, and to triple the global generation of clean electricity by 2030.
But everything is connected. The concept of systems was a key theme that emerged from the Energy Transition Accelerator Forum (ETAF) in February, highlighting the interconnected nature of decisions taken within the energy sector.
23 April 2025
Given the global instability and change in our world today, exploring the potential future design of our energy systems and their impact is more relevant than it has ever been. Decisions made on how a country or region generates its energy, like increasing the use of renewables, have very real effects that cascade through social, economic, and political dimensions. What about the countries whose economies are inextricably linked to coal, for example? The volatility of fossil fuel prices, underlined by global energy bill spikes following Russia invasion of Ukraine, raises questions about the value of price stability and energy security.
In countries where energy sector subsidies keep consumer costs low, or support mining jobs that would otherwise disappear, further intertwine energy policies with economic strategies. This complexity prompts a critical question: how can we drive systems led change for our energy production and use, while maximising the benefits for all?
Carrots and sticks
In the age of electrification, the world faces a paradox, exemplified by current affairs in the USA: while policy decisions increasingly favour fossil fuels and cancel renewable energy projects, the economic realities suggest a different path. As recently as April 2025, the US administration announced a need to revive coal fired power in the USA to meet growing electricity demand, particularly that driven by the increasing use of AI. Despite these announcements and additional policies aimed at reviving coal, the fundamental economics of energy production remain unchanged.
Whilst coal prices have fallen significantly since historic highs in the spring of 2022, the volatility of other fuel prices remains a concern. This is not an incentive to revive the coal industry that the current US administration would want. Solar and wind technologies continue to be the most cost-effective means of generating electricity and investment flows are evidence for this. This economic advantage will ultimately drive the market, as companies will naturally gravitate away from drilling if the price dynamics continue to favour renewable sources.
However, the playing field remains heavily skewed in favour of fossil fuels. Comparing the operating costs of heavily subsidised fossil fuel exploration and generation with the capex and opex of unsubsidised renewable energy projects remains challenging. So too the technical challenges of managing a more diverse grid that relies more heavily on intermittent generation from a diversity of renewable sources, including wind and solar. Nonetheless, the economic and broader benefits of shifting away from fossil fuels are clear, including: new jobs, a smaller impact on our natural environment, new supply chains, cleaner air, lower public health costs, improved energy access to name a few. The clean energy transition still requires incentives (carrots) and disincentives (sticks) to accelerate the shift away from fossil fuels.
Carrots and sticks
In the age of electrification, the world faces a paradox, exemplified by current affairs in the USA: while policy decisions increasingly favour fossil fuels and cancel renewable energy projects, the economic realities suggest a different path. As recently as April 2025, the US administration announced a need to revive coal fired power in the USA to meet growing electricity demand, particularly that driven by the increasing use of AI. Despite these announcements and additional policies aimed at reviving coal, the fundamental economics of energy production remain unchanged.
Whilst coal prices have fallen significantly since historic highs in the spring of 2022, the volatility of other fuel prices remains a concern. This is not an incentive to revive the coal industry that the current US administration would want. Solar and wind technologies continue to be the most cost-effective means of generating electricity and investment flows are evidence for this. This economic advantage will ultimately drive the market, as companies will naturally gravitate away from drilling if the price dynamics continue to favour renewable sources.
However, the playing field remains heavily skewed in favour of fossil fuels. Comparing the operating costs of heavily subsidised fossil fuel exploration and generation with the capex and opex of unsubsidised renewable energy projects remains challenging. So too the technical challenges of managing a more diverse grid that relies more heavily on intermittent generation from a diversity of renewable sources, including wind and solar. Nonetheless, the economic and broader benefits of shifting away from fossil fuels are clear, including: new jobs, a smaller impact on our natural environment, new supply chains, cleaner air, lower public health costs, improved energy access to name a few. The clean energy transition still requires incentives (carrots) and disincentives (sticks) to accelerate the shift away from fossil fuels.
Carrots and sticks
In the age of electrification, the world faces a paradox, exemplified by current affairs in the USA: while policy decisions increasingly favour fossil fuels and cancel renewable energy projects, the economic realities suggest a different path. As recently as April 2025, the US administration announced a need to revive coal fired power in the USA to meet growing electricity demand, particularly that driven by the increasing use of AI. Despite these announcements and additional policies aimed at reviving coal, the fundamental economics of energy production remain unchanged.
Whilst coal prices have fallen significantly since historic highs in the spring of 2022, the volatility of other fuel prices remains a concern. This is not an incentive to revive the coal industry that the current US administration would want. Solar and wind technologies continue to be the most cost-effective means of generating electricity and investment flows are evidence for this. This economic advantage will ultimately drive the market, as companies will naturally gravitate away from drilling if the price dynamics continue to favour renewable sources.
However, the playing field remains heavily skewed in favour of fossil fuels. Comparing the operating costs of heavily subsidised fossil fuel exploration and generation with the capex and opex of unsubsidised renewable energy projects remains challenging. So too the technical challenges of managing a more diverse grid that relies more heavily on intermittent generation from a diversity of renewable sources, including wind and solar. Nonetheless, the economic and broader benefits of shifting away from fossil fuels are clear, including: new jobs, a smaller impact on our natural environment, new supply chains, cleaner air, lower public health costs, improved energy access to name a few. The clean energy transition still requires incentives (carrots) and disincentives (sticks) to accelerate the shift away from fossil fuels.