The International Energy Agency (IEA) estimates non-hydropower renewables will capture 15% of the global electricity market by 2040. That means we should expect coal, natural gas and nuclear power to continue to dominate for decades to come. Not surprising, when you consider the massive public subsidies gifted to the fossil fuel industry year after year. Governments around the world continue to spend around $5 trillion per annum, or 6.5% of GDP, supporting these industries. Around $2.5 trillion went to coal power in 2016 according to economists at the International Monetary Fund (IMF). So much for a free market.
We hear a lot about how renewable energy must be ‘subsidy-free’ to be taken seriously. Economists and industry lobbyists love to point out that renewable energy still depends on taxpayer support in order to achieve scale. The oft-overlooked fact of the matter is that in some cases the Levelized Costs of Electricity (LCOE) for wind and solar power already outperform other heavily-subsidized fuel types. Prices are expected to fall even further as will the cost of energy storage, potentially leading to a sea change in renewable energy deployment worldwide. Yet the capture rate for solar PV and wind even in the most optimistic scenarios remains relatively modest through 2050.
There is so much hype in the renewable energy universe that on the surface it may appear inevitable that renewable energy is poised to dominate. More and more organizations are cropping up that are dedicated to a 100% renewable energy future. Some of the tactics to disrupt business-as-usual are truly creative and deserve due credit. The stranded assets and divestment campaign have had some success in shifting relatively small amounts of capital out of the dirtiest fuels by pressuring university endowments to make a change. Even the Pope has encouraged the Catholic Church to divest their portfolios. But compared to the accelerating pace of investment in natural gas — championed by certain policy-makers in major markets — divestment alone will not be enough to accelerate global-scale change.
Historically, large-scale energy transitions beginning with wood-burning fuel to coal to nuclear and natural gas have taken several decades to evolve. Arguably we’re in the natural gas age at the moment. The renewable energy age won’t happen for at least another 30–40 years, if past data tells us anything about the future. If we’re going to get serious about transitioning to a 100% renewable energy future, then we need to start looking at other ways to disrupt the status quo. Enter disintermediation.
Nothing has radically changed markets in recent memory faster than digital apps designed to circumvent the middle-person and reduce transaction costs to near-zero. Amazon, Apple, Airbnb, Uber, Netflix, PayPal. These companies arrived on the scene and took over so quickly that it’s hard to remember how we ever got along without them. At Enian we believe that the next evolution of disintermediation apps will take on the real economy, beginning with Commercial Real Estate (CRE).
In the CRE market we are already beginning to see disintermediation take hold. When it comes to offering an alternative to institutional finance, the opportunity for technology startups to disrupt the status quo in the built environment is abundantly clear. Startups like RealCrowd and Propifi are already offering investors a choice of direct-to-market participation in a sector that is notorious for opacity and inefficiency. These platforms provide access to high-return growth opportunities using a P2P crowd-funding model that renders traditional estate agents obsolete.
At ENIAN we’re applying disintermediation to the global renewable energy market by sidestepping the traditional brokered path to development financing. With $3 billion in deal flow already live on our marketplace, it’s easy to see how demand for direct investment in the commercial solar PV, wind and energy storage markets can thrive digitally. As we move toward enabling direct investments from sophisticated investors and funds through our platform, we aren’t losing sight of the bigger picture: renewable energy needs to leverage digital tools to accelerate a global market transformation faster than ever before. Fortunately or not, we can’t rely on the same welfare that our fossil fuel friends have benefited from over the last many decades, but with a little perseverance maybe we won’t have to.