Okay, I know what you’re thinking- this is counterintuitive given the record-breaking temperatures recorded last week in France, or this research from NASA which practically suggests the world is on fire:
Then you have the WHO estimating an additional 255,000 deaths per year by 2050 from extreme heat waves if we continue on our current trajectory.
So as our world warms up, we must cool down.
And what’s the solution? … Air Conditioning. (AC)
The International Energy Agency (IEA) estimates that 1.6 billion air conditioning units are in use around the world right now, a figure that has tripled since 1990. And of the 2.8 billion people inhabiting the hottest areas of the world, AC penetration is less than 10%.
So, how is this going to work with warmer temperatures, and an increasing demand for AC?
China, India and Indonesia will account for the majority of this due to growing population and income levels, coupled with lower AC costs.
AC units are energy intensive and if this extra demand isn’t met with renewables it leads to more emissions, more global warming, and again, more demand for cooling, more emissions, more global warming….the loop goes on. China for example, meet almost all of their energy demand for cooling by burning coal right now.
Bloomberg New Energy Finance (BNEF) predicts; “air-conditioning demand reaches 4,764TWh in 2050, or 12.7% of total demand. This is 2,564TWh higher than today, an increase equivalent to almost as much as the European Union’s entire electricity consumption at present.”
That’s right, almost 13% of global electricity will be used by AC units by 2050.
So, it’s crucial that the world breaks this loop and the additional demand is met with renewable energy.
Peak time energy demand will shift to mid-afternoon when the sun is at its hottest and AC units are turned up to the max. This is almost perfectly aligned with the power generation of solar panels and they might provide the best chance of breaking this destructive loop.
As Ryan mentioned last week, the tipping points (declining costs of renewables + government policy) are here and green shoots are emerging. In China, developers of solar projects are guaranteed the same price as coal plants for their energy for at least 20 years. In India, solar is now the cheapest source of new power generation throughout the daytime. BNEF predicts solar will account for 30% of their energy mix by 2050.
The tipping points are here but we have to hope they tip fast enough to keep up with new energy demands.
About the author
Euan Ker is a Sustainable Investment Analyst. He is responsible for analysing and monitoring environmental, social and governance factors within the Global Sustainable Equity Strategy. Euan joined us in 2014 as an investment implementation analyst with responsibility for implementing macro investment decisions across a number of fund-of-fund mandates, totaling some £13 billion under management. Prior to moving to the ESG Research team in 2018 his responsibilities also included asset class, regional and currency hedging overlays through derivatives. Euan has a 1st Class Honours degree in Management with Economics from Robert Gordon University. He has the IMC professional qualification and has 5 years’ industry experience (as at 30 April 2019).