Conclusion

Such contracts create legacy thermal must-run plants and prevent market penetration and wealth creation from renewable energy, even if they are cheaper to build and operate. Such policy also increases the value of stranded thermal electricity assets should the country decide to accelerate green energy transformation and shifts the burden of paying for stranded assets onto the public sector.

This chapter argues that renewable energy represents an increasingly important, yet still unaccounted, wealth of nations. Its value already matches the value of fossil fuel energy in some countries (such as Brazil and Canada) and is likely to grow fast with the global low-carbon transition. Several lessons have been learned from this first experimental effort to develop renewable energy asset values for the CWON. First, and most important, the RVM approach used in the study produced results that cohere with theoretical expectations and that are largely borne out by comparison with the results of other studies. Hydroelectricity assets, as expected based on theory, were found to have mostly positive values, while the values for solar and wind electricity assets were mostly negative, again as expected.

Second, the estimated values for renewable energy assets are already large globally and likely to get larger in the greener and more flexible electricity markets of the future. The total estimated value of hydroelectricity assets in 2017 in the 15 countries studied here was about US$1.5 trillion. Although there was no value in these countries’ solar and wind electricity assets in that year, this could have already changed when this volume went to press. These results show that leaving renewable energy assets off the national balance sheets is liable to miss a great deal of wealth in the nottoo-distant future.

Third, there are sufficient data available from global and national sources to implement the RVM approach, although data on energy prices and the cost of the produced capital required to generate renewable electricity are not as robust as those on the quantities of electricity generated or the installed generating capacity. Finally, there remain several methodological issues to address before considering inclusion of renewable energy assets in the core CWON natural capital accounts.

Going forward, efficient energy and climate policy reforms can quickly turn the value of renewable electricity assets positive. Country-specific simulations with the power sector planning model suggest that by 2040 the value of solar and wind electricity assets in South Africa could reach US$126 billion (in 2018 US$), soon matching the value of coal assets. In Angola, national resources of hydro and solar energy can create more than US$10 billion of wealth with reforms simulated here. This would already be larger than the value of the nation’s natural gas reserves. Costcompetitive wholesale electricity markets with carbon pricing, simulated here, can make clean energy profitable to project developers and can also create wealth to host countries.