Next Steps

Monday 4 August 2025

Decarbonization of global power faces a robust headwall of incumbent generation capacity that’s fated to erode, but only at an exceedingly slow rate. What to do? The standoff between this formidable headwall and wind, solar, and batteries is not challenging to explain using the intrinsic qualities unique to both categories. Wind, solar, and batteries are still too costly in nominal terms to wreck the economics of the incumbent fleet, while that same fleet, by contrast, enjoys path dependency and the ability to deliver the marginal unit of power at competitive cost. Let’s review our current location:

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• Even in nominal terms—even without the consideration of externalities like air pollution and climate change—wind, solar, and batteries reign supreme now in the market for new generation. Unless you are going to introduce Soviet-style policies that protect coal and natural gas, every region of the world is now tipping toward wind and solar in the new build of power. There are some lagging effects here, of course, and parts of the world continue to add new natural gas capacity to replace some of the old, but the rate of these additions has slowed greatly. The free market has spoken here, and there is no turning back.

• Wind, solar, and batteries are also successfully agitating the incumbent fleet at the margin, where the economics of incumbent capacity are still favorable, but barely so, already weakened to a point of vulnerability. You can see this in myriad examples of old, weakly viable coal and natural gas as the onset of renewables starts to depress wholesale power prices—and as a result their economics, already close to the tipping point, succumb to reality. Just to note: this has been observed in old nuclear and old hydropower too. Wind, solar, and batteries absolutely disrupt powergrid pricing in their own favor.

• The difference between a new technology being cheap and cheaper than, however is non-trivial. And here we get to a rather persistent blind spot that plagues the climate community, one that at this point can only be regarded as outright denial. Wind, solar, and batteries are cheap. They are the fastest and most cost effective way to bring on new power generation. However they are not cheaper than the great mass of incumbent capacity. If they were, they would revolutionize the landscape at a much faster pace. Wind, solar, and batteries are unlike many technologically advanced consumer goods that have rolled out over the past century, for example, that have offered so much value, at such competitive prices, that they allow consumers to simply throw away their incumbent products.