Renewables bring deflation to the energy sector

With the US poised to rejoin the Paris Agreement under the incoming Biden administration and the proliferation of net-zero commitments from various governments, the romance between equity markets and renewable-energy goes from strength to strength.

But in all the excitement about the future of renewables, a bigger truth is being overlooked: the underlying reason for the astonishing transformation of renewables over the past decade from niche to mainstream competing head-to-head with fossil fuels is economic rather than environmental.

Wind and solar are intrinsically deflationary, whereas fossil fuels are intrinsically inflationary. This has huge implications for the distribution of value across the global energy system over the next three decades.