Discussions about renewable energy tend to have a science-fiction quality; no matter how desirable it may be to place wind and solar power at the center of the U.S. energy mix, that outcome always seems tantalizingly just out of reach.

The case against renewables traces a well-worn argument: The technology isn’t efficient enough, the economics don’t make sense without government subsidies and there simply is not enough investment capital to make it work.

It’s time to think again.

A renewable energy revolution is sweeping the United States. More than 30 states, from Arizona to Missouri and North Carolina, Hawaii to New York, are setting ambitious targets for renewable generation. Even Texas, long a global oil and gas hub, is embracing renewables, demanding that utilities install 10 gigawatts of new renewable energy power production capacity by next year, or enough to power 7 million homes.

What’s sparking this revolution? Besides the governmental push at the state level, another key factor propelling these initiatives is that they make a lot of economic sense.

Technological advances have so dramatically driven down the costs to build and operate solar and onshore wind power generation in the U.S. that the industry is now competitive with traditional power generation, even without subsidies. For example: Generating one megawatt of renewable energy in the U.S. today costs, on average, less than half of generating the same amount of energy through coal, according to levelized cost of energy data published in the New Energy Outlook 2019 report from Bloomberg New Energy Finance.

Additionally, demand for sustainable investing — often called environmental, social and governance factor investing — is rising, especially among institutional investors that are seeking investments with robust yields and predictable cash flows.

Lately, there has been a steady drumbeat of news that suggests renewables are the future of U.S. energy investing. The Energy Information Administration said clean energy sources supplied more of America’s energy mix than coal for the first time ever in April. In May, a report from the International Renewable Energy Agency revealed that globally, the costs of onshore wind and solar each dropped 13% in 2018 and predicted prices would continue falling for a decade.

As a result, it is now typically cheaper to build and operate solar and onshore wind installations than to operate an existing coal plant. The IREA report noted that, “Onshore wind and solar (photovoltaic) power are now, frequently, less expensive than any fossil-fuel option, without financial assistance.” The report added: “Three-quarters of the onshore wind and four-fifths of the utility-scale solar PV project capacity due to be commissioned in 2020 should provide lower-priced electricity than the cheapest new coal-fired, oil or natural gas option.” Put simply, coal’s days appear to be numbered.

That new reality is most evident in Texas. So far this year, wind generated 23% of the state’s power, up from 17% in 2017, according to grid operator Electric Reliability Council of Texas. Over the same period, coal-fired generation in Texas fell to 22% from 32%. Next year, the roughly 700-megawatt Oklaunion power plant in the state will close because it no longer can make a profit, joining a handful of other recently shuttered Texas coal-fired facilities.

Coal-fired plants have another problem: They cannot produce power quickly enough for 21st century needs. Coal plants take hours to start up from cold, making them remarkably inflexible.

As renewables make up more of the energy mix, what’s needed is base load power — electricity generation that is supplied around the clock — that can also be quickly ramped up or down to make up for fluctuations in wind and sun. Coal (and nuclear power, too) is terrible at that, taking hours to supply electricity from a cold start. Natural gas, which is much cleaner than coal, can easily turn up or down to produce base-load power in a matter of minutes, making it the perfect partner for utility-scale wind and solar.

Another boost for renewables is that states are planning to add 110 gigawatts of battery storage capacity by 2040, enough energy storage to power about 77 million homes, according to BloombergNEF. That advance is possible thanks to technological breakthroughs in recent years.

Demand for renewables is coming from both states and corporations. In June, New York announced a road map to get all of its electricity from emission-free sources, matching the ambition of California, Hawaii, Nevada, Washington and New Mexico. Facebook Inc. is building one of the largest solar arrays in the U.S., a $416 million project in West Texas that will take up seven square miles, an area more than five times the size of New York’s Central Park. The facility will help power the firm’s data centers, producing sufficient electricity that, if it were not being used to run computer servers storing pictures, videos and social media posts, could power 72,000 homes. Snack food giant Mondelez International Inc. signed a deal in June to buy enough Texas renewable energy to produce 10 billion Oreo cookies annually.

These conditions are attracting capital. Last year, the private sector invested almost $57 billion in renewables and related grid projects. A great deal of that money is flowing to Texas, already the leading state for producing wind power. The Lone Star state is also becoming a solar hub; now the No. 6 state in the U.S. but forecast to rise to second only to California by 2021 as West Texas attracts a growing pool of capital, according to the Solar Energy Industries Association.

All this makes renewables a compelling proposition, especially greenfield projects where facilities are built from scratch. Beyond a compelling risk-return profile, demand is buoyed by rising ESG allocations, especially to projects combining strong expected returns with a positive environmental impact.

A report from institutional investment consultant Mercer — “Investing in a Time of Climate Change” — says, “the best way to incorporate ESG and climate change considerations into the investment process” is to “allocate to sustainability themes or impact investments for new opportunities — for example, renewable energy, water and social housing.”

The project pipeline for greenfield solar and wind projects is so significant in the U.S. that investors are being offered higher returns than are typical on comparable deals in Europe, a more-established renewables market. Current market conditions suggest those premiums could persist for another five years or so, but that over the medium to longer term, overall returns might ultimately compress closer to levels seen in Europe. For now, the premiums on offer are finally changing U.S. investor attitudes to renewables, transforming energy mix ambitions long viewed as science fiction into today’s reality.

Armin Sandhoevel is CIO for infrastructure equity at Allianz Global Investors, New York. This content represents the views of the author. It was submitted and edited under Pensions & Investments guidelines, but is not a product of P&I’s editorial team.