Are We There Yet? Glimmers of the Renewable World.

April 10, 2015

thereyetOne of the barriers to envisioning the future is not so much imagining  a world powered by sun, wind and tides, but being able to pick up the outlines of that world as it emerges from the crumbling husk of the fossil fuel era.  What do things look like that are in transition?
In the midst of a whole lot of admittedly very bad news, – signs of hope are increasing.

Bloomberg:

Utilities in the U.S. Northeast stand to lose as much as half of residential sales by 2030 as customers install solar and battery-storage systems and generate their own power, according to a report by the Rocky Mountain Institute.

Residential and commercial customers who opt for alternatives to traditional, utility-supplied electricity could erode power sales in the region by as much as $34.8 billion, the Snowmass, Colorado-based energy consultant said in the report released Tuesday. Fewer kilowatt-hours sold to customers also will affect utilities’ abilities to raise the estimated $2 trillion that needs to be spent to maintain power grids between 2010 and 2030.

A drop in the cost of solar panels and new leasing programs that offer installation with no upfront customer payments has led to a boom in U.S. rooftop systems, which have climbed more than 50 percent annually during the past three years. Utilities in some states have sought added fees from customers who generate their own power, saying the funds will support a grid to which users sell excess supply and upon which they rely when their own systems aren’t available.

Paul Gilding:

The collapse of renewable energy’s costs, especially solar, will be seen historically as perhaps the single biggest driver of transformational change in energy markets, particularly when paired with the interconnected developments in batteries, storage and electric vehicles. The key is not just how far solar costs have fallen but the likelihood that they’ll keep falling. Critics point to the very low share of global total energy demand provided by solar. I point to the same thing to make my case. If solar is competitive on price at less than 1% of global supply, imagine what will happen when it truly scales. That’s why considering the earlier analysis on oil prices, The Economist referred to solar as a “dagger in the heart of the fossil fuel industry”, particularly when combined with clever financing and business models by fast growing disruptive solar companies like Solar City and Sungevity.

Of course given all this, anyone who thinks markets are rational, at least over time, would ask “if this is all so clear, why doesn’t it reflect in prices?” It is, and dramatically so. Consider these examples:

  • Some pure coal companies like Peabody have lost over 75% of their value in the last three years. Their carbon bubble has well and truly burst. And while prices will vary over time, the coal industry is not coming back and we should politely bid farewell. To quote a recent Goldman Sachs analysis:  “Just as a worker celebrating their 65th birthday can settle into a more sedate lifestyle while they look back on past achievements, we argue that thermal coal has reached its retirement age.”
  • The European Utility sector lost half a trillion Euros by misreading the influence of renewables and energy efficiency. There were other factors as well, as always, but it was renewables that meant, like coal, this is not cyclical but existential. The Economist again:Renewables have not just put pressure on margins. They have transformed the established business model for utilities.”
  • Tesla, which produced just 30,000 cars in 2013 is valued at nearly half of GM which produced around 9 million cars. And the oil price slide seems to have had no material impact. With Tesla’s likely move into home storage for solar and rumours of an Apple/Tesla tie up, the future is looking very interesting. In response, the market has looked at history and concluded that old companies like GM mostly won’t get it; they’ll just be replaced.

So while many climate activists focus on the political power and influence of the fossil fuel industry, I see an industry scrambling to defend itself against overwhelming forces that will see it destroyed – not in a mighty moral crusade but something far more brutal and fast – the market turning on it. Of course these companies don’t believe that is possible, and nor do many of us. But to quote Mandela, who knew a few things about driving change: “It always seems impossible until it’s done.”

The Economist:

A bigger question on many minds is the effect of rock-bottom oil prices on the shift towards low-carbon energy. Solar, wind and other renewables have recently benefited from unprecedented investments: an average of $260 billion a year worldwide over the past five years. Long, and wrongly, decried as mere boondoggles, they have begun to show real commercial promise in places as diverse as India, Hawaii, and parts of Africa where the climate is favourable, costs are low and other sources of power are expensive. Renewables capacity is rising even as subsidies are falling. China, for example, has already installed nearly half the 200 gigawatts (GW) of wind power it had been planning for 2020, so it is sharply cutting back the subsidies it introduced in 2009.

But the relationship is not always straightforward. Renewable electricity mainly competes with gas- and coal-fired power stations, not with oil. In North America, low oil prices may, paradoxically, lead to higher natural gas prices. Less fracking means there will be less of the associated gas that is produced along with shale oil. More broadly, much of the support for renewables has been political, and there is little sign that this is changing. Worries about climate change continue to ensure that clean energy enjoys strong political support in many developed countries. Whereas shares in oil companies have in recent months fallen along with the price, the S&P Global Clean Energy Index, which covers the industry’s 30 biggest listed companies, has barely budged.

America’s economy, for example, has grown by around 9% since 2007, whereas demand for finished petroleum products has dropped by nearly 11%. In Germany household consumption of electricity is now lower than it was in 1990. Global demand used to rise by 2% a year, but the rate is slowing. Even emissions in China, the world’s largest and dirtiest energy consumer, may peak by 2030, thanks to huge investments in new clean-coal power generation, nuclear and renewable energy and long-distance transmission lines. Simon Daniel, an energy expert, sees two conflicting trends: on one hand greater efficiency, local production and storage, on the other increased consumption from the billions of new devices that will be hooked up to the “internet of things”.

Cleantechnica:

The International Energy Agency indicated in a preliminary statement that emissions of carbon dioxide from the world’s power sector accelerated less in 2014 than the global economy (see graph). While recession has caused this phenomenon several times in the past (the early 1980s, 1992, and 2009), for the first time in 40 years we are now experiencing a relative reduction in emissions during a time of economic gains.

The figures were first published by The Financial Times in an interview with Chief Economist Fatih Birol, who will succeed Maria van der Hoeven as executive director of the agency. He said:

“This is both a very welcome surprise and a significant one. [It] gives me even more hope that humankind will be able to work together to combat climate change, the most important threat facing us today…. For the first time, greenhouse gas emissions are decoupling from economic growth.”

“The latest data on emissions are indeed encouraging, but this is no time for complacency—and certainly not the time to use this positive news as an excuse to stall further action,” said van der Hoeven.

3 Responses to “Are We There Yet? Glimmers of the Renewable World.”

  1. redskylite Says:

    In the overused phrase of Dr James Martin, (the visionary guru of mesmerizing speeches of journeys into the future, and computer case tools man) a paradigm shift is occurring in the field of energy.

    If it can take hold across the States it can take place across the rest of the world (and quickly too). A whole new dimension has been added giving utilities and new homes power options that were unheard of just a few years ago. Michael Bloomberg is ploughing millions into dismissing coal, our climate’s number 1 enemy, India and China have woken up. As CO2 concentrations rise, followed by temperature statistics and observed phenomena, the change to carbon free energy sources intensify. If the president of the U.S.A is understanding this, then that is one huge hurdle surmounted, if it is carried on to the next encumbered than that will be truly magnificent.

    Today’s technical knowledge, support and team structures are awesome and should not be underestimated by anybody, they will not tolerate the old school of corruption and negligence. That is a dying thing of the past.


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