Guest Post: The Oil Industry is Going Solar

July 28, 2015

solarprice

I’m honored today to run a guest post from Zachary Shahan, a guiding genius behind Cleantechnica, one of the web’s most useful sites for following the renewable energy revolution.

There’s no way around it — the future of energy is solar energy. But here’s the fun part: the future starts now.

Solar panels have been on the market for decades, but saying solar panels of today are the same as solar panels of the 1990s is like saying phones of today are like phones of the 1990s. True, you can’t play Tetris on your solar panels or listen to music via them, but who wants to climb onto a record-hot roof to do that anyway? Getting back to the central point here, it’s that the cost of solar has fallen off a cliff, and solar power is increasingly the cheapest option around. (see graph above).

Solar power prices are falling so fast that it’s hard for just about anyone to keep up. Last year, many of us jumped for joy as a record-low solar PPA was signed in Austin, Texas (for 5 cents/kWh). The solar industry was rocked much harder later in the year when low bids of 6.12 cents/kWh and 5.98 cents/kWh landed in Dubai. The contracted price ACWA Power offered the Dubai Electricity & Water Authority (DEWA) ended up even lower, 5.84 cents/kWh, in return for a big increase in the contract/project size. That was the highlight of the week at the World Future Energy Summit in January.

But ACWA Power and Dubai’s spot at the top of the podium didn’t last long. Austin Energy received bids under 4 cents/kWh in a recent solar power auction. Even if you throw in federal subsidies for solar, that puts them under 5.71 cents/kWh. (But honestly, solar subsidies are a crude way of correcting for the externalities of pollution from natural gas and coal — they shouldn’t be removed from the equation until fossil fuels are priced right.)

I think somebody at First Solar was eager to grab some of the hype about that, because we soon learned that it had actually signed a PPA with Berkshire Hathaway’s NV Energy that entailed selling it electricity for 3.87 cents/kWh (though, admittedly, with a price escalator included that would raise the price in future years).

I don’t know if it’s coincidental that many of these record lows are being seen in the heart of oil country, but it’s certainly funny. There’s much more to the story, though.

I think it’s safe to say that the majority of the people, or at least high-level people, working in the energy industry know that the future of energy is solar energy. Below are two charts to help make my point of how obvious this is.

Note that, in the first chart above, the renewable energy circles are for annual energy potential, while the fossil fuel circles represent total known reserves. There’s no comparison.

The second chart comes from Royal Dutch Shell. Yes, even Shell, an oil and gas giant, is forecasting that solar energy will be the dominant source of energy by the end of this century. I’ll save you the research — its forecast is actually one of the most pessimistic out there, but still, this is one of the largest oil companies in the world, and it knows the future is solar.

Saudi Arabia has set huge solar power goals. Qatar is jumping into solar as well. The UAE is genuinely trying to create the “Silicon Valley of Cleantech” as far as I can tell, and it just launched a “Solar Hub” there. And then there’s this piece of news: an oil and gas field in Oman is likely to be home to the largest solar power plant in the world, because it will save the owners money.

Record low solar prices that undercut everything except wind energy are popping up left and right now. The oil industry is going solar. The sun isn’t going anywhere or “running dry.” I think you get the picture.

Of course, the other end of the energy equation is energy used for transportation, where oil is predominantly used. I’ll get to that in another post, but in honor of Middle East leadership, here’s a quote/slide that Tesla Motors CTO JB Straubel is fond of including at the end of his presentations:

Zachary Shahan is the editor of Sustainnovate.ae, CleanTechnica.com, SolarLove.org, and several other websites. You can make friends with him on just about any social network you like.

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18 Responses to “Guest Post: The Oil Industry is Going Solar”


  1. I’ll believe it when I see it. When Royal Dutch Shell shifts a major portion of its new project investment to solar, I’ll believe it then. No sooner. Right now, they’re still out there funding politicians that fight renewable energy, fighting every effort for broader renewable energy adoption. So change that and, yes, you have changed the world. A few pet projects does not a real trend make. And a real trend in fossil fuel reinvestment into renewables hasn’t started yet. But it could, especially considering the massive capital flight away from fossil fuel based companies that is ongoing now.

    • greenman3610 Says:

      I have no illusions that Shell wants solar to proceed as fast as it is. Part of their game in producing charts like the one above is to put it as far in the future, (2100) as they can.
      37 percent is a ridiculous lowball for that far ahead. I think people actually in the field would give much higher numbers, and indeed, the history of renewable energy over the last generation is that things have proceeded farther, faster, than the “respected authorities” ever project.
      What is significant is that even giant companies with a vested interest in burning carbon goo can no longer escape acknowledging the inevitable revolution, that is
      undermining their power even faster than they allow themselves to let on.

      • Andy Lee Robinson Says:

        Once the light is seen, adoption of renewables will go exponential and change swiftly as investors jump ship, and fossil fuel companies will be forced to retool and retrain to stay in the energy business.

        Of course fossil fuels will still be around for a long time because of their energy density for applications such as air travel, but as the price of carbon rises, even shipping will convert to electric and make use of solar, batteries and sails again.
        Shipping bulk stuff around the planet doesn’t need to happen in record time – slower is also cheaper.

        As international disparities reduce and globalization becomes less exploitable, people will learn to source more stuff locally, that should also reduce demands on transport, but there will be major geopolitical shifts, notably involving Africa which will become the Lion Economy to replace the Tiger Economy as it becomes the next source of cheap labour, with easy access to north, east and west. This time industry will leap-frog ancient fossil fuel infrastructure and be powered by renewables. I just hope they can protect the rainforests.

        Expect America to provide sweatshop services to Chinese owned African department stores, as economic hotspots wax and wane around the world and go full circle!


      • Good insights, Peter.

        Right now I’m looking at this spectacular blood letting going on in the fossil fuel markets and thinking — it’s D-Day for coal, oil and gas. As an investment class coal is already out. Oil and gas are now down 40 percent in the S&P 500 over the past five years. 118 billion in new projects is on indefinite hold. The Saudis are pumping oil like they know there’s no fossil fuel tomorrow and doing everything they can to drive all the marginal oil producers out of business while holding onto market share until the dear end. Meanwhile, renewables make up 78 percent of all new installed electricity capacity and Tesla talks of gigafactories in the plural sense.

        So what happens when half the political support for drill, baby drill is going bankrupt? A last gasp fight for zombie life as in Australia? Or do they look ludicrously out of touch to an increasingly educated public?

        • toddinnorway Says:

          Hi Robertscribbler, I have to agree with you that the speed with which coal is dying in selected markets is perhaps as encouraging as the progress in renewables. Coal has very few friends left and after Tony Abbott is gone (soon we hope!) coal will decline even faster. Question is, when will oil follow coal? Four realities need to be widely acknowledged by the investment community, our politicians and the general public.
          1. Plug-in vehicles work great and are value for money.
          2. The global oil business is the main source of income to keep terrorists supplied with arms and martyrs
          3. Importing oil is a major economic millstone around the neck of many national economies, and the plug-in vehicle value chain can keep more income and jobs within national/local economies, since renewable electricity can be produced locally and regionally, and installing new charging stations, PV panels, wind turbines, etc. requires local installers.
          4. Refining crude oil into standardized fuels requires bucketloads of electric power input, so as Elon M. said, we would have enough electricity for all the plug-in vehicles in the foreseeable future if we stop refining crude oil.

          Problem is, the oil business still has lots of friends in high places, employs quite a number of people, and pays lots of taxes. However, this changes when oil prices crash like now, so their local stakeholder support will likely reach a minimum soon, and we may see this public conversion making progress.

  2. Gingerbaker Says:

    We sure know a lot about solar prices! Strange, though, that we never were kept abreast of the various prices for fossil fuel-based power facilities. Gas burners vs turbines – beats me… I am not an engineer.

    That was government’s purview, after all. You know, back in those ancient times when it was government’s responsibility to build the energy systems for the common good.

    Why, it’s almost as if someone doesn’t want the government to purchase anything but fossil fuels! Someone like that would probably be very happy to restrain the conversation about renewable energy systems to one where people who were rich enough could just buy their own, but the nation really should just sit back until these new technologies might become attractive to the free market.

    The free market, which as everybody knows, is a perfectly level playing field, which always acts in the best interest of consumers, the environment, and the public good.

    So you can easily see just how remarkably appropriate is a discussion about the cost of solar kilowatt hours to a Texas utility, and why this is the only sort of progressive discussion we should be having about our energy future.

    • toddinnorway Says:

      Hi GingerB, I know of two government-owned and operated power utilities that quite frankly are even worse than free-market players at making rational choices on technology solutions and implementation for the future.

      1. Eskom of South Africa
      2. PGE of Poland

      Both of these are heavily invested and tied up in their national coal value chain and see coal as their reason for being. We can forgive Poland for not doing more solar and wind because quite frankly they do not have enough sun and limited wind. They really have no choice but nuclear and CCS for decarbonizing their power.

      Now South Africa, on the other hand, has fantastic wind and sun, and a world of investors who want to help SA do the right thing, i.e. invest aggressively in renewables. Yet still, they make too slow progress. This is an unfortunate example of when a being a government-owned, monopoly utility does not help make rational decisions.

      • Gingerbaker Says:

        Well, I am sure there are bad managers everywhere. But the thing about about keeping energy in public hands, is that utility mandates can be redirected for the common good, not corporate profit.

        If Obama was a real leader, for example, he could completely change the mission of the Department of Energy by mandate.

  3. dumboldguy Says:

    I must caution all against misinterpreting pretty graphics once again.

    The SOLAR DOMINANCE BY 2100? chart shows solar at ~38%, the combined coal-oil-natural gas at ~21.5%, and the not-totally-CO2-free biomass/biofuels at ~19%.

    WOW! What progress we will make! Except that we will only be cutting fossil fuel use as a %-age of total energy sources by about 2/3 (from ~65% to 21.5%). And that will be a %-age of a much larger (and unknown) energy budget some EIGHTY-FIVE (85!) years from now. If energy use doubles by 2100 as some expect, that 21.5% of the total means that in 2100 we will still be putting a significant quantity of CO2 into the atmosphere. Do the math.

    In order to stay within the 2 degree cap, stabilize atmospheric CO2, and maybe begin to reduce it, we will have to do a lot better than that, and “solar dominance” is going to have to hit a much higher figure than 38% in a lot fewer years..

    I can’t argue with “I think it’s safe to say that the majority of the people, or at least high-level people, working in the energy industry know that the future of energy is solar energy”. That’s not the problem. The problem is that they know but are STILL digging, drilling, and burning, and will continue to do so until they extract every penny of profit from cheap fossil fuels, (and also that the developing world has not yet committed to NOT following the path of the West and not burning FF).

    And “Below are two charts to help make my point of how obvious this is” makes me ask the Omno question—-WHAT? is obvious? Al that is obvious is that hey are charts of “potential” and “projections”, and it will be nice if they somehow contribute to a fossil fuel-free world—-until then, they’re wishful thinking.

  4. John Says:

    Reblogged this on jpratt27.

  5. redskylite Says:

    My grandfather lived through and took part in the first world war, both of my parents did the same in the second, I’m equally amazed at the times I’m living in too.

    Watching the persistent rise in CO2 and responding rise in land-ocean temperatures, accelerating polar melt, thinning of biodiversity, death of corals, the denial industry and the blinkered, annoying vocal minority of naysayers and vested self-interest.

    I enjoy reading CleanTechnica for it’s stream of information of progress in the renewable energy field, and unlike most other rivals, even during week-ends and holidays the staff are reporting away.

    It is frustrating to see the slow rate of progress by international bodies and reluctant politicians, but the strides in technology at least give me some hope.
    I am heartened to see offshore-wind energy taking off in the U.S, and onshore wind being implemented – especially in traditional oil exploiting country. The electric vehicle advances are also truly amazing, and I truly hope we can beat this thing before it defeats us all.

    “U.S. Offshore Wind Power Industry Starting to Emerge”

    http://www.renewableenergyworld.com/articles/2015/07/u-s-offshore-wind-power-industry-starting-to-emerge.html


  6. […] (One factor in the massive fossil fuel bloodletting has been a precipitous fall in the cost of its wind and solar energy replacements. For US electricity in 2015 fully 78 percent of new capacity additions have been wind and solar. Image source: Climate Crocks and Bloomberg.) […]


  7. […] The Oil Industry is Going Solar […]


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