Further Financial Flight from Fossil Fuels

May 7, 2020

EENews:

Warren Buffett, the chairman and CEO of Berkshire Hathaway Inc., this weekend lamented the $10 billion investment he pumped into Occidental Petroleum Corp. last April and said he plans to invest more money into wind and solar power.

“If you’re an [Occidental] shareholder or any shareholder in any oil-producing company, you join me in having made a mistake,” he said, referring to negative oil prices late last month that happened as a result of the oversupplied U.S. oil market and collapsing demand (Energywire, April 21).

“It was attractive at oil prices that then prevailed,” Buffett said of Berkshire’s Occidental bet. “It doesn’t work, obviously, at $20 a barrel. It certainly doesn’t work [at] minus $37 a barrel.”

The famous investor predicted that “oil production is going to go down a lot in the next few years because it does not pay to drill.”

Buffett’s comments were made in Omaha, Neb., at the conglomerate’s annual shareholder meeting. The closely watched event — a largely online affair this year due to the coronavirus pandemic — stretched nearly 4 ½ hours. Climate change never came up.

Berkshire has a market capitalization of more than $433 billion and owns several electric and gas utilities and electric transmission and pipeline companies. Berkshire executives said Saturday they’re looking at boosting the company’s renewable energy portfolio.

“Infrastructure is continuing to change,” said Greg Abel, the executive chairman of Berkshire Hathaway Energy. “We’re ready for $100 billion of investment opportunities there.”

Abel told shareholders that Berkshire’s energy subsidiary has committed about $40 billion over the next decade to capital expenses. Half of that is for maintaining assets. The other half, he said, is dedicated to “incremental wind, incremental transmission that services the wind or other types of renewable, solar.”

“We’ve got a huge appetite,” Buffett added. “And the country needs it, the world needs it.”

Institute for Energy Economics and Financial Analysis:

While U.S. power generators continue to assess what the total implications could be of a decline in electricity demand caused by the economic impacts of the COVID-19 pandemic, those forecasting a shift to less carbon-intensive assets have not yet changed near-term plans to retire coal plants.

In 2019, U.S. power generators retired 13,863 MW of coal-fired generation, the highest amount of coal capacity retired since 2015 when new mercury regulations drove the retirement of 15,124 MW of coal-fired capacity, an S&P Global Market Intelligence analysis shows. As of April 17, generators had 9,038 MW worth of capacity slated for retirement in 2020 and another 23,010 MW of coal capacity set to retire between 2021 and the end of 2025.

In April, renewables generated more electricity than coal every day of the month, the first time that has happened in the U.S., an analysis from the Institute for Energy Economics and Financial Analysis recently pointed out. Lower power demand due to the coronavirus pandemic is one of several reasons the transition away from coal has accelerated in 2020, the group added in a May 4 news release.

While companies around the world are reassessing capital spending forecasts and looking to preserve liquidity, most utilities set to retire coal plants said they are not yet seeing a reason to slow those plans. Eleven companies responded to a set of questions from S&P Global Market Intelligence regarding their COVID-related generation demand impacts and whether the pandemic will prompt any reassessment of their coal plant retirement plans.

Reuters:

Massive programmes of green public investment would be the most cost-effective way both to revive virus-hit economies and strike a decisive blow against climate change, top U.S. and British economists said in a study published on Tuesday.

With co-authors including Nobel laureate Joseph Stiglitz from Columbia University and prominent British climate expert Lord Nicholas Stern, the findings are likely to fuel calls for “green recoveries” gathering momentum around the world. 

“The COVID-19 crisis could mark a turning point in progress on climate change,” the authors wrote, adding that much would depend on policy choices made in the next six months. 

With major economies drawing up enormous economic packages to cushion the shock of the coronavirus pandemic, many investors, politicians and businesses see a unique opportunity to drive a shift to a low-carbon future. 

German Chancellor Angela Merkel and International Monetary Fund Managing Director Kristalina Georgieva called for green recoveries last week, and the concept has emerged as a political fault line from the United States to India and South Korea. 

While think-tanks and investor groups have also been making the case for tailoring recoveries to accelerate a transition away from fossil fuels, the study aimed to assess such proposals in the light of new data. 

The authors examined more than 700 economic stimulus policies launched during or since the 2008 financial crisis, and surveyed 231 experts from 53 countries, including senior officials from finance ministries and central banks. 

The results suggested that green projects such as boosting renewable energy or energy efficiency create more jobs, deliver higher short-term returns and lead to increased long-term cost savings relative to traditional stimulus measures. 

The authors cautioned that there were some risks with extrapolating from past crises to discern how coronavirus recovery packages might play out, given the possible reluctance of people to travel or socialise following the pandemic.

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