A Perfect Storm is Coming

You can be blown about, or it can be smooth sailing – it is entirely up to you.

The damage will not be from the weather, but it might be as bad as Sandy (pictured). Photograph by NASA.

By George Harvey

A perfect storm is coming to the fossil fuel industry and those electric utilities dependent on it. Consider the signs:

• Fossil fuels are facing increasingly strong competition in a contracting market.

Renewables: Investments in renewable power have been rising. Investments in fossil fuels have been falling. The two were first equal in 2010, a fact that became clear when data was analyzed in 2011. Renewables are still a small part of the market, but they are real, effective competition for new investment. In a three-month period in 2013, 99% or more of all new commercial electric capacity put on the grid was from renewables.

Efficiency: The thing no one noticed until data on efficiency was analyzed until 2013 was that investments in efficiency were as high as investments in fossil fuels in 2010. This explains why, even though both the population and productivity are increasing, the energy market is contracting.

• Fossil fuels are seeing customers turn into competitors.

High electric rates and low costs of renewables mean it is now possible for ordinary folk to produce their own power less expensively than buying it. This includes cost of financing. Electric generating companies are loosing residential customers.

As renewables have become less expensive, big businesses have come to know it is less expensive to make their own power than to buy it, and whatever excess they make is sold. Electric generating companies are getting competition from former large customers. The list of such companies includes Google, Apple, Walmart, Ikea, Staples, Coca-Cola, and many more.

• Fossil fuels are seeing increasing costs, while their competitors’ costs decline.

The costs of solar power have declined to below $3 per watt, for commercial installation. There is hope that they will decline to below $1 per watt by 2020. Costs of windpower are also declining rapidly.

Costs of oil and gas are not stable. “Fracked” fields are showing declining productivity even though more and more wells are drilled. In some cases, productivity is declining at rates of nearly 50% per year. Natural gas costs are currently low, but over all are only likely to go up.

Also, continued use of fossil fuels requires ever-increasing controls of emissions. This is a problem renewables do not have to face. By comparison, renewables do not have fuel demands and are not subject to fluctuations in the fuel market.

• Fossil fuels are having more trouble getting financing; at the same time, renewables are getting funding more easily.

Since wind and solar power do not depend on fuel, it is possible to calculate their costs rather closely for very long periods. Bankers have become aware of this and other benefits. They are increasingly willing to finance renewables.

By contrast, such large financial institutions as the World Bank, European Investment Bank, and the European Bank for Reconstruction and Development are no longer willing to finance coal-based operations.

• The old ideas about intermittent and variable power from solar and wind are turning out not to be valid.

Not long ago, some proponents of big power plants were saying that it would not be possible to run a grid that was more than 20% powered by solar and wind. This has turned out to be completely wrong in the real world, where some countries are already normally powered by over 40% renewables already. Some have even been occasionally powered 100% by wind.

Traditional forms of power take many hours to several days to get up to speed, so they have to produce power at full capacity all night, selling power at low prices, to take advantage of the high prices of high demand periods during daytime.

Solar power can meet the daytime demand loads, eliminating high profit periods for fossil fuels. And when the sun is not shining, the wind is usually blowing. They make it much harder for old-style plants to make money.

Windpower is getting more efficient. The output of wind turbines is getting less intermittent and variable. The capacity factor, a measure of reliability of output, is approaching, and in some circumstances even exceeding, that of hydropower and traditional gas plants.

“Smart grids,” with resources combined and controlled by computers, can match grid demand with the correct amount of energy production. It turns out that not only are renewables capable of powering the grid, they may do it better than fossil fuels and nuclear did.

• Political and financial pressure against fossil fuels and nuclear is increasing, and with compelling reasons for action soon.

The high cost of fossil fuel subsidies has become clear. The worldwide cost is calculated at over $545 billion each year by the UN. Eliminate that cost, and it is possible to finance the answer to global warming, which has the added benefits of creating jobs, keeping energy money within a country, and providing energy security. Nations are taking note.

The political pressures being brought to bear by fossil fuel companies to get their way are being matched by other, greater pressures to prevent them from doing so. Large companies have begun to notice the high costs of global warming. Major investment organizations, including retirement and mutual funds, with assets valued in the trillions of dollars, are demanding that fossil fuel producers explain how they intend to survive in a time of global warming.

• Even in the transportation sector, fossil fuels are set to lose ground.

Prices of electric vehicles and batteries are declining rapidly. Volkswagen says electric cars will cost less than traditional gas-powered vehicles within three years. Including the government incentives in the US, they already do. And, they can be powered by an owner’s solar panels.

Our conclusion: Forget fossil fuels; invest in renewable power.