Irresistible Solar and Immovable Oil
Dinosaurs had long tails, and so will fossil fuels
Overestimated in the Short Run, Underestimated in the Long Run
Renewable energy is moving from strength to strength; installations of solar, wind, and battery power systems accelerate year by year. At the same time, China is building new coal plants, electric passenger planes are not really a thing yet, and US oil production is near its all-time high. What does this say about the prospects for the clean energy transition?
In a saying of murky origin, “we tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” This has played out over and over. Remember the “paperless office”? Once, there were so many false predictions of the death of paper in the workplace that it became a joke; today, I don’t have a printer in my office. In the dot-com bust, home grocery delivery became the poster child for impractical ideas (remember Webvan?), but now it’s commonplace.
Throughout history, new technologies have taken time to mature. An early steamboat was dubbed Fulton’s Folly, because the idea of replacing sailing ships seemed crazy. The steam locomotive took decades to become important.
What about renewable energy? There have been premature predictions of the obsolescence of fossil fuels, but over the long run, progress in solar, wind, and battery power has been nothing short of astounding. I’ve previously linked to this report from a group at Oxford, which shows that all three technologies have smashed through every historical cost projection. In many parts of the world, it is now cheaper to build a new solar or wind plant from scratch than to merely continue operating an existing coal- or gas-fired plant.
This raises the question of why fossil power plants continue to operate. Increasingly, they don’t. To take a recent example, “Australia's biggest coal plant is shutting down ahead of schedule because, according to its owner, coal power simply cannot compete with renewables.” Australia’s government is noted for being particularly pro-coal, but the plant is closing anyway; it’s hard to override economics.
The economic advantages of clean power are not yet overwhelming. Manufacturers can’t yet build quickly enough to satisfy the world’s energy needs, not all regions are equally suited to solar and wind power, and there is still a huge need for “clean firm” solutions to fill in when the sun isn’t shining. But progress continues. Today, clean power is a wave; soon, it will be a tsunami, then – from the perspective of fossil operators – a cataclysm.
I’m Sure the Fossil Fuel Industry Will Bow Out Gracefully?
What happens when clean power moves from “cheaper than fossil fuel” to “laughably cheaper”?
Things are going to get very, very complicated. Some applications will be a better fit than others, varying according to:
Sector – it’s a lot easier to pack heavy batteries into a car than an airplane.
Use case – it’s one thing to go electric for a 20-mile urban commute, quite another when you’re making long trips in the Alaskan winter.
Country – Iran, for example, is in no hurry to set emissions targets. And in many regions, key figures in the government have a vested interest in perpetuating the fossil fuel industry.
Competitive environment – the current global price of oil is about $90 / barrel, but Saudi Arabia can pump it out of the ground for $3.
We’re going to see a bewildering mix: in some situations, fossil fuels will be hopelessly outclassed; in others, friction, vested interests, or the limitations of battery power will leave hard-to-convert niches. At first, some of these niches will be quite large. Just as the legal profession still uses plenty of paper, there will be many stubborn applications of fossil fuels.
The CFC Age Didn’t End Because We Ran Out of CFCs
Famously, “the stone age did not end because the world ran out of stones”. The idea, of course, is that technologies usually fall out of use not because they cease to be available, but because newer technologies out-compete them. As we’ve just discussed, older technologies often continue to find niche applications; we still make buildings out of stone.
Sometimes, regulations help to force a transition. Remember leaded gasoline, or CFCs? In the 1970s, it became widely apparent that CFCs – used for many applications, including cooling systems and aerosol spray cans – were destroying the ozone layer. In response, the a worldwide campaign was mounted to ban their use, culminating in the ratification of the Montreal Protocol in 1987.
The Whaling Age Ended Because We Ran Out of Whales
Of course, it’s often difficult to pass this type of regulation, especially at a global scale. This is true even for technologies that seem obsolete. Consider the practice of whaling.
Historically, whales were hunted for their blubber, which was rendered into oil and used for lamps. The discovery of petroleum rendered this application obsolete, but as noted in an interesting article my brother Mike shared, that wasn’t the end of whaling; in fact, the global sperm whale catch didn’t peak until the 1960s! (In part because other species were hunted to near-extinction earlier, but still.)
Modern techniques – including, ironically, the move from sailing ships to coal-burners and then petroleum-burners – allowed whaling to remain economical. New uses were found for the blubber; for instance, it was used in, ugh, margarine.
In the end, whaling was (mostly) banned worldwide, but this didn’t happen until very late, and only after they had been hunted nearly to extinction. In fact, it was only because there were so few whales left, and thus so little revenue to be had from whaling, that the anti-moratorium forces finally gave in.
Why was the world able to get together on a CFC ban, when the whaling ban was so difficult? I don’t know, but I suspect it helped that:
The modern world is more globalized.
CFCs were a global threat in a way that whaling was not.
The ban on CFCs did not end an industry; we merely switched to different chemicals, often made by the same manufacturers, who therefore had less of an incentive to fight against the ban.
All We Need Is An Overwhelming Advantage
In startlingly few years, the average cost of renewable electricity will be well below that of fossil electricity. But there will be wide variations on both sides – think solar power in Texas vs. Alaska; oil in Japan vs. Saudi Arabia. And electricity is only one part of today’s energy market. “Price advantage” is not something that happens everywhere at once; neither is “victory”.
As renewables get cheaper and cheaper, they will gain the advantage in more markets. Also, cheap renewable power will create the economic incentives to electrify more and more of the economy, eroding the holdout applications – steel manufacturing, for instance – that don’t use electricity today.
(If only someone would invent an electric cow, we could make faster headway on methane.)
In summary:
“Price parity” is thinking too small. To drive a rapid transition, we need clean power to be much cheaper than the alternative. Fortunately, this seems to be in the cards.
Dinosaurs had long tails, and so will fossil fuels. Some use cases won’t easily yield to economics; concerted pressure will be needed to push these niches onto clean power.
We banned CFCs, not chemical companies. The companies that made and used CFCs had a role in the post-CFC world, reducing their incentive to fight the ban. Geothermal, hydrogen, carbon-capture-and-storage, and other technologies have the potential to provide a path forward for today’s oil and gas industry.
You can’t win the political fight, until you can. As the economic base for fossil fuels shrinks, and clean solutions start to look like the future, political shifts that seemed impossible suddenly become inevitable. (See my earlier post about the sudden twilight of gas cars.)
