Has Paul Gilding lost the plot?

Former Greenpeace International Executive Director, Paul Gilding, has written a new blog post entitled “Don’t be Fossil Fooled – It’s Time to Say Goodbye”. He claims that “the fossil fuel energy industry [and not just in Australia, the global fossil fuel industry] is now entering terminal decline and will be all but gone within 15-30 years” and that “we’ve reached a tipping point where fossil fuels will enter terminal decline, independently of climate policy action” [emphasis in original].

He adds that “I understand this is a very big call, especially in regards to timing” but he’s very confident that he’s right.

The story he tells is essentially one of technology-driven market disruption: “The new emerging energy system of renewables and storage is a “technology” business, more akin to information and communications technology, where prices keep falling, quality keeps rising, change is rapid and market disruption is normal and constant. There is a familiar process that unfolds in markets with technology driven disruptions”. In contrast, “[t]he resources they compete with – coal, oil and gas – follow a different pattern. If demand kept increasing, prices would go up because the newer reserves cost more to develop, such as deep sea oil”. “They may get cheaper through market shifts, as they have recently, but they can’t keep getting cheaper and they can never get any better”.

A few changes and related core expected shifts are outlined: “[r]enewables are today on the verge of being price competitive with fossil fuels – and already are in many situations” and will be significantly cheaper in most places “in 10 years, maybe just 5”; the renewable energy combined with improved electric cars will “create a system shift, both directly by using clean power to charge them and indirectly by driving battery costs down to create storage for distributed renewables”; and that electricity utilities facing a “death spiral” will back electric cars and push for their growth so that there’s demand for their product and to protect the electricity grid. Within a decade:

“electric cars will be more reliable, cheaper to own and more fun to drive than oil driven cars. Then it will just be a matter of turning over the fleet. Oil companies will then have their Kodak moment. Coal will already be largely gone, replaced by renewables.”

Perhaps the most surprising claim is that “before long – maybe a decade – virtually all new electricity generation will be from renewable” both in developing economies and in places like Australia. “[T]he very thing that the fossil fuel industry had relied on for its growth – the rapidly expanding need for energy in the developing world – is the very thing that will drive the competition to wipe them out.”

What is Gilding’s goal in publishing such predictions?

Later in the post Gilding writes that “once everyone wakes up to that reality [that the fossil fuel industry is in terminal decline], it will die faster because the market will discount it, taking away capital and shifting it to the future winners. This process will drive scale deployment and innovation of renewables while denying capital to fossil fuels, constraining their options.” Perhaps that’s his core goal – to contribute, in some small way, to that process.

Some concerns

Gilding’s predictions are an interesting analysis. I’ll note just three concerns (much more could be said):

An initial concern is Gilding’s claim that fossil fuels will enter terminal decline independent of climate policy action. It would be nice if this were true. We could stop worrying about whether a carbon price will be reintroduced in Australia and about similar policies elsewhere, and so on. He is also of the view that “climate policy action is also now accelerating, [so] fossil fuels are double dead.” Again it would be nice if this was true and, whilst there’s more evidence for this view, action is certainly not uniformly accelerating around the world. We see stronger action in some places, but far from everywhere.

Nowhere does he consider the hidden costs that also need to be paid if we shift to 100% renewables which mean basic price comparisons for energy technologies can be misleading. For example, technologies such as wind, wave and utility-scale PV provide variable output of electricity – the intermittency problem (whereas as fossil fuels provide power on-demand 24/7/365). This means there are additional energy storage costs which Gilding says nothing about. There are other hidden costs like network integration costs which he fails to consider. There is also the need to provide adequate back-up for maintaining reliable supply under high renewable shares. Again he says nothing about this.

When Gilding states that “in 10 years, maybe just 5, it is a no-brainer that renewables will be significantly cheaper than fossil fuels in most places” it’s unclear whether he is taking any of this into account and my strong impression is that he hasn’t.

What’s most worrying here is that his analysis gives the impression that necessary greenhouse gas abatement actions will occur seemingly automatically. There’s no need for governments to play a role (although he might admit that this would be helpful).

Gilding is still a relatively influential environmentalist and it therefore worries me that his writings could be taken seriously. Would he be happy if environmentalists stopped pushing hard for the reintroduction of a carbon price? Because he’s basically saying that it doesn’t matter if this occurs.

The second concern I’ve got is that he appears to be assuming that electric vehicles (powered by renewable energy) will displace all forms of transportation. This seems a city-centric view of the world and fails to consider other areas of transportation – freight, shipping and aviation – or perhaps he simply assumes that biofuels will replace fossil fuels in these areas over the next 15-30 years. A big assumption if he is. A sizeable chunk of the fossil fuel industry could still remain in 30 years depending on the progress of alternative liquid fuels and how much freight, shipping and aviation grow over the next 30 years.

Consider for a moment the fact that electricity use is only around 20% of final energy use in Australia (and less as a global %). Some analysts suggest that electricity use could rise to close to 50% of energy consumption in Australia (ClimateWorks et al 2014), but, still, that leaves a lot of other energy…

A third concern is his simplistic assumptions about changes in fossil fuels prices. For example, when you adjust for inflation oil prices have gone up less that people think over the past few decades and it may take a long time (or a high carbon price) to enable most alternative fuels to be cost-competitive in the future, unless an absolute peak of oil production is reached (i.e. peak oil). As analysis at http://inflationdata.com done in April showed, the current price (as of April 30th) of $52.50 was only $10 more than the average inflation adjusted price of $41.70 from 1946-2015. The average oil price since the year 2000 (in 2015 dollars) is $64.52. Compare this to a recent study of aviation biofuels which found that they would be economically competitive with crude oil at a price per barrel of $301 (sugarcane), $374 (Pongamia seeds) and $1,343 (microalgae)! So, depending on what future technological breakthroughs are achieved, fossils fuels would need to be enormously more expensive over the long-run (not just short-term spikes) to enable these alternative bio-jetfuels to be economically competitive. Unlike Gilding’s analysis we can’t make the uber-confident predictions about such changes.

So, has Gilding lost the plot?

His latest analysis suggests he has but, as discussed in a previous post, he may not even believe his own predictions. Instead, the analysis might just be strategic ‘expectations work’ that tries to hasten the demise of fossil fuels. However, it is also possible that his efforts could have the opposite effect if environmentalists take his predictions seriously.

4 comments

  1. bill shockley says:

    Even assuming that Gilding’s analysis and predictions are correct in all aspects, there remains the important question: Will it be enough to solve the climate problem?

    What pace of FF-replacement is implied by Gilding’s forecast? My guess is about 2% per year, which is what optimistic projections consider possible for renewables alone. And that is approximately what is needed to assure we keep below the +2C limit.

    Problem is, the 2C limit is, in James Hansen’s term, a “prescription for disaster” (briefly, 2C guarantees several meters of sea level rise and an eventual further global temperature rise to 3C or 4C as a result of slow feedbacks and momentum within the system). He believes we must, and can, do much better than that, and that to do so, a strong, steadily rising price on carbon is imperative.

    Stephen Chu also believes that to achieve the necessary pace we need a strong carbon pricing policy. But he doesn’t even realize that a 450ppm goal is not sufficient. Why don’t these people talk to each other?

    Hansen’s analysis is laid out in his paper from December, 2013, “Assessing Dangerous Climate Change”.

    We must make sure our goals are sufficient and that our methods can achieve them.

    1. bill shockley says:

      PS, I should have included that Stephen Chu’s most recent forecasts for the broad crossover on the price of renewables vs fossil fuels is identical to that of Gilding’s, i.e., 5-10 years, so the comparison between the two is apples to apples, but Chu sees the need for something more. Check his most recent youtubes.

      1. Stephen McGrail says:

        Hi Bill,

        Thanks for reading and commenting. Could you provide some links to Steven Chu’s presentations? (I found no such energy forecasts when searching on youtube). My guess is he’s only talking about electricity generation technologies, and not about the production of renewable liquid fuels (i.e. alternatives to oil), but even still I’m highly skeptical. Credible bodies like CSIRO have repeated argued that it’s not comparing apples to apples due to things like hidden costs which I noted in my post.

        On the issue of targets (re: 2C limit) I’m well aware of those issues. However, whatever target is adopted the main goal is the same – as rapid as possible decarbonisation. The core question is whether this will occur automatically and quickly in a market-driven process (as Gilding claims) or if interventions by governments etc are required.

        Regards,
        Stephen

  2. bill shockley says:

    Looking again over your summary of Gilding’s scenario, I see that Gilding is suggesting the whole CO2 thing is essentially solved, FF companies are dead, they just haven’t fallen over yet… so my objection to vagueness of mitigation rate is moot. I guess all I can say is I agree with you that he must be missing some things, since Chu sees the same successes in renewables as Gilding as far as price competitiveness, including the approaching competitiveness of battery vehicles, but he is much less optimistic regarding the rate at which the technologies can be adopted without the stimulus and guidance of government policy.

    Probably the most detailed of Chu’s presentations is this one from March of this year:

    youtube: Richard R. Ernst Lecture 2015: Nobel Prize Laureate Steven Chu speaks at ETH Zurich

    Below is a partial transcription, partial summary.

    52:41 Cost of solar in US
    July 2008 18c/kWh, actual contracts. A business deal, not some environmentalists projection.
    2014, 2 signed contracts in Texas. 5c and 4.8c per kWh. I did not think solar would be that cheap for another 10 years.
    This is the cumulative installation of solar [53:24]

    http://oi57.tinypic.com/18yiw3.jpg

    doing virtually nothing until about 2009 and then something dramatic happened. What happened? Well, I became secretary of energy [humor]. I had a massive loan program and I was loaning money to people who had sound purchase agreements for solar and wind. The banks wouldn’t touch them. And all those projects are paying off. In fact Berkshire Hathaway—Warren Buffet—has bought two of our solar farms. The developer bought it and sold it to… he said look… the developer got a 15% return on investment… I’ll take 8%, because it’s safe. The project’s built, it works… I’ll take 6%! So, I did the next best thing, I bought Berkshire Hathaway after I left the Dept. of Energy. But the point is, this is taking off, but it’s only 1/4 of 1% of the electricity generation in the US today. Wind is now 4%. But Wind and Solar within the next decade will easily begin to exceed hydro power in the US. Because this is really racing. Because it’s become so cheap. But remember, those numbers are showing 2008 to 2014. That made all the difference… it tipped the balance. OK, where’s the technological headroom–this is mostly crystalline and polycrystalline silicon…[55:19]

    http://oi61.tinypic.com/a15vrk.jpg

    I should say there’s a new class of materials, so-called Perovskites, first one announced 2008, look at that learning curve [almost vertical] and so they’re now pushing 20% efficient and they can go higher, but the beautiful thing about this material is people are beginning to say you can combine it with silicon to get a solar module that’s 30% efficient. Right now the commercial polycrystalline silicon is about 17, 18% efficient, and so all the land use, all the embedded infrastructure–mounts and everything–just scale with efficiency if you can build it at the same price. So, again, lots of technological headroom, which is what we want.

    [56:01] Intermittency, storage, battery cost, electric vehicle cost, battery development cycle. Long distance transmission to mitigate intermittency of solar/wind.
    [1:08:00] What about countries without the land resources to enable the big footprint needed for renewables? Power to liquid. At 50% renewable electricity there are many days of surplus. Splitting water ==> H2 + O2 via artificial photosynthesis. Captured CO2 from cement plants, power plants, steel plants. Combine H2 with C to make synthetic hydrocarbon fuels. Very mobile, ships cheaply around the world. Store it in the country for energy secutity. European countries have a 90-120 day supply of oil because of the oil shocks of the 70s and 80s.

    [1:30:25]
    To Steven Chu:
    You showed your success in introducing photovoltaics, but you showed at the same time how tight oil production went up in the same period. Did you promote both?
    Steven Chu:
    No. That was promoted in the 70s until 1990 in the dept. of energy. Because of the environmental problem, because of the sustainability issue, one can only view natural gas as an interim measure, to transition first away from coal, but then we have to transition away from natural gas. And it could be debatable whether this fossil reserve lasts 50 years, 80 years, 100 years… the way we’re using it now and the rate of increase, no one is projecting it’s going to last for a very long time… This is not about sustainability. If you use it at the rate we’re using it today, in the next 20 or 30 years, to quote Martin Luther King, there is such a thing as being too late. So, we need to do these things and reduce the emissions of carbon by mid-century. Can we get there around the world, to get substantially in this danger zone? Well, I actually don’t think so. I think we will glide past 450ppm, and even 500ppm. And so, there are these other issues that we have to think about. To be sure, we need a price on carbon; that is a long term goal, that doesn’t jerk around with poliitical things; The US, the federal government is not going to pass anything in the next 2 years, for sure; but let me also say that if you look at the states in the US, and the amount of people in the economy in the US, 78% of the economy in the US has renewable portfololios mandatory. If you include goals, 86% of the economy has that. So in the US, although if you look at the federal government, it looks completely stalemated, which it is, the states, starting with California, with a price on carbon which will ratchet up gradually, with a very strong 20, 25, 32% renewable energy goal, and the eighth largest economy in the world. And so there are many states in the US which are marching toward this. I wish Florida and a few other popular states would do this as well. Fossil fuel can only be seen as a very temporary thing, and we have to get replacements.

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