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.
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.