[Peakoil] The future of fossil fuels: decline and collapse

[Paul Pollard]

Is this it for coal?
 
  PAUL GILDING
 RenewEconomy writer    |  EMAIL   |  COMMENT 
   
   
  CLEAN RENEWABLE ENERGY, FOSSIL FUEL INDUSTRY, FOSSIL FUELS, RENEWABLE ENERGY 
SOURCES
   
  It’s time to call it. Renewables and associated storage, transport and 
digital technologies are so rapidly disrupting whole industries’ business 
models they are pushing the fossil fuel industry towards inevitable collapse.
Some of you will struggle with that statement. Most people accept the idea 
that fossil fuels are all-powerful and it will take many decades to force them 
out of our economy. Fortunately, the fossil fuel industry suffers the same 
delusion.
In fact, probably the main benefit of the US shale gas and oil "revolution" is 
that it’s keeping the fossil fuel industry and its cheer squad distracted 
while renewables, electric cars and associated technologies build the momentum 
needed to make their takeover unstoppable -- even by the most powerful 
industry in the world.
How could they miss something so profound? One thing I’ve learnt from decades 
inside boardrooms is that, by and large, oil, coal and gas companies live in 
an analytical bubble, deluded about their immortality and firm in their 
beliefs that "renewables are decades away from competing" and "we are so cheap 
and dominant the economy depends on us" and "change will come, but not on my 
watch".
Their delusion, however, is good news for the world. If the industry really 
understood what was happening, it would pull out all stops to prevent it. 
While fossil fuels would ultimately fail, it would cost us decades of lost 
time -- decades we can’t afford if we are to stabilise society and reduce the 
risk of collapse.
As I argued in my book The Great Disruption, dramatic economic change is not a 
choice we get to make, but an inevitable result of physical science. This is 
because business as usual, with results like ever-increasing resource 
constraint or a global temperature increase of 4 degrees or more, would 
trigger economic and social collapse. So the only realistic outcomes are such 
a collapse or an economic transformation that prevents it, with timing the 
only big unknown. I argued transformation was far more likely and, to my 
delight, that’s what we see emerging around us today -- even faster than I 
expected.
Although it now frames thinking in this area, the mistake many make is to then 
extrapolate that risk into a likely global policy response as the main driver 
of change. The thinking goes that we need a "Pearl Harbour moment" -- a 
physical event that forces a global policy agreement to change. But that’s not 
how systems change or how our global market society works. Things are far more 
chaotic and messy -- though probably more predictable.
Economics is the best lens through which we can both see the triggers for 
transformation and are able to measure its progress. When we see the price of 
solar plunge at extraordinary speed and watch its deployment swing like a 
wrecking ball through the utility sector, we should acknowledge it’s going to 
have more impact on the human system response to climate change than the 
terrifying acceleration of the melting of the Arctic.
And when I say wrecking ball I probably understate it. As this excellent 
overview from Stephen Lacey at Greentech Media explains, the utility sector 
now faces a "death spiral", and it’s likely many of them won’t make it. This 
is not a theoretical future crisis -- growth in renewables is the prime reason 
the top 20 European utilities have lost $600 billion (no, not a typo!) in 
value over the past five years. That’s what the financial carbon bubble 
bursting in a sector looks like -- ugly and messy -- and there are many more 
to come.
"If you think this utility problem isn’t enough to seriously threaten the 
overall fossil fuel industry, think again ..."
The disruption is worse for old players, because this is not just technology 
switching. The whole sector is moving to a distributed rather than centralised 
system, thereby inviting in countless new, nimble competitors into the space. 
This is fundamental structural change that is going global, as Giles Parkinson 
from RenewEconomy explains.
If you think this utility problem isn’t enough to seriously threaten the 
overall fossil fuel industry, think again -- this is just one of a number of 
fronts where they’re being hammered. Long-term expert on oil and energy trends 
Richard Heinberg explains the oil story well in this podcast, while this 
excellent overview from Chris Nelder, shows how oil, gas and coal are all 
under serious pressure. Like Heinberg, Nelder also argues the "soaring cost of 
producing oil has far outpaced the rise in oil prices". Nelder also notes that 
in the US alone, 60 GW of coal power plants are expected to be taken off line 
by 2016 -- double the volume forecast by the US Energy Information 
Administration less than two years ago. Things are moving very quickly now.
I haven’t mentioned the revolution underway with electric cars, where Tesla is 
valued at more than half of GM -- despite the latter producing 300 times as 
many cars! Do you think the market knows where that is going? Or the 
incredible impact of China having to clean up its air or risk economic and 
social unrest -- knowing when China acts the market impacts are world scale.
Or the role of digital technology and dot-com billionaires in driving 
disruptive change via the move to a distributed energy system -- one 
characterised by rapid innovation and entrepreneurship and the arrival of the 
"Internet of Things". It’s in these connections between innovations that the 
most interesting disruptions are developing. So electric cars become grid 
storage devices for home renewables, with each car a mini-power station in 
peak times. I’ll never look at a city car park the same way again.
Already businesses in the US can get battery systems from Coda Energy to even 
out grid power use and avoid peak pricing. With software monitoring the grid 
to know the highest value time to respond, it can be installed at zero cost, 
then paid for by sharing the savings with the battery company. And the solar 
industry is at last in boom times, with the HSBC’s Global Solar index up 65% 
last year and already up 23% in 2014.
And all this brings increasing recognition by investors that the carbon bubble 
and stranded assets are serious financial risks, which in turn reinforces the 
growing power of NGO campaigns against coal and coal seam gas along with their 
fossil fuel divestment campaign. Then of course there is the role of climate 
policy, which, given the threat to civilisation, seems like it might gain 
traction at some point!
So, as I see it, the game is up for fossil fuels. Their decline is well 
underway, and it won’t be a gentle one. When that occurs, we may find that 
those forecasts by myself and others like Tony Seba from Stanford University, 
that the oil, coal and gas companies will be all but obsolete by 2030, might 
turn out to be conservative after all. Interesting times indeed.
*The is an abridged version of a story that appeared on RenewEconomy