When will private sector learn that age of fossil fuels is over?

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The German minister responsible for that country’s “Energiewende” says it is time that the private sector around the world realized that the age of fossil fuels is over, and his own country’s energy transition is irreversible.

Last week, new data from Bloomberg New Energy Finance suggested that in 2015 – like 2014 – more money was invested in renewable energy generation than in fossil fuels. Some $US329 billion went into clean energy investment in the last year.

But still, enormous amounts not captured by this data appear to be spent searching for new reserves to replenish and expand fossil fuel resources.


Some of that investment may need to be re-considered, particularly in light of new data coming out of China, which reveals a 3.5 per cent reduction in coal consumption in the country’s biggest coal consumer, and a 2.8 per cent cut in coal-fired generation, well ahead of all estimates.

“These figures are staggering and totally non consensus,” said Tim Buckley, Director of Energy Finance Studies at the Institute for Energy Economics and Financial Analysis (IEEFA).” The implications for the global coal industry and indeed global financial markets simply cannot be understated.”

Earlier this week, Rainer Bakke, the German minister for state said climate science and the targets agreed at the Paris climate talks are quite clear in their implications: the world has a “carbon budget” equivalent of jus 1,000GT of carbon emissions.

This compares to the 15,000GT that would be released  if all known fossil fuel reserves were burned. That means, that 14,000GT has to be left in the ground in 2015.

“My question to the private sector is this: ‘When are you going to learn that the age of fossil fuels is over’,” Bakke told the annual assembly of the International Renewable Energy Agency in Abu Dhabi this week.

“That is the key question. When is the old economy going to accept that it is over, and when are they going to be willing to sit down with us to talk about a game plan to phase out fossil fuels.”

Bakke is the man responsible for ensuring that Germany’s Energiewende, or Energy Transition, away from fossil fuels and nuclear to renewable energy, stays on track.

Bakke says the Energiewende is still going strong. In the last year, the share of renewable energy in the German grid jumped from 27 per cent to 32.5 per cent, which he said was unprecedented as a percentage rise.

Since 2007, the share of renewable energy has grown from just 7 per cent. “That is an extraordinary rise,” he said. The government expects that by 2050, 80 per cent of all energy needs will come from renewables.

In a later interview with RenewEconomy, Bakke said it was clear that the technology battle had already been won by wind and solar. The task now was to provide the integration, through software, market design, storage, flexibility and regulatory changes, to make sure it was both “ecologic and economic”.

Bakke said the next phase of the Energiewende is to ensure a push to digitization of the grid, which he says is essential. Accompanying this is the need for a change to regulatory measures and market design.

This includes mechanisms that allow for flexibility on the side of generation, flexibility on the demand side, flexibility through the grid, and flexibility through storage.

“The market has to drive these innovations,” Bakke says. Another focus is on addressing the transport and the building and industry sectors, rather than just the power sector – hence the reported push into supporting electric vehicles. (We’ll have more from Bakke’s interview in another article later this week).

Bakke’s policies are not without critics, even within the renewable energy industry. One of the biggest criticisms is his push to replace feed in tariffs with auctions.

While it is true that auctions are an effective mechanism to find lowest cost pricing, there is a fear that the mechanism effectively shuts out community-level rojects.

And one of the underlying successes of the Energiewende has been the fact that it has been largely driven by community ownership, and supported by the community.

(Later this week we will report on our interview with Bakke in more detail).

One of Germany’s main issues is how to ensure the removal of the huge lignite (or brown coal) plants, which for political, social, and more recently market reasons (the low carbon price), are proving hard to shift.

The issue of fossil fuel subsidies is a critical one. At a debate held in IRENA’s new headquarter held in the heart of Abu Dhabi’s experiment in sustainable development, Masdar City, it was pointed out that fossil fuel subsidies are more than offsetting incentives for renewables.

Data from the International Energy Agency shows that fossil fuel subsidies outrank those for renewables by a factor of 10 to 1. According to the IMF, if the health and environmental impacts are including, it is by a factor of 100 to 1.

Like Bakke, Figueres invited the private sector to work back from the climate targets agreed in Paris, “connect the dots” and work out what that means for future investment. “The long term direction is abundantly clear.”

Kyung-Ah Park, the head of environmental markets at Goldman Sachs, and one of the key drivers of that groups massive commitment to low carbon investments, agreed that it was a good time to dump fossil fuel subsidies.

But she said markets need to see the Paris pledges transformed into clear, long term policies by individual countries.

Park said there is no shortage of capital, or of interest in renewables. What there is a lack of solid long term policies. She noted, for instance, that when the Paris deal was signed, US solar stocks jumped 5 per cent. A week later, when the Obama administration locked in a further five year period for the investment tax credit, providing certainty for the sector, solar stocks jumped 30 per cent.

Park said it was clear that capital was looking for long term investment signals, but corporates were also looking for investments, while the actual technologies were breaking all records.

Back on the subject of China, Barclays released a report highlighting how critical that country was to meet the targets, suggesting it accounts for at least one third of the gap between the effects of current policies, and the targets agreed in Paris.

Various analysis suggests that the individual country agreements offered in Paris reduce the anticipated rise in temperature to 2.7C to 3.0C. That is still well above the 2C maximum agreed in Paris, and its more aspirational target of 1.5C.

Barclays suggests that China’s CO2 emissions from energy will peak already by 2025 at 10.3Gt (five years ahead of target), and thereafter start trending down to reach 9.8Gt by 2030.

“The investment decisions China makes over the next 10-15 years with regard to energy and industrial infrastructure will also be absolutely crucial in determining whether the world is able to adjust its course onto a 2°C pathway,” Lewis said.




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  • Farmer Dave

    The answer the German Minister’s question will of course vary considerably from corporation to corporation. Giles, you have over the years told us about corporations that have accepted the reality of the end of the age of fossil fuels; you have been less inclined to focus on those members of the fossil fuel incumbency who are fighting tooth and nail to not have their activities curtailed in any way. That’s not a criticism of you Giles – absolutely not: you focus on the future, on what is possible (and indeed necessary), and do not focus on the troglodytes attempting to bar the way.

    For those interested in reading an engaging, interesting and sometimes colourful account of the battle being fought by the fossil fuel incumbency, I cannot recommend too highly “The Winning of the Carbon War” by Jeremy Leggett, which is available as a free download as an ebook or to purchase as a hard copy, with profits going to SolarAid, a charity Jeremy leads which is working to phase out the use of kerosene for lighting in Africa by making affordable solar lights available. See for more information. The book covers about the last two years and culminates with the COP21 in Paris. Jeremy is in a great position to see a lot of the war first hand; the book is an insider’s account.

    • john

      farmer dave
      I tried a few mins ago to post some information on the use of DC in Africa and was prevented.
      Well it was from 1984 before this site was on line so they obviously did not know.
      But your correct what is happening in Africa really makes the joke idea that they need coal fired stations and a grid rather redundant.

  • humanitarian solar

    All levels of the economy: national economies, states, city councils, communities, geographical localities and our individual households, need goals translated into strategic realisable stages each year, to implement our renewable energy.

    • john

      You did mention ” to implement our renewable energy ”
      So how to do this ?
      It is extremely hard considering that the MSM is totally against this attitude and most of the population get their information from MSM.
      Level of education about 10% have that so you have a hard hill to shovel old mate.
      As to the politics of this it is all about me and considering the benefits of using PV has been beneficial is lost in the post term use of PV so it is a very hard road to travel.
      The beta curve against the duck curve if you follow me.

      • humanitarian solar

        All true, so it’s a slow uphill collective awareness effort. Our progress seems tied to the mainstream for our collective goals, though trail blazing communities like Byron Shire, or individuals, can move ahead wherever the inspiration ignites them to unleash their own renewable energy.

  • john

    The information leads one to conclude that each country needs to
    1 implement RE generation.
    2 transition to urban transport systems.
    3 ensure energy efficient household appliances
    I do not think there is a 4 it is all about you and me doing the best to ensure we can do this.
    So consider your vote
    Encourage others and explain to them
    Make sure you use the most energy efficient systems possible.

  • Chokyi Nyingpo

    Perhaps the problem is not that we know what to do but that we continuously allow seriously old (and white) men to run things too much. As long as they are in charge (with no diversity of views on their boards) the progress to renewable economies will continue to be glacially slow.

    • Norman Heckscher

      The claim that these companies are exclusively run by white men is not only a covert act of racism, it’s also an act of misandary. Adani is a company that is certainly not exclusively owned and run by a bunch of “rich white men… and then there are the oil companies of China. Need I go on?

      Please take your racism elsewhere. You do nobody a service with such ignorant and vile comments.

  • ryant14

    You’re having a laugh. Hahaha.. The age of oil & gas isn’t over. You know for sure that oil isn’t just used for fuel but chemical feedstock for thousands of various products like medicine, plastics, etc. Although, investments in renewables are growing, I’m not seeing a major shift unless there’s revolution in battery tech. That’s why demand for natural gas in power generation and as transport fuel will just keep rising.

    On a massive scale, relying on renewables isn’t possible to sustain increasing energy demand in commercial, industrial, residential, etc.. of course w/ the rise of electric cars. Coupled w/ increasing energy demand and when government subsidies are removed, the price of renewables will just increase.

    I believe that hydrocarbon will be used to fill the large gap. In other words, increasing global energy demand will triumph over any regulation imposed to limit the use of hydrocarbon.

    Furthermore, the industrial sector heavily rely on cheap energy for growth. Countries which pursue green energy policies aggressively can kiss their industrial / manufacturing sector goodbye.

    • humanitarian solar

      Yes we need the oil for more precious purposes rather than burning it.
      It’s not always necessary to have batteries in every application e.g. on properties PV mated to DC pool pumps don’t require a battery or inverter, ditto a solar slow pump that stores water in a header tank. Yes storage of some kind is essential and batteries are a major exploration at this time in history.
      Did you see the article on the biggest EV maker in the world targeting the transport sector with buses? There’s an example RE can replace natural gas and fuel powered transport.
      With the commercial and industrial sectors, no one is suggesting a grid need not be supplied to those sectors, only that RE and storage can compliment those sectors. We need to get past the binary intellectual stance of is it RE or not. The distributed generation paradigm is one of integration and synergy of diverse paradigms and technologies for the most efficient and cost effective service delivery. Assessments of any given property or site will be thoroughly situational or site specific, taking into account that sites geographical features and occupants needs. With residential, here we are in the process of installing a solar system which will nearly supply the first two buildings merely with one small PV array on the first roof space. Ive allocated the 100m2 shed roofspace for EV. Future building design will employ passive solar architects and we have certainly already engaged two of them here, in mods to improve building performance.

      So getting down to the point ryant14, what’s your personal pessimism about? Why the stionewalling rather than an integrative approach? What’s your personal concerns for adopting RE as part of the mix? What are you currently doing with you’re property and business premises? If you have a more proactive approach, what is it? It is unskilful to become attached and therefore narrow options for the development of your assets.

    • onesecond

      The age of coal is over, it is in structural decline and will never recover. For that to happen to oil and gas we will need another ten years, but renewable energy is more than capable of powering everything. Just look at the cost curves, fossil and nuclear are just too expensive and the ones who stick to long with them will loose their industrial/manufacturing sector because of their uncompetitive energy supply. After their investment costs are recovered renewables have no fuel costs so the kWh price will basically approach zero.

  • humanitarian solar

    What I’m hearing is the grid can be broken up into autonomous size pieces, yet nested within a larger connection. A relationship of the micro and the macro. As above so below. e.g. A grid might have a Byron Shire in it, and that might in turn have lots of smaller nodes of semi-autonomous solar/storage. In this way, all stake holders share in the profits. Everyone gets a more efficient grid and a more resilient grid, in terms of outages, bush fires and so on.