OPINION: Jeremy Leggett
Some mornings these days, I open my laptop, check the energy news and have to pinch myself to make sure that I am not still dreaming, so fast are signs of system change emerging.
On 11 July, the feeling was particularly acute. A momentous article appeared in the UK’s Daily Telegraph. It argued that fossil fuels are the new subprime threat to the global economy, doomed to mass stranding underground, with many billions of dollars of investments heading for write-offs.
Meanwhile, it asserted, a solar revolution is rushing up on society under the radar, the standard bearer of a transformative green industrial revolution that can no longer be avoided.
The article came not from the pen of some green visionary scribbling in the depths of a fringe website, but from Ambrose Evans-Pritchard, international business editor of the Conservative Party’s newspaper of choice.
The article sits uncomfortably with Prime Minister David Cameron’s vision of a UK fracking its way to “gas hub” prosperity. It is also at odds with much of the energy incumbency’s narrative. Shale boom in America? Bust, more likely. Rising global oil supply for decades to come? Shrinkage, more likely.
As some wag (unknown to me) wrote on Twitter: “What world are we living in when the Telegraph starts sounding like Jeremy Leggett?”
Since 2008, $5.4trn has been invested globally in oil, gas and coal markets. Evans-Pritchard’s conclusion? “Little has come of it.” Production from conventional oilfields has peaked. The marginal cost of new production, including from shale, is very high. Many an oil company is spending more on capex than it is generating in cash flow. And investors in this potential bubble are throwing good money after bad. “They are likely to be left holding a clutch of worthless projects as renewable technology sweeps in below [the] radar, and the Washington-Beijing axis embraces a greener agenda”.
The article does not tell us what investment would be needed in solar and other clean energy to have a good chance of keeping global warming within 2°C. The answer to that question puts the vast sums heading for fossil-fuel wastage in stark perspective. It is, according to US investment think-tank Ceres, $1trn a year, up from about $250bn today. Ceres calls this target “the clean trillion”.
What is the current $250bn achieving? Back to the Evans-Pritchard article: “...staggering gains in solar power — and soon battery storage as well — [threaten] to undercut the oil industry with lightning speed”. Once the crossover point of solar costs and fossil-fuel costs is reached in multiple markets, the switch to solar and storage “must surely turn into a stampede. My guess is that the world energy landscape will already look radically different in the early 2020s”.
The implications for the UK government are clear. At minimum, it must hedge its bets on solar and storage: if a revolution in this duo is indeed coming elsewhere in the world, make sure the UK is a player. This would mean a retreat from the current stand-off, where an “ambush” premature phase-out in Renewables Obligation Certificates in March 2015 leaves the industry facing thousands of job losses and the Department of Energy and Climate Change facing the prospect of legal action from aggrieved companies, not least my own.
It would mean working closely with solar companies to build a dynamic domestic industry, primarily on roofs of buildings, but also on appropriate ground sites.
But this would be the minimum. If the government is wise, it will also look hard at the economic case for fracking, ask tough questions about what is really happening in the American shale story and step back from a disastrous waste of money, not to mention a needless, bitter battle with its own voters in the shires it wants to desecrate for no gain.
All the evidence for this article can be found at www.jeremyleggett.net
Jeremy Leggett is founder and non-executive chairman of international PV company Solarcentury. His book The Energy of Nations: Risk Blindness and the Road to Renaissance is published by Routledge