energy

The beginning of the end of big oil

Last year I read Jeremy Leggett’s book The Winning of the Carbon War, in which he laid out a heartening argument for why the big fossil fuel companies are on borrowed time. When the oil price is low, as it has been for the last 18 months, they don’t make enough money to invest in developing new fossil fuel assets. But when the oil price is high, renewable energy becomes much more attractive by comparison and people choose to invest there instead. Heads we win, tails they lose – good news for the climate, and for a new clean energy democracy.

That’s the way the trends have been unfolding for a while. As I’ve described before, the price of renewable energy has been steadily falling for decades. At the same time, the cost of extracting fossil fuels has been rising, since the easiest resources to reach have already gone. When those trend lines cross over and renewable energy is cheaper than fossil fuels, then we reach a tipping point. The economics swing in favour of renewable energy. All things being equal, the transition runs itself from there on in.

Unfortunately all things are not equal. The world’s energy markets are not free and fair, and the fossil fuel companies hold disproportionate power. As a recent survey found, the top 25 energy companies in the US have been spending $100 million a year lobbying against renewable energy – a depressingly self-defeating strategy. Those same funds invested in renewable energy could have doubled US solar capacity in four years. In Britain the government appears to be still transfixed by the lure of the North Sea, and we are the only country in the OECD that is increasing its fossil fuel subsidies. The housing industry supported it, so I suspect that energy company lobbying was behind the culling of the Zero Carbon Homes plan. There are dozens of other examples. Fossil fuels will not go gentle into that good night.

Nevertheless, their days are numbered. Some energy companies know it already, and are extricating themselves from fossil fuels, divesting and reducing their exposure to the carbon bubble.

That’s the theory at least, and since reading The Winning of the Carbon War, I’ve been looking out for evidence that Jeremy Leggett is right. So far, the case is only getting stronger, and others are now saying the same thing. Last month The Economist suggested that fossil fuels had another 15 years to run yet, but that debts are high and investors are more wary. Eventually, energy companies fundamentally “need to develop a new business model”. The Financial Times was more blunt, in an article called The long twilight of the big oil companies. Since the Paris talks, they argue, “fossil fuel companies will either have to find ways to stop greenhouse gas emissions from their products, or shift into renewable energy, or go out of business.” Bloomberg points out that ‘wind and solar are crushing fossil fuels‘, with renewable energy drawing twice as much investment as fossil fuels this year.

It’s not over yet. Plenty more action is needed to claw back the power from the big energy companies, and to make sure politics catches up with the new energy reality. My street is still full of petrol driven cars, and I’m sure yours is too. There’s a long way to go yet, but clean energy is winning.

3 comments

    1. Thanks, I haven’t read those. Peak demand is indeed a different kettle of fish, though I’m not sure how close we are to that at the global level. There are still a lot of people who’d like to be using oil and gas if they could – but perhaps the cost of batteries and renewable energy is moving fast enough for many of them to leap-frog past fossil fuels. We shall see.

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