Renewables Are Putting an End to the World as We Know It. And I Feel Fine

In yesterday’s weekly news roundup I referenced a Reuters article that notes how renewables are turning the traditional energy utilities into “dinosaurs of the energy world”, as decentralised renewables are turning consumers into producers and thus chip away at the utilities’ centralised production model.

And then I came across this article by Ashley Seager: “Renewable energy is clean, cheap and here – what’s stopping us?” Do read the whole piece, it’s worth it. Seager notes that only three years ago his company was paying about €3,600 per installed kilowatt of solar capacity on barn roofs in Germany while today it can be done for just over €1,000 – “a staggering 70% fall”. Solar is almost at a stage where it doesn’t need a guaranteed price. In addition to taking away market shares from the big utilities, solar is also driving down daytime peak power prices, which the utilities hate even more, because this is where they make their money. Here’s a more detailed article on this phenomenon with some nifty charts: “Why generators are terrified of solar”.

And, ” Onshore wind, on a piece of land not constrained by years of planning delays, is already the cheapest form of energy on earth. These are not wild claims – those are figures from General Electric, Citibank and others.”

In sum,

“Renewables have seen such dramatic price falls in the past few years that they are threatening to upset the world as we know it and usher in an almost unprecedented boom in the spread of cheap, clean, home-produced energy.”

Which reminded me of the gem by R.E.M. below. All in all, a much-needed mood-booster as we head into another grueling two weeks of UN climate negotiations in the greatest hotel on Earth.

Must-Read (or Watch): Former Top UK Climate Diplomat John Ashton on the Politics of Climate Change

Transcript and video link of Ashton’s speech are available here, but it’s rather long, below are my personal highlights.

Ashton posits that politics are dominated by a “cult” of “The market knows best. Business will always allocate resources more efficiently than those enemies of enterprise in Whitehall. Government must be shrunk.”

But the “problem” with solving the problem of climate change is that strong government policy is needed to redirect investments. So, “You can fix the climate problem. Or you can cling to a dogma about small government. But you can’t do both at the same time ‐ which may be why so many small government enthusiasts seem troubled by the idea that we should deal with climate change.”

Ashton also points out that we have a fundamental transformation ahead in either case. Either we deliberately transform our economies. Or we unleash the forces of runaway climate change, which “will not be under anyone’s control, and the country they leave behind will certainly not be a better place.” As a recent World Bank report argued, even a warming of “just” 4°C would already trigger “a cascade of cataclysmic changes that include extreme heat-waves, declining global food stocks and a sea-level rise affecting hundreds of millions of people”.

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Bloomberg Analysis Sees Peak Fossil Fuel Use by 2030 Even Without Stronger Climate Policy

After watching and taking notes on Michael Liebreich’s keynote at Bloomberg New Energy Finance’s recent conference, I went digging through their website to see whether there’s more info on their scenario analysis. They apparently don’t have a big write-up on their website, but they have a “fact pack” powerpoint presentation available for download here.

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Recommended Video: Bloomberg’s Liebreich Sees Bright Future for Clean Energy, Peak Fossil Fuel Use by 2030, Even Without Stronger Climate Policy

Bloomberg New Energy Finance recently did their annual summit in New York. BNEF’s CEO Michael Liebreich gave a 40-minute rundown of the current state and future prospects of clean energy investmens, which in their definition includes “new renewables”, energy efficiency, carbon capture and storage, smart grid storage, but not large-scale hydro, nuclear and gas. The video can be watched here. If for some reason the link doesn’t work, which seems to happen, David Roberts also posted the video here. Notes on some of my key takeaways below.

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While 1% of Global GDP Would Be Enough to Fix Climate Change, IMF Says that World Spends 2.7% on Energy Subsidies Each Year

An add-on to the previous post. Prof. Schellnhuber last week showed IPCC results according to which the 2°C target can be met by investing 1% of global GPD annually if action starts before 2020. The International Monetary Fund recently published a report (summary presentation here) showing that the world is currently spending 2.7% of GPD on energy subsidies each year, a whopping US$ 1.9 trillion, most of which to the benefit of fossil fuels.

So lack of money rather seems not to be the issue. And according to the IMF just removing these subsidies could reduce CO2 emissions by 13%.

Update since some have highlighted the social dimension of energy subsidies:

The subsidies mostly don’t even achieve their purported objective, to help with energy access of the poor. According to the IMF, most benefits are captured by higher-income households. If you’re not even connected to the grid, you also don’t benefit from electricity subsidies. And since most subsidies go into controlling prices, the subsidy benefit is tied to the amount of energy used. On average, the richest 20% of households in low- and middle-income countries capture 43% of the benefits. So targeted social spending could achieve pro-poor benefits much more efficiently.

In addition, energy subsidies

“aggravate fiscal imbalances, crowd-out priority public spending, and depress private investment, including in the energy sector. Subsidies also distort resource allocation by encouraging excessive energy consumption, artificially promoting capital-intensive industries, reducing incentives for investment in renewable energy, and accelerating the depletion of natural resources”

The IMF report also goes into detail on how to do sensible subsidy reform including protections for poor households.

Notions of “Unburnable Carbon” and “Carbon Bubble” Go Mainstream

A little update on my last post. Shortly after analysis by HSBC concluded that meeting the 2°C target could strip as much as 60% of the market value off fossil fuel companies, another new analysis by Standard & Poor’s and the Carbon Tracker Initiative warns that oil companies could face credit rating downgrades due to emission reduction policies. As noted by Michael Wilkins, head of environmental finance at Standard & Poor’s,

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Unburnable Carbon: Ca. 90% of Fossil Fuel Reserves Need to Be Left Underground

Various sources noted last year that proven fossil fuel reserves are much greater than what may be burned if we want to keep a reasonable chance of keeping the increase of global average temperatures below 2°C. For example, the International Energy Agency noted in its 2012 World Energy Outlook that

“No more than one-third of proven reserves of fossil fuels can be consumed prior to 2050 if the world is to achieve the 2 °C goal, unless carbon capture and storage (CCS) technology is widely deployed.”

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Obama Goes All (Oil-Soaked) Climate Hawk in State of the Union Address

So Obama has once again thrilled people hoping for climate action by putting some strong messages into his State of the Union address. In particular, he announced that he was going to take executive action if Congress did not manage to pass legislation.

However, he also still keeps pushing for increasing oil and gas exploitation as part of an “all of the above” strategy and gave himself a pat on the back for how much more the US is drilling nowadays. Here’s the climate and energy part of the address with highlights by me.

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Austrian Climate Change Workshop Discusses Future of Carbon Market in EU and Globally (Wonkish)

I was at the Austrian Kommunalkredit’s annual climate change workshop last week, presenting on a new study we did with others on design options for the UNFCCC’s new market mechanism on behalf of the European Commission. All presentations can be viewed and downloaded here, the following summarises some of my personal highlights from the discussions, which covered in particular the results from Doha, the EU ETS, the future of the CDM and new market mechanisms.

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Germany’s Industrial Heartland State Adopts Climate Protection Act

The German federal state of North Rhine-Westphalia (NRW), which includes the Ruhr area, Germany’s old industrial heartland, this week adopted a climate protection act. NRW is responsible for 1/3 of German greenhouse gas emissions, produces 30% of the electricity consumed in Germany, accounts for almost 1/4 of Germany’s gross energy consumption and 40% of national industry consumption. According to the new act, NRW will reduce its emissions by at least 25% below 1990 levels by 2020 and at least 80% by 2050, making it the first German climate law with emission targets. The NRW government argues that the 25% target is compatible with Germany’s 40% target as when the NRW target was first formulated in 2010 both NRW and Germany as a whole needed to reduce their emissions by 18% by 2020, from -7% to -25% in the case of NRW and from -22% to -40% in the case of Germany as a whole.

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