May 18, 2017 Read More →

Unexpected Global Momentum Around Renewables

Financial Times:

After years of hype and false starts, the shift to clean power has begun to accelerate at a pace that has taken the most experienced experts by surprise. Even leaders in the oil and gas sector have been forced to confront an existential question: will the 21st century be the last one for fossil fuels?

It is early, but the evidence is mounting. Wind and solar parks are being built at unprecedented rates, threatening the business models of established power companies. Electric cars that were hard to even buy eight years ago are selling at an exponential rate, in the process driving down the price of batteries that hold the key to unleashing new levels of green growth.

“This clean energy disruption has just started and what is striking is how much of a financial impact it is already having on some companies,” says Per Lekander, a portfolio manager at London’s Lansdowne Partners hedge fund, who has tracked global energy markets for more than 25 years.

“It hit the electricity sector first, in Europe in 2013 and then the US two years later. Now it has spread to the auto sector and I think the oil industry is next.”

The shift has come as increased government efforts to curb climate change and smog have driven down costs and spurred technical advances, creating a green energy industry that looks nothing like it did a decade ago: expensive, sluggish and German.

Today, China and India have picked up the baton and are driving a sector that has spread to every continent. The result was a banner year for green energy in 2016.

Global renewable power generation capacity rose by 9 per cent last year — a fourfold increase from the start of this century — buoyed by the growth of newer sources such as solar power that shot up by more than 30 per cent. For the second year in a row, renewable energy accounted for more than half the new power generation capacity added worldwide. Sales of plug-in electric vehicles last year were 42 per cent higher than in 2015, growing eight times faster than the overall market. The storage capacity of big lithium ion battery systems more than doubled last year.

These advances have become too significant for the oil and gas industry to ignore. In the first three months of this year, the heads of some of the world’s largest oil companies have spoken of a “global transformation” (Saudi Aramco) that is “unstoppable” (Royal Dutch Shell) and “reshaping the energy industry” (Statoil). Isabelle Kocher, chief executive of French power and gas group Engie, calls it a new “industrial revolution” that will “bring about a profound change in the way we behave.”

Meanwhile, some fossil fuel companies are starting to put serious money into green energy.

Seven oil and gas groups, including France’s Total, Royal Dutch Shell and Norway’s Statoil, have together invested almost $15bn in renewables over the past four years, according to the Oil and Gas Climate Initiative industry group.

“Fossil fuels have lost,” says Eddie O’Connor, chief executive of Irelands’s Mainstream Renewable Power. “The rest of the world just doesn’t know it yet.”

($) The Big Green Bang: how renewable energy became unstoppable