The detail is interesting and important, as I expand on below. But unless we recognise the central proposition: that the fossil fuel age is coming to an end, and within 15 to 30 years – not 50 to 100 – we risk making serious and damaging mistakes in climate and economic policy, in investment strategy and in geopolitics and defence.
Think of energy like you think about an iPhone
The first and most important driver is the argument I first made early in 2014, in a paper with RenewEconomy editor, Giles Parkinson. For over 100 years, energy markets have been defined by physical resources, supplied in large volumes by large, slow-moving companies developing long-life assets in the context of slow-moving shifts in markets.
The new emerging energy system of renewables and storage is a “technology” business, more akin to information and communications technology; where prices keep falling, quality keeps rising, change is rapid and market disruption is normal and constant.
There is a familiar process that unfolds in markets with technology driven disruptions. I expand on that here in a 2012 piece I wrote in a contribution to Jorgen Randers book “2052 – A Global Forecast” (arguing the inevitability of the point we have now arrived at).
This shift to a “technology” has many implications for energy, but the most profound one is very simple. As a group of technologies, more demand for renewables means lower prices and higher quality constantly evolving for a long time to come. The resources they compete with – coal, oil and gas – follow a different pattern. If demand kept increasing, prices would go up because the newer reserves cost more to develop, such as deep sea oil. They may get cheaper through market shifts, as they have done recently, but they can’t keep getting cheaper and they can never get any better.
In that context, consider this. Renewables are, today, on the verge of being price competitive with fossil fuels – and already are in many situations. So in 10 years, maybe just five, it is a no-brainer that renewables will be significantly cheaper than fossil fuels in most places and will then just keep getting cheaper. And better.
Then we add in electric cars, which are now on the same path – converting a staid, slow moving industry (traditional auto companies like GM) into a disruptive technology-driven one (innovators like Tesla). Electric cars will accelerate the end of fossil fuels by joining with renewables to create a system shift, both directly by using clean power to charge them and indirectly by driving battery costs down to create storage for distributed renewables.
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