And why would we want to?
By George Harvey
Our president-elect has said he wants to resurrect the coal industry and reduce regulations on oil and gas so they can prosper again. The question of whether he will do this is really secondary to bigger issues: Is saving fossil fuels even possible? Is trying to save them a smart thing to do?
A recent long term power purchase agreement that was made in Dubai put a record low price on electricity from solar power. The 800-megawatt (MW) contract was awarded at a price of 2.99¢ per kilowatt hour (kWh). We might also note two other things. First, although this was a record low price, it has since been beaten. Second, both these records were for unsubsidized power.
Commenting on the cost of solar power, an article at Emirates 24|7 pointed out, “Impact investment firm Wermuth Asset Management has said that regardless of whether oil prices rise around potential OPEC production-capping news, there is no long-term future for the hydrocarbon sector. Solar power is now available at [3¢/kWh], which is equivalent to oil at $5/barrel.”
For oil companies, this is a bleak picture indeed. Though they are selling oil at ten times that price, oil companies are not making much money, and a large number are going broke. This is particularly a concern to some of the people of the United Arab Emirates, because although they have solar power at a very low cost, the solar power is a threat to their oil income. (bit.ly/emirates-oil-vs-low-cost-solar)
While widespread fracking has produced an increase in the amounts of natural gas sold, especially in the United States, the low prices have not brought prosperity for oil and gas companies here, either. The reason can be gathered from Lazard’s Levelized Cost of Electricity Analysis, Version 9.0, which may be the most widely quoted authority comparing energy costs in the US. Importantly, Lazard’s data are not from a pro-environment source or industry source, but from financial advisors, whose income depends on the accuracy of their information. Also important, the levelized cost of electricity (LCOE) accounts for the cost of subsidies.
According to Lazard, the cost of electricity from solar power has fallen marginally below that of fracked gas. In this situation, things will only be expected to get better for solar and worse for gas, because the price of solar power is still declining, while the price of gas is expected to increase.
According to Lazard, the LCOE from utility-scale photovoltaic systems was $50 to $70 per megawatt hour (MWh) in 2015, and wind power was even less expensive, at $32 to $77 per MWh. By comparison, combined cycle natural gas was $52 to $78 per MWh, and that of coal was $65 to $150 per MWh. Though Lazard has not yet published costs for 2016, it is clear that the costs of wind and solar power have since continued to decline, while the costs of natural gas and oil have continued to rise. (bit.ly/lazard-lcoe)
On October 28, ExxonMobil announced that it was in danger of having to write off 4.6 billion barrels of oil, mostly in Canadian tar sands, if current oil prices persist. At $50 per barrel, that is $230 billion worth of oil the company stands to lose. (bit.ly/exxon-slump) Interestingly, the same company had until recently consistently claimed, “[W]e are confident that none of our hydrocarbon reserves are now or will become “stranded” (bit.ly/stranded-asset-analysis). Now the claim appears to be, for whatever reason, wrong.
As bad as things are for oil and gas, they are worse for coal. The coal industry’s problems started with competition due largely to the decline in the cost of fracked natural gas. Since the problems began, however, the costs of wind and solar power have declined below those of gas, as we have seen, and even a rise in the costs of oil and gas cannot save coal.
The situation has come to the point that in the US, there are now more jobs in the solar industry alone than there are in oil and natural gas extraction. Furthermore, employment in the solar industry is growing twelve times as fast as the overall job market. When wind power and efficiency technologies are added to the picture, renewable clean technology employment becomes even more impressive. Meanwhile, fossil fuels are losing jobs rapidly due to competition. Fortunately, renewable power is creating jobs far faster than fossil fuels are losing them (bit.ly/clean-jobs-versus-oil).
While it seems highly likely that saving the fossil fuels industries will not produce new jobs or wealth and will only protect old wealth temporarily, the demise of fossil fuels will have benefits of its own. Fossil fuels have societal costs arising from diseases due to air pollution, agricultural losses from drought, loss of property value due to rising seas and extreme weather, and other causes.
According to the American Lung Association in California, the health and climate costs of gasoline, which are paid in taxes at the doctor’s office and in medical insurance, are $1.30 per gallon (bit.ly/fossil-fuels-societal-costs). The cost to Vermonters from the use of fossil fuels for transportation alone is $330 million per year. Worldwide, the social costs of the use of fossil fuels are estimated at between $1.6 trillion and $7 trillion per year.
The US is currently giving fossil fuels about $8.1 billion each year in subsidies (bit.ly/8-billion-on-fossil-fuels). In the US, they get far more in subsidies than renewable power does (bit.ly/comparing-subsidies). Saving coal and oil implies even more subsidies, but analysts say it will not help, because it will very likely only add to the fossil fuel glut already in a market where they cannot compete.
The World Wildlife fund says we have lost nearly 60% of all vertebrate animals in the last fifty years (bit.ly/wwf-wildlife-loss). The Royal Society for the Protection of Birds says we have lost 70% of our seabirds since 1960. While there are a number of causes, nearly all can be traced in some way to fossil fuels (bit.ly/seabird-losses). Outdoor air pollution kills a person about every sixteen seconds according to the World Health Organization (bit.ly/air-pollution-deaths). Somewhere in this world, 600,000 children under five die from air pollution every year, according to UNICEF (bit.ly/child-mortality).
We have multiple articles in every issue of Green Energy Times illustrating the simple fact that ordinary people are giving up fossil fuel dependency, and this results in living more comfortably at lower cost. This is not merely a hope for a utopian future. It is a reality in the present time. We do not need fossil fuels. We need to leave them where they remain relatively harmless, in the ground.
So we can ask again, why would we want to save fossil fuels?