An Investment in Either Wind Energy or Solar Energy Will Produce More Energy Than an Investment in Oil–But What Are the Implications?
Here’s an article that begins:
French investment bank Kepler Chevreux has produced a fascinating analysis that has dramatic implications for the global oil industry.
The implications, needless to say, are dramatic. It would signal the end of Big Oil, and the demise of an industry that has dominated the global economy and geo-politics, for the last few decades. And the need for it to reshape its business model around renewables.
It would be wonderful if all this were correct, but it isn’t. The purpose of oil is almost exclusively transportation (98% of our cars and trucks run on the stuff), but we need to keep in mind that transportation is only 28% of our total energy consumption. The other 78% makes very little use of oil; it’s largely coal, natural gas, nuclear, and hydro.
Oil’s value lies in the fact that it’s easily moved from one place to another, filling up fuel tanks around the globe. Replacing oil means finding another way to power our vehicles, and that, in the main, means electric transportation. But here’s the challenge: at least in the U.S., coal is the least expensive form of baseload power, and thus an incremental load on the grid, e.g. charging EVs at night, will normally be met by burning more coal–a commodity that is far worse environmentally than oil. As long as this remains the case, the eco-value of EVs will remain dubious.
This is why it’s so important that we develop technology that removes coal from the equation, e.g., our wind energy project combined with compressed air energy storage, and our effort in synthetic fuels.
Craig,
Obviously, we agree…
But the biggEST point that Kepler Chevreux missed is the relative value of the different types of energy. Yes, you get more energy by investing $100 billion in wind than you ever could by investing $100 billion in developing oil fields… But PPA’s for new wind farms are going for ~$25/MWh. Oil sells for twice that – in terms of energy content – and diesel sells for 4 times that. The fact that you might get more energy means nothing if the net value of the energy is less.
It’s frustrating when advocates try to pretend that we’re already at a break-even without considering externalities… because we aren’t. And groups like Kepler working to hide that fact only serve to reduce the appetite for further government incentives, when they are clearly still needed.
But we clearly agree on your other points as well.
Craig,
This was a great post, BTW.
Speaking of investments in other than oil, you heard about the Rockefeller trust announcement right?
Speaking of investments in other than oil, did you catch the announcement by the Rockefeller Trust regarding their divestment of fossil fuel holdings?
Yes, in fact, my mother asked me about that on the phone last night. Cool stuff.