Magicians Misdirect Their Audiences—So Do Energy Advocates

I wrote a post yesterday poking fun at French investment bank Kepler Chevreux for their analysis that they claim has dramatic implications for the global oil industry. They estimate: “$100 billion invested in either wind energy or solar energy – and deployed as energy for light and commercial vehicles – will produce significantly more energy than that same $100 billion invested in oil” and go on to posit: “the implications, needless to say, are dramatic. It (sic) 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.”

The problem, as I outlined in that post, as much as I wish it were so, is that this is essentially untrue. Senior energy analyst Glenn Doty notes:

Yes, you get more energy by investing $100 billion in wind than you ever could by investing $100 billion in developing oil fields… But power purchase agreements 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 Chevreux are working to hide that fact only serve to reduce the appetite for further government incentives, when they are clearly still needed.

Glenn is right, as usual.  The sad part is that both sides of this argument seem very happy to misdirect readers brazenly away from the obvious weakness in their side of the argument.  The energy industry wants to pretend that fossil fuels aren’t ruining the planet.  This, obviously, is perhaps the most egregious lie of our times, as it’s knowingly intended to cause untold millions of people to suffer and die in an effort to make a few fantastically rich people even richer.  I doubt Jesus would be too impressed with that.

But let’s acknowledge that many renewable energy advocates want to sugarcoat the economics that lie behind integrating variable resources into the grid mix. It’s clear that Kepler Chevreux is among them; it’s hard to believe that people of this level of sophistication don’t really understand basic math and economics.

My advice to readers: don’t waste too much of your precious time here on Earth looking for a voice of sanity and reason in the energy space.  It’s a rare bird indeed.  In place of that reason, we have hordes of people trying to capitalize on their positions, hysterically waving their hands and imploring us:  “Pay no attention to that man behind the curtain.”