Co-written with Doug Woodring
The disruptive innovation of fracking followed by the collapse in crude oil prices gives the world a surprise opportunity for investment in clean energy. One we better seize if we are to meet the carbon reduction goals reached in Paris last month at the UN COP21 Climate Change Conference.
The old school of thought was that only high oil prices made renewable energy more competitive – even with a decidedly uneven playing field – renewables have had to compete with over US$650 billion in global oil industry subsidies.
But with Big Oil hemorrhaging at the wells and laying off large numbers of staff, countries should be less inclined to keep those unnatural levels of subsidies intact and reallocate spending to long-needed clean energy infrastructure and services.
Crude oil is precariously selling below US$30 a barrel, creating the chance of a lifetime for a decisive shift of energy investment dollars.
The writing is also on the wall with oil large companies having less shareholder support, resources or the will to make new investments in increasingly expensive and controversial wells. The smart money has to shift to long-term investments in clean energy, especially if countries intend to meet the ambitious carbon mitigation commitments they made at COP21 – to keep global temperature increase at 1.5 degrees Celsius by the end of this century.
But the other significant factor that drove the shift is fracking.
Fracking is the ability to extract – with relative ease – gas from shale in previously unreachable locations and quantities. Fracking gets heavily pushed by the U.S government as the ideal complement to renewable energy. Because unlike carbon spewing coal-fired power plants that run continuously, natural gas fired plants can be turned off and on as energy is needed – at night when there’s no more solar or during periods of low wind and turbines stand idle.
Environmental groups don’t like the potential methane emissions and compromised water quality impacts of fracking, but there is actually a silver lining.
Fracking pulled the rug out from under the feet of large oil industry incumbents, with a multitude of smaller players getting in on the production and supply bonanza. Big Oil’s monopoly began to shift.
Then fracking found itself on shaky ground as prices for propane – a natural gas liquid produced during the process – fell along with crude oil. This added to the natural gas glut because of over zealous production, and then decreased demand due to initial warm U.S winter temperatures, which means the fracking players – both big and small – are also shutting up shop. So, where will the money go?
To clean energy.
Because there’s no turning back global will, societal pressure and, of course, innovation. The scaled advances in solar, wind and other clean technologies, will bring renewable energy prices down even further, while take-up rates and installations escalate.
We’ve seen the rapid growth of electric vehicles and battery capacity through the likes of Tesla and Panasonic, the boom of megacities where car use will decrease, and agreements within the Asia-Pacific Economic Cooperation forum that reduce tariffs on clean technology equipment between members while aiming to double renewable energy generation by 2030.
The assumption was that low oil prices would kill off new innovations. Not this time.
It only takes a year or two for innovation and scale to take root, and with all the other factors falling into place, this is the time for renewables to truly take off.
Even the World Economic Forum, while talking about the fourth industrial revolution, hasn’t factored in this development yet – the end of oil as we know it!
Doug Woodring is based in Hong Kong and is the co-founder of The Ocean Recovery Alliance and the Plasticity Forum