If big energy companies continue to undervalue the continuing falling costs of renewable energy and electric vehicles, they could face a world where the fossil fuel industry is dashed upon rocks of time. That’s according to a new report, Expect the Unexpected, from the Grantham Institute at Imperial College London and the Carbon Tracker Initiative, which found that growth in renewable energy and clean transportation technologies could halt growth in global demand for oil and coal as soon as 2020.
Under business as usual (BAU) scenarios, according to the report, fossil fuel companies aren’t anticipating coal to peak before 2030 oil demand to peak before 2040. But the report found that coal demand could peak in 2020 and fall to half 2012 levels by 2050, while oil demand could be flat from 2020 to 2030 then fall steadily to 2050.For instance, the report stated that ExxonMobil had anticipated that all renewables will supply only 11 percent of global power generation by 2040. But other models have anticipated that solar alone could supply 23 percent of the world’s power generation in 2040 and 29 percent by 2050. That would completely phase out coal and leave natural gas with a 1 percent market share.
Indeed, the International Energy Agency (IEA) has already observed that the installation of renewable energy has outpaced the installation of coal-fired generation, as it saw renewables reach 13 percent of the world’s new energy installations in 2015, driven by lower costs. It’s anticipated that wind and solar power could grow to 60 percent of the world’s new energy deployed annually by 2021.
Likewise, BP has estimated that in 2035 EVs could make up just 6 percent of the transportation industry by 2035, whereas other models are predicting they could make up a third of the transportation market by 2035 and more than half just five years later.
“There is no more business as usual in the energy sector—so it is time that scenario was discarded. There are a number of low-carbon technologies about to achieve critical mass decades before some companies expect,” said James Leaton head of research at Carbon Tracker.
Worldwide growth in electric vehicle (EV) sales and use alone could reduce the need for 2 million barrels of oil per day (mbd) by 2025, the report found. It observed that is the same amount of change in demand that caused the oil price collapse in 2014-15. Under this scenario, EV use will continue to grow and the need for oil will be reduced by 16 mbd by 2040 and 25 mbd by 2050. The industry, on the other hand, expects to see continuous growth in demand, the report asserted.
“Electric vehicles and solar power are game-changers that the fossil fuel industry consistently underestimates. Further innovation could make our scenarios look conservative in 5 years’ time, in which case the demand misread by companies will have been amplified even more,” said Luke Sussams, senior researcher at Carbon Tracker.
Indeed, there’s great contention as to what scenarios will play out. The IEA’s expectations for future growth rates of renewable are roundly criticized by others, like the Energy Watch Group, have challenged that the growth rate of renewables has outpaced IEA’s expectations annually for years and that’s it’s underestimating the future of renewable energy growth. The organization cautioned that by underestimating the growth of renewables it could encourage future investments in fossil fuel, which are not needed.
Along these lines, the Carbon Tracker/Grantham report stated that the energy companies should: “Expect the unexpected.” It said, “The disruptive power of low-carbon technology, warns that fossil fuels may lose 10 percent of market share to PV and EVs within a single decade—this may not sound much but it can be the beginning of the end once demand starts to decline. A 10 percent loss of power market share caused the collapse of the US coal mining industry and Europe’s five major utilities lost more than €100 billion in value from 2008 to 2013 because they were unprepared for an 8 percent growth in renewable power, of which solar PV was a big part.”
In addition to the report, the Carbon Tracker Initiative is hosting an interactive tool allowing users to check out various scenarios at: carbontracker.org/expect-the-unexpected-dashboard.Tweet