Global Renewable Energy Capacity To Increase By 700 GW Over Next 5 Years, IEA
With costs falling and emerging economies stepping into the game, the International Energy Agency is predicting renewable energy capacity additions to grow 700 GW over the next five years.
The International Energy Agency (IEA) published its latest Renewable Energy Medium-Term Market Report 2015 report on Friday, in which it claims that renewable energy will represent the single largest source of electricity growth over the next five years, ending with a predicted 700 GW of global renewable energy capacity increase. This growth is set to be driven by well-publicized falling costs of renewable energy technologies, and the increasing role of emerging economies, which are turning to renewable energy for much-needed electricity generation expansion.
“Renewables are poised to seize the crucial top spot in global power supply growth, but this is hardly time for complacency,” said IEA Executive Director Fatih Birol at the launch of the report. “Governments must remove the question marks over renewables if these technologies are to achieve their full potential, and put our energy system on a more secure, sustainable path.”
We have seen plenty of evidence over the past several years of real declines in the cost of renewable energy technologies, especially solar, with companies drawing ever-closer to making solar as cheap — if not cheaper — than traditional fossil fuel-based electricity. Such declines in global renewable energy technologies are not only allowing massive expansions in traditional developed countries, but big capacity goals in developing nations throughout the rest of the world as well — specifically in China, India, and throughout South America.
“Affordable renewables are set to dominate the emerging power systems of the world,” Dr. Birol said. “With excellent hydro, solar, and wind resources, improving cost-effectiveness and policy momentum, renewables can play a critical role in supporting economic growth and energy access in sub-Saharan Africa, meeting almost two-thirds of the region’s new demand needs over the next five years.”
There will be a slight drop-off in some areas, such as throughout Europe and in Japan, due to what the authors of the report describe as “persistent policy and market integration uncertainty” — something we have seen a lot of in the UK, recently. Nevertheless, according to the IEA, these uncertainties will be well compensated by the growth of renewable energy in emerging countries, which are set to account for almost two-thirds of global renewable energy capacity expansion through to 2020.
Unsurprisingly then, one of the only challenges highlighted by the report is the potential for changes to national policy to undermine global renewable energy growth. In fact, as costs continue to decline almost across the board, national policy is one of the only things standing in the way of even greater growth for the global renewable energy industry, with the IEA highlighting the role that policy can have to dramatically increase that growth.
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So the EIA once again predicted a stagnating renewable energy deployment like in its reports before, where it has been wrong every single time. The EIA has downplayed the re deployment for a long time now by simply being totally wrong. On purpose? one may ask.
In 2014 135 GW of renewable capacity have been added worldwide.
http://www.theclimategroup.org/what-we-do/news-and-blogs/2014-was-record-breaking-year-for-renewable-energy/
Or maybe they only understand linear growth.
The EIA can do linear. Here’s their prediction for US solar growth for the next few decades.
That graph is hilarious, we hit the 2035 number by July of this year, according to the EIA’s September monthly outlook
Wind is worse. Couldn’t get the graphic to link.
That’s wronger than Tony Abbott in a budgie smuggler.
RE fans are guilty of similar distortions in the opposite direction. The link you put in is an example. They cite phenomenal growth in solar and wind but choosing a base point before solar and wind really got competitive. More relevant would be the last 2-3 years when growth has not been as hot. The chart they have shows investment in RE actually declining for the last 4 years.
Then they lump all RE together which means they are including a lot of hydro in money invested. Then they lump all capacity in together as if the capacity of thermal plants, nuclear, hydro capacity, solar, and wind are directly comparable. If they focused on energy actually generated it would be a lot less dramatic but a lot more honest.
When RE fans do this cherry picking of data it only hurts their credibility. Ironically, the story for RE is very good and doesn’t need this.
I am a long time fan of solar and wind and getting away from FFs. I don’t like having to defend that sort of “Rah-rah Sis-boom-bah” cheerleader stuff.
Amount invested is not a good metric to use when installed prices are dropping rapidly. US utility solar prices are falling 10% a year. For the same dollars invested as the previous year one gets 10% more installation.
Let’s look to see how global wind and solar installations have been doing.
Solar’s on a tear (first graph).
Wind is coming right along. It got knocked back a bit in 2013 (no) thanks to Republican in the US Congress (second graph).
Both charts show an early strong growth then a considerable slowing of growth in the EU of PV and worldwide in wind. For whatever reason, PV and wind may have some barrier to overcome after they reach a certain minimal level. It could be economic, or political, or geographical, but “trees don’t grow to the sky”. I hope for a 100% wind-solar world but I can’t be sure when I see these slowdowns in growth at such minimal market penetration – 3% wind, 1% PV electricity out of the world total electricity generation.
BTW, sources?
Sources are on the graphs.
Suggest you watch wind and solar growth going forward.
Why are you cherry-picking the poor EU numbers? There is always somewhere doing worse than the average. What matters is the balance between the bad news (Spain) and the good news (India). That is reflected in the world totals, and only these.
I am not cherry-picking – simply pointing out that after a certain level of PV sales, growth seems to have slowed down (not stopped, thank G*d) in the EU for PV and the whole world for wind. This is entirely consistent with the logistic growth curve. The other geographical areas are earlier in their logistic curve and have not yet hit their “slowing point”.
The reason for the slow growth is immaterial except insofar as the IEA can use it to push world leaders to do more.
I thought you, at least, would not fall into the Pollyanna trap of thinking that those not wildly and blindly optimistic must be against RE. Clearly, the IEA would like to see more progress in GHG mitigation. Making everything sound hunky-dory does not serve those ends.
You can do better than that. Napkin calculations are not good enough. Read the NREL Futures study and comment.
And if you wish to comment on the EIA projections or IEA projections, stick to facts.
Like this;
http://www.energypost.eu/wp-content/uploads/2015/03/Adam-Whitmore-graphic-1-old-article-1024×419.jpg
Or this:
According to EIA projections
“Construction of wind farms ceases in 2016 and does not resume for almost 20 years.”
http://cleantechnica.com/2014/01/10/horrible-eia-forecasts-letter-cleantechnica-readers/
The closest and most accurate projections?
Greenpeace.
Maybe we should discuss what they say out to 2030, not EIA and IEA.
http://zacharyshahan.com/wp-content/uploads/2013/02/renewable-energy-share-projections.png
Show the growth slowing and provide a reference, please.
I was referring to the graphs Bob Wallace provided above of Wind PV installations. I asked for links and he said the sources are on the graphs.
Why do you want EIA to be so optimistic? That would run counter to their message to world leaders that they need to do more. You want leaders to kick back and feel good about how great everything is because EIA will be saying PV and wind will “like totally rule dude”?
Be a cheerleader if you want to – doesn’t matter one way or another. Don’t waste your time trying to turn the rest of the world into Pollyannas.
“Why do you want EIA to be so optimistic?”
Please. Lets not add to exaggeration.
EIA is not in any way imaginable optimistic. Look at the curves Bob showed. Complete cessation of growth in wind and solar for a decade or more.
Leaders base their funding on likelihood of success. With such poor representations of renewables future, less funding is received, not more.
These erroneous reports, ignoring rooftop PV which is not even counted, and projecting ridiculously low growth are used as an excuse not to fund renewables, not as a factor to push expansion.
Skip the exaggeration in any direction. Deal with facts.
World leaders could still need to do more. Carbon needs a price and countries need to commit to more action. We can’t leave it up to economics to leave FF in the ground. Lets use both techniques. Bring on cheaper alternatives to get rid of that excuse and hasten FF elimination and call for phase out based on GW.
Here is Greenpeace vs IEA>
http://reneweconomy.com.au/wp-content/uploads/2014/08/graph-of-day-greenpeace-590×413.jpg
From previous CT articles.
http://cleantechnica.com/2015/04/20/eia-2040-forecast-understates-renewables-policy-contingencies/
Provide references and detail. All this rhetoric is too mushy.
I can say one thing,
“More relevant would be the last 2-3 years when growth has not been as hot”
The last thing one would ever do is base the next few decades growth prediction on a few years. Thats noise.
Look at long term global.
Additionally, adoption curves are notoriously unpredictable, because they are rapid and non-linear. They rise fast. When a new technology replaces old, there is a turning point.
Its more important to determine the crossover point. Like Solar Grid parity. There are multiple technologies involved. Several types of renewables. Storage. EVs. Thats a lot to consider. And they are all nearing tipping points simultaneously. I would not want to have to predict that. But its certain that there will be rapid change in the next decade, changing how we do almost everything in energy.
http://cleantechnica.com/2014/10/29/solar-grid-parity-us-states-2016-says-deutsche-bank/
http://blogs.dnvgl.com/utilityofthefuture/wp-content/uploads/2013/05/Solar1.png
http://4.bp.blogspot.com/_D9-JNTtRKgs/TBuFe2NvKHI/AAAAAAAABBE/Z3mDC6xW_aE/s1600/Picture+99.png
“The chart they have shows investment in RE actually declining for the last 4 years.”
Wrong metrics. Added capacity is.
I really don’t get it. All the news in the renewable energy secor is that all the PV and wind players are growing and expanding and heavily investing in their production capacity. And the EIA just says, nope, you are all wrong, you won’t sell more per year, not gonna happen, let’s just ignore your cost reductions. It is basically telling everyone every year that nothing’s gonna change. Newsflash to the EIA: It did!!!
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You should pay more attention to the quotes from the IEA individuals. They are talking directly to world leaders saying “We’re making progress but you aren’t doing enough – remove those legal and financial barriers in your countries.”
If you only want good news – more optimistic stuff – there are plenty of press releases from PV and Wind cos.
The systematic downwards bias of the Very Serious EIA and IEA matters because the same national policymakers they address are deciding on coal and nuclear capacity. Mistakes here, like Hinkley C, will be very expensive in a lot of ways.
Of course it does. Do we really want IEA bringing in our old friend “Rosy scenario”? “All is just peachy and you don’t have to do anything different” is *NOT* what world leaders need to hear or convey to their constituencies.
They aren’t *advocating* low growth in RE (or fiscal austerity). Quite the contrary.
Rosy is not what you would call EIA or IEA. More like out to lunch. They have never overestimated always underestimated terribly.
http://www.energypost.eu/wp-content/uploads/2015/03/Adam-Whitmore-graphic-1-old-article-1024×419.jpg
http://www.energypost.eu/ieas-projections-renewables-continue-look-way-low/
http://cleantechnica.com/2014/01/10/horrible-eia-forecasts-letter-cleantechnica-readers/
“They have never overestimated always underestimated terribly.”
And I wouldn’t have it any other way.
You applaud them for always being wrong?
Not only always wrong, but always repeating the same error?
Thats where you are terribly wrong. False EIA and IEA projections are used as an excuse for governments to underfund renewables and invest more heavily in FF and mis spend valuable investments.
It allows opponents of the Clean Power Plan to claim falsely that renewables are too expensive or will not be available in time. That changes government policy, weakening renewable initiatives and convincing politicians to vote against such measures.
http://switchboard.nrdc.org/blogs/syeh/eia_report_confirms_clean_powe.html
http://www.greentechmedia.com/articles/read/why-the-eias-energy-outlook-misses-the-real-value-of-green-energy
I actually thought about that, if they downplayed it to tell governments to do more. But even if they did I would think that it would move a lot faster if everyone agreed that it would. Wow, is that acutally correct grammar in that sentence?
REN21 has a very good report on their web site. It is hopeful and pessimistic at the same time. They show good (not great) global growth in PV and Wind capacity of around 16% from 2013 to 2014. But the total global electricity generated by PV and wind is only 0.9% and 3.1%. Lot of work to do.
http://www.ren21.net/status-of-renewables/global-status-report/
Parable of the rice (or grains if wheat) and the chessboard. Compound growth is the 600-pound gorilla, nothing stands in its way.
I did the calculations. If PV continues growing at last year’s rate of 28% (B-i-i-i-g “if” there) it will take 18+ years to replace FFs. Good, but not great.
If wind keeps growing at last year’s 16% then 22 years to replace FF. “If” is just as big, if not bigger.
But even my calculations are overly optimistic. Exponential growth (as in the chess board story) does not continue forever. The logistic curve is the one to look at and at around 50%-70% market saturation growth starts to slow down markedly. Plenty of people still without smart phones, while others are on their 10th.
That is assuming the “population maximum” (= market saturation) in the logistic curve is 100% RE. We can certainly hope so, but no guarantees.
In human terms, the low hanging fruit is grabbed first and then it gets progressively harder to fill the fruit basket.
Fortunately, low-hanging fruit grows back. There is still a shocking amount of end-use efficiency to be gained in transport, housing, commercial buildings, and industrial processes.
Glass half empty? You are taiking about saturation. What about accelerated growth as wind and solar prices drop?
The logistic curve doesn’t just saturate, it also speeds up as adoption grows.
Your calculations are for wind or solar. Do both together. And add the rest.
Its been done. Better than those calculations.
80% renewables by 2050.
http://cleantechnica.com/2015/04/13/80-renewables-by-2050-in-us-says-nrel/
The logistic curve looks like exponential growth up to about 50% saturation. At 50% saturation it starts slowing down in a mirror image of its acceleration – first a little, then slower and slower until it seems to barely be moving.
I don’t think you read my numbers. I was looking at 100% saturation and finding that by 2035 if growth continues at the current pace we get complete saturation. These were very rough estimates – back of the envelope calculations. You’re essentially “accusing” me of being too conservative when I was actually *considerably* more optimistic then your 80% by 2050. Combining both solar and wind just averages them out.
As for everything getting cheaper and cheaper – that is built into the logistic curve implicitly – otherwise there would not be the approximate exponential growth initially. At some point it reaches a point of diminishing returns.
Wind turbines are going to level off at some cost, and so will solar panels. When that happens, growth will start to slow as you have picked all the low hanging fruit, cut costs and improved efficiency enough to get the next bunch higher, and now you are fighting for market share. The big breakthroughs in tech come early in the cycle. It gets progressively harder to cut overall costs after a while.
Oil will fluctuate up and down but if we move half the ICE fleet to EVs (50% market share) oil will be in a continual state of oversupply. Then RE has to fight very cheap oil and NG and it will be considerably harder to make progress. As predicted by the logistic curve. You can’t fight the math.
Or we’ll be in a real panic to get the last of the fossil fuels shut down and we’ll put our militaries to work building wind and solar farms.
You’ve got to include the correct variables in your equation. If you don’t then the math might be correct but the answer could be worthless.
What math? Show it. NREL did the numbers.
And what if growth slows when wind and solar reach over 50%?
We don’t need 100% wind and solar. They are not the only renewables.
Thats more than NREL projects for their future study to get 80% renewables by 2050. And when we get to high solar and wind, things like CSP with storage will have economic value that don’t today.
“oil will be in a continual state of oversupply.”
Reduction in oil demand does not mean cheaper prices. We already have a reduction in demand and prices have never come back to pre 2004 levels. Thats because exploration costs have risen. And thats the reason Shell has ceased Arctic drilling hopes. Unconventional oil is too expensive. The reduction in oil demand has brought us back to conventional oil prices, albeit higher than 2004 because extraction now requires help to get it out of the ground even for conventional oil.
More like, in 30 years, you will be able to have all the oil you want at over $100 a barrel. And if volume drops because its less popular, price could increase, too.
Here’s the math.
PV growth at 28% growth, 0.9% base, FF = 77%, 77/0.9 = 85.5,
years to 100% PV = ln(85.5)/ln(1.28)
A crude back-of-the-envelope calculation as I said. It isn’t much, but since you haven’t shown any to prove your point (whatever it is) it puts me ahead, so to speak.
Oil doesn’t need to get back to 2004 prices, it just needs to be as cheap as electricity to run a car (which it pretty much is right now) to significantly slow EV adoption. Inflation adjusted oil prices are in the chart below:
https://uploads.disquscdn.com/images/a1aa78d5331c7870994c59bf1f23b63b9684ae26be445c10230d2d44eb2cd578.jpg
Chart Source:
http://inflationdata.com/Inflation/Inflation_Rate/Historical_Oil_Prices_Chart.asp
Fracking technology has improved to the point where it is profitable at $27/BBL.
If your goal is to win, you can say you won, because I don’t care. Now that you’ve won (don’t forget to collect your prize) can you tell me why it is so important that IEA be more optimistic than it is? And please respond to my point that if they *were* more optimistic it would work AGAINST what you and I and everyone else here wants. That is for world leaders to do more and have some authoritative source to back them up when they speak to their home constituencies.
On oil prices:
From: http://www.marketwatch.com/story/saudi-arabia-cuts-oil-prices-amid-opec-price-war-2015-10-04-10485293
“Saudi Arabia has vowed to keep pumping at high levels as it hopes lower oil prices will stimulate Asian demand and hit rival production in the U.S.”
With a reader commenting:
“Just bought another gas guzzling GMC Yukon 4WD. Awesome beast of a vehicle. Who needs an electric wussy car in this market?”
I thought maybe the commentator was being ironic but a few lines down he lumps Democrats in with Hezbollah as a threat to the US. So let’s hope President Trump does better than “W”.
13 MPG for that Yukon. $2.29/gallon means 17.6 cents per mile. 13,000 miles = $2,290/year, $191/month for gas.
That’s not money I would be happy to be spending.
Me neither – but that’s the kind of mentality you’re up against IDK – maybe half the country?
“Oil doesn’t need to get back to 2004 prices, it just needs to be as cheap as electricity to run a car (which it pretty much is right now) to significantly slow EV adoption.”
$2.29/gallon. Today’s average.
25.5 MPG. US average car mileage per gallon.
That’s 9 cents per mile.
55 MPG. Best production car mileage – Toyota Prius.
That’s 4.6 cents per mile.
$0.0984/kWh. Average cost of electricity in US.
0.3 kWh/mile. A bit higher than most EVs seem to use.
That’s 3.3 cents per mile.
Yes, high fuel prices would drive EV sales (and Prius sales) faster. But in no way is oil as cheap as electricity.
It’s close. Electricity goes up a little – oil comes down a little. But even if not, penny for penny equality isn’t going to persuade those Yukon drivers to get a Volt.
The GOP has very roughly half the voters. SUV and truck sales are very roughly 50% of vehicle sales. That is the 50% level I was saying is where adoption slows down and the logistic curve starts to flatten out. Not stops – just gets progressively harder to make the next sale.
No it isn’t close. The cost of gasoline is almost double the cost of electricity on average. And that does not include lower EV maintenance costs.
An EV is thousands less in operation and maintenance over a 5 year period. Edmunds has a calculator. Try a Leaf against a Corolla.
You asserted oil is cheap enough to compete with electricity in cars.
I doubt that.
The US national average gas price is now $2.29, down from over 3 dollars a gallon, and near a low.
http://www.fuelgaugereport.com
The US national average electricity rate is $0.143/kWhr.
http://www.bls.gov/regions/west/news-release/averageenergyprices_losangeles.htm
The US average mpg is 25.4 miles per gallon.
An average EV gets about 3 miles per kWhr.
http://www.greencarreports.com/news/1099011_average-fuel-economy-reaches-25-4-mpg-in-u-s-vehicles-during-first-half
$/mile= gal/mile x $/gal = 1/25.4 x 2.29/gal = $0.09/mile
$/mile=kwhr/mile x $/kwhr = 1/3 x 0.143 = $.0476/mile
On average, gasoline prices need to drop by almost half to equal electricity prices.
Whats the break-even calculation? What $/gal equals $0.476/mile?
$/gal= $/mile x mile/gal = $0.0476 x 25.4 = $1.21/gal.
None of which includes the cheaper maintenance of an EV.
US average retail electricity price July 2015 = $0.1298.
http://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_5_6_a
Apparently, the numbers are not static. It changes month to month. We should include the annual gas price average, too. I can’t get too excited about temporary gas price drops. They seem to be volatile.
Here’s what gas has done over the last ten years. Cheap is not the normal.
Better to look at inflation adjusted prices over a longer time period. Like my earlier chart showing the avg. since 1946 is $41/BBL – lower than the current price.
The average since 46 consists of lofty oil prices during the Oil Embargos, a period when prices where artificially inflated, not just cheap oil during the Reagan administration. Infation adjusted prices have not reached the average during the 1986 to 2004 period or pre embargo periods.
Even more importantantly, price volatility is the norm.
Look again at the chart I posted in reply to you earlier showing inflation adjusted oil prices avg. of $41/BBL (lower than now) since 1946.
Yes. Inflation adjusted oil prices were lower pre 2004. That’s what I am saying. They will not return to decades ago prices for more than a transient because of higher extraction and exploration costs. Compare inflation adjusted oil prices from 90s until now.
http://inflationdata.com/articles/wp-content/uploads/2014/05/Inflation_Adj_Oil_Prices_Chart2.jpg
Recall avg. car in US has to get 54 MPG by 2025. That requirement roughly halves the annual cost of gasoline use on avg. So now your figure of $0.09/mile becomes closer to $0.045. By your calculations, that would make gas cheaper than electricity. Gas can go lower in cost and with all countries ramping up their Fuel Economy standards it almost certainly will. Iranian oil hasn’t even started hitting the markets and fracking is cutting costs dramatically. We are going to be awash in cheap oil. If the choice is between not selling oil and selling it at $30/BBL (vs current $45/BBL) Saudis, Iranians, ISIS, etc., etc. will sell at $30/BBL.
I hate the above scenario as much as anyone.
I traveled for 4 weeks in Europe in a rented a Ford B-Max (virtually identical to a C-Max) and got an honest 45+ MPG over the 4 weeks by my calculations (YMMV). It was NOT a diesel. It had a smaller engine, which shut off at every stop light, and revved higher. The B-Max was larger than most European cars which tend to all look like a Ford Focus. US cars will get smaller, lighter, with smaller engines, and more aerodynamic as they did when they went from 11 MPG to 25 MPG. Hardly any hybrids were visible in Europe but with a little battery assist, that 54 MPG is certainly attainable.
Even trucks need to get more fuel efficient (finally). Ford is starting with aluminum bodies – which is being used against them by competitors.
54 MPG is the CAFE fleet average. The average mileage for all cars sold has to hit 54. That could be reached by a couple of ICEVs with lousy mileage and one EV.
Getting an ICEV above 40 MPG is pretty hard without going small and going hybrid. Many people aren’t going to want compact and subcompact cars. Driving a “standard” sized car is likely to take almost as much fuel as it does now.
EVs are likely to get preferred rates if they charge at times best for utilities. 12 cents is likely high.
Just trying to keep the discussion grounded.
I don’t disagree. For every Volt GM sells, they will be allowed to sell that many more Silverados. But people who buy Silverados don’t care about gas costs to begin with. As the amt of oil used per car goes down, so does the price and fueling the gas-guzzler gets cheaper.
So we get 50% driving PHEVs or something and the rest drive gas-guzzlers. Which brings me back to my point that you can see rapid GHG mitigation up to 50% when it starts to slow down. Not stop – just slow.
Do you think people who want a “Silverado” will pick the ICE or EV version if the EV version costs less to purchase?
Actually the price of gas may go up as volume sold decreases. At first gas stations will thin out, but after we hit some sort of minimum spacing stations will likely increase their price due to lower sales volumes.
What I see is an accelerating move away from petroleum. EVs will simply become cheaper to purchase. Add in the fuel savings. I see no reason for a slowing when we reach 50%. By the time we pass the point at which over half of all new vehicle sales are electric we will see some manufacturers no longer offering ICEVs and others reducing the variety of models offered plus making fewer updates.
We saw that with film and cameras. At some point in the transition companies quit spending money on film/camera development and just sold the same old same old. Only a few diehards continued to buy film/film cameras. Manufacturing collapsed. Even the people who wanted to shoot film found it too inconvenient.
It’s a myth that lower oil production volume will lower costs. Understand the economics. the lowest cost supply available, the Saudis, are losing money and spending their available cash to maintain lower prices. That can’t continue. It sets the lowest price on the market.
http://www.ibtimes.co.uk/saudi-arabia-set-borrow-heavily-low-oil-prices-create-budget-deficits-1514482
Right now they stubbornly refuse to lower production to reduce the glut. This is what happens when a small handful of people control wealth. But that can’t last. When it gets worse, it will threaten political stability.
Ironic that Middle East tension is increased by drought the result of GW caused by oil.
That 54 mpg is inflated. And we are not there now. By the time we get there, there will be more efficient EVs and lower cost PV and wind.
Making comparisons by fixing one side with no progress on one side and unrealistic assumptions on the other is no way to do an accurate assessment.
You need to view the video by Kopits. Supply and demand are not elastic. Traditional economics assumes prices will rise, new supplies and methods will be stimulated, and prices will drop. But that’s not true when a resource becomes depleted. Prices rise because the cost of exploration and drilling becomes ever higher. New finds are much less than existing supplies, and much more expensive. She’ll has halted Arctic exploration because of it.
Right now there is an oil overhang, but US shale and tar sands have cut back. There is a glut, but it’s not permanent and costs are not elastic. Don’t bet on 1.21 gas soon or to stay low for long. Nobody is making money at these prices. Even rich producers can’t sustain it for long.
http://www.gurufocus.com/news/350224/energy-guru-steven-kopits–the-current-price-of-oil-isnt-sustainable
http://www.zacks.com/stock/news/189151/us-rig-count-falls-on-lower-oil-drilling-gas-rigs-flat
Kopits predicted that increasing capex like Shell did to do Arctic drilling would cause them to lose money and be forced to sell assets to prop dividends. See 59:20.
https://m.youtube.com/watch?v=dLCsMRr7hAg
That’s exactly what they are doing.
http://m.industryweek.com/global-economy/chevron-selling-more-assets-amid-low-oil-prices
Here is analysis of prices.
http://www.cnbc.com/2015/08/20/us-crude-oils-break-even-cost-how-low-can-it-go.html
You wrote “It’s a myth that lower oil production volume will lower costs”. that has to be an error in typing. You must mean “…that HIGHER oil production …”. No one thinks lower production lowers prices.
I followed your links to IBTimes. There were several related articles. One by the IMF that SA will be okay near term and long term if they lower their subsidies and diversify their economy. Both of which SA have clearly stated they are doing. Another article says part of the reason for the current draw down of SA savings is to fund their military build-up. They can definitely balance their budget with a slightly smaller military and a few less subsidies.
In any event, they won’t make more money by cutting back on production. They tried that before and all they did was lose market share with no effect on prices since others stepped up production.
Other IBT articles mention that SA has increased oil production to successfully squeeze out US fracking oil and will continue to produce more to depress prices and keep out cheaper sources.
Another mentions the SA govt. acknowledges oil will have no market in 2050 and they hope they can export solar energy by that time. (BTW, SA is starting an inverter factory).
I followed your Kopits video up to about 16 minutes when I found he was so horribly out of date in just 18 months that there was no point to further listening. He claims OPEC is maxed out and Iran is out of the picture, which are both now obviously false. His assertion that China is not consuming as much oil as predicted was true but was an early precursor to their rapidly diminishing growth – obvious now – not so obvious in 2/2014.
Statistically speaking, there is “a reversion to the mean” going on which for oil prices means $41/BBL, about 15%-20% lower than currently.
The math of commodity production has long been:
Increased demand => increased prices => lower demand => decreased prices = increased demand … repeating forever.
We will get to 50% EV (including PHEV) quickly, then it gets harder. We will quickly get rid of coal, and some NG, then it will get harder. Oil will be the last to go.
We only differ on timing.
Saudi Arabia sets the price. If it sells at higher price, it gets less volume. So far they are losing money by keeping share. Don’t see how they can continue that forever.
Don’t be so hasty on Kopits video. You need to see the whole picture to understand. Also, his comments refer to a year and a half ago. What he is saying all along is that China and US compete for oil. China has been shunning oil lately. They don’t want to import coal,or oil. That leaves US. But Chinese demand is huge. Pollution and an economic slowdown are causing this. US demand has flattened. All signs that oil demand has slowed because oil prices reflect the increasing costs of getting oil.
That’s what he is talking about. We are in a supply driven economy mode, not a demand driven one.
That series of simple equalities is not true. The assumptions are wrong. The same assumptions the oil cos made. They assume demand will be there for any oil they get at any price. That error is why Shell abandoned Arctic drilling. It wasn’t even true when oil had a monopoly on transportation. There will be a million EVs on the road end of this year. The monopoly is starting to break.
http://www.fierceenergy.com/story/one-million-mark-global-evs-accelerate-toyota-scrambles-catch/2015-09-21
In the future, oil will be freely available at a high price.
The video was made when oil was oscillating in the range $85-$98/BBL. It closed at $47/BBL today. Nothing Kopits says in that is correct now and wasn’t then – he was saying things had changed and settled into a “new normal”. They hadn’t.
SA’s break-even price is $10/BBL. They have social welfare obligations that require a higher price but they can stop subsidizing a lot of things, stop expanding their military and get back in black. They have far more oil then will ever get out of the ground. Their foreign reserves can sustain even this elevated spending for 10 years. A few cut backs and they can go on until oil is no longer wanted.
My equations are true and are NOT saying there is demand at any price. Demand raises prices. Raised prices cut demand. Cut demand lowers prices. Lower prices raises demand etc., etc. in an endless cycle. I cannot imagine how you read that to say the exact opposite of what it says.
You’re saying oil cos. think demand always outstrips supply and that for some reason the price of oil is fixed at $100/BBL or higher. I cannot reply to a counterfactual statement like that when anyone can see oil producers are bringing ever more oil online, even from existing wells, as demand stabilizes and the price keeps falling from $98/BBL a year ago to $47/BBL now.
They can see the end of oil (and have said so out loud) so they intend to pump as much as they can to get the most money for what they’ve got regardless of the price. This will definitely slow, but not stop, the adoption of EVs.
What is counter factual? US oil producers cut expenses to the bone and rig counts have fallen off a cliff. When their money is already invested in existing wells, they can either go broke, or keep pumping. So they are pumping, but it’s taken time for production to stop going up. Now it looks like demand may rise and production slowly fall.
http://www.reuters.com/article/2015/10/06/us-oil-outlook-usa-idUSKCN0S021Y20151006
http://marketrealist.com/2015/10/steepest-us-rig-count-fall-5-months-whats-impact/
US Crude oil production is finally down in September.
http://marketrealist.com/2015/10/crude-oil-prices-hit-4-week-high-led-slowing-us-production/
I disagree. You have not factored in the effects of dwindling resources in your simplistic equation. Your equation assumes complete supply demand elasticity without limits. Thats false. That does not work when supplies are constrained due to resource depletion.
Thats exactly what Kopits is saying and you seem to be rejecting.
SA cannot sell oil at 10/barrel. And Russia and several other oil producing countries are bearing the brunt of oil prices at around 50/barrel, with deep economic impacts. Same deal. Heavily oil dependent countries cannot produce oil at marginal costs. Their national budgets are always a consideration that makes reference to marginal cost superfluous.
More importantly, if you listen carefully to what Kopits says, its how the market behaves that counts when determining if the economics are demand or supply based.
Listen to that part and his arguments for that. I don’t think any prediction of the ever volatile oil prices has any bearing on that issue.
We disagree on that inequality. Supply vs demand is not unhindered by resource scarcity.
I sat through 16 minutes of your video. Try 3.5 minutes of this video – oil supply is increasing world-wide and Iran hasn’t even had sanctions lifted.
http://www.cnbc.com/2015/10/08/crude-awakening-beware-oils-dead-cat-bounce.html
We all know there are global geopolitical ramifications of oil that make supplies volatile and that Iranian oil has been out of the market due to sanctions for some time now. Obviously, the possibility of its release is having repercussions.
All of which has little to do with what Kopits says. Its not about a prediction of how much oil will cost in a particular year, or how much China buys on the market at a particular time. These are all highly variable and unpredictable due to the inherent volatility of oil. BTW, Hubbert like predictions on the down side of conventional oil do predict volatility.
The thrust of what the message is starts at 4:00.
Whats more important is the principles underlying the behavior of the markets.
The whole thing is about whether the markets have switched to be ing supply side driven or whether they are still demand driven.
Demand based assumptions are that demand will keep growing.
If anything, the current oil glut is proof that we are in a supply, not demand driven market. The demand driven market assumes OPEC (SA) will lower supply if demand drops. They didn’t .
Here is exactly where Kopits defines Supply constrained economics.
He starts around 8:46 laying the groundwork.
Specifically at from 9:00 to 9:20 where he says it this way,
“We are arguing that in general, in this recent period, Oil has been a binding restraint on economic activity.”
He says the test of that is whether additional oil supplies result are used up and put into economic growth.
He makes the case that they are not, and I agree.
Putting large supplies of 100/barrel oil on the market has not resulted in increased economic activity. Thats one reason why oil is testing lower values. Even at mid 40s, oil is still not being soaked up.
Why isn’t the market soaking them up?
Because its changed. The market will not just sop up additional oil at any price. And price no longer can drop arbitrarily low to meet demand.
If gas and oil prices matter, you get things like a decrease in driving miles:
http://usa.streetsblog.org/wp-content/uploads/sites/5/2014/05/pic7192be702c1e2ab3cc88b58ae91bfb82.gif
Driving miles have never flattened for as long a period in the charted history since 1970.
Kopits point, and my point, perhaps you would agree, that people would buy large cars and SUVs and use more gas, if its price were arbitrarily lower. He even says so.
But its not low enough and cannot go low enough anymore because there is only so much cheap (conventional) oil.
I don’t so much see this as the Saudis trying to pump it while they can, as the Saudis trying to get back market share.
IMO, the negative slope of the dwindling oil supply inherently creates this kind of instability.
No matter what the supply of oil, if price is high enough, it limits market absorption.
That is the idea.
Simply put, price. nations do planning based on projections from agencies like IEA and EIA. their forecasts not only predict no renewable growth, they predict higher renewable prices than even exist today. That convinces politicians to go slow on renewables expansion, and artificially boosts alternates like coal, oil, gas. These kinds of assumptions, ones that don’t take into account lowering renewables costs and mounting ecological costs are exactly why China is in the mess it is in today, and why US and China rejected Kyoto.
Read the NREL futures study. Then respond.
This chart only proves that gas prices have never been as low as electricity prices for transportation. Doesn’t look like they ever will be unless oil drops to inflation adjusted prices it has never achieved in its entire history, not just pre 2004 prices.
And oil and gas prices simply do not compete with electricity. You need to stretch gas mpg to the highest levels of any gas vehicle to get equal to the equivalent EV electron guzzler, the Model S, an unrealistic comparison. An equivalent ICE super car would get much worse than 25mpg. You would be lucky to get 12 mpg.
You can be certain the next gen of lighter, smaller, model 3 will use less charge. Thats a bit better comparison. EVs still win on fuel. Even more if cheaper renewables are used for electricity.
There is no way for ICE to catch up.
” the low hanging fruit is grabbed first and then it gets progressively harder to fill the fruit basket.”
That’s assuming the tree stays the same.
I would caution about using previous years’ growth to predict future years’ growth. That’s the sort of “stick a ruler on the graph and draw a straight line” type of thinking that apparently leads to worthless predictions by some organizations.
Many predictors (here’s looking at you EIA) totally failed to take into consideration the rapid drop in solar panel prices.
Let’s try to list the factors which might drive installation rates faster for wind and solar.
1) Dropping prices. Very likely, for a number of reasons.
2) Increasing concern about climate change. Think people in South Carolina might be giving the climate a rethink about now?
3) Decreasing opposition from fossil fuel interests. Simply because they are shrinking and have, in some circumstances, become pariah.
4) Decreased opposition from utility companies as they learn how to more easily incorporate wind and solar.
5) Improvements and cost drops in storage.
It’s getting easier and easier to reach the fruit. Not harder.
We’ve had this discussion before. As always, you are assuming human rationality & acceptance of cause-effect. If it helps you to sleep at night believing that economics and rationality will solve all our problems, believe away. Everyone needs their sleep. You’re probably happier than I am looking at humanity destroy itself when it would be so easy to fix it all.
Taking your reasons 1-by-1
1. I agree
2. Agree and disagree. Only 50% in US believe Global Warming is man made. Only 33% think it is a serious issue. These 2014 numbers are the same as in 2009.
http://www.scientificamerican.com/article/big-gap-between-what-scientists-say-and-americans-think-about-climate-change/
I read an article on a Gulf coast town in Alabama whose livelihood was being decimated by rising seas, storms, etc. – i.e., Global Warming. Everyone said it was all in the hands of G*d and humans were committing the sin of pride to think they could do anything about it either way. 42% of Americans believe humans were created by G*d in the last 10,000 years. 42% is a lot of Silverados and Suburbans. Belief systems trump science.
Right here in CleanT. a reader noted the local Orange Co. Solar City guy was afraid to talk to passers-by at the local Home Depot because of hostility. You can’t live in So. CA without AC. On a pure economic basis people should have been happy to see him. Belief systems trump economics.
http://www.huffingtonpost.com/2014/06/02/creationism-america-survey_n_5434107.html
3. Vehemently Disagree. Koch – one example – is doubling their contributions to candidates. These guys do not go quietly into the night.
4. LOL- tell that to the electric customers in AZ and Australia, WI and too many other states and countries. Recall HECO was stopping all solar installations and not using available wind until the state forced them to straighten up.
5. Agree.
My conclusion: exponential increase in GHG-mitigating tech deployment until around 50% saturation. Then it gets progressively tougher to make progress.
As usual, Michael, you seek out the dark side.
Americans are gradually becoming more convinced that humans have caused climate change and that we need to do something about it. Here’s some more current poll info than the 2013 poll you cite –
“An overwhelming majority of the American public, including half of Republicans, support government action to curb global warming, according to a poll conducted by The New York Times, Stanford University and the nonpartisan environmental research group Resources for the Future.”
“Among Republicans, 48 percent say they are more likely to vote for a candidate who supports fighting climate change….”
http://www.nytimes.com/2015/01/31/us/politics/most-americans-support-government-action-on-climate-change-poll-finds.html
Eleven of the Republican candidates for president state that climate change is happening, only four say no. Seven say that we must take action to reduce the problem.
Koch, Inc. is mainly invested in coal, not oil. Coal is cooked.
“Another executive has apparently decided to ditch the shrinking US coal mining industry: Bill Koch, who made billions selling petcoke and coal with his company Oxbow Carbon. Energy and Environment News reports:
“The coal business in the United States has kind of died,” Koch said during a phone interview Friday, “so we’re out of the coal business now.”
Bill Koch is the younger brother of notorious oil billionaires Charles and David Koch, and while he has not played a major role in funding climate denial and right wing extremist groups like his brothers, he has used his wealth in other ways to try and protect his fossil fuel business from competition and health, labor, and environmental safeguards. Bill Koch’s role in funding attacks on the Cape Wind project was detailed in this 2010 report, and more recently he gave millions to super PACs in the 2012 elections to try to defeat President Obama, taking advantage of the controversial Citizens United Supreme Court ruling.”
http://grist.org/article/bill-koch-is-the-latest-executive-to-leave-the-coal-business-saying-it-has-kind-of-died/
“OL- tell that to the electric customers in AZ and Australia, WI and too many other states and countries.”
You might want to get current on what is happening in Australia. And Hawaii is past their utility resistance period.
Now, let’s circle back –
” If it helps you to sleep at night believing that economics and rationality will solve all our problems, believe away.”
Perhaps you should pay more attention to what I write and spend less time making stuff up.
Depends on the source and the question. In this case it’s more like the glass is one third empty. And ignoring the trend. I agree it’s no time to lose vigilance, but let’s not paint a more dire picture than reality.
Yale Project on Climate Change Communication:
• 88% of Democrats, 59% of Independents and 61% of liberal/moderate Republicans think global warming is happening, compared to only 28% of conservative Republicans;
• 81% of Democrats and 51% of liberal/moderate Republicans are worried about global warming, compared to only 19% of conservative Republicans;
• 82% of Democrats and 65% of liberal/moderate Republicans support strict carbon dioxide emission limits on existing coal-fired power plants to reduce global warming and improve public health, compared to only 31% of conservative Republicans.
http://climatecrocks.com/2014/08/26/tide-turning-on-climate-politics/
3. ALEC (Koch) is a serious threat, but even they are losing momentum. That was not the perspective before. Their arguments are losing.
http://ecowatch.com/2015/06/12/alec-war-against-solar/
4. The glass thing again. People forced the government to respond and radically altered HECOs response. It was shape up or be run out of town. Strange to,paint that as a failure.
5. Expert analysis says 80% renewables by 2050 with BAU costs. discuss NREL futures study.
I do agree people sometimes are irrational. But it doesn’t change the peer reviewed science.
Are there any liberal-moderate Republicans? 61% of a small number is a smaller number. Counting all Democrats but then dividing up Republicans smells very fishy. The statistician in me assigns an “F” to that study.
I didn’t count HECO as a failure, merely saying that the struggle will be harder and longer than some think. Same with the other opponents – they will lose, but it will be a lot longer and harder than we would wish.
You are saying the same things, but losing the central message. I disagree about skewing the message. I don’t want it skewed at all. Pessimism and optimism are not things that should describe data.
False EIA forecasts causes Congress to underfund and under plan renewables.
That’s where our disagreement lies.
Yes there are liberal-moderate Republican. The late Republican litmus tests have altered that somewhat, but they still exist.
We find that solid majorities of self-identified moderate and liberal Republicans – who comprise 30% of the party – think global warming is happening (62% and 68% respectively). By contrast, 38% of conservative Republicans think global warming is happening. At the extreme, Tea Party Republicans (17% of the party) are the most dismissive – only 29% think global warming is happening. – See more at: http://environment.yale.edu/climate-communication/article/not-all-republicans-think-alike-about-global-warming/#sthash.A0Yqatfb.dpuf
http://environment.yale.edu/climate-communication/article/not-all-republicans-think-alike-about-global-warming/
I think there are several things you can say.
1) Both IEA and EIA not only under predict PV and wind, but have claim that both would drop to zero annual install “next year” for that last 5 years. wrong!
2) new world wind installs were ~flat 2009-2011 (~39GW) and 2012-2014 (~45) when you average out the GOP slap to 2013.
3) We have only seen solar really start to grow in the last 4-5 years. Asia last 2-3.
But governments using IEA/EIA to justify putting off the shift are making a big mistake. It is past time to stop supporting FF and time to put the pedal to the metal with RE.