BP Energy Outlook Ignores Renewable Energy Outpacing Fossil Fuels
British multinational oil and gas company BP has published its highly-anticipated Energy Outlook for 2018 and, even though it has branded its standard model the ‘Evolving Transition’ scenario, this year’s report is the very picture of business as usual for the fossil fuel giant.
BP began publishing its Energy Outlook to the public back in 2011, and since then the document has actually become something of an important marker for those monitoring the global energy space. To be certain, BP stands for British Petroleum, so on the surface, one might consider it biased — sort of like trusting the wolf’s status updates on the contents of the sheep pen. I’m not one to dismiss out of hand anything and everything BP says or does, because we’re not going to make progress unless we incentivize the involvement of fossil fuel supermajors like BP and bring them into the party. And this year’s BP Energy Outlook 2018 edition does make some allowances for the difficulty in predicting the future of the global energy sector.
In its introduction, the authors of the Outlook explain that much of the report is based on their business as usual predictions — the ‘Evolving Transition’ scenario. “But,” as the authors immediately explain, “that does not imply that the probability of this scenario is higher than the others. Indeed, the multitude of uncertainties means the probability of any one of these scenarios materializing exactly as described is negligible.”
In other words, let’s give credit where its due. Though we might disagree with some of BP’s main takeaways — and trust me, we do — let’s not pretend that any of us are really overly confident in how things will turn out.
All of that being said, it is dismaying to have all my attempts to give BP the benefit of the doubt undone when you consider their predictions through to 2040 — the extent of this year’s Outlook. The report is an ‘energy’ outlook, so it covers all aspects of energy around the world. You can get a sense of the report’s scope here.
My main point of contention with the Outlook is its fuel analysis through to 2040. “By 2040, oil, gas, coal and non-fossil fuels each account for around a quarter of the world’s energy,” explained Spencer Dale, group chief economist. “More than 40% of the overall increase in energy demand is met by renewable energy.” In other words, BP is more than willing to acknowledge the impressive growth of renewable energy and its importance as the energy generation technology of the future.
I just think they are missing just how quickly renewable energies are transforming the power sector specifically.
According to the Outlook out to 2040, “renewable energy grows 400% and accounts for over 50% of the increase in global power generation.” The lion’s share of the growth is thanks to the “increasing competitiveness of wind and solar” despite the fact that “Subsidies are gradually phased out by the mid-2020s, with renewable energy increasingly able to compete against other fuels.” Unsurprisingly, BP acknowledges that “China is the largest source of growth, adding more renewable energy than the entire OECD combined, with India becoming the second largest source of growth by 2030.”
Sounds good, right?
The issue is less about the company acknowledging the growth of renewables and more about its consistent belief that fossil fuels, especially coal, will maintain their stranglehold on the world energy mix.
When you dig into the numbers beyond just the initial front page and press release you find that, even though BP acknowledges that “the world continues to electrify,” it still believes that coal will remain the largest source of energy for power in 2040, predicting a 30% share. Yes, coal decreases over that time and renewables expand dramatically, but it still misses current realities.
Source: BP
I’m not simply poking holes in BP’s predictions — as already mentioned, good luck getting that right at this point — but rather at their seeming ignorance of the trends already evident. Coal isn’t just going to disappear one day, it is disappearing right now with massive closures across Europe and project cancellations in China.
“We agree with BP that electrification is a mega-trend that will change the energy sector in ways previously unimaginable,” said Laurence Watson, a data scientist with London-based not-for-profit think tank the Carbon Tracker Initiative. “However, we see the future energy system predominantly supplied by cheap wind and solar backed up by a combination of storage, demand response and gas. For coal, national phase-outs in Europe, large-scale cancellation of projects in China, and global progress on carbon pricing should give BP pause.”
“BP’s costs for renewables are already out of date. Remarkably, solar PV tariff prices in India have declined nearly 80% since 2011. This price decline means solar PV is no longer just a threat to new coal investments.”
I will give BP credit. Its renewables presentation highlights an alternative scenario for the growth of renewables — its ‘renewables push’ scenario which sees renewables account for more than 90% of growth in power demand by 2040 (compared to over 50%). However, as BP notes, accurately, “The pace at which renewable energy penetrates the global power system depends partly on the size and persistence of government support.” In BP’s Evolving Transition scenario support for renewables is largely phased out by the mid-2020s — a not-unlikely event, given the current malaise of government support for renewable energy technologies. In its ‘renewables push’ scenario, however, government support persists until 2040 and, unsurprisingly, punches renewables through the roof, squeezing out room for coal and gas.
But, and on this score I’m with BP, the current situation does not necessarily back the idea that governments will pick up the mantle of support for renewable energy beyond 2020, unless something drastic happens, which I simply don’t see happening at this point. Government support in major markets like the United States, the UK, Australia, and parts of Europe are sliding, and though renewables are gaining traction in emerging markets such as Latin America and Asia, it is not guaranteed that they will break with the pattern and continue to support renewables past their mass adoption.
BP’s Energy Outlook for 2018 digs into many more aspects of the world’s energy sector, and it’s all worth a look if you’re interested. But in the end, while BP may have given short shrift to the renewable energy industry, I think it has accurately predicted the current state of support for the sector — and there’s only so much the renewable energy sector can do on its own.
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