11488RE: [hreg] A Wake Up Call from Seattle - responding
- Jan 2, 2013
Very thoughtful response, Robert, thank you!
Heliosolar Design Inc
Houston TX 77083-3525
281 202 9629
I’m not disputing that subsidies exist in all kinds of industries including fossil fuels. But the market/sales price is what drives consumer behavior and thus sales volume. I don’t see that gap closing soon, particularly if natural gas prices remain low due to shale gas. While RE has doubled on the following chart, look how small it is compared to coal and natural gas; just the annual oscillation in natural gas based generation dwarfs the total RE volume (and most of that isn’t solar). http://www.eia.gov/todayinenergy/detail.cfm?id=8450
I’m not trying to dump on RE. I’m just saying that it is a long, slow climb ahead. And low NG prices will further slow growth.
Worldwide, RE is not growing as fast as fossil fuels over the past 30 years, on an absolute basis:
And, the RE curve there is mostly hydro:
Solar barely registers!
According to EIA, U.S. electricity generation from RE will grow from 13% in 2011 to 16% in 2030. That’s hardly a rapid rise to dominance. http://www.eia.gov/forecasts/aeo/er/executive_summary.cfm
So, my argument stands. It really doesn’t matter what stock portfolio divestitures Seattle politicians do; it is just a stunt. It doesn’t matter if they are followed by 10 other major US cities. The worldwide growth of fossil fuel usage for electricity generation will continue to swamp RE growth for the foreseeable future (and stock prices will reflect that). This doesn’t mean that you and others like you can’t enjoy a high growth business in RE/PV. It just means there is no tidal wave of change coming that will dramatically reverse the dominance of fossil fuels anytime soon.
On a related note, I think the natural gas industry has done a great job of positioning themselves as the “clean fuel” (in contrast to coal and nuclear). That view is pretty well entrenched. Until there is a very decisive turn against all fossil fuels on the basis of climate change, I don’t think low cost natural gas will quit being used for a long time (decades).
What will change that is if the cost of RE is lowered to below the cost of fossil fuels. That is the true game changer. EIA analysts don’t seem to project that outcome at least through 2040. If your cited projections for California were to prove true nationally/globally, then of course by 2020 RE will be the preferred power source (of course, still have to figure out daily/seasonal load balancing and energy storage issues). But given how fast shale gas is ramping up, I wonder how likely a $0.15/$0.06 cost ratio is? I doubt companies would be investing billions in shale gas if they believed that in just 7 years their production sites would be so badly priced out of the market. California may not be representative. On a national basis, electricity costs for all users is projected to rise (in 2011 dollars, i.e., adjusting for inflation) by only 0.3%/yr through 2040, according to EIA. http://www.eia.gov/forecasts/aeo/er/pdf/tbla3.pdf. Electricity generated by natural gas is projected to grow by 1.4%/yr through 2040 and by RE 1.5%/yr, or about the same rate. http://www.eia.gov/forecasts/aeo/er/pdf/tbla8.pdf. EIA does not seem to believe that economics will drive faster growth in RE than NG for electricity production anytime soon. Later in the same table (Table 8) prices (in 2011 dollars) for residential electricity are projected to be constant through 2030. This is hardly what one would expect if RE was going to severely undercut NG generation costs by 2020.
The good news is that solar/PV **will** grow at relatively rapid rates: http://www.eia.gov/forecasts/aeo/er/pdf/tbla16.pdf. It still makes only a small contribution overall, though, because it is starting from such a small base. Thus, I am all for cheering solar’s (and RE’s) growth. I just don’t see the wisdom in running down fossil fuel companies, boycotting their stocks, etc., when experts forecast our continued dependence on fossil fuels for the foreseeable future. I’d be much more impressed with Seattle politicians if they would turn off all fossil fuel generated electricity in their city. Of course they can’t do that (the city wouldn’t survive, and they wouldn’t survive in office). So instead they are just pulling a political stunt, making a lame statement that they aren’t able to follow through with meaningful change/action. Meantime, I suspect that Microsoft data centers alone chew up more megawatts than all of greater Seattle generates from PV in its drizzly, overcast northern climate. Politicians won’t pull the plug on Microsoft either.
On a related topic, biomass (ethanol) is one of the faster growing components of RE, used in transportation. I don’t see how that is sustainable. Corn based ethanol is of questionable ecological benefit (energy balances are close to neutral), but a farm state politician’s pork. Switchgrass, algae, etc. may eventually help, but seriously, this is a racket that is negatively affecting food supplies for the world’s poor. How long will that be morally tolerable? One doesn’t hear nearly as much now about a hydrogen based transportation system as we did 10-20 years ago. I think it is highly unlikely in the next couple decades; more likely would be that if liquid fuel sources (gasoline, diesel) are priced too highly, natural gas will become the transportation fuel (making T. Boone Pickens happy!). Electric cars may prevent that if battery and refueling technologies develop fast enough to cause us to “skip” the natural gas generation of transportation system (beyond the small pilots today that are mostly in urban fleet vehicles). I hope that happens, since that infrastructure would be generation source neutral, while a NG infrastructure would be delay the development and proliferation of an electric car infrastructure and thus use of RE for transportation. An electric transportation system would still be powered by NG for a long time, given the economics I’ve reviewed, but RE could replace it when cost effective. In this case, the added liquid fuel sources that are also coming from fracking/domestic oil production may provide the kind of delay that facilitates this technology generation skipping that I suspect most of us would like to see.
P.S.—I don’t claim any expertise here! Just citing some data and suggesting that weak political gestures by Seattle, even if followed by several others, won’t reverse the tide; production system economics will.
I have to disagree with your comment about subsidies.
1)Fossil fuel subsidies dwarf renewables subsidies, and the US nuclear power industry wouldn’t exist without them. Do you not consider the cost of our military presence in the Persian Gulf a form of subsidy? Who pays for it? We do. Oil and gas production on public lands? Not a subsidy?
2) It’s not realistic to think American technology can be competitive in the world marketplace without government support, for the simple reason that other nations are aggressively supporting their industries. Look at the success China has had in becoming the dominant player in wind, pv and solar thermal. They set a goal while we dithered, and now they are the dominant player, and we’re somewhere behind Italy…
The nature of advanced technologies is that most require some type of early support to facilitate their adoption. That isn’t a political statement, just reality.
The solar industry is one of the fastest growing industries in the US, creating thousands of jobs. That doesn’t deserve government support?
You are right in that eventually the market decides, but cheap gas is resulting in a loss of market share for coal, while California is on track to achieve 33% renewable power generation by 2020.
It’s projected solar generated power will cost $.06/kwh in California in 2020, while fossil fuels will hover around $.15.
The world is bathed in enough sunlight every 88 minutes to power it for a year. Seems like a good investment to me
281 202 9629
As of close today, the market cap of ExxonMobil alone was $404 Billion. Let’s see… 17.6M/404B = 0.004%. Add in the rest of the fossil fuels industry and we’re probably talking 0.0001%. I hardly think Seattle’s little statement will register, and I don’t see prudent pension and other fund managers following suit. Face it: the revitalization of natural gas due to shale gas/fracking is going to make for a very challenging time for wind power and other renewables. Market forces will prevail. Only when renewable technologies become competitive without subsidies can we expect to see massive inroads. Government entities like Seattle can make political statements, but it isn’t likely that a supermajority of Congress will turn against fossil fuels anytime soon. I think our challenge is to do what we can to promote continued R&D to improve energy efficiency and renewable source cost reduction. Eventually, regulatory bodies will be forced to admit the magnitude of climate change and then there will a shift. I suspect that is still many years down the road.
If you haven't heard already an alarm sounding off, you will soon. There's a loud wake up call coming out of Seattle. All you need to do is point your ears and telescope diagnally across the nation's mid-section to hear the message. With Houston being the energy capital of the world, the message is for US. And this alarm will reverberate on Wall Street, too.
The City of Seattle and its Mayor - Mike McGinn - just made a decision to divest ALL fossil fuels from its investment portfolio. The funds represent $17.6 million (only 0.9% of its current $1.9B total assets), but enough to make a statement and set an example for others to follow.
And the followers are lining up. Because Seattle's decision gives the Fossil Free Campaign more fuel to spread this ground-up revolution. (And if pressed for a prediction, I suspect the dominos will start falling next in California's direction. . .)
This is so reminiscent of Paul Revere. . .
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