Home Energy company In the face of war and pestilence, clean energy continues to grow

In the face of war and pestilence, clean energy continues to grow

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The remission of Covid-19 has not been great for the energy transition. That’s the title of BP Plc’s latest statistical review of global energy.

But 2021 has been a kind of Newtonian year: an equal but opposite reaction to the pandemic-induced downfall of 2020. And not quite equal either. Although global oil demand rebounded by 5.5 million barrels per day, it remained below its pre-pandemic level. The International Energy Agency doesn’t expect demand to top 2019 until 2023. Coal consumption, meanwhile, topped 2019’s total, but hasn’t quite peaked. history of 2014. Only natural gas has comfortably reached a new record. Yet fossil fuels dominate the world, supplying 82% of primary energy demand.

What they don’t govern, once you eliminate the dip and rollback distortion of the last two years, is growth.

Notice how, in this graph above, wind and solar power consumption has increased substantially. Their rise has been overshadowed by the oil, coal and gas boom, but renewables have not collapsed in 2020; indeed, they accounted for the vast majority of any positive demand growth. The chart below normalizes the experience of the past two years, as well as the financial crisis lash in 2009 and 2010, averaging growth over the period and showing proportions by major energy source .

The impact of the pandemic is immediately evident, with primary energy demand growth at relatively subdued levels, similar to the cyclical lows of 2015, 2008 and 2001. What is also apparent is how the Wind and solar have led growth for the past two years – but also accounted for more than half of marginal growth in 2019, before the pandemic took hold. In addition, wind and solar continue to develop at a sustained pace: 18% last year, whereas they have already multiplied by almost 80 since the beginning of the century. Last year, their combined output exceeded that of nuclear power for the first time ever, and their growth of 4.17 exajoules was greater than their entire output in 2010.

This eats away at the energy share of fossil fuels: they accounted for 85% of the pie in 2017. But it is also moving slowly; it would be madness for renewable energy advocates to brag about a 3 percentage point drop over five years for their main competitor. That’s not the trick to meeting climate goals.

Yet change starts at the margins, as marginal growth tends to capture the attention of investors and CFOs – as we are already seeing in the shift from auto factories to electric vehicle production. While the reversal of falling cleantech costs is a justifiable concern, it’s worth remembering that supply chain disruptions have affected the entire energy sector. As John Ketchum, Managing Director of NextEra Energy Inc., said at the recent Utilities and Renewables Powerhouse Investor Day:

I keep hearing about inflation. What does inflation do to your business? What does windward inflation do? What does solar inflation do? … The real question everyone should be asking is: what does this do to your competitors? Our competition is a new gas unit, an existing gas unit. And with gas prices having tripled, my goodness, renewables are super cheap.

The coal renaissance, such as it is, owes much to the sharp increases in the price of natural gas which, in turn, owe much to the double pressure of Russia invading Ukraine and the reluctance of investors to support another shale boom. The renewed focus on energy security will bolster support for fossil fuels in some markets, but it also provides a powerful argument for seeking alternatives to mitigate the power of armed supplies from Russia.

Look past the disruptions of plague and war, and the underlying trend remains in place: manufactured energy technologies such as wind and solar continue to gain scale efficiencies at the expense of fossil fuels. The message of BP’s latest compendium is not quite that fossil fuels are making a comeback. Rather, the encroachment of renewables continues unabated, but it needs to accelerate.

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Liam Denning is a Bloomberg Opinion columnist covering energy and commodities. A former investment banker, he was editor of the Heard on the Street section of the Wall Street Journal and a reporter for the Lex section of the Financial Times.

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