We should prepare for major changes in the energy industry – changes much bigger than the current debate on utility fuel transition from coal and/or oil to natural gas.
I attended an August conference sponsored by the Climate Reality Project (www.climaterealityproject.org) and got updates on climate data and startling energy trends. Since that meeting, I have confirmed these claims with research from major sources such as Reuters and The Economist.
There are new facts about our climate for you to consider, no matter where you live. Some of them are depressing, but by understanding the situation, it is possible to see opportunities for prosperity. For example, the true value of solar grid parity is apparent, and you’ll see that’s good news.
July 2013 was the 341st consecutive month with a global temperature above the 20th century average. Every national academy of science in the world endorses that climate change is real and man-made. It is compelling that in over 30 independent sovereign nations (some that have current conflicts with each other) the overwhelming majority of scientists agree that climate change is anthropogenic.
Since the industrial revolution, humans have been burning progressively more fossil fuels – effectively transferring a massive amount of carbon (and other material) from below the ground into our skies. Since 1800, we have increased the CO2 in our planet’s atmosphere by 43%. Carbon dioxide concentration hasn’t been this high for at least 3 million years, so it’s difficult to estimate long-term impact on humans and the world.
Local air pollution in Beijing (40 times greater than the “safe level”) has lowered the expected lifetime by 5 years. Public outrage has motivated the Chinese government to react. In June 2013, China started its first formal carbon market, resulting in cap and trade laws in many areas. This is no small venture – during the next 5 years, China plans to spend $275 billion to clean its air. This amount is equivalent to the GDP of Hong Kong, and twice the size of China’s defense budget. China has already improved the average efficiency of its coal-fired power plants to 37%, while the U.S. average remains at 33%.
Worldwide, climate change has already begun to generate more extreme weather events that cause property damage, agriculture losses, and migration of diseases. Each year, environmental catastrophes around the world are measured in hundreds of billions of hard dollar losses. And we are only beginning to experience the impacts of climate change.PageBreak
Energy Effects of Climate Change
We must change – much like how we responded when the Cuyahoga River in Cleveland caught fire in 1969, which led to the Clean Water Act in 1972. Governments have similarly set up emissions reduction schemes to reduce acid rain and protect the ozone layer.
From a carbon emissions perspective, U.S. policy needs to be more aggressive. The U.S. has reduced some of its emissions by burning natural gas instead of coal, but in the long-term, natural gas is just a bridge. It is still a fossil fuel. Natural gas from fracking also carries risk of contaminating water supplies, and the risk is not fully understood.
We face huge energy challenges. These facts can be overwhelming and depressing, but we can’t keep our heads in the sand or blame someone else. Blame doesn’t matter. Let’s work more aggressively on solutions. Here are some game-changing opportunities.
The Power of Solar
During the last five years, solar prices have dropped 80%. Making kWh from solar will reach grid parity in most of the U.S. by 2020. That means it will be less expensive to make energy from solar panels than coal or natural gas within 7 years (this assumes that fossil fuel energy prices do not increase from where they are today).
When solar power becomes cheaper, utility companies will face a quandary as consumers disconnect from the grid and make their own power. The utility will have to distribute its infrastructure costs over a smaller population of remaining customers, which will drive their costs up, further motivating defections from the grid. This transformation is similar to the impact that cell phones and VOIP (voice over internet) have on land-lines. The utilities will likely adjust their business to avoid loss of customers.
For many buildings, it will become economically advantageous, secure, and self-reliant to make your own energy. Fossil fuels will lose appeal as they get more expensive, and this rise doesn’t even count external costs of fossil fuels – such as the cost to defend access to foreign oil (billions of U.S. military dollars every year), increased health costs from air pollution (asthma, cancer, etc.), and weather-related costs (which are harder to associate dollar for dollar to the root pollution).
The degrading appeal of fossil fuels will have serious impact on the stock prices of coal companies (and to a lesser extent, oil and natural gas). A significant percentage of their value is based on their stated reserves of fuels that are still in the ground, which may be unburnable due to regulation or stranded due to the inability to obtain a high enough price from them.
Regarding oil and natural gas for transportation, the shift to renewable energy may take more time, but there will be plenty of consumers who want an EV to be powered by their own roof panels. Because it takes a few years to get a car from design to market, let’s hope that American car companies start preparing now.PageBreak
Clean Technology Is Key
For the first time in 2010, there was more investment in renewable energy than fossil fuels. Globally, a wind turbine was going up about every 30 seconds. As of 2012, there were more wind jobs than coal jobs, and 38 of 50 U.S. States have established renewable policies and goals. Although lagging behind many countries in renewable energy adoption, the U.S. has exceeded its own goals multiple times.
Even if you ignore the climate change impact, the trends regarding solar costs will change the energy industry, because people always choose cheap. Alternative energies have the cost advantage for the first time. The 2020 projection is not far away. It’s time to start preparing so that your building and infrastructure can seize these opportunities.
If you want to learn more about climate data, there will be a free 30-minute webinar on October 1st at 11:00 A.M. E.T. It will be followed by live Q&A with Dr. Woodroof. To attend, click here: https://www2.gotomeeting.com/register/475056122.