Is this the end of climate denialism?

Front page of The Sun newspaper.  Source: JPratt

From The Guardian:

It’s not always easy to recognise a historical tipping point when you see one, but I believe I spotted one when I walked into my local newsagent last Wednesday and saw the front page of the Sun. Over a map of the world which was coloured bright scarlet, the splash headline screamed: “THE WORLD’S ON FIRE”.

Britain’s biggest-selling daily newspaper was not mincing its words. The subheading on the left-hand side proclaimed “PLANET GRIPPED BY KILLER HEATWAVE”, while the right-hand one announced: “HUNDREDS DIE IN EUROPE AND JAPAN”. And if you were wondering what the cause of all this might be, the accompanying news report carried a quote – just the one – from Len Shaffrey, professor of climate science at Reading University, who said: “Global temperatures are increasing due to climate change. The global rise in temperatures means the probability that an extreme heatwave will occur is also increasing.”

I nearly choked on my KitKat when I read that. Is this really the Sun? The shoutiest outlet belonging to Rupert Murdoch, the media mogul who famously characterised climate change as “alarmist nonsense”? Is something happening here?

I think something is, and I think what the appearance of this front page in a rightwing tabloid signals is that the summer of 2018, which is throwing up extraordinary climactic extremes all over the northern hemisphere, from north Africa to the Arctic, is finally puncturing the bubble of so-called climate scepticism, at least in Britain. Let us at once say that it will take a lot more to puncture that bubble in the United States, where unabashed and brazen denial of the overwhelming scientific evidence for global warming is an article of faith not just with Donald Trump, but with the Republican party as a whole.

[W]hat we are witnessing now is a historic shift in the way that the threat of climate change is perceived by the world, from prediction to observation. Remember: from the first report by the UN’s Intergovernmental Panel on Climate Change in May 1990, the whole argument that global warming is a potentially disastrous danger has been based on the predictions of supercomputer models of the climate system; they were essentially the same computer models that forecast the weather up to six days in advance, but were now being tasked with forecasting the climate up to 100 years into the future. So most of the biggest climate change headlines for the last three decades have been based on prophecy, as it were, from successive IPCC reports calculating that unless we cut our greenhouse gas emissions, global average temperatures will rise by four or even six degrees celsius by 2100, and that sea levels will rise by up to a metre by the same date, and so forth. There have been five IPCC reports, and with each one the computer models have been more refined and the predictions more reliable, so the conclusions are likely to be more robust. Yet the uncertainty of predicting the future remains.

These predictions have been the scientific strength of the argument for acting to combat the warming to come, but also, its political weakness. The large degree of uncertainty they inevitably contain has provided the soil in which climate denial has sprouted and flourished, after the issue so lamentably became politically polarised between left and right. It has allowed climate action to be characterised by its rightwing opponents merely as an unnecessary and colossally expensive bet about the future, without overwhelming numbers of ordinary people – voters – disagreeing. This is because for the 30 years that ordinary people have been hearing these predictions, they have not seen anything much to worry them when they look out of their windows.

But observation is different. Seeing things happening around you cannot be gainsaid like predictions can, and in this remarkable summer of 2018, events in the real world have been starting to catch up with the climate models’ forecasts of an overheating globe. Not only has Britain sweltered in the five-week heatwave that finally ended last Friday, record-breaking heat has subjected Norway, Sweden and Finland to unheard-of temperatures – above 32C, that’s 90F, recorded 60 miles north of the Arctic Circle. Meanwhile in Ouargla, a Saharan desert city in Algeria, a temperature of 51.3C (124.2F) recorded on 5 July is thought to be the highest ever reliably measured in Africa. And so in Japan, and so in Greece, and so in Canada: all over the northern hemisphere, record-breaking heat.

[Read more here]


We're going to get more and more actual evidence (as opposed to theory and models) that global warming is happening, and the pressure to do something about it is going to intensify.  Voters are going to insist that de-carbonisation happens, and as temperatures rise, droughts and floods worsen, and heatwaves become more intense, public concern will increase.  Given that there are technologies which are cheaper than fossil fuels, the shift to a fully de-carbonised economy could happen much faster than everybody now expects.

Fossil fuel's dirty secret

Via NexusMedia:

Ten years ago Blockbuster CEO Jim Keyes said he wasn’t worried about digital streaming. “I’ve been frankly confused by this fascination that everybody has with Netflix,” he said. Blockbuster’s head of digital strategy echoed this sentiment, asserting the company was “strategically better positioned than almost anybody out there.” Not long after, Blockbuster went the way of the butter churn, while Netflix became a household fixture. Today, the movie streaming service is worth almost as much as Disney.

To most people, that’s a funny story about the hubris of a technological dinosaur. Imagine, however, if Blockbuster had been a cornerstone of the U.S. economy, that millions of people had been employed in the manufacture and sales of Jurassic Park DVDs, that there were hundreds of cities dotting the South and Midwest where brick-and-mortar video rental was the only job in town. Then, the collapse of Blockbuster wouldn’t be so funny. It would be a catastrophe.

This, experts warn, could be the future of fossil fuels.

Wind turbines, solar panels and electric vehicles are getting cheaper and more abundant by the day, which is hurting demand for coal, oil and natural gas. As demand falls for conventional fuels, so will prices. Companies that laid claim to coal mines or oil wells, won’t be able to turn a profit by digging up that fuel. They will default on their loans, pushing banks to the brink of failure. Prices are likely to crash before 2035, costing the global economy as much as $4 trillion, according to a new study published in the journal Nature Climate Change.

As with everything, there will be winners and losers. Countries that import large volumes of fossil fuels — namely China, Japan and much of Europe — would likely be better off, having transitioned to cheap, renewable power and electric cars. They would likely also be spending more money on clean technology produced at home and sending less money to fossil fuel producers overseas.

Viñuales said a collapse in the price of fossil fuels would likely strengthen China and weaken the United States. China has a lot of incentive to ramp up renewables. It wants to create jobs and cut pollution, but it also wants to gain an edge over its chief rivals, Russia and the United States. Driving down the cost of renewables would undercut the U.S. fossil fuel sector. “The only thing that the United States could do would be to massively invest in renewable energy to be a competitor in the economy of the future,” Viñuales said. Continuing to invest in fossil fuels will only make the United States more vulnerable. “There is no walking out from the energy transition,” he said.

[Read more here]

(Source of both charts above: Nexus Media)

For both power generation and road transport, I am convinced that the transition will be faster than shown in the charts above.  I think the 2040 coal number will actually occur by 2030, because (like the authors of the study) I am certain that renewables and storage will be so cheap no one will want to keep their coal power stations running.  I suspect their gas forecasts are plausible, though, because gas is an excellent complement to renewables.

For transport, I expect EVs to make up 100% of new sales by 2030.  I don't believe petrol cars/lorries will last 10 years before replacement, because EVs will be very cheap to run and buy, so by 2040 the global car/lorry fleet will have transitioned away from petrol/diesel. 

Beware the carbon bubble, peeps.

Carbon bubble bursts in India

I talked here about how in India electricity from a new solar farm is now cheaper than the cost of electricity from a new coal power station. 

In an article in Asia Times, Tim Buckley of IEEFA explains how coal in India has gone from ginormous to ... not much:

In India, which until recently had the world’s second-largest coal pipeline, two seismic events have signalled the contrary to be true.

NTPC, the largest owner and developer of domestic coal plants in India, shelved its 4GW Pudimadaka Ultra-Mega Power Plant, due to be built in the state of Andhra Pradesh.
“Redesigning the project after acquiring 1,200 acres from the APIIC was found unviable… we have decided not to go ahead with the project,” an NTPC official told The Hindu newspaper.

This decision to cancel the largest new coal-fired power station planned in India is another step in the country’s remarkable Indian energy transition.

Since the start of 2010, as a result of shelved and cancelled projects, India’s coal plant pipeline has shrunk by a staggering 547GW. To give this some perspective, that is almost three times the total installed capacity of Germany.

Today, 88GW – or rather 84GW – are still reported to be “progressing” through approval processes

Though given current trends, this more accurately translates as “yet to be formally cancelled or put into administration.”

In fact, of the remaining pipeline, the Institute for Energy Economics and Financial Analysis (IEEFA) estimates no more than 10-20GW might actually see the light of day. That means more than 84% of India’s 2010 coal pipeline will have been cancelled.

What’s more, if India’s 2018 National Energy Plan forecast of 48GW of end-of-life coal plant closures by 2027 occurs, India is rapidly approaching peak thermal coal.

The coal industry will no doubt question this logic, but underlying it are numbers than can’t be disputed.

New imported coal-fired power costs between Rs5-6/kWh (US$75-90/MWh). Domestic coal is generally Rs3-4/kWh (US$45-60/MWh), depending upon if it is mine-mouth or 1,000km away from the coal mine. At the record low May 2017 auction, solar was priced at Rs2.44/kWh (US$38/MWh).

New solar costs less than half the price of new imported coal, and while the coal price has doubled over the past two years, IEEFA forecasts the price of solar to drop by double digits every year.

Last week Bloomberg New Energy Finance released its new energy outlook 2018 estimating the cost (LCOE) of wind and solar in India is down to US$40/MWh. It would not surprise us if that is revised down another 25% within the next year.

This brings us to the second seismic piece of news. On June 21, Indian New and Renewable Energy Minister RK Singh announced a 100GW solar tender, with an emphasis on battery storage and domestic solar manufacturing.

It follows on the heels of plans for 8-10GW of annual onshore wind installations, plus an ambitious 30GW of offshore wind by 2030 and the launch of an additional 10GW solar tender which will take place in July 2018: the biggest single solar reverse auction in history!

[Read more here]

The consequences for carbon asset prices and debt are now becoming obvious.

Deep in the jungles of eastern India lies an abandoned power plant, a warning symbol for the $38 billion of additional bad loans which are about to engulf the country’s banks.

Like many of India’s power stations, the Jharkhand project had all the markings of success when a group led by State Bank of India lent about $700 million five years ago to build it. There’s abundant coal and water in the area, a rail track was set to run through the premises, and its promise of 1,080 megawatts of electricity was alluring in a country that faces persistent power shortages and blackouts.

Yet today it stands deserted and Indian banks have had to write off three quarters of their loans, after selling the operating company to a specialist in distressed debt. Haircuts of that magnitude are now expected across the whole power sector in India, according to Bank of America Merrill Lynch, suggesting local banks face a new $38 billion wave of losses. That would be more than four times the $9 billion they’ve written off from a previous tide of bad loans from India’s troubled steel sector. 

[Read more here]

This has all happened in 8 years.  Coal has gone from a sure thing a massive liability.  The lessons for other SE Asian countries, and for banks and investors, are obvious.

Source: Why India’s solar sector has turned into a $100 billion investment magnet

The carbon bubble

(Source: Your Pension and the Carbon Bubble)

A recent analysis reported in The Guardian argues that the carbon bubble will burst before 2035.

Plunging prices for renewable energy and rapidly increasing investment in low-carbon technologies could leave fossil fuel companies with trillions in stranded assets and spark a global financial crisis, a new study has found.

A sudden drop in demand for fossil fuels before 2035 is likely, according to the study, given the current global investments and economic advantages in a low-carbon transition.

The existence of a “carbon bubble” – assets in fossil fuels that are currently overvalued because, in the medium and long-term, the world will have to drastically reduce greenhouse gas emissions – has long been proposed by academics, activists and investors. The new study, published on Monday in the journal Nature Climate Change, shows that a sharp slump in the value of fossil fuels would cause this bubble to burst, and posits that such a slump is likely before 2035 based on current patterns of energy use.

Crucially, the findings suggest that a rapid decline in fossil fuel demand is no longer dependent on stronger policies and actions from governments around the world. Instead, the authors’ detailed simulations found the demand drop would take place even if major nations undertake no new climate policies, or reverse some previous commitments.

That is because advances in technologies for energy efficiency and renewable power, and the accompanying drop in their price, have made low-carbon energy much more economically and technically attractive.

[Read more here]

For coal, it's going to happen long before 2035.  At the end of 2017, solar provided 1.9% of the world electricity, wind 5.6%.  Solar has been growing at 40% per annum for nearly 3 decades, and there seems every reason to believe that it will continue to grow at that rate for the next 10 at least.  Perhaps it could even accelerate as the cost of storage declines.  Wind is growing more slowly (20% per annum) , but will likely continue to grow because (a) wind gives power 24/7, (b) a grid with a mixture of wind and solar is more stable and requires less backup/storage than a grid dominated by solar and (c) wind is still one third the price of coal and continues to decline in price, though more slowly than solar.  Hydro provided 16.4% of total demand in 2018.  Hydro (though not pumped hydro) is unlikely to grow rapidly.  All the best big dam sites have been taken.  So I've assumed only modest growth in hydro (3% per annum).

World electricity demand is growing at 3-ish % (there's no demand growth in developed countries, even declining demand, but varying demand growth in developing countries).  I've increased that by 1% in 2022 and 2023 and by 2% in 2024 and 2025 in my forecasts to allow for the growth of electric car charging.

Using these assumptions, fossil fuel demand for electricity generation (i.e., mostly coal, because gas will still be used for firming and peaking power for a couple of years longer) peaks in 2020, falls slightly in '21 and '22, and then starts to plunge.  By 2025 the supply of electricity generated from fossil fuels will be falling by 8% per annum.  Which means demand for fossil fuels for electricity generation will be falling as fast.

What about demand for petroleum and diesel for land transport?  That's a bit slower.  Cheap EVs will only be available from 2020 on.  As a quick and easy estimate, petrol/diesel demand will fall by 1% per year for every 10% share of new sales EVs have.  But EVs could make up 50% of sales by 2025.

Markets look ahead.  By '21 or earlier  it will be obvious to everybody in the market place what's happening and what's going to happen.  At that point share prices will start to plunge, debt defaults by fossil fuel producers will rise, hitting the banks, and the carbon bubble will pop.  Long before 2035.

Gird your loins.

Rush to gas risks billions in stranded assets

There is a massive rush on in the USA to build new gas-fired power stations and the pipelines which will supply them.  Now, gas is a good complement to renewables, because the output from gas-fired power stations can be scaled up or down much more quickly than is the case with coal-fired power stations. That doesn't necessarily mean that gas is financially viable.  If you are only using a power station for part of the day, its average cost is higher because the costs of maintenance, depreciation, and interest/capital repayment have to be spread over a smaller output.  Which means that there is a big risk that batteries will soon be cheaper than gas because battery costs are falling by 20%+ per annum.  The Rocky Mountain Institute (RMI) has done some sums:

RMI’s The Economics of Clean Energy Portfolios notes that, in many cases, these gas plants are being built to replace the older generation, including aging coal and nuclear power plants. Over half the U.S. thermal generation fleet is more than 30 years old and expected to reach retirement by 2030, and RMI estimates that it would require $500 billion to replace all of these plants with gas generation. This would lock in a combined $1 trillion in asset and fuel costs.

This would also result in 5 billion tons of CO2 emissions through 2030, with that number increasing to 16 billion tons through 2050. With these emissions comes the release of methane (CH4), a far more potent greenhouse gas over 20 and 100-year timeframes.

None of this is necessary. RMI conducted case studies of four natural gas-fired power plants currently proposed for construction across the nation and found that in three of four cases, the optimized portfolios of renewable energy and other non-emitting resources could replace the gas plants at a lower cost. In the fourth scenario, RMI found that the clean energy portfolio would cost roughly 6% more.

Source: PV Magazine

These are at current costs for clean energy resources, and do not include a price on carbon. RMI found that when factoring in a modest $7.50 per ton cost of CO2 and expected price declines for distributed solar, clean energy is the cheaper alternative in all cases.

These clean energy options showed generally superior economics versus both combined cycle gas plants and combustion turbines, which have different use cases. Combustion turbines are typically used as “peaker” plants, running seldom and in times of high demand, wheres combined cycle plants tend to run more often as “mid-merit” plants.

The clean energy portfolios modeled by RMI have the ability to provide not just energy, but also the ancillary services required by the grid.

[Source: PV Magazine]

My guess is that most of these new gas plants planned for 2020 onwards won't be built.  Utilities are naturally conservative--they own assets with lifetimes of  3 decades or more; they have leveraged balance sheets; the regulators themselves are conservative; and we're all still feeling our way towards a 100% green grid, so aggressive jumps to new technologies are potentially very risky.  So right now they're choosing gas over storage, which may be a rational decision.  The trouble is, in 5 years, storage won't just be normal, it'll also be cheap--perhaps 1/4 its current cost. 

As RMI points out, the renewables alternatives are already nearly as cheap as or cheaper than gas.  In 5 or 10 years time, the cost advantage of green energy will be irresistible.  What will all these shiny new gas power stations and pipelines be worth then?

Airpocalypse in India

[Read more here]

Seriously, people.  Does anybody seriously think that India is going to go on burning coal, driving petrol cars and burning rubbish?  When solar is cheaper than coal, and EVs will very soon be cheaper than ICEVs?  Airpocalypse is going to lead to coalpocalypse and the bursting of the carbon bubble.

Doublings

(Source)

When I wrestle with climate denialists and fossil fuel spruikers, they keep on saying that wind and solar only provide a small percentage of total electricity generated world wide.  And therefore (a) we might as well give up, and (b) we simply have to keep on using coal. Forever.  Never mind the rise in global temperatures.  Well, no. It's perfectly true that renewables still make up just a small percentage of global electricity generation.  But that completely misses the point.

From 2000 to 2015, the percentage of electricity generated from solar has doubled 7 times.  Over the same period, the percentage of electricity generated from wind has doubled 4 times. That means solar has risen 128 fold and wind 16 fold, over 15 years.  In fact, the percentage of solar in total global electricity supply has been doubling every two years for over 30 years, a growth rate of 41% per annum.  As costs have fallen, so more solar has been installed,  which has led to further cost falls.  A classic virtuous cycle, or learning curve.  The wind percentage, meanwhile, has doubled every 3 years, which is a growth rate of 26% per annum.

Together, wind and solar now produce about 5% of global electricity.  This means that together they are just 4 and a half doublings away from 100%.  Obviously as we get closer to 100%, growth rates will slow.  But over the next few years, as costs continue to decline, and the concern about global warming continues to grow, growth rates are likely to remain high.  At 25% growth, the percentage of electricity from wind and solar will reach 15% in 5 years, 45% in 10 years, and would exceed 100% within 15 years. In fact, all we need to reach 100% renewables over the next 20 years is a mere 16% growth per annum.  And that ignores nuclear and hydro.  Eminently doable.

A similar dynamic is happening with electric cars.  They make up just over 1% of the world car sales.  But sales are doubling every 18 months.  That means that in ten years 100% of car sales could be electric.

We doubt these forecasts because our brains think linearly.  Exponential growth at some deep level make no sense to us.  But you have to ask yourself, using the logical analytical parts of your brain: why would growth rates slow before we reach close to 100% saturation?  Prices keep on falling; awareness of these new technologies keeps on rising, the cost advantage keeps on improving.  And technology take up S-curves are extremely common.  Think mobile phones, DVDs, microwaves, the telephone, colour television, electricity itself, etc, etc, as this beaut graphic shows.

(Source)

What could stop 100% renewable electricity?  Well, the only thing, now that cost is no longer a hindrance, is that renewables are intrinsically variable in output.  And as we get closer and closer to 100% renewables, we will need progressively more storage. That will add to the total all-inclusive costs of wind and solar, so their uptake will slow.  But a grid with mixed sources of supply might need one day's storage (the CSIRO in Australia estimates that only half a day's storage is needed to reach 100% renewables).   And in 15 years, batteries and perhaps other storage will be one tenth of current costs.  So I don't think that will be too big a factor.  I think growth in wind and solar will continue to barrel along for another decade or more.

The implications for fossil fuel producers--and for policy makers and governments-- are clear.  Beware the carbon bubble.  Change is happening faster than our linear-constrained brains realise or feel comfortable with.  And getting it seriously wrong could be disastrous, for everybody. We don't need more coal mines.  And oil companies should stop exploring for new oil, because we won't need it.

Trump, Putin and the pipelines to nowhere

(Source)

[Read more of this extremely interesting article here]

Here’s the blunt reality: the pressure to cut emissions and respond to a changing climate are going to alter what we do and don’t see as valuable. Climate action will trigger an enormous shift in the way we value things. 

If we can’t burn oil, it’s not worth very much. If we can’t defend coastal real estate from rising seas (or even insure it, for that matter), it’s not worth very much. If the industrial process a company owns exposes them to future climate litigation, it’s not worth very much. The value of those assets is going to plummet, inevitably… and likely, soon. 

Currently, though, these assets are valued very highly. Oil is seen as hugely valuable, coastal real estate is seen as hugely valuable, industrial patents are seen as hugely valuable.

When there’s a large difference between how markets think assets should be valued and what they are (or will) actually be worth, we call it a “bubble.” 

Experts now call the differences between valuations and worth in fossil fuel corporations, climate-harmful industries and vulnerable physical assets the “Carbon Bubble.” It is still growing. 

And here’s the thing about bubbles: they always pop.

As it becomes clear that these assets will not produce profit in the future, their valuations will drop — even if the businesses that own them continue to function for years. The value of oil companies will collapse long before the last barrel of oil is burned; the value of beachfront hotels will collapse long before rising tides flood their lobbies. 

Put another way: The pop comes when people understand that growth in these industries is over and that, in fact, these industries are now going to contract. That’s when investors start pulling out and looking for safer bets. As investors begin to flee these companies, others realize more devaluation is on the way, so they want to get out before the drop: a trickle of divestment becomes a flood and the price collapses. What triggers the drop is investors ceasing to believe the company has a strong future. 

Because that risk already exists, the pop is way closer than most people understand. 

A crisis in investor confidence is the biggest threat to fossil fuel companies — not environmentalists, regulations, clean energy competitors or climate agreements. 

For high-carbon industries to continue to be attractive investments, then, they must spin a tale of future growth. They must make potential investors believe that even if there is a Carbon Bubble, it is decades away from popping — that their high profits today will continue for the foreseeable future, so their stock is worth buying.

How would you maintain this confidence? 

• You’d dispute climate science — making scientists’ predictions seem less certain in the public mind— and work to gut the capacity of scientists to continue their work (by, for instance, defunding NASA’s Earth Sciences program). 
• You’d attack global climate agreements, making them look unstable and weak, and thus unlikely to impact your businesses. 
• You’d attack low-carbon competitors politically, attempting to portray the evidence that they can replace high-carbon industries as fraudulent (or at least overly idealistic). 
• You’d use every leverage point to slow low-carbon industrial progress — for example, by continuing massive subsidies to oil and gas companies, while attacking programs to develop new energy sources. 
• You’d support putting a price on carbon, since this makes you look moderate and engaged, but you’d make sure that the definition of a “reasonable” price on carbon was so low and took so long to implement that it was no real threat to your business, and at worst would replace the dirtiest fossil fuels with others (switching for example from coal to gas). 
• You would ally with extremists and other sources of anti-democratic power, in order to be able to fight democratic efforts to cut emissions through the application of threats, instability and violence. 
• Most of all, you’d invest as heavily as possible in new infrastructure and supply. For oil and gas companies, this means new exploration and new pipelines. Why would you do this, if you know you may have to abandon  these assets before they’ve paid off? Two reasons: First, it sends a signal of confidence to markets that you expect to continue to grow in the future. Second, it’s politically harder to force companies to abandon expensive investments than it is to prevent those systems from being built in the first place — the mere existence of a pipeline becomes an argument for continuing to use it. This, too, bolsters investor confidence. (Note that whether these assets are eventually abandoned or not is of little concern to current investors looking to delay devaluations). 

Here’s the kicker: If you were going to put in place a presidential administration that was dedicated to taking these actions, it would look exactly like what we have now: a cabinet and chief advisors in which nearly every member is a climate denialist with ties to the Carbon Lobby. 

No One Cares More about the Carbon Bubble than Putin.  Trump’s ties to Russian espionage suddenly make more sense in this light.  If you were going to ask why a country like Russia would risk a war to interfere with American politics, look at what the Russian economy is.

 Russia is a petrostate. It’s the number one gas exporter and number two oil exporter in the world, but it’s economy is otherwise stagnant and out-of-date. Those oil and gas assets are controlled by a small number of oligarchs gathered around Putin, the former head of the KGB. Those oligarchs may be the one group of investors who stands to lose the most from the popping of the Carbon Bubble.

This is a most interesting article.  I urge you to read in in full.  It explains very clearly that the denialists are neither quixotic nor demented.  They know exactly what they're doing.  And they want us to pay, through financial losses and climate disasters.

We must not let them get away with it.