Oil fuelled the 20th century. Now the world is in the midst of an energy shock that is speeding up the shift to a new era, reports The Economist.
When lockdown hit the global economy earlier this year, demand for oil dropped by over 20 per cent and prices collapsed. There was even a brief period in April when you couldn't give the stuff away and the world ran out of storage. Since then there's been a jittery recovery, but a return to the old world is unlikely.
Fossil-fuel producers are being forced to confront their vulnerabilities. ExxonMobil has been ejected from the Dow Jones, having been a member since 1928. Oil titan BP says that renewable power is growing faster than any other fuel in history and petrostates such as Saudi Arabia need an oil price of $70-80 a barrel to balance their budgets. Today it's scraping along at just $40.
There have been oil slumps before, but this one is different. And that's really good news. As the public, governments and investors wake up to climate change, the clean-energy industry is truly gaining momentum. Capital markets have shifted: clean-power stocks are up by 45% this year. With interest rates near zero, politicians are backing green-infrastructure plans. America’s Democratic presidential contender, Joe Biden, wants to spend $2 trillion decarbonising America’s economy. The European Union has earmarked 30% of its $880 billion covid-19 recovery plan for climate measures, and the president of the European Commission, Ursula Von Der Leyen, used her state-of-the-union address last week to confirm that she wants the EU to cut greenhouse-gas emissions by 55% over 1990 levels in the next decade.
The 21st century energy system promises to be better than the oil age - better for human health, better for the planet, more politically stable and less economically volatile.
60% of global coal power plants are currently generating electricity at a higher cost than renewables. Fortunately, by 2030 at the latest, it will be cheaper to build new wind or solar capacity than continue operating coal in all markets - says Carbon Tracker, a financial think tank, in a report called ‘How to Waste Half a Trillion Dollars’.
A picture of the new energy system is emerging. With bold action, renewable electricity such as solar and wind power could rise from 5% of world supply today to 25% in 2035, and nearly 50% by 2050. Perhaps surprisingly, China is the world leader in wind power investment - constructing more offshore wind capacity than the rest of the world combined.
This new energy architecture will ultimately bring huge benefits. Most important, decarbonising energy will avoid the chaos of unchecked climate change. Once mature, it should be more politically stable, too, because supply will be diversified, geographically and technologically.
Original source: The Economist