Embracing energy transition will give first movers like Saudi Arabia significant head start
The election of Donald Trump has emboldened climate change opponents – fossil fuel Fossils, if you will. Unfortunately for the American President, he and his energy booster buddies – including his many fellow travellers in Alberta like Brian Jean and Jason Kenney – are already losing the battle.
Now, if all you read are the headlines, the impending defeat of the Fossils may not be apparent.
For instance, North American Energy News published a story Wednesday about Trump EPA head Scott Pruitt saying, “he is not convinced that human-activity-caused carbon dioxide is the main cause of climate change” and “he is looking for Congress to weigh in on whether CO2 is a harmful pollutant that should be regulated.”
Former Stephen Harper finance minister Joe Oliver – a Bay Street executive, not a climate scientist, and lately a contributor to Rebel Media, the disgraceful Canadian version of Breitbart News – is in the pages of one of Canada’s most respected business papers questioning the link between rising CO2 levels and global warming, and suggesting that higher temperatures will be beneficial for humankind.
These are just two examples of the newly resurgent Fossils pushing back against the environmental policies of former president Barack Obama in the United States and current prime minister Justin Trudeau in Canada.
But let’s step outside North America politics and media for a moment. What are leaders in other oil producing countries saying?
Saudi energy minister Khalid Al-Falih delivered a major speech at CERAWeek in Houston on Tuesday. Nestled in his comments on over-production, demand, and oil prices were several observations about the changing nature of energy technology. Despite having the world’s largest oil reserves, the Saudis are under no illusions that their supply and cost advantage will last forever:
“As for the evolution of the global energy mix, the costs of alternatives like renewables and electric vehicles are declining as their technologies and performance improve. But we all know that energy transformations are complex phenomena that take considerable time to unfold. [emphasis added] In the future they will claim a greater share of a growing global energy market—and we welcome their contributions…”
Here is a sampling of comments from the CEOs of super major oil and gas corporations:
“Social, political and geographical conditions differ from country to country. So the energy transition is likely to play out in a different way in different places…The pace of the transition will differ too. In some places it will be relatively fast, in others relatively slow,” Shell CEO Ben van Beurden said in a major speech to the Norwegian Parliament last August.
“Statoil is committed to developing its business in support of the ambitions of the Paris agreement. We believe that being able to produce oil and gas with lower emissions while also growing in profitable renewables will give competitive advantages and provide attractive business opportunities in the transition to a low carbon economy,” said CEO Eldar Sætre in the introduction the Norwegian state oil major’s 2030 climate roadmap.
As I have argued in numerous columns, the energy transition that the global economy is embarked upon is probably only five to 10 years old.
The fact that electric vehicles or solar power generation or utility-scale battery storage are considered novelties by the Fossils is not evidence the energy transition doesn’t exist. Not at all.
The evidence confirms that the adoption of clean energy technologies has just begun. They are at the very bottom of the diffusion S-curve, which means that only Innovators – risk takers willing to pay a very high price premium for promising new technology – are buying them.
Such as rich folks paying over $100,000 to have the latest Tesla Model S with Ludicrous Mode, for example.
But the evidence also confirms that clean energy technologies are already moving up that S-curve. Why?
For a number of reasons, including declining costs, rising value, public policies (including subsidies, in some cases), significant capital invested in basic science and commercialization, changing public attitudes, better marketing by manufacturers, and so on.
We know from studies of technology diffusion that these are the pre-conditions for new technologies to eventually become dominant in the market (which I define as roughly 70% to 80% marketshare). And the scientists, academics, analysts, and industry executives I regularly interview agree that clean energy technologies will eventually push fossil fuels mostly out of the market.
That might not happen until 2100 or later, but it will happen.
Around the globe, political and industry leaders recognize this inevitability. Everywhere it seems except Trump’s United States and Alberta’s political opposition.
Those attitudes need to change. Not because of the politics, but because of clean energy technology, which is on the march and cannot be stopped. Throughout modern history, the technological imperative has changed politics, but politics has never blunted the force of technology change.
The technology is already transforming the energy industry, as Al-Falih clearly acknowledges in his CERAWeek speech:
“At the same time, I want to add that as an industry we must invest more to minimize the environmental impact and carbon footprint of fossil fuels. Such investments will make petroleum use more acceptable and more sustainable in a period of significant technology shifts and growing concern over climate change.”
That is the trend that cannot be denied: decarbonizing oil and gas as much as possible while encouraging and adopting clean energy tech as it becomes competitive.
Pretending the energy transition hasn’t started – as the Trump Administration and Messrs. Jean and Kenney regularly do – will only put the USA and Alberta (assuming Jean or Kenney form government in 2019) further behind Saudi Arabia, the Netherlands, Norway, and other enlightened energy producing jurisdictions.
Perhaps far enough behind that they will never catch up.