|An energy transition to climate friendly sources is underway, as technological progress, economic recession and other factors reduce demand for fossil fuels and drive down stock prices of oil companies like ExxonMobil. Photo: Michael Foley, Flickr Creative Commons. Click to enlarge.|
TipSheet: Renewables To Flourish Further in 2021
EDITOR'S NOTE: This story is one in a series of special reports from SEJournal that looks ahead to key issues in the coming year. Visit the full “2021 Journalists’ Guide to Energy & Environment” special report for more.
By Joseph A. Davis
The energy transition will continue to be a central environmental story in 2021. The job for many journalists will be sorting out the facts from the spin.
Carbon dioxide emissions from fossil fuel burning are a major driver of climate change. And while cutting CO2 emissions, eventually to net zero, is a key goal of climate activists, the market may be doing more than the government to get us there.
The outgoing Trump administration “dug coal” (and was a friend of oil and gas) and did everything it could to reverse (may require subscription) the climate actions of the Obama administration. Coal baron Robert E. Murray gave Trump a wish list that practically became a to-do list (may require subscription) for Trump’s U.S. Environmental Protection Agency. Murray’s company went bankrupt before Trump’s watch ended and coal’s long decline continued (may require subscription).
The incoming Biden administration has already declared climate action to be a top priority, and has named a team (may require subscription) of top leaders who will fight hard and elevate the issue. It could take a lot of time and political capital merely to undo all the Trump climate rollbacks.
Biden sees a massive push on renewable
energy as a jobs program that could animate
economic recovery and social justice.
Biden’s climate ambitions, however, go well beyond that. Like the young activists of the Green New Deal, he sees a massive push on renewable energy like solar and wind, along with energy efficiency, as a jobs program that could animate economic recovery and social justice.
Betting the ranch on government action to solve problems has not been a surefire winning proposition lately. Biden’s ambition ($2 trillion worth) may be harder to achieve if Dems do not control the Senate (and hard enough even if they do). There will be conflict if he tries to fund climate programs by repealing Trump’s billionaire tax cut.
Technological progress, shifting demand
Enter “the magic of the marketplace,” as popularized by GOP legend. It’s complicated, but climate-friendly energy seems to be getting steadily cheaper than coal, oil and even natural gas for many applications.
The reason is technological progress. Wind turbines and solar photovoltaic electricity at utility scale are drawing more and more investment from electric utilities. And electric cars and household heating are on the brink of a breakthrough. That has been accompanied by progress in energy storage (mostly batteries) that time-shift clean energy to when it is needed.
|Chart showing burgeoning market capitalization for NextEra Energy, now the largest U.S. electric utility holding company. Image: NextEra Energy. Click to enlarge.|
Those market trends (encouraged, of course, by government action) are quite real, and are what we refer to as the “energy transition.” It will continue.
Plenty of other things are happening at the same time — e.g., a pandemic and an economic recession. The pandemic has hurt the fossil fuel industries by reducing demand. The closely intertwined oil and gas industries are suffering from too much product and relatively low prices. OPEC can barely prop up the price of crude.
This may not be a temporary situation, although the oil industry wishes otherwise. The market is speaking. The stock price of oil and fracking companies has fallen dramatically.
Perhaps, then, it was symbolic when the Dow Jones index in August dropped ExxonMobil, once the largest oil company in the world. Its market capitalization, as high as $500 billion in 2008, had dropped to the neighborhood of $175 billion. Similar things have been happening industrywide.
Giganticness alone may not be the best sign of value. But among U.S. electric utilities, NextEra, a firm focused on renewables, now has the biggest market cap at around $150 billion.
Subsidies tilt playing field, for better or worse
It’s worth remembering, though, that the “free” market is not always free. For more than a century, in the U.S., fuels have competed ruthlessly to dominate the market by rigging the rules and making sure that it is not free.
Case in point: Standard Oil, which once dominated the world market with monopoly power before it was broken up in 1911.
Things today may be slightly more subtle, but corporations spend heavily on lobbying laws and regulations that constrain markets.
The House Energy Committee was dominated not so long ago by congressfolk from oil states like Texas and Louisiana. In 2008, we learned that oil lobbyists were using drugs and sex to influence the Minerals Management Service, which collected royalties from offshore drilling. MMS has since been renamed, reorganized and (one can hope) reformed.
Although renewables have been gaining on fossil fuels, they too have had some government help on the way. Tax breaks (sorry, incentives) like the production tax credit made a difference, although Congress has been on the brink of ending them for years. For many years, Congress gave the Energy Department funds for research and development on renewables (as well as on coal). Under Trump that amount has lessened.
If the United States really wants to shift
from fossil fuel to renewables, it might
consider ending subsidies for fossil fuels.
If the United States really wants to shift from fossil fuel to renewables, it might consider ending subsidies for fossil fuels. Yes, the federal government subsidizes fossil fuels in many, many ways — one of the most obvious being leasing federal lands for energy development. Tax breaks, too.
Many politicians still operate on the principle that the interests of the federal government are the same as the interests of the oil, gas and coal industries. Because fossil fuel subsidies are many and technical, it’s hard to count them up exactly. But one estimate says they are at least $20 billion a year, and another says they are as high as $52 billion a year.
Gas has, for sure, helped close a lot of coal plants. But the price of renewables is starting to edge below even the price of gas.
One thing you will see or read about in mainstream news is corporate pledges about reducing emissions. View them with a gimlet eye. There is a lot of fuzziness about “net zero,” without rigorous definition of the term. A lot of the pledges are to achieve something by 2050, which is far away and likely too late.
Some fossil fuel firms vow to zero out their operations, but continue to sell products that emit carbon when they burn. Inside Climate News scrutinized a pledge by Exxon, which for decades has funded anti-science climate denial. Exxon’s plan, ICN said, “suggests it will continue business as usual.”
Developments to track
Journalists who want to follow the climate story via the energy transition in 2021 might want to follow a few things, regardless of the Biden plans and their progress. Here are a half-dozen examples:
- New technological developments that help store energy or make it portable (opening paths to non-gasoline vehicles). Hydrogen is one of these, although there are others, like ammonia. Fuel cells are only one of the ways to use hydrogen.
- Stock prices and commodity prices for all energy modalities and the companies involved in them — coal, oil, gas, wind, solar (photovoltaic and other), geothermal, hydroelectric, etc.
- The actions of state and local governments.
- The heating of buildings. Oil and natural gas are being replaced by electric heating, which includes highly efficient devices like heat pumps.
- The auto and truck market, beyond whatever is mandated by any revised EPA-DOT mileage standards. Are people buying electric vehicles?
- Other CO2 sources such as cement-making, which emits CO2 in two ways: burning the fuel to fire a kiln and then breaking down limestone, which emits CO2 when it changes to cement. Be wary of miracle cures.
Joseph A. Davis is a freelance writer/editor in Washington, D.C. who has been writing about the environment since 1976. He writes SEJournal Online's TipSheet, Reporter's Toolbox and Issue Backgrounder, as well as compiling SEJ's weekday news headlines service EJToday. Davis also directs SEJ's Freedom of Information Project and writes the WatchDog opinion column and WatchDog Alert.
* From the weekly news magazine SEJournal Online, Vol. 6, No. 1. Content from each new issue of SEJournal Online is available to the public via the SEJournal Online main page. Subscribe to the e-newsletter here. And see past issues of the SEJournal archived here.