After the usual spate of stock-taking wrap-up blogs about 2014 it is time to look ahead at what may be in store for us on the renewable energy and climate change front in 2015. Will low oil prices hurt or help renewable energy and climate action? Will the new Congress succeed in rolling back progress and reversing the President’s leadership on the Clean Power Plan? Will investors continue to back a renewable energy expansion? Will the recovering economy drive additional demand for residential renewable energy? Will coal survive or go the way of whale oil as a fuel source?
Keeping in mind that prognostication is a notoriously sketchy undertaking, here are my own predictions, based on observation, trends, and data from a variety of sources about one possible direction for 2015.
Drivers and Trends Point to Continued Progress on Climate and Renewable Development
According to the National Ocean and Atmospheric Administration (NOAA) and NASA, 2014 was the hottest year ever recorded. This combined with new information about the state of global resources, especially the world’s oceans, will continue to drive international concern about global warming and provide new market opportunities for renewable energy resources at all scales. The upcoming United Nations conference on climate change slated for this November in Paris will also shine a renewed light on the urgent need for progress on climate mitigation and drive international investment in emerging technologies.
China Awakens on Climate
Also driving progress is China’s pledge to cap carbon emissions by 2030, and the possibility it could reach its peak of coal consumption as soon as 2020. China’s awakening on the climate challenge signals a continuation of the upward trajectory of its investments in renewables, and a potentially catastrophic loss for US and Australian coal exporters of what has been the most robust market in the world for coal. China’s decision has major ramifications here in the US, as Wyoming struggles to get approval to build massive coal export ports on the Columbia River, intended to feed a market that is rapidly shrinking. China aims to cut its 2020 carbon intensity by 45 percent from the 2005 level and plans to launch a carbon market next year. This all dreadful news for a reeling coal industry.
Coal on the Ropes; Down Goes Coal (with apologies to Howard Cosell)!
Perhaps one of the best signs for climate mitigation is the accelerating collapse of the coal sector, whose slide shows no signs of slowing. Coal stocks have been slaughtered, and there remains little sign of life in the sector. According to CNBC reporting the Dow Jones Coal Index has plunged 36.5 percent in the past year, and in the past five years it is down almost 75 percent—87 percent since before the last recession began in 2007. Moody’s Investors Service and Standard & Poor’s rates the bonds of all coal companies that have publicly traded debt as junk. “If you look at the long term, it’s not getting any better,” said Standard & Poor’s analyst Aneesh Prabhu. “It’s a secular decline.” Some Pollyanna’s still hold out hope that low equity pricing makes coal stocks a bargain, but the deck is well and truly stacked against any revival of this industry. The era of burning rocks for power is coming to a close. My favorite quote on this subject is: “We have the absolute destruction of the coal industry. If you think it’s coming back, you don’t understand the business … because it’s not going to come back.” -Bob Murray, CEO of privately held Murray Energy.
And it is growing more and more difficult to portray the coal industry’s demise as an economic catastrophe. Despite the “war on coal jobs” rhetoric, coal mining jobs have been in decline for decades, and as the economy grows, these jobs should be easily offset by jobs in other sectors of the economy, including renewable energy, energy efficiency and housing. According to a January 12, 2015 CNBC article:
Coal mining is down to just 75,900 U.S. jobs, from 175,000 in 1985 and about 80,000 during 2009, when President Barack Obama took office, according to the Bureau of Labor Statistics. But at current rates, the U.S. economy would replace those jobs in a week if they all disappeared tomorrow. In Kentucky, where Sen. GOP Leader Mitch McConnell used the administration’s “war on coal” as a rallying point in this year’s election, the 11,000 coal-mining jobs equal the number created by the state’s economy in October and represent less than 0.6 percent of Kentucky jobs (emphasis mine).
Congress: Irrelevant or Meaningless? Tough Call.
The most highly visible wild card in this deck is the Republican-led Congress, whose climate denial caucus has grown stronger in the low-turnout (and I would argue low to no mandate) mid-term elections. The fealty of the GOP leadership (if not the entire rank and file) to the fossil fuel industry is nearly absolute. But do these views match up with the American people’s? How about their own constituency’s views? What about independents? Do they think pretending climate change does not matter and propping up fossil fuels (including enacting legislation to export gas and oil) is a wonderful idea?
According to a new poll from the Center for American Progress (CAP), the answer is “nope.” Here is a look at CAP’s results regarding the public’s views on energy.
It is remarkable how backwards Congressional Republicans (and coal state Democrats) have it. Not a lot of love here for nuclear power either. Nor should there be. See my previous column: “Radioactive Distractions,” for more on why.
But this disconnect is not the only reason Congress is irrelevant to the bigger picture of climate and renewable energy progress. In addition to lack of public support for their agenda, they don’t actually want to pass anything; instead they seem intent on squandering their political capital on issues they know will either fail in the Senate of be vetoed by the President, such as rolling back health care, seeking to reverse immigration measures, or most relevant to this discussion, approving the Keystone XL pipeline and repealing the Presidents Climate Action Plan. Despite the intensity of many in the GOP caucus, the real action on these issues is in the states, and it will remain so the next couple of years, even as Republican congressional ideologues repeatedly fall on their political swords.
Renewables gaining political and economic clout
Moreover, the industries Congressional leaders seem intent on killing have become burgeoning economic juggernauts, even in many “red” states. In particular solar and wind energy have become political heavyweights in some states long dominated by fossil fuel interests. Over the last five years solar employment grew by approximately 86%, adding about 80,000 jobs to the US economy, mostly during the worst economic downturn in nearly eight decades. The industry employs over 175,000 Americans (coal by contrast around 76,000) in all 50 states. Employment in this sector grew more than 20 times the national average over the last half-decade.
Renewable investment exceeded all expectations last year, topping $310 billion worldwide. Declining prices and improving performance of solar power is expected to continue to drive investment in this industry, creating even more jobs.
Despite outgoing Governor Rick Perry’s confused take on climate change, Texas is the nation’s leading wind producer (11 Gigawatts of installed capacity) and is seeking to expand its solar portfolio. Efforts to roll back net metering and Renewable Portfolio Standards failed last year in such states as Utah, Arizona and Kansas, hardly hot beds of wild eyed radicalism. Why? These industries have well-established supply chains and create many thousands of jobs in red states with outstanding renewable energy resources.
Low oil prices are a mixed bag
Of course the biggest energy story of the young year is plunging oil prices. While low prices are slowing the drilling boom and threatening many companies in that space (a good thing in my book) low prices will drive up carbon emissions, especially in the transportation sector as people drive more, unless clean energy policies like low carbon fuel standards and carbon pricing of transportation fuels can keep this expansion under control. And while prices are below $50 a barrel now, volatility in the oil sector is the norm, and a correction cannot be too far off.
All of this means relatively little for the electricity sector, because almost no electricity is generated by burning oil. Moreover, as we electrify the personal and public transportation sectors more, oil will be less likely to compete. Electric cars operate at the equivalent cost of about a dollar a gallon, or less than $25 a barrel of oil. This chart shows that even long range prices of gasoline are no match for the operational costs of electric vehicles. I should say though that electricity prices themselves are expected to rise somewhat. But they are typically nowhere near as volatile as oil prices.
All in all 2015 should be a year of political turmoil at the national level for progress on climate and renewable energy issues. But continued global job creation in the renewable energy sector, the increasing political clout of US renewable energy businesses, China’s efforts to cut CO2 emissions and the evolution of global energy markets increasingly away from fossil fuels should provide plenty of opportunity for continued progress in 2015.
Carl Zichella is the Director of Western Transmission for the Natural Resources Defense Council (NRDC)