Global Economic Realities Confirm, the ‘Future is Not in Fossil Fuels’
by Deirdre Fulton –
While oil and gas companies falter, ‘renewable energy has reached a tipping point,’ says World Economic Forum expert.
Underscoring the need for a global shift to a low-carbon economy, a new report finds a record number of U.K. fossil fuel companies went bust in 2016 due to falling oil and gas prices.
The Independent reported the analysis from accounting firm Moore Stephens which found “16 oil and gas companies went insolvent last year, compared to none at all in 2012.” And the trend was not unique to the U.K.—a year-end bankruptcy report from Texas-based Haynes and Boone LLP showed there have been 232 bankruptcy filings in the U.S. and Canadian energy sector since the beginning of 2015.
“As the warnings from climate science get stronger, now is the time to realize…that the future is not in fossil fuels,” Dr. Doug Parr of Greenpeace U.K. told The Independent. “It’s also time for government to recognize that we should not leave the workers stranded, but provide opportunities in the new industries of the 21st century.”
Those opportunities are likely to come in the renewable energy sector, as the World Economic Forum (WEF) announced (pdf) in December that solar and wind power are now the same price or cheaper than new fossil fuel capacity in more than 30 countries.
“Renewable energy has reached a tipping point,” Michael Drexler, who leads infrastructure and development investing at the WEF, said in a statement at the time. “It is not only a commercially viable option, but an outright compelling investment opportunity with long-term, stable, inflation-protected returns.”
Quartz reported last month:
In 2016, utilities added 9.5 gigawatts (GW) of photovoltaic capacity to the U.S. grid, making solar the top fuel source for the first time in a calendar year, according to the U.S. Energy Information Administration’s estimates. The U.S. added about 125 solar panels every minute in 2016, about double the pace last year, reports the Solar Energy Industry Association.
The solar story is even more impressive after accounting for new distributed solar on homes and business (rather than just those built for utilities), which pushed the total installed capacity to 11.2 GW.
And as Paul Buchheit noted in an op-ed published Tuesday at Common Dreams, “solar is also creating jobs at an unprecedented rate, more than in the oil and gas sectors combined, and 12 times faster than the rest of the economy.”
But it remains unclear how these trends will develop under an incoming Donald Trump administration.
As Moody’s Investor Services reported Tuesday, under Trump’s fossil-friendly cabinet, “U.S. energy policy likely will prioritize domestic oil and coal production, in addition to reducing federal regulatory burdens.”
In turn, according to Moody’s:
Increasing confidence in the oil and gas industry’s prospects will spur acquisition activity among North American exploration and production (E&P) firms, Moody’s says. Debt and equity markets are again offering financing for producers seeking to re-position and enhance their asset portfolios after a lull. [Merger and acquisition activity] will also pick up in the midstream sector. At the same time, integrated oil and gas firms will continue to improve their cash flow metrics and leverage profiles by cutting operating costs, further reducing capital spending and divesting assets.
Even so, the oilfield services and drilling (OFS) sector is in for another tough year, with continued weak customer demand, overcapacity, and a high debt burden.
Bottom line, wrote Buchheit, is that with the rapid expansion of solar power, Trump has “the opportunity to make something happen that will happen anyway, but he can take all the credit, with the added bonus of beating out his adversary China.”
“Unfortunately, Trump may not have the intelligence to recognize that he should act,” Buchheit wrote. “And the forces behind fossil fuel make progress unlikely. But there is plenty of American ego and arrogance and exceptionalism out there. We need some of that ego now, just like 60 years ago, when the Soviet accomplishments in space drove us toward a singular world-changing goal. Then it was the moon. Now it’s the sun.”
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Reprinted with permission from Common Dreams