Progress Report: Peak oil and zero-carbon grids
Nigel Topping, CEO of the We Mean Business coalition
Welcome to the February edition of the Progress Report, where surging demand for cleaner transport is sparking renewed reflection on the future of oil demand, while the UK and Germany lead the charge for increasing renewables in Europe.
Peak oil is coming
Remember when people used to have heated debates about peak oil production? The assumption being that our insatiable demand for oil would far outstrip all the reserves hidden beneath the earth’s surface – it was only a question of when. Now the debate is intensifying around the timing of peak oil consumption, with even the oil majors accepting that the inevitable rise of electric vehicles (EVs) will curtail demand for the black gold.
BP’s annual Energy Outlook has, for the first time, forecast a peaking in global oil consumption. The British oil giant is predicting that consumption will plateau at around 110 million barrels a day by 2040, from current levels of sub 100 million. BP put this largely down to expected growth in EVs, which it sees making up around 15% of registrations by then, though accounting for some 30% of passenger vehicle kilometres due to shared use.
While this is a welcome acknowledgement from BP, the forecasts on the EV rollout are woefully pessimistic and the timescale for the peak is some ten years behind what Fitch Ratings put forward earlier this month. It’s also years off what Royal Dutch Shell Chief Executive Ben van Beurden predicted last year when he called the peak in the early 2030s thanks to the surge in EVs.
And critically, that surge is starting to materialise, with China proving to be the growth engine. Full-year data from 2017 shows global plug-in EV deliveries reached 1.2 million units in 2017, up 58% on 2016, with China making up roughly half of the total thanks to year-on-year growth of 73%.
The global share of plug-in EVs hit 1.3% of the overall light car and truck market in 2017, which is up from 0.9% in 2016 and more than double the share in 2015 of 0.6%. The fact that the market share of plug-in EVs has more than doubled in two years shows the start of the exponential growth rate that will get the market to 100% by the close of the 2020s (#DoTheExponentialMath).
My prediction that the market share of EVs will double roughly every two years has been dubbed ‘Topping’s Law’, by colleague and collaborator Peter Bakker, President of the World Business Council for Sustainable Development!
Meanwhile, the Union of Concerned Scientists have completed a two-year study comparing the environmental impact of conventional cars with battery powered alternatives – finally putting to bed the myth that EVs are more polluting. They found EVs generate roughly half the emissions of the average gasoline car, assuming a ten-year lifecycle, even though they have a more emissions-intensive production process.
At the heavier end of the EV rollout, UPS has been running a trail of 50 Workhorse plug-in hybrid electric trucks and found they are cost competitive with their conventional trucks. 50 trucks might seem like a small number when you consider the size of the UPS fleet, but the fact that Workhorse are proving their competitiveness has major implications for the delivery market.
And we shouldn’t forget the fastest moving sector – public transport. Shenzhen made good on its pledge to electrify its entire 16,000-strong bus fleet by the close of last year. Add to that the rollout of Daimler’s electric school bus next year and the great work of the C40 Cities Climate Leadership Group and it leads to the realistic expectation that diesel buses will be soon be a relic of the past.
Also in the EV sector, Geely Chairman Li Shufu has made a big bet on the future of Daimler. Lu has invested some $9 billion in the German automaker as he looks to expand the Chinese automakers’ global reach and get ahead in the race to electrification.
Zero-carbon grid in sight
2017 marked a new high for Europe’s renewable electricity generation at 30%, according to a new report from Agora Energiewende and Sandbag. While this is up only marginally on the previous year, huge growth in wind generation managed to offset significantly lower hydro generation levels.
Wind generation grew by a massive 58 Terawatt hours, solar grew by 9 Terawatt hours and biomass grew by only 5 Terawatt hours, which led to wind, solar and biomass generation surpassing coal generation for the first time in the region’s history.
The UK played a big role in that, accounting for more than half of all Europe’s new offshore wind power capacity built last year, having added 1.7 GW. The UK also added 2.6 GW of onshore, giving it a total of 4.3 GW of extra wind power. In terms of the EU’s ranking of total wind additions, this puts the UK only behind Germany, which brought 6.6 GW online in 2017.
The UK also boosted its credibility by having its greenest year yet in 2017, with roughly half of its electricity coming from low-carbon sources. In fact, the renewable output for the year would have been enough to power Britain for the whole of 1958.
Speaking of rankings, it was well pointed out this month, that the Indian state of Tamil Nadu has an installed wind capacity that would put it well among the leaders of the pack in Europe. It’s current wind capacity of 7.9 GW is in fact higher than that of Sweden, Denmark and Portugal. However, Tamil Nadu has a lot further to go to cut its dependence on coal from its current eye-watering level of 69%.
Another major milestone in the energy sector this month came from American Electric Power (AEP), which became the latest major power utility to layout a long-term plan to tackle emissions from its power plants. AEP aims to cut emissions 60% by 2030 and by 80% by 2050, compared to 2000 levels. While there is clearly further to go in terms of ambition from the US power sector, this positive step from AEP is certainly welcome.
Also in the US, First Solar has been given the go-ahead to build a 200 MW solar project in Georgia, which will be the largest in Southeast US.
Staying in the energy space this month, Vattenfall CEO Magnus Hall called on the German government to be clearer on the country’s coal phase-out. Spain’s Balearic Islands have proposed a new Climate Change Law that would allow it to switch to 100% renewable energy by 2050, putting it on a collision path with Madrid and its infamous ‘sun tax’.
South Australia’s Jay Weatherill has promised to lift the region’s renewable energy target from 50% to 75% by 2025, while introducing an energy storage target. A move that is also seen as a challenge to the government’s unambitious stance. Weatherill also announced an innovative project with Tesla this month which would see homeowners in the region being offered Tesla solar tiles or panels, with battery storage, free of charge in exchange for the electricity generated.
And a new study from Stanford University, UC Berkeley, and Aalborg University in Denmark, on 20 regions of the world, found that it is possible to avoid blackouts at low costs with a power grid with 100% wind, water and solar power plus storage. The kindergarten assumption that you can’t have a 100% zero-carbon grid because the sun doesn’t shine at night has been overtaken by ongoing renewable generation cost reductions and advances in storage, interconnectors and demand management. Industry experts understand this and are calling for policy makers to catch up – the prime example being the European industry body Eurelectric. Here are two quotes from the recent release of their new vision for the electricity sector in Europe, showing how the sector is embracing the low-carbon transition as a driver of innovation and growth.
“Electrification of heating, transport and industry is a win-win. It comes with higher efficiency and lower CO2 emissions. We should do everything possible to advance electrification with smart regulation,” said Magnus Hall, CEO of Vattenfall and Vice-President of Eurelectric.
“Our sector shares a vision of a clean and fully sustainable European energy future. This is within reach and electricity plays a key role in realising it. Today we declare the determination of our sector to accelerate the process and make the European power sector carbon-neutral well before mid-century,” said Francesco Starace, Eurelectric President and CEO of the Italian energy group Enel.