Renewable Energy: Profiting from Fossil Fuels' Woes

Submitted by Rosalinda Sanquiche

By Rosalinda Sanquiche, co-author, Green Transition Scoreboard® Report

Over $2 trillion has been privately invested globally since 2007 in renewable energy, the highest sector monitored by the Green Transition Scoreboard®. While reduced cost and greater efficiencies are a large part of the story, renewable energy is benefiting also from changing attitudes toward fossil fuels and diminished returns on these investments.

Coal Falls Out of Favor

Goldman Sachs cautions that coal mining and infrastructure “projects will struggle to earn a positive return,” based on environmental regulations discouraging coal-fired generation, energy efficiency improvements and strong competition from gas and renewables, for example, recognizing onshore wind power as a mature technology.

Cloud Peak Energy recently decided to forego the lease to an estimated 149 million mineable tons adjacent to the company’s existing Cordero Rojo Mine, stating that “in combination with prevailing market prices and projected costs of mining the remaining coal, we were unable to construct an economic bid,” the first US Bureau of Land Management coal lease sale in Wyoming to receive no bids.

Coal faces encroachment from hydroelectric, solar PV, onshore wind, biofuels and geothermal which, together with other renewables, provide 20% of global power generation and are predicted to provide 25%, according to the International Energy Agency, by 2018.

Distributed Energy Gains on The Grid

Geothermal technologies are being redesigned to respond to the need for flexibility, addressing the question of intermittency, without imposing significant cost. NRG Energy CEO David Crane believes customers will move to distributed energy as quickly as cellphones supplanted landlines in US homes, diminishing the need for utility grids.

The FDA's 26-megawatt microgrid kept its White Oak facility running during hurricane Sandy and saves the US government $11 million a year in electricity costs. Villages in India use microgrids, providing needed electricity, while the process of connecting its northern and southern utility grids lags.

Stranded Assets

Increasingly worldwide regulations are leaving fossil fuel investments as stranded assets. In communication with Hazel Henderson, president of Ethical Markets Media, Christine Tørklep Meisingset, Head of Sustainable Investments for Storebrand, a major Norwegian pension fund advisor, confirmed the company has excluded from its Energy Sector all 13 coal producers and its six oil companies with the highest exposure to tar sands.

Meisingset explained that in light of climate change, Storebrand needed to adjust its investment strategy to reduce exposure to fossil fuels, which are becoming unburnable and dramatically losing financial value. Dutch Rabobank will now refuse loans to companies involved in tar sands and shale gas, citing the long-term financial and environmental risks are too large.

Existing nuclear infrastructure is threatened, less due to often mentioned safety concerns, but because many nuclear reactors face "economic abandonment." In the US, four nuclear reactors have been retired: Wisconsin’s Kewaunee site closed for lack of competitiveness and three others because of excessive costs of repair. Another five have cancelled uprates (increasing power by tapping into the excess capacity designed into commercial reactors, requiring upgrades to non-nuclear equipment such as turbines, pumps, motors, generators and transformers).

In a federal ruling supporting Entergy’s Vermont Yankee plant’s continued operation, the ruling’s language allows the state the right to reject nuclear plants for economic and environmental reasons. Entergy has decided to close the plant regardless. President of Entergy Wholesale Commodities Bill Mohl stated, “the decision was solely based on economics.”

Shale: Bridge to Nowhere

Energy industry expert Bill Powers, author of Cold, Hungry and in the Dark (2013), explains the promise of “100 years” of shale gas mentioned by US President Obama in the 2012 State of the Union is based on misrepresentation of recoverable shale gas, much of which is only potentially recoverable.

Shale gas production has plateaued since December 2011. According to Powers, cheap gas, the increase in industrial, commercial and residential demand and the electric power industry’s switch from coal to natural gas as feedstock will send shale gas prices soaring, leading renewables to “grow substantially as technology improves and gas prices rise.”

Further debunking the myth, major players BP, England’s BG Group and Canada’s Encana have taken write-downs on their assets. While lucrative sales of hydrocarbons rights and tax revenues make shale appealing, the US military is opting for solar over shale gas as often as possible, both as life-saving (deadly convoys), back-saving (solar cells embedded in backpacks) and cost savings (where solar beats shipped gas in Hawaii).

Investments in renewable energy are expected to grow significantly in the next several years, in large part thanks to the inherent financial, manufacturing and functionality flaws of fossil fuels.