Ambition paves the way for continued energy transitions

The Barrel blog turned 10 years old on April 2, and to celebrate, we’re sharing special posts throughout the month. As a part of the celebrations, Ross McCracken examines why the fossil fuel age won't end for a lack of coal, gas or oil.

The pace of technological change within the energy sector has been rapid over the last decade and shows no sign of abating.

Within the power sector, renewables, in the form of onshore wind and utility-scale solar PV, have become competitive with fossil fuels, and have done so at a time of relatively low oil prices. Portugal is building a Feed-in Tariff (FiT) free 300 MW solar PV facility, while Danish utility Dong offered and won subsidy-free bids for three offshore German wind projects in April.

A key change has been the switch from FiTs to competitive auctions, which forces bidders to factor in expected future declines in renewable energy costs — if they want to win. But the significance is that they can. Advances in wind turbine size and in solar cell efficiency, materials and manufacturing suggest that renewables will continue to see further reductions in cost.

This forward perspective is important because conventional technologies, such as nuclear, coal or gas-fired power generation, cannot make the same claims, while the latter two both carry major fuel price risk. That the cleanest forms of power generation have become the least-cost option in any generation portfolio is a critical turning point for the power industry and the fossil fuel producers that supply it.

Falling technology costs are also evident in the transportation sector, with a proliferation of hybrid electric vehicles already on the market, and new models of pure electric cars now being offered at around $40,000. Battery costs are falling fast as the first Giga-factory moves towards completion.

Just as with solar and wind, widget-style production of batteries promises significant learning-by-doing cost gains.

In Norway, pure electric cars made up 29% of new sales in 2016 on a par with gasoline engines. In China, sales of electric buses last year reached 115,700, up from just 1,672 in 2013. Alternative modes of transport are still washing at the margins of a sector dominated by oil, but an exponential growth attack on oil's last bastion has precedent in the spectacular and consistently under-estimated early growth of renewables.

Moreover, a combination of city air pollution, air quality standards, environmental activism, public concern and mayoral power has created a potent cocktail of forces driving a backlash against diesel engines. This is resulting in a plethora of abatement measures being proposed in the world's major cities, affecting tens of millions of vehicle users, passenger and commercial alike.

Alternative modes of transportation, such as Compressed Natural Gas, electric vehicles and hydrogen-powered engines, already receive tax breaks in many countries. Now their competition faces surcharges and bans, nudging the economics ever closer in favor of the technological upstarts.

But most significant of all, both for power and transportation, is the change over the last decade in the level of ambition. Concerns 10 years ago that more than 20% wind penetration in a grid would create massive instability were alarmist. The technologies to mitigate variable power generation are being tested, developed and deployed. There is now little on the technology front that stands in the way of 100% renewable electricity systems.

Industrial revolutions and changes in energy systems are natural bedfellows.

It should be no surprise that huge improvements in information technology should provide the means for new forms of energy provision, use and trade. The stone age did not end because of a lack of stone, and the fossil fuel age won't end for lack of coal, gas or oil. Instead, it will be usurped by the electron, provided by zero fuel cost generation in a digital world.