London — The economics of wind and solar twinned with electric vehicles "crush oil" over a 25-year view, according to analysis by French investment bank BNP Paribas.
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The report, "Wells, Wires and Wheels," notes that for gasoline to yield as much useful energy as new solar PV projects, oil would have to trade at $10/b -- or 80% below the current market price.
"While oil has a massive flow-rate advantage [over wind and solar], this is time limited. We think the economics of renewables are impossible for oil to compete with when looked at over the cycle," Lewis said.
It would cost six to seven times more to get the same amount of mobility from gasoline as from new renewables in tandem with EVs over the next 25 years, he said.
Even including the cost of building new network infrastructure to cope with all the new wind and/or solar capacity implied by replacing gasoline with renewables and EVs, the economics of renewables still crush those of oil.
Extrapolating total expenditure on gasoline in 2018 for the next 25 years would see $25 trillion spent on mobility, whereas BNP Paribas estimates the cost of new renewables plus network enhancement needed to match 2018 levels of mobility provided by gasoline every year for the next 25 years at $4.6 trillion-$5.2 trillion.
"The clear conclusion of our analysis is that if we were building out the global energy system from scratch today, economics alone would dictate that at a minimum the road-transportation infrastructure would be built up around EVs powered by wind- and solar-generated electricity," Lewis said.
This was before factoring climate and clean-air benefits, the fact that electricity was easier to transport than oil, and that the price of electricity generated from wind and solar was low and stable over the long term while the price of oil was "notoriously volatile".
With 36% of crude oil demand accounted for by light duty vehicles and other vehicle categories susceptible to electrification, and a further 5% by power generation, the oil industry "has never before in its history faced the kind of threat that renewable electricity in tandem with EVs poses to its business model," Lewis said.
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