Oil’s Out…Clean Energy Is In

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The International Energy Association (IEA) has spoken. What the world needs now is a clean energy technology revolution.

June saw the 2010 launch of IEA’s biannual report, Energy Technology Perspectives. Speaking at the launch was Nobuo Tanaka, executive director for IEA. The Gulf oil spill, he said, could prove to be a tipping point in the world’s energy consumption habits. He added that the disaster serves as a tragic reminder that our current path is not sustainable.

As far as the IEA is concerned, this is probably a very important moment to start looking at alternative energy sources. If we, as a collective group of consumers, continue on the business-as-usual path, the scenario for 2050 is looking grim.

This baseline scenario sees carbon emissions rising by 130%, with power generation accounting for 44% of total global emissions in 2050. Oil demand will be up by 70% – that’s five times the oil production in Saudi Arabia today. I’ll leave you to imagine what this means from an energy security perspective.

The other scenario offered by the publication, known as BLUE Map, is the “target” scenario. It assumes that all carbon emissions will be reduced by 50% by 2050 and suggests the least costly way to get there. This 50% reduction, the IEA insists, is the absolute minimum, should we want to keep climate change within the more acceptable 2-3 degree change.

The main focus of this scenario is, of course, weaning the world off fossil fuels. Carbon intensity of energy use would have fallen by 64% by 2050. Demand for coal would drop by 36%, gas by 12%, and oil demand by 4%. Renewable energy would be providing a hefty 40% of primary energy supply and 48% of the electricity generated. As for cars, 80% will be electric, hybrid, or hydrogen-fueled.

And while the world is expected to reduce emissions by 50% by 2050 in the BLUE scenario, it is the OECD that will bear the real burden. Non- OECD countries can get away with just a 50% reduction; OECD countries are looking at cutting 70-80% of their 2007 emissions. This would mean that the electricity sector for these 32 countries would have be “almost completely decarbonized” by 2050.

BLUE Map Emissions

So what needs to be done to make this work? Well, gird your loins – the “top priority” will be to increase energy efficiency, reduce energy consumption, and lower energy intensity.

But there’s also some exciting news. The revolution is already under way.

On a global scale, total investment into technology and its deployment between now and 2050 would be about US$45 trillion – 1.1% of average annual global GDP over the period. The good news is, that investment has already begun all around the world.

Even as China grudgingly accepts the mantle of the biggest energy consumer, investment dollars are being poured into renewable energy research. China has already surpassed the United States as the largest producer of clean energy, whether it be hydro, wind, solar, or nuclear.

Germany, Europe’s powerhouse, is lining up renewable energy to compete with nuclear. Currently getting 10% of its energy from renewable energy, Germany’s renewable numbers for 2020 are projected at 38.6% electricity, 15.5% heating and cooling, and 13.2% of the transport sector.

And in the United States, the Obama Administration has been pushing for, and encouraging, clean energy research and development since it came into power. On display are a variety of subsidies and loans guaranteed to tempt even the most conservative producer.

Whether it’s the 30% cash up-front that the government is willing to give renewable energy projects or the vast amounts of cash injections into various energy technologies programs, renewable energy is set to take off in America.

For those investment portfolios that have taken a hit from the BP and Enbridge oil disasters, the IEA report is only going to spur up greater interest in the renewables game. Knowing which companies are enjoying political favor from Washington to Berlin and are at the receiving end of substantial grants is a sure-fire way to repair the damage.

Regards,

Marin Katusa
for The Daily Reckoning Australia

Marin Katusa
Marin Katusa, who works with Casey Research, is an accomplished investment analyst who specializes in the junior resource sector. He left a successful teaching career to pursue analyzing and investing in junior resource companies. In addition, he is a member of the Vancouver Angel Forum where he and his colleagues evaluate early seed investment opportunities. Marin also manages a portfolio of international real estate projects. Using advanced mathematical skills, he has created a diagnostic resource market tool that analyzes and compares hundreds of investment variables.
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11 Comments on "Oil’s Out…Clean Energy Is In"

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brc
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I can’t believe this article was actually published on the Daily Reckoning.

Here’s an article that actually encourages investments in zombie alternative investment companies that only exist as a result of government largesse. It actually advocates investing in businesses that have no business plan past getting subsidised to produce a product that the free market will not buy on its own. While that might be great for the environment in the long run, it’s investing advice I’d never, ever follow. If your chief revenue stream is at the whim of politicians, that’s a pretty high risk profile.

Biker
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Get used to it, son. It’s a new world. The Chinese know that. They’re not just the world leaders in solar panel production, but in electric vehicles as well. And the Germans know it, too.

The US is just starting to play catch-up. It’s called ‘tech-no-logy’.
The zombies will be those who continue to depend on oil, as the world runs out of it. ;)

Don
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I love it when they calculate the cost effectiveness of renewables and compare them with those nasty nasty fossil fuel energy sources, all those figures are not quite correct. Take one of those big old lovely solar “power plants” they set up in the desert. All the panels are made using a fossil fuel base, they are transported all the way into the desert using diesel trucks, they are constructed by fossil fuel powered construction equipment driven by workers who either flew or drove out there on you know what kind of vehicles. When all that is done by a… Read more »
Biker
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Don, I agree. That’s not the answer. The easiest method is to simply subsidise each homeowner. The last four rentals we’ve fitted with panels cost us less than $1800.00 each. (The first one cost us $2500.00, for slightly less capacity.) Yes, it’s heavily subsidised by government. Yes, it creates local employment fitting these systems. Yes, it’s the future. Complaining about it reminds me of the introduction of both computers and mobile phones. A lot of oldies complained about computers when they were introduced. “Don’t need ’em. Won’t use ’em!” Mostly they’re deceased or converted. Same with mobiles. “I’ll never need… Read more »
Don
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I am not complaining about it as such, just pointing out that in my opinion there is little or no chance of such piddle power being used for heavy industry and the like. Absolutely nothing wrong with utilising solar for you home or anywhere else where it makes economic sense to do so. In fact it is in everyone’s interest to supply as much as their own power/food etc as possible. It is like people saying that if cars had advanced as much as computers you could drive for 1,000,000 kms on a thimble full of petrol. Cute concept but… Read more »
Biker
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“…there is little or no chance of such piddle power being used for heavy industry and the like…” Not with the technology as we currently know it. When I first started researching solar electricity systems, the standard panel generated 122W. Within months they were replaced by 125W panels. Small beer, I thought. When I started putting them on rentals, I realised that 250W was old technology… and the new standard was 300W. WA’s government apparently doesn’t believe that it’s ‘piddle power’, since the most they’ll ‘buy’ from our homestead system is 5kW. Clearly they don’t want competition. That will change,… Read more »
Don
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As I mentioned before I have no issues with people generating their own power for their domestic use – more power to you :)

Just saying that when it comes time to crank up my 20 megawatt grinding circuit, I wont be poking my head out the window to see if the sun is shining or the wind blowing to see if it is ok :)

Biker
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“…when it comes time to crank up my 20 megawatt grinding circuit…”

Sale of surplus energy is to the grid, Don. The sun does not need to be shining, the wind does not need to be blowing, the tides do not need to be rising or falling.

There’s no suggestion that alternative energy sources can run heavy industry (yet). Last year, in New Brunswick Canada, we saw an experimental tidal power station producing 5MWe. That’s a beginning. :D

peterg
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I’m contrarian to your viewpoint. I think large scale farms are more preferable at this stage. economies of scale high voltage network with low transit losses. storage of heat into liquid salt. satisfies the ptb with centralised control.(can’t have the rabids going feral). its estimated that domestic rooftop subsidies are at a cost of $600 per kwh. its so inefficient. as for the ‘alternatives’ being made from dirty black and brown stuff, that is so true, and true accounting should be used (is it ever?). that said, what are the gains from such investment, as a one off ‘sin’, and… Read more »
JoeR
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We have plenty of land (solar & wind), lots of coast (tidal), geothermal, coal, gas, nuclear in Australia, spare a thought for most countries (like Hungary where my parents came from and which would fit into NSW 12 times) who have neither. From an investment point of view there are great opportunities as in developing new industries. Like the article pointed out the oil supply (peak oil production) will not increase so even without global warming we will have to move to other energies.

Soylent
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“Get used to it, son. It’s a new world. The Chinese know that. They’re not just the world leaders in solar panel production, but in electric vehicles as well. And the Germans know it, too.” Sweden, Canada, France, Vermont and some other places have already had a clean energy revolution. Pushed coal and oil almost entirely off the electrical grid and we did it profitably. How? Nuclear and hydro; not fickle piddle power. Germany is a superb example of what not to do. They’ve spent a quite enormous amount of money, it has gotten them essentially nowhere except into a… Read more »
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