Economic and Technological Transition

by Tom Buckley

The following article is being reprinted with the permission of the Institute for Energy Economics and Financial Analysis.  It has been edited to fit.

What’s missing from Donald Trump’s economically ludicrous promise to revive failed Rust Belt industries in the U.S. is an honest discussion of the economic and technological transition that is rapidly unfolding. New industries are growing that have already created many millions of jobs around the world and that will provide clean energy to power the 21st century.

This is not an “alternative fact” — it is the only game in town.

For the second straight year in a row the demand for coal has dropped. Renewable energy technologies are increasingly competitive with thermal electricity generation — without subsidies and without factoring in all the hidden costs of thermal power plants and their associated extractive industry requirements (think water pollution, emissions, coal ash, mercury).

Late last year, the Institute for Energy Economics and Financial Analysis (IEEFA) published “2016: Year in Review — Three Trends Highlighting the Accelerating Global Energy Market Transformation,” it examines the broad emerging patterns and highlights country-specific trends and key data on national and international investment toward renewables and clean energy technologies.

Throughout 2016, as with 2015, the indicators of great change in energy markets could be seen everywhere. But when examined holistically at a global level, the scale and pace of change is simply staggering — not entirely unexpected, but staggering nonetheless.

The breakthroughs have been dramatic. Our research found solar farms contracting to supply power at record low tariffs across countries as diverse as India, the United Arab Emirates, Chile, Argentina, Mexico and South Africa in 2016. Offshore wind farms are being tendered for off Germany that will supply electricity without subsidy, a decade ahead of the most bullish expectations even just last year. Rapidly falling costs of battery storage will allow time shift solar to power homes without interruption.

Australia’s policymakers and pundits need only to look at their neighbors in China and India to understand the breadth and scope of this transformation. The fact that we still have politicians holding up lumps of coal in our national parliament as some sort of testament to the fossil’s future is breathtaking in its stupidity, and indeed its complete failure to recognize some very simple basic economics.

This suggests stupidity on the part of our elected officials, simple economic illiteracy, or just sponsored obfuscation.

Away from the petty political sideshow of the Australian energy debate, on show for all to see at full steam the last few days, China and India are embracing clean energy as they seek to address local pollution, reduce energy imports, reduce fossil fuel imports — and protect the global climate. They boast economic growth rates more than twice that of the US — and they are embarking on transformative investments in their power sectors.
But the lessons from around the world are clear: successful clean energy industries need domestic policy support and regulatory encouragement.

Too often, incumbent mostly foreign owned fossil interests have proved adept at using well-paid lobbyists and generous campaign contributions to shift the playing field away from its clean energy competitors.

The Paris agreement does much to address this imbalance. It provides a roadmap that leads away from the fossil-fuelled economy of the past towards a global economy that is compatible with a sustainable climate. It gives encouragement to investors and entrepreneurs that they will find ready markets for low-carbon technologies.

Regardless of Trump’s decision or Australia’s weak commitment to the Paris agreement, the urgency of the climate change challenge means that those markets will still be created. Costs will continue to fall to a degree that fossil industries will be outcompeted. Investments in high-carbon infrastructure will likely become stranded, costing their owners dearly. Repudiating or shunning the Paris agreement may slow this process, but it won’t reverse it.

Tragically it will be the stranded economies, the stranded communities and the stranded workers and their families who will face the brutal fallout from the failure of political leaders to grasp, or even acknowledge, the greatest economic, financial and technological changes we have seen in nearly 150 years.

Tim Buckley is director of energy finance studies, Australasia. A version of this column was originally published in The Guardian.

Institute for Energy Economics and Financial Analysis
June 22, 2017, IEEFA Op-Ed: Blind Faith in Fossil-Fuel Industries Will Strand Economies, Communities, Workers.


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