Everything is changing.
We remain the complex, creative, courageous, fearful, insular but remarkable creatures we have always been.
It is the world around us that is morphing at warp speed into a future we only dimly imagine.
In November 2013, 15,000 scientists reissued a warning to humanity of “widespread misery and catastrophic biodiversity loss” unless business-as-usual is changed. “By failing to adequately limit population growth, reassess the role of an economy rooted in growth, reduce greenhouse gases, incentivize renewable energy, protect habitat, restore ecosystems, curb pollution, halt defaunation, and constrain invasive alien species, humanity is not taking the urgent steps needed to safeguard our imperiled biosphere,” they wrote.
Former UN climate chief Christiana Figueres and physicist Stefan Rahmstorf warn that the world has approximately three years before the worst effects of climate change become inevitable. In an open letter they urge companies, communities, countries and citizens to cut carbon emissions now, arguing that failure means fires, floods, droughts, rising sea levels, extreme weather, agricultural losses and massive insurance costs. Already 65 million people are fleeing failed states driven to collapse by climate change.
Humanity is in a horse race with catastrophe. The good news is that we are in the race.
We have all of the technologies we need to solve the worst of the crises facing us, and buy the time to deal with the rest. More are entering the market every day. In 2009, Stanford scientist Dr. Mark Jacobson showed that renewable energy could power the entire world by 2030. His Solutions Project calculated how to do this for every state in the U.S. and many countries. More recently, scholars like Christian Breyer have shown how to do this with photovoltaics.
Stanford Professor, Tony Seba argues that not only is it possible, it is inevitable.
In his book, Clean Disruption, Tony describes the convergence of disruptive technologies and business models, especially four factors: the fall in the cost of solar energy, the fall in the cost of storage (batteries), the rise of the electric vehicle, and the advent of the driverless car. These innovations, he argues, by delivering renewably powered, electric vehicle transit as a service (TaaS) will be ten times cheaper than current private ownership of internal combustion cars. In the process, this shift will power the entire world renewably. Seba points out that whenever in history a new technology has enabled ten-fold savings, it has driven disruption of the dominant industry.
He reminds doubters that experts totally underestimated sales of mobile phones. In the 1990s, McKinsey told ATT that to expect 900,000 mobile subscribers by the year 2000. They were only off by 108 million. By 2014 there were more mobile phones on earth than the seven billion people, increasing five times faster than humans.
Seba warns that falling costs will see solar achieving not only global grid parity by 2017, but what he calls “God parity.” This means that the cost to put solar on your roof is cheaper than just having the utility sell power to you and maintain its lines. In this scenario, which Seba believes could come as early as 2020, even free electricity at any central station would be more expensive than distributed solar. Tony writes:
Don’t believe in the Clean Disruption? The IEA wants you to invest $40 trillion in conventional energy (nuclear, oil, gas, coal) and conventional utilities. It’s their Kodak moment. It’s your money.
OK, a new solar array goes up in the U.S. every 150 seconds, but can the whole world be renewable by 2030? No way, you say….
Or will it?
I’ve been following Tony’s work for many years, but after the U.S elected its Child-in-Chief, I wanted to ask whether he was still optimistic. This June he told me that he’s even more convinced that he is right. Since then I’ve watched for signs to prove or disprove his thesis. Here’s what I’ve found:
In August China announced that it had already eclipsed its 2020 goal in solar installations. It now adds 45 gigaWatts of solar (more than the entire installed solar capacity of Germany) every year. California now predicted it will hit its declared 2030 target of getting 50% of its power from renewable energy by 2020—10 years early. The state is now debating resetting the goal to 100% renewable power. More than 100 companies have set such a goal.
Why? Because the cost of solar is falling rapidly. In April, 2017, an industry journal predicted that solar power would fall below 2¢ per kilowatt hour (kWh) that year. In October Saudi Arabia announced the new world record low price: 1.7¢/kWh.
When the Kentucky Coal Museum puts solar on its roof rather than plug into the coal fired electric grid at its doorstep, you know that the fossil era is over.
Well, OK, we CAN run our society on solar energy, but what if the sun isn’t shining or the wind blowing?
Storage technology to make renewable energy available 24/7 is only in its infancy as an industry, but its prices are collapsing. Combinations of renewable energy and storage are now cheaper than the fossil alternatives.
When the Aliso Canyon natural gas well blew out, spewing 100,000 metric tons of methane, a potent greenhouse gas, across neighborhoods and into the atmosphere, the local utility feared it would be unable to keep lights on in Southern California. In record time, Tesla and others installed 20 megawatts of battery storage (supplying 80 MWhours) at a price cheaper than building a new gas peaking plant, and vastly faster. Tesla then installed 100 MW of storage in South Australia, creating the world’s largest battery, fulfilling a promise to build it in 100 days or charge nothing for it and proving that grid-scale storage can be deployed faster, cheaper than any other option.
Tesla, in mid-2017, valued at more than General Motors or Ford, had proved the sexiness of electric vehicles. But how on earth can a company selling 1% as many cars consider itself a car company? It doesn’t. Tesla is really a battery company. Or more to the point, an integrated energy services company. Whatever you call it, it’s disruptive.
In late 2016 the Financial Times reported that Fitch Ratings warned:
“Widespread adoption of battery-powered vehicles is a serious threat to the oil industry….The oil sector would not be the only industry affected. Big electricity utilities burning fossil fuels such as gas or coal face the risk of batteries solving the intermittency problem of wind or solar plants that cannot generate on windless days or at night.
Utilities with a lot of gas “peaker” plants that deliver power quickly at times of peak demand, when prices are generally high, could be more at risk. If batteries start supplying this peaking power, prices could eventually fall to the point where “traditional peakers can no longer compete….But the impact of batteries on the oil industry may be profound…. transportation accounted for 55 per cent of total oil use in 2014….An acceleration of the electrification of transport infrastructure would be resoundingly negative for the oil sector’s credit profile….In an extreme scenario where electric cars gained a 50 per cent market share over 10 years about a quarter of European gasoline demand could disappear.
It endangers the banks, as well: a quarter of all corporate debt, perhaps as much as $3.4 trillion is related to utility and car company bonds that are tied to fossil fuel use. Fitch, the ratings agency, warned that low cost batteries could
“…tip the oil market from growth to contraction earlier than anticipated. The narrative of oil’s decline is well rehearsed—and if it starts to play out there is a risk that capital will act long before” and in the worst case result in an “investor death spiral.”
Anyone doubting this risk must have been sobered when in September 2017 China announced that it was going to phase out internal combustion vehicles. Given that China represents a quarter of the global automobile market, this, coupled with India, France, the UK, and Norway making similar announcements, is an existential crisis for both the oil and car industries.
About a week after China’s announcement, Jerry Brown, the Governor of California, the world’s fifth largest economy, asked Mary Nichols, head of the state’s Air Resources Board, whether California could do the same. Two days later she said yes. Two days later Jerry said, then we will. That was a Friday.
Monday, General Motors, which had reclaimed its coveted status of the world’s leading automobile manufacturer on the strength of its Bolt electric car, announced that its future is electric. Meanwhile, Daimler, Volkswagon and Volvo have committed to electrifying their entire product portfolios.
Hmmm, we’re three for three. But in Seba’s scenario, it’s the driverless, autonomous electric vehicle (AEV) that drives the real reduction in cost he claims will make the disruption inevitable. Are AEVs more than just science fiction? Didn’t Tesla’s self-driving car kill a guy?
To get the straight story, I talked to Tom Chi, the brilliant head of Product Experience at Google X and one of the designers of the self-driving Google car. Is what Tony’s saying possible?
“Within ten years?” asked Tom. “Easy.” Tesla, he said, released its driverless vehicle when it was as safe as a human driven car. Remember, hundreds of thousands of people die every year in car crashes. The Teslas have been driven more than 5 billion miles in autonomous mode, en route to the company’s 10 billion mile safety proof point. In fact, all Teslas are now capable of full autonomous mode. The Google car has driven four million real miles, and 2.5 billion simulated miles. Waymo, Google’s spinoff, threatens to have its service on the road very soon.
It gets better. GM just announced that it is pivoting its business model to offer autonomous electric vehicles Transit as a Service by 2019.
Does that make it four for four? Is Tony right?
You decide. But realize that if the evidence laid out here is true, it has profound implications for, well, everything. It will mean the dissolution in value, likely complete loss of the oil, gas, coal, uranium, nuclear, utility, auto industries, the banks that hold the loan paper for all of these companies and the pension funds that are invested in them.
It will mean an economic collapse on a scale never seen on earth coming at us within about 10-year’s time.
Consider take oil. In 2011, Mark Campanale and his colleagues at Carbon Tracker published “Unburnable Carbon—Are the world’s financial markets carrying a carbon bubble?” They calculated that at least 80% of the fossil deposits still in the ground would have to stay in the ground if the world is to avoid warming beyond 2 degrees C more that pre-industrial levels.
Given that those fossil assets are on the balance sheets of some of the world’s wealthiest companies and form the basis of the sovereign wealth funds of many nations around the world, John Fullerton, previously a Managing Director set out to calculate the enormity of stranding these assets. His article “Big Choice,” reckoned that this implied a write-off of at least $20 trillion dollars. In contrast, Fullerton warned, the 2008 financial collapse was triggered by the stranding of only $2.7 trillion in mortgage assets. So we’re looking at an order of magnitude greater dislocation from the triumph of the sun.
Mark Campanale recently told me that it’s worse: an October 2017 CitiGroup report calculated that if you count the foregone revenues from not digging up, selling and burning all that fossil fuel, the looming loss is $100 trillion, or more that global GDP.
What can be done?
For starts, it appears unwise to have any of YOUR assets in the industries that will be disrupted. Bevis Longstreth, former Securities and Exchange Commissioner, observed,
“It is entirely plausible, even predictable, that continuing to hold equities in fossil fuel companies will be ruled negligence.”
Norway recently announced that it is considering divesting of ownership in fossil industries. BNP Paribas, the large French bank sold its holdings in a tar sands pipeline. Change Finance offers an Exchange Traded Fund, CHGX, that is entirely fossil-fuel free. For the price of a pizza, ordinary individuals can now invest in companies that are not subject to the looming fossil risk.
Where does your energy come from? Are you dependent on an industry that is at risk? Millions of people, communities and cities are going 100% renewable.
Is your job at risk? Companies will either become part of the solution or they won’t be a problem, because they won’t be around. The emerging industries are creating millions of jobs, but millions are at risk. Will we substitute a Universal Basic Income? Will we entrepreneur our way to a Well-being Economy? Will we descend into unimaginable darkness? Or will we create a Finer Future?
Either way, we will totally transform the global economy. The crises we face, and the inevitabilities of change described here WILL drive this change.
The change is here. How will you change to deal with it?