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The Simple Reason Why Renewables are Surging (It’s Not the Government)

by | published June 21st, 2017

After last year’s election, a number of pundits had predicted that a Trump victory would usher in a new age for coal and crude oil in the U.S.

Renewables, like solar and wind, would be used as alternatives only in certain regions of the country – or so these pundits suggested.

Well, it’ hardly worked out that way, even with the more recent decision to cut the U.S. from the Paris Climate Accord.

Renewables are soldiering on, and the reason is simple (and market-based)…

Even in the Heart of the Shale Oil Boom, Wind is Going Strong

Both solar and wind continue to decline in operating costs, while increasing in energy efficiency. The combination is making it difficult for coal to recover and poses a challenge in what had been oil-dominant areas.

Take West Texas, for example.

The Permian basin, which straddles Texas and New Mexico, continues to be the most preferred drilling location in the country.

Here, operating costs as compared to wellhead prices (the below-market price producers actually receive for the volume coming out of the ground) make for some profitable fields even at low oil prices.

And yet the same location has become the largest in the country for wind power. Meanwhile, other areas have witnessed a surge in solar power.

In both cases, the assumption not long ago was that once government subsidies had been phased out, a ceiling would form on additional renewable power production.

However, this argument in favor of a return to dominance for traditional energy sources failed to consider one salient point…

Solar and Wind are Now at “Grid Parity”

Solar and wind have become far cheaper to produce than even their strongest adherents had expected. That means they have both reached and exceeded “grid parity” – their generating costs being equal or lower than those of natural gas and even coal.

Yes, nuclear remains the cheapest way to produce electricity.

But the high costs of constructing nuclear power plants and the still long delays in approval and finishing the plants have propelled renewables into an ascendancy in the non-fossil fuel category.

Crude oil hardly figures into the electricity-generation equation in the U.S. And until the next massive wave switch in vehicle engines – electric, hybrid, CNG (compressed natural gas), and LNG (liquified natural gas) – distillates (gasoline and diesel) will have the lion share of the transport fuel market.

Which means that on the electricity production front, this has become a competition between coal and natural gas on the one hand, and renewables (solar and wind, with a marginal presence of biofuel and geothermal) on the other.

Now, natural gas production in the U.S. would seem to have been given a boost by the Trump Administration’s support for hydrocarbons. The problem has been a persistent surplus of production, combined with a penchant by Mother Nature to produce mellower than expected temperatures, which drives down air conditioning use and thus power demand.

The latter is likely to change as we move into summer and hotter temperatures. But the bottom line remains the same.

There’s a New Energy King in Town

Solar and wind have become far more competitive and have in some cases – West Texas (wind) and the Southwest (solar), for example – emerged as the preferable move.

All of which has set the stage for a very different scenario following the D.C. decision to make the U.S. one of only three nations opposed to the Paris Climate Accord.

Even then, that number is misleading, since Nicaragua largely opposes the agreement because it did not go far enough in combatting climate change. That leaves just the U.S. and Syria, of all places.

Yet here is the interesting matter.

Despite the elimination of government support and new management at the Environmental Protection Agency (EPA) bent on resurrecting coal, solar and wind continue to undercut the cost of increasing reliance on hydrocarbons.

Put simply, renewables are progressively becoming the energy “currency of choice” regardless of what exercise in political dominoes the Administration had in mind.

And consider this…

Solar and wind have added more than 500,000 jobs to the domestic workforce; a figure likely to be doubled by 2020.

Meanwhile, coal jobs have dwindled to less than 70,000… nationwide… and will decline even further by the end of the decade.

Regardless of the short-term electoral machinations practiced in the White House, the market itself is making its own decision.

While there will remain a position for coal in the developing energy balance, it’s not going to return to its dominance of last century. King Coal is not coming back.

THERE’S A NEW ENERGY KING IN TOWN

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  1. Thomas Coleman
    June 22nd, 2017 at 00:33 | #1

    How does the time to build a nuclear power plant in the U.S. compare to China?

    When you speak of parity for wind and solar, is that before or after tax subsidies?

  2. June 25th, 2017 at 07:58 | #2

    If solar is so cheap why are we still forced to subsidize it? Electric companies are forced to take it plus state, fed subsidize it. You are also not figuring in the fact that electric companies have to spend additional money for backup to solar/wind. It wasn’t too long ago in Texas that the wind quit blowing and since there was no backup the city went black. You have to figure in all costs and to date the public has been milked to death to subsidize green energy.

  3. Carl Townsend
    June 26th, 2017 at 17:43 | #3

    Please DO NOT encourage the USA to WASTE any more money subsidizing Wind & Solar energy. Let them compete on a Level Ground. If & when they can compete on the SAME BASIS, More power to them. But let mkt forces work their will. Stop wasting MY TAX MONEY. Let’s encourage the use of CLEAN Natural Gas, made in the USA, rather than Wind & Solar machines made in China. Stop encouraging EPA’s resources to WASTE TIME & ENERGY shutting down Coal-Fired Pwr plts since Natural Gas is doing this very well all by itself. EPA’s efforts in this effort were redundant & highly wasteful. I have degrees in Civil Eng, & MS in Env Sci & 20+ yrs of “Boots on the ground’ work w/the EPA as an inspector. Let the Acts of Congress WORK alone w/out Obama HUGE BIAS. Our Pollution Control pgms have worked very well for decades so leave them alone to work. Do not subsidize ANY fuel.

  4. Eric Bischoff
    October 6th, 2017 at 10:18 | #4

    There’s no such thing as clean gas or clean coal. It’s production continuously releases methane which is 80 times more destructive than Co2. All energy development is subsidized, Oil is subsidized, nuclear is heavily subsidized. Plus if we were honest we would allocate the cost of military as it relates to oil and nuclear. You are on the losing side of a futile argument. Solar and wind are the fastest growing, their production price is falling faster that projected, the clean jobs created dwarf the other carbon and nuclear energy sectors and it’s clean for the environment. We should have a manhattan project to increase and speed up it’s deployment. And we should be repurposing the fracking drillers and slant drillers towards developing geothermal instead of ruining our precious water table for barely 30 years of gas reserves.

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