‘Green energy’ a casualty of low oil prices
By Henry Bonner ([email protected])
Reports on the biggest losers from the oil price drop have become commonplace, with Russia topping the list. But there’s one big loser that few people are talking about.
‘Green energy’ is predicated on providing an alternative to fossil fuels, says Mr. Epstein, author of a recent top-selling book, The Moral Case for Fossil Fuels. The Wall Street Journal called the book “a full-throated defense […] of the American way of life.”
Green energy is much more expensive than fossil fuel energy. It relies on the expectation of higher and higher prices for oil and other fossil fuels.
Usage of green energy has increased over the last decade. The stimulus plan set aside $90 billion for clean energy programs. Electricity generation from wind will make up 4.7% of total electrical generation in 2015, according to the U.S. Energy Information Administration.1Solar is expected to make up 0.6% of US power generation.
I spoke with Mr. Epstein about why green energy may be a casualty of the oil price drop.
What does it mean for ‘green energy’ as oil and gas prices have gotten cheaper?
Whereas high oil prices naturally muted demand, lower oil prices stoke consumption.
Consuming oil becomes more attractive as it gets cheaper. For instance, airline tickets prices drop when oil prices decline, and people are more likely to travel.
Green energy advocates claim that oil will become relentlessly more expensive, eventually rendering more expensive alternatives like wind and solar energy economic.
For decades, however, wind and solar energy have been unable to provide cheap, reliable, large-scale energy – and the reasons why have been understood for a long time.
They are diluted energy sources, which must be captured and concentrated – which requires additional use of energy and is technically difficult.
More devastating is that they are intermittent energy sources that take even more resources to store and deliver on demand. As a result, there are no free-standing, independent, wind or solar facilities in the world. They require a back-up energy source powered by fossil fuels to make up for gaps in energy production.
Countries that have prematurely restructured their whole economy based on this expectation are paying the price now.
Germany, the world’s largest consumer of solar and wind power as a percentage of its power needs, gets 6 percent of its energy consumption from solar and wind. It can rely on essentially none of it at any given moment.
Solar and wind aren’t being touted because they’re ‘new and exciting.’ They are nothing new – they’ve been around for decades. In my view, they are not particularly exciting either.
Instead, they are touted as a solution to an anxiety that we have over fossil fuels.
Particularly, we have the idea that fossil fuels are an ‘addiction.’ They might be practical for the short term but have catastrophic effects in the long term. That is how we frame fossil fuels.
Green energy has been sold as a solution to this addiction, and an excuse for imposing caps and bans on fossil fuel use.
Does the fossil fuel industry do a good job of explaining why oil and gas are so difficult to replace?
The core issue is that the fossil fuels industry itself does not understand the value of fossil fuels.
That might seem like heresy, but here’s the thing: when you’re in the fossil fuel industry, you spend all your time learning about how to produce the fossil fuels. You don’t learn about the value that fossil fuels create.
You’d be hard-pressed to find a single energy company in the world that gives employees even a few days of education on the value of fossil fuels. That includes learning about the challenges, risks or side effects.
Part of the reason for putting together The Moral Case for Fossil Fuels was that I didn’t think the whole value proposition of fossil fuels had been well represented.
I wanted this book to be persuasive to the public, but also to the industry. The industry itself needs an education in the value of fossil fuels before they can convince others.
How does The Moral Case for Fossil Fuels address the issue of climate change?
Pretend we asked a bunch of scientists: ‘do you believe that antibiotics have side effects?’ You then could say that 97 percent of scientists believe that antibiotics have side effects. Therefore, you would say, we shouldn’t use antibiotics.
Well, what about the positive effects of antibiotics? What created the need for them in the first place?
Global warming is a potential side effect to fossil fuel use, but these risks should not be discussed in isolation.
The real question is whether fossil fuels, given their impacts, positive, negative and unknown, are good. In the book I try to show that fossil fuels are immensely good things.
‘Climate change’ is itself a very vague and manipulative term. There is this huge equivocation between a mild warming impact and a runaway catastrophic warming impact.
There is evidence of a very mild impact on the climate from fossil fuels, but none yet for runaway catastrophic warming.
A lot of leaders, and political representatives who claim to speak for scientists, are deliberately equating this mild warming with runaway catastrophic warming.
The purpose of the book is to bring much more logical and fair thinking to this issue.
Climate change and public perception aside, low oil prices are bad news for alternative or green energy.
When oil prices rise, green energy receives more attention, because the market searches for candidates for substitution. Investors get excited about green energy projects and politicians promote green energy programs.
For instance, the Energy Independence and Security Act of 2007, arguably one of the most massive ‘alternative energy’ subsidies ever launched, occurred when oil prices were rocketing upwards from around $60 to $140 per barrel in an 18-month timeframe.
When the prices of oil and other fossil fuels drop, the added costs of green energy become even more prohibitive just as the demand for alternative energy sources decreases.
Companies that depend on higher oil prices to function could be decimated if the oil price remains subdued. An indirect consequence of an oil rout may, in fact, be a takedown of the alternative energy sector as well.