Is the eco-bubble about to burst?
Firms are starting to wake up to the lunacy of Net Zero.
Economist Herbert Stein once said that ‘if something cannot go on forever, it will stop’. Today, there is growing evidence that ‘Stein’s law’ is coming for the renewables industry, particularly for wind and solar power.
After investing billions of dollars into the green-energy transition, many of the major players in the energy sector are now shifting their priorities. The global energy shortages of 2022 seem to have woken much of the world up to just how impractical renewable energy can be.
Last year, not a single investment was made in a major European offshore wind farm. The numbers for overall wind-turbine orders also declined by 47 per cent compared with 2021. Earlier this month, the Financial Times also poured cold water on hopes of a breakthrough in battery technology. Batteries are critical if we want to store wind- and solar-generated power for when the wind isn’t blowing or the Sun isn’t shining.
Another signal of this shift comes from the US Securities and Exchange Commission, which has suggested it could soon soften the requirements it places on companies to estimate and disclose their impact on the climate.
Major fossil-fuel giants have put great efforts into rebranding themselves as ‘green’ in recent years. But they are now starting to shift gear. BP, after years of using the slogan ‘Beyond Petroleum’, is quietly moving back to plain-old petroleum. As CEO Bernard Looney stated frankly earlier this month: ‘We have to invest in today’s energy system, and the reality is that today’s energy system is predominantly an oil and gas system. And that needs investment.’ Although changing the corporate strategy of a giant multinational can often be achingly slow, it seems as if ‘reality’ has an expediting effect.
Remember peak oil? We were supposed to have passed the global peak of oil demand back in 2020. But given current trends, peak renewables seems more likely. While politicians will undoubtedly keep paying lip-service and taxpayer money to renewables, the ground really is shifting. Even US president Joe Biden, who in 2019 promised to ‘end fossil fuels’, has seemingly changed his tune. In his State of the Union address last week, he noted that the world will need oil for ‘at least another decade’.
Meanwhile, new data from Germany show that consumers’ willingness to switch from traditional cars to electric vehicles (EVs) declines substantially once government subsidies are reduced. Total EV sales are expected to fall by eight per cent this year in Germany. This may not seem like much, but the trend is going in the exact opposite direction to what would be needed to reach a fossil-free future.
Even Denmark, once known as a wind-power pioneer, is having second thoughts. It is both re-evaluating new renewable-energy projects and reopening the door for a return to nuclear energy.
Poland, which currently relies heavily on coal, has decided to go all-in on nuclear power. It is planning to open up new fleets of both conventional nuclear reactors and, later on, smaller modular ones. Meanwhile, it is creating regulatory hurdles for renewables like wind. In some countries like Germany, people are terrified of living near a nuclear power plant. But in Poland there is just as much resistance to living near wind farms, which is why a new law has increased the minimum distance onshore wind projects must be from people’s homes, from 500 to 700 metres.
The year 2022 marked a decisive shift. Energy security replaced climate change as the world’s top priority. And while politicians’ green rhetoric will carry on as normal, the markets are reflecting this transition. In the US, the market for green bonds has already started to stall as producing clean energy has become less of a priority than producing energy full stop.
This process is not likely to be smooth, however. Politicians and CEOs could still be held accountable for their over-ambitious green promises of recent years. Oil giant Shell, for instance, is currently being sued by some of its shareholders for failing to implement an energy-transition strategy. Like BP, Shell promised to become a Net Zero business by 2050, and it will be difficult to wriggle out of some of these commitments.
The energy crisis was a major wake-up call for the world. It was a reminder that our energy supplies are far more fragile than we often realise. And it made it clear that green technology can rarely be relied on. The exception to this rule is nuclear power, which can produce vast quantities of electricity without any carbon emissions. Despite this, during last year’s global energy crunch, working nuclear power plants were shut down across the world, from California to Germany. This will be seen by future generations as a moment of absolute madness. As will attempts to phase out fossil fuels before reliable replacements are available.
To return to Herbert Stein’s quote, there is a positive to stopping something that cannot go on forever. It forces us to face up to the reality of our energy needs and to reject the green delusions that have dominated decades of policymaking. A complete overhaul of Europe’s energy strategy is long overdue. We cannot afford to keep ignoring reality.
Ralph Schoellhammer is an assistant professor in economics and political science at Webster University Vienna.
Picture by: Getty.
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