The renewable energy sector has applauded this week the clean energy incentives included in the bus approved by Congress. And he is even more optimistic about the prospects for a Biden government, given the president-elect’s plans for a $ 2 trillion effort to put the country on the path to eliminating greenhouse gases from the power grid by 2035 and the general economy by 2050.
While that promise will face obstacles in Congress, especially if Republicans retain control of the Senate, Biden can still make moves to benefit the renewable energy industry that has grown steadily over the past four years – despite President Donald Trump’s commercial tariffs, rental increases and frequent attacks in the industry.
“The understanding – the understanding of the market, the understanding of the financial community and the perception of the customer – that we are moving towards clean energy savings has already happened,” said Abigail Ross Hopper, CEO of the Solar Energy Industries Association, a group of trade in solar energy. “But the pace of this transition is still at stake.”
Biden is expected to accelerate the adoption of electric vehicles and boost powerline transmission networks that will open up new opportunities for renewable energy generators, analysts said. He pledged to invest $ 400 billion in clean energy development and research over 10 years and to work with states to implement more than 500,000 new public electric vehicle charging points by the end of 2030.
Simply changing the White House message will benefit renewable energy, said Ben Serrurier, electricity practice manager at Rocky Mountain Institute, a clean energy research institution, as many red states feared to publicize their local solar and wind industries. . In the past four years, he has risked causing an explosion by Trump, who once claimed that the sound of wind turbines caused cancer and that solar panels were expensive and fragile.
“With more political coverage from above and an energy transition line that can be traced in a few years in the future, I would not be surprised if you saw more aggressive action from companies that were reluctant to do it before, because you got a political space for them, “said Serrurier.
Renewable energies are now on track to overtake coal as the world’s largest source of electricity by 2025, according to a November report by the International Energy Agency. And in the United States, the Department of Energy’s latest Energy Information Administration prospects are optimistic about wind and solar energy, which together with hydropower and other renewable energy will exceed 20% of US electricity generation in the United States. next year, almost the same level as coal or nuclear energy. The EIA is projecting that the US electricity sector will add a record 23 gigawatts of new wind capacity this year – almost double the previous record – while utility-scale solar capacity will increase by 12.8 GW in 2020, enough to supply millions of homes.
One of the biggest advances for wind and solar energy in recent years has been the sharp drop in battery prices, which allow utilities to store their electricity for when the sun is not shining and the wind is not blowing.
Prices for lithium-ion batteries have fallen 89 percent over the past decade, according to research firm BloombergNEF. Researchers now expect prices for these batteries to be close to $ 100 / kWh by 2023, a limit they say will allow automakers to produce and sell mass-market electric vehicles at a price comparable to internal combustion vehicles.
But the situation for fossil fuels is noticeably more bleak. U.S. crude oil production, which hit a record of more than 13 million barrels a day before the pandemic undermined fuel demand, has dropped to 11 million barrels a day, according to the latest government data. The production of natural gas, which has doubled since the spread of fracking began in earnest in 2005, is expected to show a modest decline amid weak prices caused by an oversupply.
The weak prices of natural gas and crude oil – which quickly went negative with the April pandemic – forced 45 oil and gas companies to file for bankruptcy in the first 11 months of 2020, according to the law firm Haynes and Boone.
The outlook for coal is much more dire. The energy source that produced more than half of U.S. electricity just over a decade ago saw its share of the energy market drop nearly a quarter under Trump, despite its promises to revive the sector. Valuations by coal producers have dropped dramatically, and the leading company, Peabody Energy, is struggling to avoid its second bankruptcy filing in five years.
Still, renewable energy will not supplant fossil fuels anytime soon and remains a small portion of the overall energy market, even with rapid growth, said Erik Olson, a climate and energy analyst at the Breakthrough Institute. He warned that while the growth of clean energy continues, it will take some time for it to grow on a scale that dramatically changes energy markets.
“You are really seeing the initial wave of renewable energy now beginning to reshape the energy sector,” said Olson.
The dramatic drop in fuel demand amid the Covid-19 pandemic accelerated the need to shrink the debt-laden oil and gas industry, and companies like Exxon Mobil, which saw its market value cut in half earlier this year, they were forced to lay off tens of thousands of employees and cut their spending like a bulwark against a flood of red paint.
But the pandemic has also hit jobs in the clean energy sector hard, leaving 446,000 clean energy workers unemployed since February, although it has continued to expand, according to an analysis by the BW Research Partnership.
Now, with a new White House promising to pass stricter regulations on capturing heat-trapping methane gas and a ban on new permits to drill on federal land, oil companies will have to spend money to adapt or, in the case of smaller companies that don’t have the money or experience to do it, to look for other options.
The oil and gas industry will eventually return to profitability, albeit with a smaller footprint, said Dave Meats, director of energy research at market analysis firm Morningstar. The companies accumulated sufficient drilling licenses in the final months of the Trump administration to keep their activities on federal land relatively unchanged for the next two years or more, even if Biden immediately suspends the new licenses, Meats added. Meanwhile, drillers will move their rigs to private land to compensate for the loss of access to federal land.
But, Meats added, it would be “unrealistic to expect more growth” by the end of this decade.
“I would compare it to tobacco in the late 90s,” said Meats. “There is a long-term secular decline. The steady growth that we’ve seen is going to slow down, flatten out and eventually there will be a contraction.”
In Houston, the energy capital of the United States, the oil industry is preparing for a future in which companies will return to profitability – but with fewer participants, said a Texas oil and gas lobbyist. For now, they are preparing to hire new teams of lobbyists to try to negotiate the edges of Biden’s plans or to start looking for ways to adapt to the new normal.
“Companies are saying that they need to hire more outside consultants or dramatically change their business model,” said the lobbyist.
With everyone from progressive environmental protesters to Wall Street analysts pushing to reduce greenhouse gases in the energy supply, the fossil fuel sector is trying to remain politically relevant and adapt to a changing world.
Biden promised stricter pollution standards for potent greenhouse gas than those created under the Obama administration – and reversed under the Trump administration. This is something analysts said the new president will need to do to reach European governments.
BP, ConocoPhillips and other large companies that have pledged to reduce their own emissions may do the same, but smaller, independent players may have to struggle just to keep a seat at the negotiating table. Still, these smaller companies argue that the world will need its fuel for at least the next few decades.
“While we understand that many of those nominated by the Biden government may believe that our country must make the transition away from fossil fuels, even under the International Energy Agency’s Sustainable Development Scenario, which presupposes that all countries fulfill their Paris commitments, the world will still have almost 50 percent of its oil and gas energy by 2050, “said Anne Bradbury, chief executive of the AXPC trade association representing independent oil companies, in a recent statement. “If the world wants to deal with global climate change, the American oil and gas industry must be at the table.”
But statements like that may be a little too late, said Mark Jones of Rice University.
“The oil and gas sector is committed to a backward effort to keep the industry running as long and robust as possible,” said Jones. “But there is a clear understanding that, in fact, renewable energies are the future.”