State of The Transition, early – mid January: "I promise you …we will be celebrating"

Jeremy Leggett for Recharge magazine: If the pace of play in the first weeks of 2016 is anything to go by, the great global energy transition is moving fast. The bad news for fossil fuels piled up and the good news for clean energy snowballed. Much of this had nothing to do with the success of the COP21 climate summit in December, but the strong signal sent by 195 governments in Paris can only compound woes for the energy incumbency in the year ahead.
Arch Coal, America’s second-largest coal miner, filed for bankruptcy. “The King is dead”, the Financial Times concluded. “Even if the climate deal slips, technology will help bury Peabody [the leading US coal miner] and other producers.” As US coal production fell to its lowest level for more than a quarter of a century, President Barack Obama hammered another nail in the coffin by halting mining leases on public lands. In desperate search of growing markets, miners have been looking to demand in China and India. But during the Paris summit, Beijing suffered its first-ever red alert on air pollution. Coal demand is already falling in China and can only be expected to fall faster now. Delhi’s air pollution is even worse, and the year opened with the city’s first driving ban: a million cars taken off the road. So good luck to any corporation that is banking on the Indian government to back coal, especially just after it announced its leadership of a global solar expansion crusade in Paris.
Meanwhile, the carnage created by the enduringly low oil price forced the 40th North American driller into bankruptcy. Being big doesn’t necessarily help: BHP Billiton wrote off $7.2bn in US shale assets. The junk debt mountain being carried on the balance sheets of shale drillers is now threatening banks. This problem is global. Entering 2016, capex cuts on oil projects that have been delayed since the oil price began to drop in the second half of 2014 neared $400bn.
Saudi Aramco unveiled its intention to offer shares in an initial public offering. But why do that when oil is at its lowest price since 2003? Analysts say it is because the national oil company has accepted that the end of the oil age is now on the cards. In the neighbouring United Arab Emirates (UAE), that is certainly the case. Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi, talked enthusiastically on the eve of the World Future Energy Summit of an economy free of the volatility of oil. “While we have the resources and wealth,” he said, “we must invest in education. If we do so correctly now, in 50 years, when we ship off the last barrel of petrol, we will not be sad. I promise you, my brothers and sisters, we will be celebrating.” Dubai’s Sheikh Mohammed bin Rashid Al Maktoum, vice-president and prime minister of the UAE, announced an upcoming ministerial retreat to map the route to moving the UAE’s economy beyond oil.

The terms of the Paris Agreement will require investment in clean energy swelling rapidly to $1trn and more. Bloomberg New Energy Finance published figures for 2015 portraying a record year for global investment in clean energy, at $329bn. This is telling, in a year in which the prices of key fossil fuels were so low.
With investment and growth come jobs, and entering the new year, a remarkable milestone was passed. The US solar industry now provides more jobs than oil & gas extraction: more than 200,000 in 2015, a 20% increase from the previous year, amounting to more than 1% of all American jobs. Oil extraction jobs stood at 185,000 in December, on a falling trajectory.
Obama, for whom climate change is the top legacy issue, allowed himself a little triumphalism in his State of the Union address. “Seven years ago, we made the single biggest investment in clean energy in our history,” he said. “Here are the results. In fields from Iowa to Texas, wind power is now cheaper than dirtier conventional power. On rooftops from Arizona to New York, solar is saving Americans tens of millions of dollars a year on their energy bills and employs more Americans than coal — in jobs that pay better than average. We’re taking steps to give homeowners the freedom to generate and store their own energy, something environmentalists and Tea Partiers have teamed up to support.”
The smell of transition is thick in the air, from the USA to the UAE, and the year is only a few weeks old.