A few years ago, everyone in sustainability circles was talking about peak oil. It was the subject of resilience workshops and post-crisis survival books and the impetus for many a rooftop solar pioneer.
While the theory of peak oil is still very much sound, it has lost relevance in recent years because the climate change issue became so much more urgent and we learnt that we have more oil reserves already than can safely be burnt without triggering runaway climate change. If we already have more oil than we can use, then peak oil just isn’t relevant anymore.
Or is it?
What if it ends up being more about peak demand, not peak production?
That’s something that wouldn’t have even been contemplated by anyone a few years ago, but a new report by Imperial College London and Carbon Tracker poses that as not just a hypothetical, but a likely scenario. The most shocking part: they think it could happen in just 3 years.
Why? Because of the plummeting cost of solar panels and electric vehicles.
They have crunched the numbers on several different global scenarios, using 3 key variables: energy demand, price of solar panels and EVs, and climate policy.
According to their model, the scenario with ‘medium’ energy demand, cost of low-carbon tech falling in line with industry predictions and the climate pledges already signed into the Paris Agreement being enacted, will see demand for oil and coal peak in 2020.
This is in stark contrast to the fossil fuels industry predictions, which don’t see coal and oil demand peaking before 2030 and 2040 respectively. However, the researchers of this study point out that the fossil fuel companies have continuously underestimated the potential of renewables in all previous forecasts – and been proved wrong.
The cost of solar PV has fallen 85% over the last 7 years and battery costs have fallen 73% in the same time. Neither show any sign of stopping their price free-fall any time soon and are expected to continue to get cheaper and more efficient. It does seem a bit crazy to think that solar will soon be the biggest contributor to global energy demand, but technologies do have a habit of disrupting an industry at rocket rates. Both these technologies are on the cusp of gathering critical mass: in some markets solar is now cheaper than oil – when that normalises across markets, it will be a tipping point. Once it’s the cheapest energy, it will quickly become the norm that Joe on the street who doesn’t understand climate change will choose as the standard go-to.
I’m quite happy to trust the industry predictions on the cost curve of tech. What I do think is a little ambitious of this study is to assume the national commitments of the Paris Agreement will be met. While they’re not enough to be in line with the science, they are fairly ambitious, and governments have a habit of backsliding on environmental commitments. Plus, it hasn’t factored in the Trump factor. Even if all the other countries do their bit, the USA’s emissions are realistically likely to rise under his presidency. Possibly USA cities and other nations could ramp up ambition to compensate, but still…
What’s really interesting is the interactive dashboard that comes along with this report. You can manipulate the 3 variables and the graphs change, so you can compare two or more different scenarios. I chose the same as the research headline, but put ‘weak’ for climate policy – which is basically what’s currently being done now.
Even that shows oil demand peaking in 2020, with global emissions peaking in 2030.
The upshot is, there’s a good chance everyone has been seriously underestimating the disruptive power of solar and EVs technology. Granted, they’re not enough to save the day without policy and other actions – we will always need concerted political action to solve this global crisis. But they show promising signs of bringing success within our grasp.
UPDATE: The Financial Times are now reporting that ‘big energy fears peak oil demand is looming’. While the oil companies think the peak is coming considerably later than Carbon Tracker and Imperial College London predict, it’s still notable that they are preparing for this ‘risk’. (Funny how the article makes this out to be a bad thing!!!).
Big energy fears peak oil demand is looming https://t.co/HY89la3kN8
— FT Energy (@ftenergy) March 15, 2017
What do you think? Will demand for oil and coal peak by 2020? Let me know in the comments, or over on Twitter at @TheClimateLemon.