Prospects for fossil fuels as renewable energy attracts more investments

Against the backdrop of a world where investments for renewable energy technologies have surpassed investments in fossil fuels, the International Petroleum (IP) week was held under a cloud of uncertainties. Isaac Anyaogu in this piece examines the prospects for fossil fuels in the face of plummeting oil prices.

From 2013, investments in renewable energy technologies began to surpass investments in fossil fuels leading experts to predict a gloomy future for fossil fuels.

According to the United Nations Environmental Programme (UNEP) global trends in renewable energy investment report for 2014, green energy investments worldwide surged 17% to $270 billion at the beginning of 2014 and before the year ran out, it peaked at $339 billion driven mainly by investments in solar and wind energy.

This year’s International Petroleum (IP) Week event that held in London from February 9 -11, was shorn of the usual pomp and pageantry that accompanies one of the industry’s most prestigious calendar events. Not only were oil prices diving south, governments have begun to take seriously the threat of climate change because voices of dissent against decarbonising the world, have since lost their steely resolve.

IP Week, a flagship oil and gas event, is organised every year by the Energy Institute. The official programme comprises a series of conferences and a prestigious industry dinner. Participants include senior figures from the leading oil and gas producers, alongside government departments, trading houses and analysts. The events attracted around 2,000 energy professionals to London from more than 50 countries around the world.

More than ever, this year’s edition has clearly shown that an energy transition is underway, with anticipated growth in renewables and nuclear in previously oil and gas dominated regions such as the Middle East. Perhaps the surest indicator of this transition is the fact that China alone invested over $80 billion in renewable energy technologies in 2014 according to UNEP.

Industry participants at this year’s IP week were not in doubt that oil prices will remain low hence their mood according to the release from the Energy Institute was “cautiously optimistic.” This would not mean that the requiem for fossil fuels is already under way just yet, but all symptoms seems to suggest that its condition may be terminal.

However energy buffs suggests another viewpoint. The Energy Institute reports that while policymakers are stepping up their commitment to reducing carbon, as the world expands, energy demand continues to grow. Sustainable energy production is what they see as critical. From BP’s perspective, this can be achieved through the development of natural gas, reduced flaring and methane, improved efficiency and increased renewables. Energy efficiency can often be thought of specifically relating to the demand sector.

There are currently moves towards strategic consolidation of an already fallen market share. Russia and Saudi Arabia has agreed to cut back output and fix production at January levels on the condition that other nations agree to participate. Iran and Nigeria have also been reported to back the deal.

IP week speakers maintained in their presentations that none of these challenges are new and the industry is not starting from scratch. The EI reports that they agree that policies are needed to frame development and education is fundamental. In the longer term, these challenges should be viewed as opportunities to open new ways of thinking, creating innovative business models and demonstrating responsible leadership

Current realities seem to suggest that innovation is on the path of renewable energy. Bloomberg reports that the shift to renewable energy occurred in 2013 when the world added 143 gigawatts of renewable electricity capacity, compared with 141 gigawatts in new plants that burn fossil fuels. Since then the world has been adding more capacity for renewable power each year than coal, natural gas and oil combined.

It is even more significant that core users of oil are now seeking alternatives. The media reported that 13 chief executives from the car industry led by Renault have committed themselves to decarbonising transport over the next ‘two to three decades’. While they anticipate about 2 billion vehicles on the road by 2050, they would not rely on fossil fuels to power them. Electric cars is seeing a revolution by Tesla.

Bloomberg quoting their New Energy Finance (BNEF) research, said that technologies are now shifting from using biofuels such as ethanol and green diesel in making the internal-combustion engine fit into a world with greenhouse gas limits. New solutions are coming in the form of low-pollution cars which are competing with fossil fuels aggressively. In 2014, about 288,500 of such cars were manufactured.

Costs are plunging in the electric car business as quickly as they did in the solar industry in the last decade. The price of lithium-ion batteries that power most electric cars has fallen 60 percent. Fuel-cell cars are also moving from the laboratory to the showroom, starting in Japan with models from Toyota Motor Corp and Honda Motor Co. By 2018, Japan will be the biggest market for fuel-cell vehicles, with 4200 cars on the road, according to the research.

The implication of these development is that the government should concentrate investments in renewable energy. Nigeria can see billions of dollars’ worth of revenue by adding value to the raw materials in her domain and grow agro allied industries. There is also a critical need for advanced technologies in manufacturing to reduce dependence on foreign imports.

Isaac Anyaogu