Climate change is the cost of burning capital that cannot be replaced. The best thing about switching over to renewable energy is that the world will no longer be burning irreplaceable capital; we will be living off our income, with an infinite supply. Grandfather would be pleased: “Never dip into capital” being one of the first things he (should have) told you.
The mightiest economic power ever (so far), the U.S., rose to its zenith on an ocean of virtually free energy – coal first, then oil. American oil at 35 cents per million Btu (= $2 barrels) or less brought us here (as did being the world’s leading creditor); staying mighty at $8.50 per mBtu ($50 barrels) or more and $19 trillion in debt will be another matter, regardless of how much the Permian, Eagle Ford and Bakken spit out.
Even if U.S. production gets back to its all time peak of 10 million barrels per day (mbd -- which occurred in 1970), or manages to zoom past that figure, the price of a mile using gasoline still won’t compete.
If you own a car that gets 35 miles per gallon and you are paying $2.50 per gallon, the cost per mile is 7 cents. But an average car in the U.S. gets around 25 miles per gallon which means it costs 10 cents per mile. If you drive a clunker or a hog (15 mpg) in some parts of the country, with gallons selling at $3.50 each, you are paying 23 cents per mile.
Suppose, on the other hand, you drive a Tesla near Seattle or Vancouver. (It is permitted though bicycles are favored, even during the 150 days of rain.) Using unremitting hydropower at around 6 cents per kWh (retail), you will pay less than 2 cents per mile, or a tenth of the clunker/hog benchmark. Considering that your EV only has a handful of moving parts, against more than 1,000 in a typical internal combustion model (= ICE-age), the outcome of this race should be clear to all.
From a policy perspective, it is also worth noting that having variable sources of domestic production, i.e., electricity, is a much more sensible way to feed vehicles than a single source, often coming from places and powers hostile to American interests.
Since the U.S., even with frackers working full tilt (100 barrels at a time vs the Saudi Ghawar, a single well pumping 5 million at a time), only produces what we burn in our cars, around 9 mbd, the other 9 we use everyday have to come from somewhere else. Or we could just plug into the roof. (PV4EV.)
In Seattle, you are still better off with hydro since 1,000 hours of sun is only a blessing not a feature. However, in the SW and many other parts of the world, where 2,000 hours and sometimes 3,000 are on offer (there are 8,765 hours in a year), the dynamics for EV miles are superb. Many places are already producing reliable power at 5 cents per kWh or less, and at that rate an EV mile costs around a penny and a half. In fact, Tucson Electric has just announced it will buy power from a 100 MW array for less than 3 cents: Miles for a penny. Come and get ‘em. (Tucson Electric isn’t the first to get here and there are many.
Along with 3-cent PV, the Tucson project is providing storage at a price of 4.5 cents per kWh. Bankable storage is the most interesting new game in town, and it’s a big game. The sources of funds for storage projects are clear to see. First, eliminate the losses caused by the curtailment of generation by system operators when ‘too much’ sun and wind drive prices below zero, i.e., when sun and wind turn back the meter.
Then there are the gas peaker plants that sometimes see only 100 hours of service per year (roughly twelve hard days). The case for either of those sub-optimal conditions is going away. “If the pricing proves accurate, it would represent a major cost reduction for combined storage facilities since the signing of the last significant PPA — a $0.11/kWh Hawaii contract in January” (UtilityDive.)
Tucson is not alone. GTM’s Shayle Kann has this to say: "There's a race for the next record for lowest power-purchase agreement price that keeps happening," Kann said. "We'll get probably the lowest one again in the next couple of months. We have a sub-$30 megawatt-hour price in the U.A.E. We've got another one at about $30 in Mexico. In India, we're down to about $40 a megawatt-hour. India historically has been a much more expensive market for solar, so these projects are real. This is a notable change."
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And as this chart shows, PV can get cheaper still. With projects already coming in at 3 cents and room to improve module lifetimes to 50 years in conjunction with very low degradation rates (0.2 percent per year), perhaps 1-cent solar is in sight. Imagine getting an infinite supply of miles from your rooftop at three to a penny (which is a lot like free). Related: What Is Behind The Surge Of Russian Oil Exports To India?
Even if you want a 54.5 mpg ICE-age vehicle (the California standard in 2025) and gasoline stays near $2.50 per gallon, you will be an order of magnitude ahead in an EV. In a clunker/hog you will lag EVs by a factor of 25 to 50x. No one sees gasoline getting back to a nickel. (Hence, cash for clunkers is still a good idea.)
Think about it, gasoline will have to come from barrels costing a dollar or less to compete (even if they weren’t carboniferous), which means that it is all over but the shouting. We can still argue about when EVs with a 200-mile range will be produced profitably, or when widespread PV will produce more miles than crude oil. (My guess is Monday morning at 10:15 AM EDT, May 11, 2037, when the last Pinto breaks down and the tide will have turned forever.)
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Multiple Domestic Sources -- Renewables Take the Lead
As we all know, there is no crying in the investment world, so rather than whine about the rise of renewables, the time has come to recognize that they are the place to be, whether as an owner or user. The chart below indicates that it is, by no means, too late to get on board. And while you are at it, it is past time to divest yourself of fossil fuels. In case you had not heard or did not know, fossil fuels are finite. The same cannot be said for the source that is coming to eat their lunch (dinner and breakfast).
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$2.8 Trillion More Invested in Solar by 2035
For those renewable enthusiasts who do not yet realize they have already won (or, at the very least, are winning) and who still rant about the end of the world because of fossil fuels and rising seas, the time has come to stay calm, get on with it and understand it is much better to buy a PV panel than to curse the oil patch. Related: The Battle For Natural Gas Dominance In Russia
If you still doubt the old order is under threat, consider what is already happening to California utilities in the face of the onslaught. From Greentech Media we learn: “. . . as much as 25 percent of retail electric load will be effectively unbundled and served by a source other than an investor-owned utility sometime later this year, the paper noted. And these trends are only accelerating. Over 85 percent of retail load could be served by sources other than the investor-owned utilities by the mid-2020s.”
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Finally, there are the jobs. In the U.S., solar jumped over oil & gas in 2014. Worldwide there are already 10 million in renewables, and counting. Shoveling coal and piping Canadian bitumen do not stack up on this score.
The wind sits fair for this new generation and if you are clinging to nostalgic notions about a world that cannot live without fossil fuels, you would do well to realize you are now part of a crew wracked upon a sand looking to be washed off the next tide.
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But gracious in victory, I suppose we can still argue about the merits of Chinese manufacturers, like Goldwind, hiring out-of-work U.S. coal miners to build wind arrays in Wyoming, the nation’s leading coal producer. Where is GE, one of the industry leaders? Why are the Americans letting the Chinese beat us in the long march to the future?
By Henry Hewitt for Oilprice.com
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