Last week Jeremy Leggett, founder of SolarCentury and chairman of CarbonTracker visited Amsterdam to give a keynote at the Smart City Event and launched the Dutch version of his book “The Winning of the Carbon War”. In front of a large international audience of people operating in the field of smart cities and sustainability, he uncovered 10 visible pieces of evidence that indicate how the global transition towards clean energy is already happening: rapidly and on a massive scale.
In this article I’ll summarize the main messages.
1. Policymakers are getting serious about climate change
The 2015 Paris Agreement has been a great success. A clear signal has been given: we want decarbonization, as soon as humanly possible. The clearly defined goal is to stay well-under a 2 degrees temperature rise. At 2 degrees Celsius of warming, as stated by the Economist, low-lying lands are expected to flood, storms will become supercharged and a third of all species may face extinction. If that’s not enough, there is also an increased risk of deadly heat waves. Obviously, our world leaders don’t want to let that happen. Every independent nation on the planet has signed the Paris Agreement, which is more than any other treaty in history.
2. Civil society is awakening in critical mass
More than 1,000 cities and 50 corporations have committed to 100% renewable energy targets, while investors worth € 440 billion have pledged to pressure corporations that are listed on large stock exchanges to do the same. Meanwhile, the pope announces that “We are at the limits of suicide” and we should “replace fossil fuels without delay”.
3. Regulators are beginning to regulate climate risk
The Bank of England speaks out on climate risk to capital markets and stranded assets, calling climate change “the biggest issue for the future”. The Dutch central bank calls for a switch to carbon-neutral energy in face of a carbon bubble, stating that “inaction is no longer an option”. And the Swedish financial regulator calls for climate risk transparency and company stress tests.
4. Disruption is moving fast
Global installed Photovoltaics (PV) is soaring due to massively declined costs, coming at grid-parity with fossil electricity. Last month, Portugal ran for four straight days on 100% renewables and Germany almost did the same. As a result, more people now work in US solar than in either coal- or oil and gas production. Tesla is furthermore en route to manufacturing battery cells at enormous scale thanks to its Gigafactory. And it is becoming increasingly clear how electrical vehicles will be charged in years to come, since solar energy is becoming cheaper than any other energy source on the planet.
5. Utilities are racing to escape a death spiral
A couple of major utilities, like E.ON, Enel and Engie have made a business model U-turn. The coal industry is going bankrupt as you read this. Peabody and Arch Coal, the former two biggest US coal producers, are already bankrupt. And from a finance perspective, JPMorgan has stopped directly financing new coal mines and plants in rich nations.
6. Divestment from fossil fuels is snowballing
In September last year, 400 Institutions worth USD 2.6 trillion had divested from fossil energy or had pledged to. A few months later, in December last year, this amounted to more than 500 institutions worth USD 3.4 trillion.
7. Incumbency spending is squeezed
Oil majors’ business models are under increasing pressure. Due to a drop in oil price their profits are declining. While oil companies receive multiple warnings from different sources about large amounts of stranded assets, huge amounts of debts are accumulating. As a consequence, oil companies are borrowing money to pay out dividends. And guess what: that is not sustainable…
8. The shale gas boom is going bust
A similar issue is occurring regarding the shale gas boom. Bloomberg reports in April 2014 that “Shale drillers feast on junk debt to stay on the treadmill”. This implies that the shale industry could be swallowed by its own debt. Furthermore, share prices have been dropping as well as the rig count and as oil jobs dry up, workers turn to the solar sector.
9. The oil and gas industry is facing talk of twilight
Short-sellers are now targeting the oil and gas industry. Oil companies respond differently and vary in their strategies of mitigating risk. As for example Statoil sets up a renewable energy division, Total is investing billions in battery storage solutions and Shell is now focusing on “Reshaping Shell to create a world class investment case” by prioritizing unconventional deep water oil and gas projects. The time to make fundamental decisions is very limited in a carbon constrained world.
10. The legal system is fast becoming a driver
Energy industry executive will need to be extra careful from now on, since the legal system is gradually getting pitted against them. For instance, a Californian Attorney General is investigating whether ExxonMobil lied about climate-change risks and wants to hold them accountable for the consequences. Reason for the suspicion was the discovery that oil majors have been bracing for global warming themselves, while denying the problem. For example by raising their gas platforms to accommodate for a rising sea level.
These are the key findings that Mr. Leggett has been witnessing at the frontiers of climate change and clean energy politics. His journey is well described in his book. He explains how massive change is unfolding, in which markets abandon fossils and follow a herding effect to transition to renewables. Watch his full speech here.
Thus the question is, rather today than tomorrow: do you keep your head in the sand (or deep water), or are you ready to take the challenge to accelerate the transition? I'm curious to hear your thoughts on how to make it happen. Let me know what you think and share your thoughts in the comments below.