Utilities in the Southeast are rallying behind a surprising cause: a new electricity market that could boost renewable energy in a region still dominated by fossil fuels. The push from the area’s energy giants to buy and sell their excess electricity could help them meet net-zero carbon targets but also change a business model they have relied on for decades. The so-called Southeast Energy Exchange Market (SEEM) would expand one major utility company’s trading system to create a platform for buying and selling excess wholesale electrons every 15 minutes.
Exxon just got dethroned as the top U.S. energy company (Earther, E&E $), the best case for and against a fracking ban (Vox), [Permian] oil site leaked gases uncontrollably for months, group says (Bloomberg $)
Reason 10,001 why we shouldn’t leave it to industry: Fracker/violator told regulators in April that it would fix and replace a faulty valve and broken tank hat but just continued to release heavy emissions
Oil Site Leaked Gases Uncontrollably for Months, Group Says
October 8, 2020, 8:58 AM MDT Updated on October 8, 2020, 12:54 PM MDT
Earthworks calls on Texas regulators to act on its findings
The site’s owner, MDC Energy, filed for bankruptcy last year
An oil well site in the Permian Basin owned by a bankrupt shale producer has spewed polluting gases into the atmosphere for 10 months, despite being investigated by Texas regulators, according to an environmental group.
Infrared video footage collected during multiple visits from November 2019 through September show “continuous intense and significant” emissions from faulty valves and tank hatches at MDC Energy LLC’s Pick Pocket location in West Texas, Earthworks said in a letter to two state regulatory agencies on Thursday. The group called on the Texas Commission on Environmental Quality and the Texas Railroad Commission to rescind permits for MDC.
“TCEQ and RRC must properly address these intense emissions including, but not limited to, volatile organic compounds (VOCs), methane, and hydrogen sulfide,” Sharon Wilson, Earthworks’ thermographer, wrote in the letter.
It’s the latest example of mounting environmental concerns in the Permian Basin, where the extent of methane emissions from the oil and gas industry is largely unknown. Those concerns are being compounded by a collapse in crude prices that’s forced many producers into bankruptcy, sparking worries that they won’t be able to pay to maintain producing wells or properly plug ones that are abandoned. Methane emissions attract particular scrutiny because it’s a greenhouse gas far more potent than carbon dioxide.
TCEQ said in a statement that it will look into the issues raised in the letter. An enforcement case for complaints raised about MDC’s operations “is currently under development and will include the assessment of an administrative penalty and corrective actions, as needed,” the agency said. The RRC, whose website says MDC’s site is associated with a producing well, didn’t immediately have comment.
Earthworks first raised a complaint to TCEQ in December and MDC told regulators in April that it would fix and replace a faulty valve and broken tank hatch, according to an incident report obtained via a public records request by Earthworks. MDC also hired a third party to measure site-wide emissions, which were found to be higher than the quantities allowed by the agency and lacking a special permit. In May, TCEQ sent the company a message saying it would be issuing a notice of enforcement action. The agency also listed other violations, which MDC had until Aug. 10 to correct.
When Wilson revisited the site in September, however, she continued to record emissions, according to her letter.
Texas has taken a friendly stance toward the shale industry. But, more recently, some of the industry’s biggest investors, and even some oil producers, have called for stricter regulations. Another major environmental concern is the widespread industry practice of flaring in which producers burn off excess natural gas. Recent surveys by the Environmental Defense Fund found flares in the Permian are frequently unlit or malfunctioning, meaning methane is being released directly into the air.
MDC Energy’s parent company, owned by real estate developer Mark Siffin, filed for bankruptcy last October, owing more than $400 million in funded debt. The company is now seeking court approval to start a bankruptcy sale process while continuing to solicit offers to finance its way out of Chapter 11. Siffin didn’t immediately respond to an email seeking comment.
Three months after California’s largest oil producer went bankrupt, environmentalists are warning that the state could be on the hook for as much as $1 billion to plug the company’s oil wells.
California Resources Corp., leading oil and gas producer, files for Chapter 11 bankruptcy
Palm Springs Desert Sun
California Resources Corp., the state’s largest oil and gas production company with more than 2 million acres of reserves spanning four major basins, filed for Chapter 11 bankruptcy protection on Wednesday evening, seeking relief from $5 billion in debt and looming interest payments.
The company’s announcement came just hours before the clock was about to run out at midnight Eastern Time on the last of several agreements with creditors.
Under a Chapter 11 restructuring filed in U.S. Bankruptcy Court for the Southern District in Texas, the company hopes to eliminate more than $5 billion of debt and equity interest and consolidate its ownership of its Elk Hills power plant and a gas plant in Kern County upon court approval.
Liquidity would be bolstered by $1.1 billion debtor-in-possession financing, which also would refinance in full CRC’s current revolving loan facility.
CRC will continue to operate its production facilities during the process, company executives said, although its operations are already sharply reduced due to the coronavirus and other issues.
The Santa Clarita-based company, created in late 2014 as a spin-off from Occidental Petroleum, was saddled with debt from its inception after transferring billions of dollars to Occidental. But it did well for part of its brief history, reporting average net daily production of 132,000 barrels of oil equivalent per day in 2018. By this week, though, nearly half of its 17,500 wells sat idle, from the tidelands of Long Beach and Huntington Beach to the sprawling Elk Hills oil field.
A global oil price war earlier this year and pandemic-related stay-at-home orders have caused steep drops in demand and caused huge losses to CRC’s market value. As of mid-July, its share prices had plunged 92% in the past 12 months.
“CRC will emerge from Chapter 11 as a strong, healthy company committed to providing Californians with safe, affordable, reliable and locally produced energy, good-paying jobs and millions of dollars in annual government revenues for vital public services for many years to come,” said Todd Stevens, CRC’s president and CEO. “We take this role very seriously, and our commitment to ensuring a safe, diverse and resilient supply of energy from California resources will not change.”
“We have consistently operated within cash flow, significantly reducing the outsized debt burden we inherited from Occidental Petroleum at our December 2014 spin-off. However, today’s unprecedented market conditions, including oversupply and reduced demand due to COVID-19, require that we further reduce our debt through a Chapter 11 process,” said Stevens.
But one industry analyst said the company’s woes predated the pandemic, and it would be tough for CRC to recover.
“One sign that this is a particularly bad bankruptcy is that’s a lot of debt. $5 billion is not chump change for an oil and gas bankruptcy,” said Clark Williams-Derry, an energy finance analyst at the Institute for Energy Economics and Financial Analysis. “In today’s market, it’s very hard to see how CRC is going to emerge from bankruptcy as a healthy company,” he said.
The bankruptcy filing is another shock for the state’s already distressed economy. CRC employed about 1,250 Californians at the beginning of the year, according to U.S. Securities and Exchange Commission filings, and is one of Kern County’s top property taxpayers. As recently as 2018, it pumped $37 million into county coffers, second only to Chevron.
Kern County, however, is listed in the bankruptcy paperwork as an unsecured creditor, and is owed more than $25 million by CRC. The company also owes $24 million to the State of California’s Geologic Energy Management Division, or CalGEM, by Aug. 15.
“CRC’s bankruptcy filing does not reduce its obligation to comply with California’s stringent oil and gas regulations and to pay its annual assessments,” said state Oil and Gas Supervisor Uduak-Joe Ntuk, who heads CalGEM. “CalGEM has taken steps to prepare for developments like this and will continue its oversight of CRC’s facilities and operations to ensure ongoing protection of public health, safety and the environment.”
CRC spokeswoman Margita Thompson said CRC expects to pay the state assessment fee on time.
CRC has sharply reduced production in recent months as it sought to slash costs low enough just to maintain “mechanical integrity” of its field operations, according to SEC filings. No employees are currently furloughed, said Thompson.
WhileCRC has been hemorrhaging cash, The Desert Sun and the Ventura County Star also revealed that the petroleum company spent $825,000 in March Ventura County board of supervisors races in a jurisdiction where CRC drills. CRC’s efforts succeeded in one of two elections.
Oil and gas company bankruptcies have been rising in recent years, and the demand downturn caused by business closures and stay-at-home orders has only exacerbated the issue. According to law firm Haynes and Boone, LLP, which tracks the energy sector’s bankruptcy filings, 23 oil and gas companies went bankrupt in North America in the first half of this year alone.
“It is reasonable to expect that a substantial number of producers will continue to seek protection from creditors in bankruptcy even if oil prices recover over the next few months,” the law firm predicted in a late-June report. However, with a glut in oil reserves, still-low commodity prices and only minimal near-term demand growth predicted, the return of oil markets anytime soon appears unlikely.
Taxpayers left with the headache
Taxpayers could also be saddled with major cleanup costs for idle and orphan wells if CRC’s efforts to reorganize do not succeed or if other companies fail.
“Bankruptcy proceedings like these are a threat to California because oil companies like CRC try to weaponize them to dump their environmental cleanup costs on the public,” said Kassie Siegel, an attorney at the Center for Biological Diversity. “Given the huge number of wells at stake, the Newsom administration has to intervene quickly to protect the public and our environment.”
Two new California laws aimed at increasing state regulators’ ability to hold petroleum companies accountable for the costs of plugging and cleaning up their wells couldget their first real test with the CRC restructuring. According to its own math, CRC has roughly $500 million in environmental cleanup costs. Based on the average cost of plugging wells as defined by the California Council on Science and Technology, the true number may be much higher.
State officials said they had been preparing for a CRC bankruptcy for months based on published reports of the company’s spiraling financials and high levels of debt and cleanup liabilities. If CRC is ultimately unable to pay for its own reclamation, California has the legal ability to seek payments from the immediate preceding owner. That would be Occidental, which is facing its own fiscal woes.
Although CRC has the second-most idled wells of any company operating in the state, all its wells and facilities are currently in full compliance with state laws, according to state oil regulators. The company made its required $3 million payment for idle well costs on time in May to the state.
CRC made a partial payment on interest owed to funders last month but had faced another $74 million in payments due in June 2021 to JPMorgan Chase, Bank of America and other lenders.
In addition to its thousands of unplugged onshore wells, CRC is also partly responsible for eventual cleanup costs of unique oil production facilities on state-owned tidal lands that are managed by the city of Long Beach.
A state trust fund for cleanup there holds about $300 million. However, it needed an estimated $900 million as of Jan. 1, leaving a $600 million gap. Legislation failed in recent years to require greater contributions to the fund. Long Beach has about $180 million in its own post-production fund.
There is extra urgency to maintain or properly close wells in the Long Beach tidelands because the city suffered subsidence as much as 2 feet per year until the 1950s due to fluid extraction. It was once known as the “Sinking City by the Sea.”
City and state officials said subsidence is closely monitored and is nearly nonexistent because proper pressures are maintained in the wells at all times, in essence keeping downtown properly afloat. If oil operations ceased, they said that the worst-case scenario could be avoided by continually injecting water into the idle wells.
State Lands Commission attorneys were also working with CRC this spring to try to structure payments into a trust for the eventual cleanup of Huntington Beach wells. Earlier this year, Thompson said CRC across all its subsidiaries had more than $80 million to pay for its cleanup around the state.
A full recovery or even fiscal stability for CRC will be difficult, with experts predicting it would take several years before oil markets recover from the coronavirus pandemic and continued tensions between domestic and international suppliers.
Williams-Derry, the energy finance analyst, has tracked the company’s downward trajectory since before the pandemic. “CRC is claiming that the COVID crisis is the reason for their bankruptcy filing, whereas in reality, this is a company that was in no position to pay off its massive debts, even before the coronavirus hit,” he said.
California oil on the way out?
CRC’s woes bring into sharp relief the decline since the mid-1980s of oil production in California and a pitched battle between energy companies and environmentalists over its future.
Environmentalists pushing to transition California off of all fossil fuels want to see CRC’s oil and gas extraction halt. They said largely low-income communities of color around its operations have suffered severe health effects for years, from being exposed to contaminantscontained in oil and from dangerous soot and smog emitted as part of the extraction, refining and transport processes.
Rosanna Esparza is a Bakersfield-based community activist who watchdogs CRC’s Elk Hills field and other oil and gas infrastructure around Kern County. “This is not a surprise that they filed for Chapter 11, not at all. What concerns me, though, is that we have been saying all along that these companies aren’t paying a high enough fee to cover when they default.”
Fossil fuel emissions, including billions of tons of carbon dioxide, are also causing global climate change. A national coalition of 700 environmental, consumer and public health groups dubbed the Last Chance Alliance, with dozens of members in California, is pushing Gov. Gavin Newsom’s administration to phase out all oil production. They argue a “just transition” can be achieved for energy workers by paying them to properly plug wells and otherwise close down the state’s legacy oil and gas fields.
But energy trade groups, lobbyists and the companies themselves say CRC and other oil and gas companies provide good, high paying jobs. They say California can meet aggressive emission reduction mandates in coming years by achieving “net zero” emissions from fossil fuel production rather than shutting it down completely. That would include burying or re-injecting carbon dioxide underground rather than sending it skyward.
CRC won some private and federal funding earlier this year to construct an early centerpiece of those efforts — a facility to capture carbon dioxide emissions from its Elk Hills natural gas plant and inject them back into the sprawling field to aid in extracting the last bits oil from mature reservoirs. The project is moving forward with a completely funded front-end study, company spokeswoman Margita Thompson said Wednesday.
And as more oil companies walk away from their environmental and labor liabilities, Democrats and some Republicans have begun pushing for a federal government-funded pool of money to address the pollution flowing from the country’s potentially millions of orphan wells.
According to CalGEM, there are about 5,500 deserted or orphaned wells scattered around the Golden State, many in Los Angeles County. These can pollute aquifers, emit climate-warming gases and carcinogens, and present an explosion hazard.
On July 1, the Democrat-controlled U.S. House of Representatives passed a $1.5 trillion bill that wrapped up COVID-19 relief and infrastructure spending, including $2 billion that would put unemployed oil workers back on the job plugging orphan wells.
“It’s a win for the environment, it’s a win for states, it’s a win for workers,” chair of the Subcommittee on Energy and Mineral Resources Rep. Alan Lowenthal (D-Calif.) said during a June 1 forum on the proposal. “And it simply accelerates the cleanup that American taxpayers are on the hook for sooner or later anyway.”
Sen. Mitch McConnell (R-Ky.), however, already made it clear that he had no intention of advancing Democratic stimulus bills in the Senate, making it unclear where the proposal would head next.
Esparza, the Kern County activist, is worried about what comes next for the industry.
“Everybody was waiting for this, waiting for the next shoe to drop,” she said. “So who’s going to be next? The small operators are struggling, and a lot of them have just walked away.”
Janet Wilson and Mark Olalde cover the environment for The Desert Sun. Wilson is the senior environment reporter and part of the 2020 ProPublica State Reporting Network. She can be reached at email@example.com or @janetwilson66. Get in touch with Olalde at firstname.lastname@example.org, and follow him on Twitter at @MarkOlalde.
August 21, 2020
|Contact:||Hollin Kretzmann, (510) 844-7133, email@example.com|
Judge OKs Millions in Executive Payouts for Bankrupt California Oil Giant
Nine CRC Executives Could Get Up to $57 Million Over Next Year
HOUSTON— A federal judge in Houston late yesterday approved an incentive package worth up to $57 million for top executives as part of bankruptcy proceedings for oil giant California Resources Corporation.
Nine executives with the company, which is California’s biggest oil and gas producer, would get the high-dollar payouts if they meet certain metrics over the next year as part of CRC’s Chapter 11 bankruptcy claim, filed last month.
The potential executive payouts are nearly double the $29 million in back taxes the company owes to Kern, Ventura and Orange counties. In all, the state’s largest driller is seeking bankruptcy protection to wipe out more than $5 billion in debt and equity interests.
“After laying off hundreds of workers, polluting California’s environment and failing to pay taxes, CRC is piling execs into a luxury getaway car and stepping on the gas,” said Hollin Kretzmann, an attorney at the Center for Biological Diversity. “If company officials have the money for big-bucks incentive payments, they can pay their taxes and do environmental cleanup. It’s time for Gov. Newsom to step in and prove he’s with Californians over fat cat polluters.”
The Center has called on Gov. Gavin Newsom to intervene in the company’s bankruptcy proceedings to ensure it sets aside enough money for well cleanup.
CRC and its affiliates operate approximately 18,700 wells in California, which could cost more than $1 billion to properly plug, according to the Institute for Energy Economics and Financial Analysis. Of these 7,826 are already “idle,” which means they’ve produced no oil in the past two years.
So far in 2020, Gov. Newsom has issued more than 500 permits to CRC for drilling new wells, reworking existing wells and other dangerous activities.
NYPA to consider swapping gas peakers for batteries in novel deal with environmental justice groups
Robert Walton, Oct. 14, 2020
- The New York Power Authority (NYPA) on Tuesday announced that it will consider utilizing battery storage and other advanced energy technologies to replace 461 MW of gas peaking generation operating at six sites in New York City.
- The announcement is a win for the environmental justice community, and advocates say it is unique: NYPA agreed to pay for consultants to represent the perspective of five environmental and clean energy groups in considering how the plants may be retired.
- The collaboration between the largest state public power utility in the United States and the environmental justice community could be a model for elsewhere in the country, said Lewis Milford, president of Clean Energy Group (CEG), one of the groups that will be represented by NYPA-paid consultants. Local advocacy groups are often underrepresented in energy infrastructure debates because they lack technical resources and funds, he said.
NYPA’s announcement is two stories in one, according to Milford: the potential for batteries to replace peaking plants, and how to involve local activists.
“The history of energy project fights are littered with environmental justice and local groups getting screwed left and right because they didn’t have the technical resources to fight the good fight,” Milford said.
NYPA’s announcement resulted from a memorandum of understanding (MOU) with PEAK Coalition, which represents the environmental groups: CEG, New York City Environmental Justice Alliance, UPROSE, THE POINT CDC, and New York Lawyers for the Public Interest.
The PEAK Coalition proposed the agreement to NYPA earlier this spring, and officials said it took a few months to work out the details in the MOU.
The groups wanted to find an alternative to “a long, drawn out litigation fight over the fate of NYPA’s fossil peaker plants,” Milford explained in an email. “To our surprise, NYPA was interested in some alternative as well — we both had an interest in resolving these issues through discussion, instead of litigation.”
The MOU “sets the path for the transition of NYPA’s plants to low to zero carbon emission resources and technologies,” the utility said in a statement. The utility is working to meet clean energy goals set out in the Climate Leadership and Community Protection Act, which calls for zero-carbon emission electricity in New York state by 2040.
The MOU specifies the analysis will consider 10 small gas-fired plants at six sites in New York City.
NYPA said the gas peaker plants were installed in 2001 and operate “infrequently” — only about 10% of the time or less — when directed to do so by the New York Independent System Operator and Consolidated Edison.
“There is no better time to address pollution and inequities of NYC’s energy system,” UPROSE Executive Director Elizabeth Yeampierre said in a statement. The Latino community-based organization promotes sustainability and resiliency in Brooklyn’s Sunset Park neighborhood.
“This collaboration is a model of the innovative and timely work that is necessary to address billions of dollars that are put into infrastructure that impacts the health of our communities,” Yeampierre said.
NYPA said it is “committed to being a leader in piloting low to zero carbon emission resources and technologies, investigating the feasibility of short- and long-duration battery storage, and driving forward a system-wide transformation to a clean energy economy.”
According to Milford, there are about a thousand peaker plants around the United States that could be retired — possibly through a similar process.
“This is a national problem,” said Milford. “It might be the lowest hanging fruit in gas replacement.”
PEAK Coalition published research in May showing New York City ratepayers paid $4.5 billion in capacity payments in the last decade to keep 16 fossil fuel-based peaking plants available, though the plants run only a few hundred hours per year. NYPA’s peakers were among the plants examined in the report.
While Milford said the decision to close peaking plants may be clear, it is also “extremely complex stuff” highlighting why the environmental justice collaboration is such a big deal.
“There are a slew of complicated energy modeling and forecasts and reliability questions that need to get resolved to answer the question whether replacement can happen, over what timeframe and [with what] technology.” The collaboration being used in New York City “could be applied in other cities where the same issues are prevalent and local groups have for the most part not gotten a foothold.”
NYPA will now issue a request for proposals to hire consultants for the project. According to the MOU, the consultants must have a scope of work by January 2021.
NYPA will “most likely” own the replacement generation, a spokesperson said in an email. “But we need to see what the consultants come back with first.”
Eight out of 15 deaths in Hurricane Laura on the US’s Gulf Coast were caused by carbon monoxide poisoning from portable generators, as NPR wrote in September. And that’s not an isolated incident — 85% of all carbon monoxide poisoning deaths in the US are caused by portable generators because people mistakenly run them indoors or in their garage when they lose power.
Mark Rabin is the CEO of Vancouver, BC-based Portable Electric, which manufactures emissions-free mobile power stations — green generators — that run on solar and li-ion batteries. Rabin spoke with Electrek via email about the role electric generators can play in natural disasters such as wildfires and hurricanes and how vital it is to switch to electric generators and off fossil-fuel-powered generators overall, as quickly as possible.
Poop + bulking agent (usually peat moss and sawdust) + heat + time = compost.
But telling people that they are going to be sitting on a barrel of poop is, I think, a hard sell.
The world’s best solar power schemes now offer the “cheapest…electricity in history” with the technology cheaper than coal and gas in most major countries.
That is according to the International Energy Agency’s World Energy Outlook 2020. The 464-page outlook, published today by the IEA, also outlines the “extraordinarily turbulent” impact of coronavirus and the “highly uncertain” future of global energy use over the next two decades.
Reflecting this uncertainty, this year’s version of the highly influential annual outlook offers four “pathways” to 2040, all of which see a major rise in renewables. The IEA’s main scenario has 43% more solar output by 2040 than it expected in 2018, partly due to detailed new analysis showing that solar power is 20-50% cheaper than thought.
Despite a more rapid rise for renewables and a “structural” decline for coal, the IEA says it is too soon to declare a peak in global oil use, unless there is stronger climate action. Similarly, it says demand for gas could rise 30% by 2040, unless the policy response to global warming steps up.
This means that, while global CO2 emissions have effectively peaked, they are “far from the immediate peak and decline” needed to stabilise the climate. The IEA says achieving net-zero emissions will require “unprecedented” efforts from every part of the global economy, not just the power sector.
For the first time, the IEA includes detailed modeling of a 1.5C pathway that reaches global net-zero CO2 emissions by 2050. It says individual behaviour change, such as working from home “three days a week”, would play an “essential” role in reaching this new “net-zero emissions by 2050 case” (NZE2050).
The IEA’s annual World Energy Outlook (WEO) arrives every autumn and contains some of the most detailed and heavily scrutinised analysis of the global energy system. Over hundreds of densely packed pages, it draws on thousands of datapoints and the IEA’s World Energy Model.
The outlook includes several different scenarios, to reflect uncertainty over the many decisions that will affect the future path of the global economy, as well as the route taken out of the coronavirus crisis during the “critical” next decade. The WEO also aims to inform policymakers by showing how their plans would need to change if they want to shift onto a more sustainable path.
This year it omits the “current policies scenario” (CPS), which usually “provides a baseline…by outlining a future in which no new policies are added to those already in place”. This is because “[i]t is difficult to imagine this ‘business as-usual’ approach prevailing in today’s circumstances”.
Those circumstances are the unprecedented fallout from the coronavirus pandemic, which remains highly uncertain as to its depth and duration. The crisis is expected to cause a dramatic decline in global energy demand in 2020, with fossil fuels taking the biggest hit.
The main WEO pathway is again the “stated policies scenario” (STEPS, formerly NPS). This shows the impact of government pledges to go beyond the current policy baseline. Crucially, however, the IEA makes its own assessment of whether governments are credibly following through on their targets.
The report explains:
“The STEPS is designed to take a detailed and dispassionate look at the policies that are either in place or announced in different parts of the energy sector. It takes into account long-term energy and climate targets only to the extent that they are backed up by specific policies and measures. In doing so, it holds up a mirror to the plans of today’s policy makers and illustrates their consequences, without second-guessing how these plans might change in future.”
The outlook then shows how plans would need to change to plot a more sustainable path. It says its “sustainable development scenario” (SDS) is “fully aligned” with the Paris target of holding warming “well-below 2C…and pursuing efforts to limit [it] to 1.5C”. (This interpretation is disputed.)
The SDS sees CO2 emissions reach net-zero by 2070 and gives a 50% chance of holding warming to 1.65C, with the potential to stay below 1.5C if negative emissions are used at scale.
The IEA has not previously set out a detailed pathway to staying below 1.5C with 50% probability, with last year’s outlook only offering background analysis and some broad paragraphs of narrative.
For the first time this year, the WEO has “detailed modelling” of a “net-zero emissions by 2050 case” (NZE2050). This shows what would need to happen for CO2 emissions to fall to 45% below 2010 levels by 2030 on the way to net-zero by 2050, with a 50% chance of meeting the 1.5C limit.
The final pathway in this year’s outlook is a “delayed recovery scenario” (DRS), which shows what might happen if the coronavirus pandemic lingers and the global economy takes longer to recover, with knock-on reductions in the growth of GDP and energy demand.
The chart below shows how the use of different energy sources changes under each of these pathways over the decade to 2030 (right-hand columns), relative to demand today (left).
Left: Global primary energy demand by fuel in 2019, million tonnes of oil equivalent (Mtoe). Right: Changes in demand by 2030 under the four pathways in the outlook. Source: IEA World Energy Outlook 2020.
Notably, renewables (light green) account for the majority of demand growth in all scenarios. In contrast, fossil fuels see progressively weaker growth turn to increasing declines, as the ambition of global climate policy increases, from left to right in the chart above.
Intriguingly, there are signs that the IEA has been giving greater prominence to the SDS, a pathway aligned with the “well-below 2C” Paris goal. In the WEO 2020, it features more frequently, earlier in the report, and more consistently through the pages, compared with earlier editions.
This is shown in the chart below, which shows the location, by relative page position, of each mention of “sustainable development scenario” or “SDS” in the WEOs published over the past four years.
Mentions of “sustainable development scenario” or “SDS” in the last four WEO reports, by relative page position. Source: Carbon Brief analysis of IEA World Energy Outlook 2020 and previous editions. Chart by Joe Goodman for Carbon Brief.
One of the most significant shifts in this year’s WEO is tucked away in Annex B of the report, which shows the IEA’s estimates of the cost of different electricity generation technologies.
The table shows that solar electricity is some 20-50% cheaper today than the IEA had estimated in last year’s outlook, with the range depending on the region. There are similarly large reductions in the estimated costs of onshore and offshore wind.
This shift is the result of new analysis carried out by the WEO team, looking at the average “cost of capital” for developers looking to build new generating capacity. Previously the IEA assumed a range of 7-8% for all technologies, varying according to each country’s stage of development.
Now, the IEA has reviewed the evidence internationally and finds that for solar, the cost of capital is much lower, at 2.6-5.0% in Europe and the US, 4.4-5.5% in China and 8.8-10.0% in India, largely as a result of policies designed to reduce the risk of renewable investments.
In the best locations and with access to the most favourable policy support and finance, the IEA says the solar can now generate electricity “at or below” $20 per megawatt hour (MWh). It says:
“For projects with low-cost financing that tap high-quality resources, solar PV is now the cheapest source of electricity in history.”
The IEA says that new utility-scale solar projects now cost $30-60/MWh in Europe and the US and just $20-40/MWh in China and India, where “revenue support mechanisms” such as guaranteed prices are in place.
These costs “are entirely below the range of LCOE [levelised costs] for new coal-fired power plants” and “in the same range” as the operating cost of existing coal plants in China and India, the IEA says. This is shown in the chart below.
Estimated levelised costs of electricity (LCOE) from utility-scale solar with revenue support, relative to the LCOE range of gas and coal power. Source: IEA World Energy Outlook 2020.
Onshore and offshore wind are also now assumed to have access to lower-cost finance. This accounts for the much lower cost estimates for these technologies in the latest WEO, because the cost of capital contributes up to half of the cost of new renewable developments.
When combined with changes in government policy over the past year, these lower costs mean that the IEA has again raised its outlook for renewables over the next 20 years.
This is shown in the chart below, where electricity generation from non-hydro renewables in 2040 is now seen reaching 12,872 terawatt hours (TWh) in the STEPS, up from 2,873TWh today. This is some 8% higher than expected last year and 22% above the level expected in 2018’s outlook.
Global electricity generation, by fuel, terawatt hours. Historical data and the STEPS from WEO 2020 are shown with solid lines while the WEO 2019 is shown with dashed lines and WEO 2018 as dotted lines. Source: Carbon Brief analysis of IEA World Energy Outlook 2020 and previous editions. Chart by Carbon Brief using Highcharts.
Solar is the largest reason for this, with output in 2040 up 43% compared with the 2018 WEO. In contrast, the chart shows how electricity generation from coal is now “structurally” lower than previously expected, with output in 2040 some 14% lower than thought last year. The fuel never recovers from an estimated 8% drop in 2020 due to the coronavirus pandemic, the IEA says.
Notably, the level of gas generation in 2040 is also 6% lower in this year’s STEPS, again partly as a result of the pandemic and its long-lasting impact on economic and energy demand growth.
Overall, renewables – led by the “new king” solar – meet the vast majority of new electricity demand in the STEPS, accounting for 80% of the increase by 2030.
This means they overtake coal as the world’s largest source of power by 2025, outpacing the “accelerated case” set out by the agency just a year ago.
The rise of variable renewable sources means that there is an increasing need for electricity grid flexibility, the IEA notes. “Robust electricity networks, dispatchable power plants, storage technologies and demand response measures all play vital roles in meeting this,” it says.
The lower costs and more rapid growth for solar seen in this year’s outlook means there will be record-breaking additions of new solar capacity in every year from 2020, the IEA says.
This contrasts with its STEPS pathway for solar in previous years, where global capacity additions each year – net of retirements – have flatlined into the future.
Now, solar growth rises steadily in the STEPS, as shown in the chart below (solid black line). This is even clearer if accounting for new capacity being added to replace old solar sites as they retire (gross, dashed line). Under the SDS and NZE2050, growth would need to be even faster.
Annual net additions of solar capacity around the world, gigawatts. Historical data is shown in red while central outlooks from successive editions of the WEO are shown in shades of blue. The WEO 2020 STEPS is shown in black. The dashed line shows gross additions, taking into account the replacement of older capacity as it retires after an assumed lifetime of 25 years. Source: Carbon Brief analysis of the IEA World Energy Outlook 2020 and previous editions of the outlook. Chart by Carbon Brief using Highcharts.
The story of raised outlooks for solar – thanks to updated assumptions and an improving policy landscape – is directly contrasting with the picture for coal.
Successive editions of the WEO have revised down the outlook for the dirtiest fossil fuel, with this year seeing particularly dramatic changes, thanks in part to a “structural shift” away from coal after coronavirus.
The IEA now sees coal use rising marginally over the next few years, but then going into decline, as shown in the chart below (red line). Nevertheless, this trajectory falls far short of the cuts needed to be in line with the SDS, a pathway aligned to the “well-below 2C” Paris target (yellow).
Historical global coal demand (black line, millions of tonnes of oil equivalent) and the IEA’s previous central scenarios for future growth (shades of blue). This year’s STEPS is shown in red and the SDS is in yellow. Carbon Brief analysis of the IEA World Energy Outlook 2020 and previous editions of the outlook. Chart by Carbon Brief using Highcharts.
Taken together, the rapid rise of renewable energy and the structural decline for coal help keep a lid on global CO2 emissions, the outlook suggests. But steady demand for oil and rising gas use mean CO2 only flattens off, rather than declining rapidly as required to meet global climate goals.
These competing trends are shown in the chart, below, which tracks primary energy demand for each fuel under the IEA STEPS, with solid lines. Overall, renewables meet three-fifths of the increase in energy demand by 2040, while accounting for another two-fifths of the total. Smaller increases for oil and nuclear are enough to offset the decline in coal energy use.
Global primary energy demand by fuel, millions of tonnes of oil equivalent, between 1990 and 2040. Future demand is based on the STEPS (solid lines) and SDS (dashed). Other renewables includes solar, wind, geothermal and marine. Source: IEA World Energy Outlook 2020. Chart by Carbon Brief using Highcharts.
The dashed lines in the chart above show the dramatically different paths that would need to be followed to be in line with the IEA SDS, which is roughly a well-below 2C scenario.
By 2040, although oil and gas would remain the first and second-largest sources of primary energy, there would have been declines in the use of all fossil fuels. Coal would have dropped by two-thirds, oil by a third and gas by 12%, relative to 2019 levels.
Meanwhile, other renewables – primarily wind and solar – would have surged to third place, rising nearly seven-fold over the next two decades (+662%). The SDS sees smaller, but still sizeable increases for hydro (+55%), nuclear (+55%) and bioenergy (+24%).
Together, low-carbon sources would make up 44% of the global energy mix in 2040, up from 19% in 2019. Coal would fall to 10%, its lowest since the industrial revolution, according to the IEA.
Despite these rapid changes, however, the world would not see net-zero CO2 emissions until 2070, some two decades after the 2050 deadline that would be needed to stay below 1.5C.
This is despite the SDS including “full implementation” of the net-zero targets set by the UK, EU and most recently China.
(These targets would be only partially implemented under the STEPS, based on the IEA’s assessment of the credibility of the policies in place to meet the goals. For example, table B.4 of the report says that under the STEPS, there is only “some implementation” of the UK’s legally binding target to reach net-zero greenhouse gas emissions by 2050.)
The NZE2050 “case”, describing a route to 1.5C, has been published for the first time this year, because the WEO team agreed “it was time to deepen and extend our analysis of net-zero emissions”, according to IEA director Fatih Birol, writing in the report’s foreword.
Over the past 18 months, major economies announcing or legislating net-zero emissions targets include the UK and EU. Most recently, China announced its intention to reach “carbon neutrality” by 2060. [Forthcoming analysis for Carbon Brief will explore the implications of this goal.]
Carbon Brief analysis of the last four WEOs shows that these developments – along with the publication of the Intergovernmental Panel on Climate Change (IPCC) special report on 1.5C in 2018 – have been accompanied by a significant uptick in coverage of these topics in the WEO.
Whereas the WEO 2017 used the phrase “1.5C” less than once per 100 pages, this increased to five uses in 2019 and eight uses per 100 pages in 2020. The usage of “net zero” is up from once per 100 pages in 2017 and 2018, to six in 2019 and 38 per 100 pages in this year’s report.
However, the NZE2050 case is not a full WEO scenario and so it does not come with the full set of data that accompanies the STEPS and SDS, making it difficult to fully explore the pathway.
This seems “bizarre”, says Dr Joeri Rogelj, a lecturer in climate change and the environment at the Grantham Institute at Imperial College London and a coordinating lead author of the IPCC 1.5C report.
The IEA already publishes lengthy annexes, with detailed information on the pathway for different energy sources and CO2 emissions from each sector, in a range of key economies around the world, under each of its main scenarios. (This year these are the STEPS and SDS.)
Rogelj, who last year joined scientists and NGOs calling for the IEA to publish a full 1.5C scenario, tells Carbon Brief that “all underlying data of the NZE2050 case should be made available with the same detail as the other WEO scenarios”.
Carbon Brief has asked the IEA for such data and will update this article if more details emerge. Rogelj adds:
“The main question, of course, is how the NZE2050 intends to reach its objective of net-zero CO2 emissions in 2050. Of particular interest here is how much and which type of CO2 removal [negative emissions] the scenario intends to use and how it intends to do so while ensuring sustainable development.”
The WEO devotes a full chapter to the NZE2050, with a particular emphasis on the changes that would be needed over the next decade to 2030.
(It also compares the pathway to those set out in the IPCC special report, saying that the NZE2050 case has a comparable CO2 emissions trajectory to the “P2” scenario, which stays below 1.5C with “no or low overshoot” and has relatively “limited” use of BECCS.)
The chart below shows how CO2 emissions effectively plateau to 2030 in the STEPS, remaining just below the level seen in 2019, whereas the NZE2050 case sees a decline of more than 40%, from 34bn tonnes (GtCO2) in 2020 to just 20GtCO2 in 2030.
Global CO2 emissions from energy and industrial processes, 2015-2030, billion tonnes of CO2 (GtCO2), under the STEPS, SDS and NZE2050. Coloured wedges show contributions to the additional savings needed for the SDS and NZE2050. Source: IEA World Energy Outlook 2020.
The power sector contributes the largest portion of the savings needed over the next decade (orange wedges in the chart, above). But there are also important contributions from energy end-use (yellow), such as transport and industry, as well as from individual behaviour change (blue), explored in more detail in the next section.
These three wedges would contribute roughly equal shares of the extra 6.4GtCO2 of savings needed to go from the SDS to the NZE2050 in 2030, the IEA says.
The NZE2050 case would see low-carbon sources of electricity meeting 75% of demand in 2030, up from 40% today. Solar capacity would have to rise at a rate of around 300 gigawatts (GW) per year by the mid-2020s and nearly 500GW by 2030, against current growth of around 100GW.
CO2 emissions from coal-fired power stations would decline by 75% between 2019 and 2030. This means the least efficient “subcritical” coal plants would be phased out entirely and the majority of “supercritical” plants would also close down. The WEO says the majority of this decline would come in southeast Asia, which accounts for two-thirds of current global coal capacity.
Although nuclear would contribute a small part of the increase in zero-carbon generation by 2030 in the NZE2050, the IEA notes that the “long lead time of large-scale nuclear facilities” limits the technology’s potential to scale more quickly this decade.
For industry, CO2 emissions would fall by around a quarter, with electrification and energy efficiency making up the largest shares of the effort. More than 2m homes would get an energy efficiency retrofit during every month this decade, in “advanced economies” alone.
In the transport sector, CO2 would fall by a fifth, not including behavioural shifts counted below. By 2030, more than half of new cars would be electric, up from around 2.5% in 2019.
For the first time, this year’s outlook contains a detailed analysis of the potential for individual behaviour change to reduce CO2 emissions. (This is clear even at a simplistic level, with the word “behaviour” mentioned 122 times, against just 12 times in 2019.)
Behavioural shifts, such as cutting down on flights and turning down air conditioning, will play a vital role in achieving net-zero emissions, according to the report.
While the SDS calls for modest changes to people’s lifestyles, such as increased use of public transport, these choices only make up 9% of the difference between that scenario and the STEPS.
By comparison, in the NZE2050 these changes are responsible for nearly a third of the CO2 reductions relative to the SDS in 2030.
The report includes a detailed analysis of estimated emissions savings from the global adoption of specific actions, including a global switch to line-drying laundry, slower driving speeds and working from home.
The authors estimate that 60% of these changes could be influenced by governments, citing widespread legislation to control car use in cities and Japan’s efforts to limit air conditioning in homes and offices.
As the chart below shows, changes to people’s transport choices account for the majority of the emissions savings. Road transport (blue bars) accounts for more than half the savings in 2030 and significantly reducing the number of flights accounts for another quarter (yellow).
Impact of behaviour changes across three key sectors on annual CO2 emissions in the NZE2050 scenario. Source: IEA World Energy Outlook 2020.
Around 7% of CO2 emissions from cars come from trips of less than 3km, which “would take less than about 10 minutes to cycle”, according to the authors. In the NZE2050 scenario, all of these trips are replaced with walking and cycling.
The report estimates that behaviour shifts could cut emissions from flying by around 60% in 2030. These include substantial changes, such as eliminating flights of less than one hour long, as well as reducing numbers of both long-haul and business flights by three quarters.
Even so, due to the growth in aviation that is otherwise expected, total aviation activity in 2030 would still remain around 2017 levels in this scenario.
The remaining savings come from decisions to limit the use of energy in homes, such as turning both heating and air conditioning systems down.
Working from home has the potential to save emissions overall, as the reduction in emissions from commuting is more than three times larger than the increase in residential emissions.
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The report estimates that if the 20% of the global workforce who are able to work from home did so for just one day a week, in 2030 this would save around 18m tonnes of CO2 (MtCO2) globally, as the chart below shows.
In fact, the NZE2050 scenario assumes that all those who are able to do so, work from home three days a week, amounting to a relatively modest 55MtCO2 savings.
Due to wider changes in the energy mix in NZE2050, the emissions impact of widespread home working is small when compared to the current situation, shown in the left-hand column, or STEPS in 2030, shown in the middle column.
Change in annual global energy consumption (left y-axis) and CO2 emissions (right y-axis) if 20% of the population worked from home for one day a week, under three different scenarios. Emissions savings from transport (red and light blue) exceed the increase in residential emissions (purple, dark blue and grey) associated with working from home. Source: IEA.
While the report focuses on CO2 emissions from the energy system, it also alludes to the high levels of methane and nitrous oxide resulting from global agriculture and livestock farming in particular.
It notes that without shifts towards vegetarian diets it will be “very difficult to achieve rapid emissions reductions”.
The authors acknowledge that universal adoption of the proposed behaviour changes is unlikely, but suggest there are “alternative ways” in which such changes could combine to yield similar results.
For example, though some regions may not introduce tougher speed limits, others might decide to cut driving speeds by more than the 7km/h suggested in the report.
Simon Evans was one of more than 250 external peer reviewers who read sections of the World Energy Outlook in draft form.
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