Donald Trump, Renewable Energy and The Global Energy Transition

President Trump spewed out a lot of unscientific claims yesterday (22 October 2020) about renewable energy (RE) in his last presidential debate ahead of the crucial 3 November 2020 poll in the United States. His knowledge of the RE industry, I daresay, is from 15–20 years ago — that windmills kill birds, solar is non-dispatchable and cannot compete at scale, among other claims.

Even the major international oil companies (IOCs) like BP, Chevron, Shell, ExxonMobil and others have woken up to ‘smell the coffee’ and are now rebranding themselves as International energy companies (IECs). The energy transition is real and it’s happening.

Although I am an oil and gas industry man, the global energy transition is one that I am particularly interested in, especially what it means for the several new oil-producing countries, most of whom are also developing countries such as Ghana. The big question being whether COVID-19 and post-pandemic recovery will fast-track the transition if any, and the implications for resource development in these countries.

The energy transition is happening even though it will pick up major momentum in the 2030s. It’s not that there won’t be any oil, but oil’s share of the global energy mix will drop from the current 90% to about 50% if the 2-degree centigrade global warming target is to be attained by 2050, according to some estimates.

One implication of this is that countries with newfound oil resources like Ghana and Guyana have about a 20 to 25-year window to maximise the outcomes from the resources. Of course, natural gas will always be welcome, however, issues of access to infrastructure to evacuate gas to demand markets and pricing (monetisation challenges) will need to be addressed — e.g. Suriname, Mozambique and Senegal.

The rapid change happening in the energy industry can at best be captured in this famous statement: The Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil ¬ Sheikh Ahmed Zaki Yamani, Saudi Arabian politician & Minister of Oil and Mineral Resources, 1962–1986

Two reports which have been published in the past few weeks make this inevitable trend even much clearer:

1. OPEC, in major shift, says oil demand to plateau in the late 2030s. “World oil demand will plateau in the late 2030s and could by then have begun to decline, OPEC said on Thursday, in a major shift for the producer group that reflects the lasting impact of the coronavirus crisis on the economy and consumer habits”. See OPEC 2020 World Oil Outlook

2. In a related note the IEA World Energy Outlook 2020 says the pandemic has been especially bad for poor countries, and energy poverty is getting worse. Five-hundred and eighty million people in Sub-Saharan Africa will end this year without access to electricity. This reverses several years of progress, says the IEA. IEA assesses that global energy demand is set to drop by 5% in 2020, energy-related CO2 emissions by 7%, and energy investment by 18%.

Disruption or rather, Creative Disruption (in Schumpetian economics) is the name of the game. Change is the only constant.