by Deborah Lawrence
The US has been in the throes of the “shale revolution” now for about 10 years. During that time, the financial press and investment sites have deluged investors with sound bites touting the enormous success of this self styled revolution. But has it really turned out as well as that?
Fossil fuels’ two biggest markets are transportation and electricity generation. By fossil fuels, I’m referring to coal, natural gas and oil. Electricity generation is the largest sector with roughly 39% of energy consumption as opposed to transportation with approximately 29% of energy consumed.
So what’s been happening quietly behind the scenes?
Fossil fuels have lost market share.
In 2007, fossil fuels accounted for about 71% of electricity generating capacity in the US. By 2017, that number had fallen to approximately 63%. Natural gas producers like to tout their growing domination over coal and that “clean burning natural gas” has replaced “dirty ole coal”.
Well, sort of. Natural gas has displaced coal to a large degree but it has lost overall market share to renewables. To put this into historical perspective, this is like saying my oil from sperm whales is superior to your oil from baleen whales and all the while the end use customer is putting in more electric light bulbs.
Renewables in 2007 accounted for about 8% of generating capacity. This includes hydro power. By 2017, this share had grown to 17%.
It is also interesting to note that renewables didn’t gain pricing parity with natural gas until 2016. So coal and natural gas were losing market share to more expensive competition. This may seem counter intuitive until one remembers that once wind and solar are in place, they have no ongoing fuel costs. This is very seductive to long term investment.
Now in 2018, onshore wind is the cheapest form of electricity generation on an unsubsidized levelized cost basis and solar is set to pass nat gas by year end if it hasn’t already. Combine this with no ongoing fuel costs to generate electricity and one can see headwinds beginning to blow for the fossil fuel industry. Kinda like those whaling ships...