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  • Want your energy clean and cheap?

    Do you know the feeling when you are having a thought that you know cannot be new but you haven’t heard anywhere before? I had it recently when I was asked to speak at a Carnegie event on a report entitled Oil Market Futures. Essentially the report and event revolved around the question on what ‘Paris’ can mean for future oil prices. And the answer is: a lot. If the world indeed follows through on its climate action commitments, the oil price in 2040 would be 24% lower than under business-as-usual.

    This result is not unexpected. In fact, I wrote about it half a year ago, but it is good to actually do the maths and raise awareness around this vital issue.

    In brief: the less oil we use, the cheaper it gets. The more we use, the more expensive it gets. The same goes for bioenergy. Both forms of energy come from scarce resources, that are then burned, and emit CO2 in the process. Such ‘resource energies’ have diseconomies of scale: prices go up when demand is high. If we want low prices, we better use little of it.

    But the event did not just get me thinking about oil. Over the past year I have read a lot about, and attended events on, trends in wind and solar electricity as well as batteries. Much of it was in the context of our electromobility strategy, a new platform which we helped establish in April. Solar and wind energy are different; they are not burned, do not use resources that cannot be recovered (ie, they are truly renewable) and do not emit CO2 when producing energy. They are not resource energies, they are ‘technology energies’. The sun and wind keep giving their services for free, no matter how much we use them.

    In these sectors, it’s all about the ‘learning effect’: how quickly wind and solar farms and battery packs get cheaper if we deploy them in larger numbers. And that all depends on the economies of scale – we just need to deploy a lot of them and prices will keep dropping because technology will keep improving.

    Want your energy cleaner and cheaper? Use less oil and bioenergy, and use more solar and wind (and tidal, wave and geothermal, for that matter) and they will all become cheaper. It might sound too good to be true, but it isn’t. The oil industry – and, most prominently, the Koch brothers – know it too and are starting a rearguard action to put the genie back in the bottle by trying to pour scorn over electrification of transport at every possible opportunity. They know too well that they will lose in the end, but I hope that end will be reached well within my lifetime.