Solar and Wind vs Fossil Fuels

There is no doubt that solar and wind power will replace gas and oil- it’s just a matter of when. This is the view presented by Jeremy Grantham.  “Who is he?” You may say. He’s a man with a lot of business acumen and clout. He’s also got no axe to grind in favor of any particular form of energy production. He is a British inventor and co-founder of $100 billion funds managing firm GMO Capital, based in Boston. He is also a philanthropist and an acquaintance of Prince Charles. Here he is shaking the Prince’s hand in Buckingham Palace:-

Grantham has built much of his investing reputation over his long career by correctly identifying speculative market “bubbles” as they were happening and steering clients’ assets clear of impending crashes. Grantham has repeatedly stated that the rising cost of energy – the most fundamental commodity – between 2002 and 2008 has falsely inflated economic growth and GDP figures worldwide and that we have been in a “carbon bubble” for approximately the last 250 years in which energy was very cheap. He believes that this bubble is coming to an end.

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He says that while it must be obvious that eventually, fossil fuels will run out, the time scale for the pace of change to renewable energy will surprise everyone and have implications for fossil fuel investment much sooner than people realize. In his quarterly newsletter, he says:

“I have become increasingly impressed with the potential for a revolution in energy, which will make it extremely unlikely that a lack of energy will be the issue that brings us to our knees. Even in the expected event that there are no important breakthroughs in the cost of nuclear power, the potential for alternative energy sources, mainly solar and wind power, to completely replace coal and gas for utility generation globally is, I think, certain. The question is only whether it takes 30 years or 70 years. That we will replace oil for land transportation with electricity or fuel cells derived indirectly from electricity is also certain and there, perhaps, the timing question is whether this will take twenty or 40 years.”

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Grantham’s predictions go against the conventional wisdom of the fossil fuel industry, but they align with the thoughts of many people, including Stanford researcher Tony Seba, who said last year that this could occur within a few decades.

He also argues that Governments are overstating the benefits of switching to natural gas and ignoring or belittling the threats it poses in terms of earthquakes.

“Fracking gas,” like all-natural gas, is basically methane. Methane unfortunately is an even more potent greenhouse gas than CO2: at an interval of 100 years, it is now estimated to be 32 times as bad, and at 20 years it is 72 times worse! If it leaks from wellhead to stove by more than 3%, it gives back its critical advantage and becomes no better than coal in its climate effect. Emissions, for whatever reasons, have not been carefully monitored. It would be nice, though, to know how fast we are roasting our planet. A series of tests in the next three years or so, privately funded, will measure leakages. In old cities with Victorian-era gas lines, leakage will be terrible – probably 2% or 3% on their own. At some “cowboy” wells, emissions will be much higher than that. “

He also considers that China will become more and more pro-green energy as its demand for energy rises and as its (increasingly vocal) people demand an end to smog and health risks. He reminds us that China already has 200 million electric vehicles – mostly motorbikes – almost as many as the rest of the world squared. He thinks they are the future of both personal and mass transport.

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He has himself been won over to electric car transport, having borrowed a friend’s Tesla. As the cost of batteries declines and the technology becomes more efficient he thinks the cost of electric cars will be cut by almost 50% in the next few years.

Those governments that take on board that the future of fossil fuels is limited to a few more decades will begin to put more into research to make turbines, solar panels, and storage batteries more efficient and be ahead of the game (as well as reduce the carbon footprint).

This man is clever. He has proved he knows what he is talking about in the past. Ignore him at your peril!