FC100: It's Carnage Out There
Why 2020 is the worst year ever for one industry. Plus, bionic swifts, the best science fiction movie of the last three decades, and good news on US prisons, conservation in Pakistan.
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The funny thing about living through a turning point in human history is that it doesn’t feel historical or momentous. In the popular history books, everything happens in nice tight story arcs, with a few key protagonists, and “a number of factors that contributed to the events of that year.” For the people living through it though, historical moments are mostly a confusing mess (just ask the revolutionaries in Paris, the proletariat in Moscow or the former residents of East Berlin). Each day seems crazier than the last, the whiplash of news becomes increasingly unreal, until eventually everyone is reduced to a semi-permanent state of shock, exclaiming “can you believe it?” to each other over and over again like a Hillsong Kids record on repeat.
Five, ten, hundred years later, the messiness is cleaned up and smoothed over for popular audiences, wrapped up for mass consumption in a pretty, fifteen chapter bow. The daily news stories that seemed so important at the time quite literally, become footnotes, and if the historians do their work really well, the last thing left is just the date itself, 1789, 1917, 1989, four numerals containing multitudes, serving as shorthand for millions of small stories of freedom, revolution, or peace.
What do you think 2020 will come to symbolize? Back in March, we pointed out that it was too early to impose narrative on this pandemic, that all of our carefully constructed heuristics had fallen apart overnight, and that it didn’t make sense to evaluate the raw, noisy data until more time had passed. Five months in, it’s probably time give it another go. What will the historians of the future write about this current moment in time? Perhaps it’ll be something like “with the United States reeling from the body count and distracted by its domestic political dramas, China cemented its superpower status by abolishing the autonomy of Hong Kong,” or “while remote working had been around for years, the crisis turned it mainstream overnight, ushering in the biggest change to working habits since the invention of the PC.”
These aren’t bad candidates, but it’s not clear whether they count as major turning points in history. That distinction belongs instead to something you might not have heard about at all unless you’ve been staring gobsmacked at the news coming out of global energy markets. I’m willing to bet that many years from now, when the two newest members of the FC family, Lola (8 months) and Nina (3 months) are in high school, they won’t be writing essays about lockdowns or protests or masks or even elections. Instead, they’ll be learning about how the coronavirus crisis set off the most devastating downturn in the fossil fuel industry’s 150-year history, one from which, ultimately, it would never recover.
You see, 2020 isn’t just the year of the pandemic.
It’s the year of fossil fuel carnage.
“What’s front and center has been the extreme volatility and carnage that’s occurred in the energy sector. These companies are now in survivor mode, never mind thinking about the energy transition.”Jennifer Rowland, Senior Analyst, Edward Jones
The last few years haven’t been easy for coal, gas and oil companies. They’ve come under growing pressure from climate activism and divestment campaigns, and the rapid growth of cheaper alternatives. COVID-19 however, has put everything on fast forward, brutally exposing their frailties, wiping billions from market valuations, and catapulting them into situations they thought they would only have to deal with five or ten years from now. It’s the biggest shock to the global energy system in more than seven decades, with the drop in demand this year set to dwarf the impact of the 2008 financial crisis. Many energy analysts are now saying something that would have been unimaginable a few months ago — it looks very likely that global carbon emissions peaked in 2019.The historic decline in global emissions is not something to be celebrated. It comes at an unimaginable cost, hundreds of thousands of premature deaths and devastating economic trauma around the world. Nor is a peak guaranteed. If governments do not learn the lessons of the last financial crisis, and put clean energy technologies — renewables, efficiency, batteries, hydrogen and carbon capture — at the heart of their plans for economic recovery, then this brief, unlooked-for window of opportunity will close. There are good reasons to believe though, that this time will be different, because this time, it’s all about the money.
Coal has been the hardest hit, with global coal-fired power generation set to fall by more than 10% this year. That’s the problem with being the dirtiest and most expensive source of electricity. You’re the first thing that gets switched off, and you don’t get switched on until demand comes back up again. The key issue is what economists call the ‘marginal cost.’ The idea is simple: once you’ve built your power stations, it’s more expensive to run the ones that need fuel than the ones that rely on wind, rain or sunshine. Think about it. Coal-fired electricity requires you to keep on digging up black rocks, transporting them to power plants, and setting them on fire. Once you’ve installed your wind turbine, solar panel or hydropower plant though, the electrons come pretty much free of charge.
A similar economic logic applies to natural gas — demand is on track to decline 5% in 2020, the largest recorded year-on-year drop since natural gas was developed at scale during the second half of the 20th century. Renewables will be the only energy source that will grow in 2020, with their share of global electricity generation projected to jump by 5% this year. Adding momentum is the fact that renewables keep on getting cheaper. Not only is clean energy now the lowest cost source of power generation for at least 85% of global power generation, it’s actually cheaper to build new wind and solar, including battery storage, than to continue operating 40% of the world’s existing coal capacity.
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The sun sets behind an idle pump jack near Karnes City, Texas, April 8, 2020 (AP Photo/Eric Gay)
Money talks. It doesn’t matter how strong the coal and gas lobby has been, how many officials they’ve bribed or how many campaign donations they’ve made — the inexorable logic of economic gravity is taking hold. Those companies hoping to eke it out for another few years have suddenly, like the Road Runner, discovered that there’s no ground under their feet. Union leader Nicholas Klein’s often misattributed aphorism comes to mind. First they ignored clean energy, then they laughed at it, then they fought it with every dirty trick they had, and now they’re on the wrong end of a battle they cannot win.
The bad news is coming thick and fast. In the United Kingdom, where humanity’s industrial experiment first began, the country didn’t switch on a coal plant at all between the 10th April and the 17th June, and permanently retired two coal plants during lockdown, leaving just four in operation. Eight years ago, about 40% of the country’s electricity came from coal. This year, it’ll be a rounding error. Renewables have filled the gap; their output was higher than fossil fuel generation in the UK for the first time ever in the first quarter of 2020, with wind energy alone supplying almost as much electricity as natural gas.
Across the Channel, thermal coal has been absolutely hammered, with imports to Europe plunging to lows not seen in 30 years. Thanks to the EU’s slow ratcheting up of the carbon price, four fifths of the continent’s coal fleet is already more expensive to run than to build new wind and solar. This presumably, is why, since March, Sweden and Austria have closed their last coal plants, Poland and the Czech Republic have scrapped planned coal expansions, Portugal has brought forward its planned coal shutdowns by two years, Italy’s largest utility has brought forward its closures by five years, and seven of Spain’s remaining 15 coal-fired power stations have been retired after the owners admitted they couldn’t afford to keep them open any more. Two years ago, 15% of electricity in Spain came from coal. In May this year, it contributed just 1.4% of the power mix.
It’s Germany however, that has surprised analysts the most. In Europe’s industrial powerhouse, and the fourth largest economy in the world, coal only supplied about 20% of the power mix in the first half of the year (compared to 31% in 2019) and more than half of electricity has come from renewables. This remember, is a country that’s been hammered by environmentalists from the one side for its refusal to abandon coal, and from the other by carbonists for its ‘profligate’ spending on clean energy. Suddenly, from out of nowhere, it looks possible that Germany’s remaining 40GW of coal power will shuttered by the middle of this decade, well ahead of the government’s 2038 deadline. Someone, somewhere, is muttering Ich hab’s dir doch gesagt under their breath (we’re just not sure who).
This is not intended as a criticism of environmentalists — far from it. Their untiring efforts have slowly but surely shifted the climate conversation to the center of debate in Brussels. It’s been a grueling process, the result of decades of activism, painstaking planning, lobbying, and death by committee. The reward, when it came though, was quick. The European Green Deal, in the space of less than 24 months, went from NGO wish list to the new defining mission of the European Union, and a ‘green transition’ is now at the heart of the region’s recovery plan. It’s backed by almost €2 trillion of financial firepower. The way Europe sees it, if every nation in the world is going to be in debt for at least the next decade, they might as well be paying for something that solves the biggest challenge of the 21st century.
That same political calculus of course, is nowhere to be seen in the United States. In 2018, the current president declared that “coal is indestructible” and that “the coal industry is back.” The current president is of course, p̶r̶o̶b̶a̶b̶l̶y̶ ̶t̶h̶e̶ ̶m̶o̶s̶t̶ ̶u̶n̶f̶a̶i̶r̶l̶y̶ ̶p̶e̶r̶s̶e̶c̶u̶t̶e̶d̶,̶ ̶m̶a̶l̶i̶g̶n̶e̶d̶ ̶a̶n̶d̶ ̶m̶i̶s̶u̶n̶d̶e̶r̶s̶t̶o̶o̶d̶ ̶U̶S̶ ̶l̶e̶a̶d̶e̶r̶ ̶o̶f̶ ̶t̶h̶e̶ ̶p̶a̶s̶t̶ ̶1̶5̶0̶ ̶y̶e̶a̶r̶s̶,̶ ̶a̶ ̶s̶t̶a̶l̶w̶a̶r̶t̶ ̶d̶e̶f̶e̶n̶d̶e̶r̶ ̶o̶f̶ ̶t̶h̶e̶ ̶A̶m̶e̶r̶i̶c̶a̶n̶ ̶w̶a̶y̶ ̶w̶h̶o̶ ̶h̶a̶s̶ ̶s̶a̶v̶e̶d̶ ̶t̶h̶e̶ ̶C̶o̶n̶s̶t̶i̶t̶u̶t̶i̶o̶n̶ ̶a̶n̶d̶ ̶t̶h̶e̶ ̶R̶e̶p̶u̶b̶l̶i̶c̶ ̶f̶r̶o̶m̶ ̶t̶h̶e̶ ̶f̶o̶r̶c̶e̶s̶ ̶w̶h̶o̶ ̶w̶o̶u̶l̶d̶ ̶h̶a̶v̶e̶ ̶d̶e̶s̶t̶r̶o̶y̶e̶d̶ ̶i̶t̶ sorry let’s try that again t̶h̶e̶ ̶J̶a̶b̶b̶a̶ ̶t̶h̶e̶ ̶H̶u̶t̶ ̶o̶f̶ ̶p̶r̶i̶v̶i̶l̶e̶g̶e̶,̶ ̶a̶ ̶F̶r̶a̶n̶k̶e̶n̶s̶t̶e̶i̶n̶ ̶o̶f̶ ̶h̶u̶m̶a̶n̶ ̶f̶l̶a̶w̶s̶,̶ ̶a̶n̶ ̶e̶g̶o̶t̶i̶s̶t̶i̶c̶a̶l̶,̶ ̶n̶a̶s̶t̶y̶,̶ ̶p̶e̶t̶u̶l̶a̶n̶t̶ ̶m̶a̶n̶-̶c̶h̶i̶l̶d̶ ̶s̶o̶w̶i̶n̶g̶ ̶d̶i̶s̶c̶o̶r̶d̶ ̶a̶n̶d̶ ̶h̶a̶t̶e̶ ̶t̶o̶ ̶d̶i̶s̶g̶u̶i̶s̶e̶ ̶h̶i̶s̶ ̶g̶r̶e̶e̶d̶ ̶a̶n̶d̶ ̶p̶r̶o̶f̶i̶t̶e̶e̶r̶i̶n̶g̶,̶ ̶a̶ ̶s̶e̶l̶f̶-̶s̶e̶r̶v̶i̶n̶g̶ ̶b̶u̶l̶l̶y̶ ̶w̶h̶o̶ ̶t̶u̶r̶n̶s̶ ̶i̶n̶t̶o̶ ̶a̶ ̶s̶n̶i̶v̶e̶l̶l̶i̶n̶g̶ ̶s̶i̶d̶e̶k̶i̶c̶k̶ ̶a̶m̶o̶n̶g̶s̶t̶ ̶b̶u̶l̶l̶i̶e̶s̶,̶ ̶i̶n̶c̶a̶p̶a̶b̶l̶e̶ ̶o̶f̶ ̶t̶h̶e̶ ̶t̶i̶n̶i̶e̶s̶t̶ ̶s̶h̶r̶e̶d̶ ̶o̶f̶ ̶e̶m̶p̶a̶t̶h̶y̶,̶ ̶s̶a̶c̶r̶i̶f̶i̶c̶e̶,̶ ̶c̶o̶m̶p̶a̶s̶s̶i̶o̶n̶,̶ ̶h̶u̶m̶i̶l̶i̶t̶y̶,̶ ̶o̶r̶ ̶p̶e̶r̶s̶o̶n̶a̶l̶ ̶r̶e̶s̶t̶r̶a̶i̶n̶t̶,̶ ̶a̶ ̶m̶o̶r̶a̶l̶ ̶b̶l̶a̶c̶k̶ ̶h̶o̶l̶e̶ ̶w̶h̶o̶s̶e̶ ̶s̶h̶e̶e̶r̶ ̶i̶n̶c̶o̶m̶p̶e̶t̶e̶n̶c̶e̶ ̶i̶s̶ ̶s̶i̶n̶g̶l̶e̶-̶h̶a̶n̶d̶e̶d̶l̶
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The US president models a hard hat in support of miners during a rally at the Charleston Civic Center in Charleston, West Virginia. Credit: Mark Lyons/Getty
Last year saw an 18% decline in coal generation, a 15% fall in coal consumption, and a 53% drop in the value of coal stocks. Coming into 2020, the US coal industry was already in the middle of its very own Kodak moment, punchdrunk from a combination of climate activism, cheap gas and renewables. The lockdowns have acted like a clean uppercut to the jaw: as demand for electricity has plummeted, expensive coal has been the first thing to go. The latest estimates suggest that US coal generation this year will provide less than 18% of power supply, and analysts predict it could fall to just 10% in five years, down from 50% a decade ago. By contrast, renewables will account for over a fifth of electricity generation this year, surpassing coal for the first time since 1885, when the Statue of Liberty first arrived in New York. Nobody in the coal industry, it appears, is laughing any more.
They’re not laughing in the oil and gas sector either. It wasn’t that long ago that energy executives and their lobbyists in Washington were (…)
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