Fossil Fuels Aren’t Going Anywhere
“There is no scenario where hydrocarbons disappear,” the chief executive of Baker Hughes, Lorenzo Simonelli, said during his keynote speech at this year’s annual meeting in the company. Like other executives from the industry, Simonelli acknowledged and welcomed the energy transition, but he noted that a 100-percent renewable energy scenario was simply not possible. There is plenty of evidence this is indeed the case, despite the hopes and ambitions of many environmental advocates.
These hopes and ambitions imagine a world where human activity is powered from electricity only, and this electricity in turn is being generated using only renewable energy sources such as solar, wind, and hydropower.
Such a world, however, is unrealistic.
Take Germany, for example. The country, which is among the EU members with the most renewable energy capacity, has not produced a single Watt of solar energy since the start of this year. The reason: it’s winter. It is producing solid amounts of wind power, that’s for sure, but it is also generating power from the most despised fossil fuel of all: coal.
At the time of writing its carbon intensity was 264 grams of CO2 equivalent per kWh. That was comparable to the carbon intensity of another poster girl for renewables in Europe, Denmark, which is currently getting most of its energy from wind power.
So, it seems building renewable capacity in itself is not a silver bullet solution to the emissions problem. In fact, if you build it too quickly without adding substantial storage capacity, it could backfire. This was most recently evidenced by a narrow miss of a major blackout in Europe prompted by a minor problem at a Croatian substation that rippled through the continent, highlighting the importance of maintaining the grid at a constant frequency—something renewables cannot do because of their intermittent generation.
Even Denmark has thermal power plants to secure the baseload any grid needs to function properly and eliminate or at least reduce the risk of blackouts.
But back to Simonelli’s prediction about the guaranteed future of oil and gas. This future won’t be like the past. The world is firmly on course to change the way it generates and uses energy. Both Simonelli and the other keynote speaker at Baker Hughes’ AM2021, IHS Markit’s Daniel Yergin, recognized that. It is simply that this change will not be limited to a build-up of solar- and wind-generating capacity.