The risk of stranded assets is becoming a reality for fossil fuel companies and their investors, and analyst Deborah Lawrence says that isn’t just because of climate change.
Opinion leaders from Bank of England Governor Mark Carney to U.S. climate envoy Todd Stern are convinced the large majority of fossil fuel assets are unburnable. “What is starting to emerge, however, is that stranded assets in oil and gas are not going to happen merely because of climate change,” Lawrence writes.
“Though climate change will no doubt prove to be one aspect of stranded assets, others will include a simple but powerful realization that there are simply better places to put your investment dollars…or euros…or yuan.”
Lawrence points to the rise of solar and wind as one of the “potentially disrupting events” facing fossil fuels. “While most of us were not paying attention, they were quietly adding capacity to the grid. While we were incessantly fixated on the ‘shale revolution’ they were streamlining manufacturing processes and the costs were plunging.”
Oil and gas “apologists” might still “knowingly smile and make smug pronouncements about wind and solar only accounting for a minuscule part of the overall system,” she notes. But even so, “they are already economically competitive! In fact, wind is now the cheapest form of electricity generation in the U.S. and many other places globally on a levelized basis. And yes, this is without subsidies. Solar is expected to be competitive with wind in the next 18 months to two years, and yet these technologies have not reached scale. Imagine the possibilities.”