Even Fossils Are Cutting Their Fossil Investment, Investment Writer Notes

Renewable energy is no longer an “alternative” investment, and fossil fuels are now a “legacy” option, @ImpactAlpha Editor and CEO David Bank argues in a recent post on Medium.

“The shape of the future is becoming clearer, as first coal, and now oil and gas, give way to solar, wind, and battery power,” Bank writes. “Can I interest you in a soot-belching coal plant? Thought not. How about a tar sands pipeline or long trains of coal or Arctic drilling?”

Or “how about mobile, distributed, connected, smart and, oh yeah, clean, solutions that are only getting better and cheaper?”

Bank acknowledges that clean energy has received some important policy boosts, from tax credits in the United States to carbon pricing. “But as the energy story becomes, solidly, a technology story, policy is no longer the driver,” he states. “Instead, renewable energy is showing the same kind of network effects, increasing returns to scale and virtuous circles that have powered the tech revolution.”

With renewable energy prices falling and deployment soaring, “fossil fuels are increasingly ‘legacy,’” he argues. “Coal production for 2016 was down an estimated 17% from 2015, continuing its eight-year fall from its peak in 2008.” The transition is bound to be rocky, but look no farther than fossil companies’ own investment plans for a sense of how long they expect the ride to continue.

“The real signal to watch is the oil companies’ ‘capex’., or capital expenditure budgets for drilling and production, where they reveal what they really think about future prospects,” he advises. Chevron’s 2017 capex estimate is US$19.8 billion, down 15% from 2016, and a whopping 42% from 2015. Other major oil companies have also cut back sharply.”

Bank’s conclusion: “It’s not just activist college campuses that are divesting from the fossil-fuel economy. It’s the fossil-fuel producers themselves.”