Fracking opens the gate for renewables

A wind farm in Zhoushan, Zhejiang province. China's investment in clean energy in 2014 hit a record $89.5 billion, accounting for 29 percent of the world's total. [Photo/China Daily]

The Paris COP21 Climate Agreement in December put the world in an exciting position, with 187 countries agreeing to make 'intended nationally determined contributions (INDCs) to control the impact of CO2 on our environment. The fact that we reached such a consensus was amazing in itself, but now we need to act on this collective momentum, with many wondering who will lead this charge, and where the "big wins" will come from.

Those who follow these issues can now celebrate, as 2016 brought a large unexpected global gift – Oil at $30/barrel, or even less. No one ever expected these low prices, with assumptions of "Peak Oil" constraining supply, and China and India's growth driving demand, most assumed high revenues and continual investment attraction, while government subsidies kept the machine well-oiled.

A major factor in the price drop has been the disruptive innovation of fracking which now happens almost in Internet time, and virtually guarantees that oil prices will not rise for a long time coming (unless there are significant international political disruptions which could increase in likelihood with some oil countries losing their main revenue sources). Fracking is the ability to extract gas from shale in previously unreachable locations and quantities, and with relative ease. This means that the large incumbents and oil nations who have relied on high prices have had the rug pulled out from under their feet with a multitude of smaller players now competing with production and supply.

Environmental groups do not like the potential dangers and impact of fracking, but there is a big unintended silver lining for renewable energies. Now with low oil prices, even the new, smaller fracking players will not want to enter the market. So where will the money go? To clean energy, because there is no turning back technology, and fracking has now opened the flood gates, creating enough supply that the U.S. can now become an oil/gas exporter.

The old school of thought used to be that high oil prices made renewable energy more competitive, but this did not remove the need for clean energy to also compete against over $650bn in global subsidies to the oil industry. Now, contrary to popular belief, with oil at $30/barrel, and the reverse oil shock, we have the opportunity of a lifetime to shift investment into the much needed clean energy.