The Pace of Energy Transition
Tags: Oil And Gas, Energy Transition, Renewable Energy, Electricity

We can see that overall capacity factors for wind and solar are 32% and 22% respectively. They are improving over time though. So let’s filter down to the latest data that we have and see what the most recent numbers look like. For now, we have a full years worth of data for 2019, so we can focus in on 2018 installs. I also just pulled larger wind/solar farms with 50+ MW capacity. This is a list of 36 wind installations with an average capacity factor of 43% and 32 solar that are running at about 25%. This means although we expect to add 36 MW in renewable capacity in 2020, it will only contribute 13 MW to our electricity system. This increases our time to displace fossil fuels to 23 years.

One last thing to note is that the average amount of electricity consumed swings wildly throughout the day. While the US uses an average of 471 MW of power through the year, during the summer months this swells to 670+ MW for brief periods in the afternoon! And guess what, fossil fuels make up for most of that difference. So capacity actually needs to be built to handle our peak loads, which run about 480 MW just from fossil fuels. See this plot of hourly data from the EIA below. It can be found here: https://www.eia.gov/beta/electricity/gridmonitor/expanded-view/electric_overview/US48/US48/GenerationByEnergySource-4/edit.

Hourly electricity generation data. It is interesting to note that wind peak generation occurs during the night, it does not line up with peak demand!

Again, keeping with the 2020 expected rate of renewable installations, building enough capacity to handle this summer spike in demand will take 47 years.

This is really only scratching the surface. This is a very complex subject and I didn’t even to mention a host of other factors that could affect this timeline. Just a few to consider:

Timing of peak generation from renewables vs demand. For example, wind puts out more power at night, when demand is the lowest. Will we have to add more capacity than expected as a result? Maybe with the right mix of solar and wind we will be able to cover the swings in demand. The two generate peak electricity at different times so they compliment each other well. We would also need to find non carbon solutions for primary usage of fossil fuels. These are things like heating your home, driving your car, or industrial uses. This gets much more complicated and there may not be a clear path today on how all of this will happen. I assumed flat electricity demand. As we do things like add more EVs to the grid, demand could grow. Although, if everyone charges their cars at night, we may have enough nightly wind capacity to handle to load of cars. Electricity capacity will need to be over built to account for days when the sun doesn’t shine and the wind doesn’t blow. We also have to find a way to store large amounts of it.

One last point…clearly there is a long way to go before renewables completely displace our heavy reliance on fossil fuels. However, they will start having an impact on the oil and gas industry much sooner. In my opinion, the US is a marginal producer on the global level. Without a growing demand for oil, US shale will not be competitive with the Saudi’s and Russia’s of the world. We will largely be left producing out what we have already drilled. This means a very different environment for the industry than what we see today. The Onion really nailed it two years ago: