BP annual review shows the parlous state of fossil fuel addiction

The CEO and others at BP have stood up this week, surveyed the state of decarbonization and told the world off, with a “must do better” attitude – despite the fact that BP has consistently been mealy-mouthed about climate change and fossil fuels and has no real stake in the ground in renewables territory.

This then was its annual statistical energy review which more or less sums up what we have been writing all year up to this date – that emissions are up, and actually they are up quite a bit and that’s a surprise. Tut-tut.

Let’s take some samplings – Primary energy consumption grew at a rate of 2.9% last year, that’s a doubling of its 10-year average of 1.5% a year. This is energy use speeding up. Now that’s hardly surprising. For all the bluff and blunder that goes on about decarbonization, there is virtually no regulatory movements anywhere in the world, which focuses on energy efficiency. It’s as if that part of the equation, stimulating the falling use of energy, is just not important. BP outlines it, but does not outline what to do about it.

The culprit is natural gas which made up over 40% of the increase and of course if you have a colder or longer winter, a country which has a natural gas based home boiler system and mains gas, is going to up its gas burn considerably – and while it seems this is mostly what’s happened, actually the other major factor is economic grow as we shall see later. Insulation may have taken the sting out of that energy growth. So what kind of government regulation might have affected that?

That’s a tough one. If you tax homes which have too low an insulation level, then the poorer homes are the ones which are most likely to have poor or cheap insulation, and the poorer people get hit – not ideal. Perhaps a ruling that said that all homes above a certain size or value, must set aside some percentage of the sale price to be spent on getting a new home up to scratch on insulation after it is sold, this may have an effect. But that effect might be to freeze home sales and drop house prices, so it is not straightforward. And some of this temperature alignment is not about keeping heat in the home, but keeping it out.

Better carrot then, rather than stick, and this means governments have to subsidize insulation work, which has been carried out in at least one period in each of the last 3 decades across Europe – but more needs to be done and that at least cannot be laid at BP’s door.

The next line of the report points the finger more accurately as it points out that China, the US and India together accounted for more than two thirds of the global increase in energy demand, with US consumption expanding at its fastest rate for 30 years. So there it is, it is Mister Trump’s fault.

All that US fracking, and self-sufficiency has brought down gas pricing, that has a) Helped make many of those fracking firms fail to make any money, and b) Made Americans cavalier with cheap energy. All of which meant that carbon emissions grew by 2%, instead of falling.

So every time you read or hear a BP spokesman on the radio say, “The shift needs to be from coal to gas and then onto carbon capture,” what you should really hear is “It will help my share price a lot if we can just carry on as we are, change fuel, keep exploring for reserves and do this until I retire and then it’s not my problem.”

Ask a renewable expert and he will say, “there no point stopping off at gas on the way to renewables, since renewables are now cheaper.” Better to listen to him.

While oil consumption is up a tiny bit , gas is up 5.3%. ExxonMobil would rather we capture China as a growing gas customer, as a way of getting it off coal. That is short-termism, but for fossil fuel thinkers, it remains tempting logic.

Other gas producers including China, Russia and Iran, were chasing the US as lead producer. Haven’t we heard those names a lot on the news? Oh yes, all about strife in the middle east. If they did not have fuel security at the heart of their foreign policy, there would be less wars, and less gas. Actually if they DID have fuel security at their heart, but weren’t so knee jerk. That realizes that if you rely on the sun and the wind, you ARE self-sufficient since it is YOUR sun and YOUR wind.

The mystifying number is how coal consumption could have gone up, by 1.4%, when every day we hear of an old coal plant being retired. It may have some thing to do with those fresh plants being built in China and India, and that remains a problem.

But given that renewables grew by 14.5% globally, if renewables had a higher starting point, that would be impressive, but it is the low total percentage that renewables have in most economies which prevents this growth from outstripping the need for more electricity. And that in turn lets in gas, coal and oil. Again China and India were responsible for most electricity growth, so we can see where the coal issues come from.

The surge in batteries has been noted and Cobalt and Lithium production rose by 13.9% and 17.6% respectively, not enough to make a real difference yet, but confirming the stories we write each week on the rise of the grid scale battery. As a result Cobalt (used in Lithium Ion battery cathodes) rose in price by 30% and Lithium Carbonate by 21%. Replacing these at the heart of EVs and also in grid scale batteries is an urgent matter. Grid scale could shift dramatically away from Lithium if it adopts other technologies such as Vanadium Flow, currently acknowledged, but only as a minor player based on investment spend. That would leave Lithium Ion for cars and homes. Not a bad plan.

The graph below sums up best where energy growth came from.

1The interesting part about that is looking for Europe. Its just not there. It’s buried in Rest of the World, and its economies grow more slowly, its energy standards drive usage down, in most devices, year after year, it is decarbonizing faster, and that’s while it still contains aberrant cultures like Poland, which runs 92% on coal for electricity, as the odd one out.

In the “Other Asia,” sector you have countries like Indonesia, another coal obsessed culture. The numbers show that the US is being slowly weaned off coal, and to some extent gas, despite having a pro-coal President, and that once the political agenda there changes, it will be no problem. Clearly China and India are rushing to sustain their economic growth, and are less discriminating than they should be. Some level of persuasion will be required to bring these two territories to heel and the best possible pressure is lowering the price of renewables. Nothing else is that much of a problem.

Given that China is forcing parity on its renewables companies, India is likely to be the sole stick-in-the-mud over the next ten years, as it continually fails to make thing happen the way the government wishes in renewables, mostly because it is so poor and the prices it offers are too low to attract international energy businesses.

What the BP figures do show is a much stronger correlation between country GDP growth and energy usage, that weather effects. A country that is growing is using roughly the same % more electricity as it achieves in commercial GDP growth. That’s worrying. The idea that to grow an economy requires more electricity is not one we want to be married to in a world where all western economists are attached at the hip to GDP growth as a measure of societal success.

BP raises the worrying idea that hot days and cold days drive energy usage. This sort of contradicts the piece about it being tied to GDP growth, but bear with the logic for a second. As global warming gets going, there will be more cool and warm days, and people will use more electricity and it could end up as a vicious cycle. That is certainly partly true, as major warm countries adopt air conditioning for the first time. But we would add that this only happens in an economy which has GDP growth. In other words everyone has wanted air conditioning, but it is only when then can afford it, that it becomes an emissions problem.

The rest of the report is tighter and tighter detail on those overarching conclusions and worth drilling down to any problem you need a closer look at if you have highly localized interests either geographically or industry wise. We don’t believe for a moment that BP, with its history of flirting with renewables and constantly reverting back to fossil fuels, would dream of tampering with the numbers – it reads too badly for the industries it is active in. So these numbers can be trusted. Whatever we do about them leads to a strong future for renewables and at some point BP will have to join everyone on that side of the equation and stop prevaricating about it.