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Experts Were Wrong on Oil Prices. They’re Just As Wrong to Deride Solar Energy’s Viability.

| January 28, 2015

A very popular sign in Palm Coast these days. (© FlaglerLive)

A very popular sign in Palm Coast these days. (© FlaglerLive)

By Emily Schwartz

I recently mentioned in a column on renewable energy that solar power could generate half of the world’s electricity by 2050. I cited the International Energy Agency as my source.

Actually, the IEA is predicting that rooftop, utility-scale, and industrial solar will fuel about one quarter of the global grid by then. Wind energywill account for another 18 percent. All told, the IEA says renewable energy will generate at least two-thirds of the world’s electricity 35 years from now.

Green energy’s future is clearly bright. But I felt bad, even a bit sick about my mistake. I corrected my column. Then, I checked something out. How precise is energy forecasting?

To put it politely, the experts who get paid to predict these things aren’t the most accurate arrows in the quiver.

Take the still-unfolding crude crash. Its cause boils down to one simple fact: The industry is producing way more oil than consumers want. With supply outweighing demand, prices have plunged by more than 50 percent since mid-2014.

Oil prices are always volatile and they’ve plummeted before. Steep declines generally follow events that no one could anticipate with precision, such as the global economic slowdown that began in 2008.

Not this time. As Morgan Stanley’s analysts recently observed in their 2015 outlook, “this is a self-inflicted crisis.”

Legions of experts monitor the industry. Their insights guide billions of dollars in oil-related investment decisions. Surely they saw this coming, right? Nope.

Take Daniel Yergin, the world’s most prominent oil expert. He declared six months ago that without surging U.S. oil production, gas prices would have been painfully high.

Without higher U.S. output, “we’d be looking at an oil crisis,” Yergin told a high-octane gathering in the summer of 2014. “We’d have panic in the public. We’d have angry motorists. We’d have inflamed congressional hearings and we’d have the U.S. economy falling back into a recession.”

He really said that.

Peak oil that never was and other tea-leaves readings.

Instead, the low prices that “drill-baby-drill” boom helped trigger are disrupting millions of people’s lives. Alaska, North Dakota, and other states are bracing for economic downturns. Economic mayhem is lashing Russia, Venezuela, and other oil-dependent countries.

How about the U.S. Energy Information Administration? That’s the Department of Energy’s statistics arm. It tracks zillions of data points. Back when Yergin was toasting the U.S. oil boom, the agency said oil prices would average about $105 a barrel this year.

Oops. After crude nosedived to about $47 a barrel in January, the agency slashed its forecast to below the $60 mark.

Economic analyst Jesse Colombo was more prescient. “Crude oil prices are likely to finally experience a bust in the not-too-distant future,” he correctly predicted in June of 2014.

There’s really no excuse for the collective failure of oil experts to reach the same conclusion.

Back to my mistake. Predicting what will happen with solar power over the next 35 years is hard. The same people who couldn’t spot oil’s “self-inflicted” wounds seven months ago surely can’t be trusted to get it right.

In 2002, a research firm called Management Information Services Inc. assessed the accuracy of energy forecasts during the second half of the 20th century.

Experts consistently claimed that the world would hit “peak oil” — the point when petroleum supplies will stop meeting demand — within 15 years. And they insisted that solar energy and other renewable options were on the brink of hitting critical mass.

In light of that terrible track record, the researchers at Management Information Services correctly predicted that peak oil wasn’t around the corner. They also mistakenly said that solar and wind power wouldn’t be competitive with dirty-energy options by now.

But green energy, it turns out, is reaching that point. So I think it’s fair to say that their crystal ball failed in that regard.

I believe in learning from your mistakes. I hope Daniel Yergin and other energy experts do too.

Emily Schwartz Greco is the managing editor of OtherWords, a non-profit national editorial service run by the Institute for Policy Studies.

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9 Responses for “Experts Were Wrong on Oil Prices. They’re Just As Wrong to Deride Solar Energy’s Viability.”

  1. Paul says:

    Renewable energy ‘simply won’t work’: Top Google engineers

    Google has written off nearly a billion dollars in failed renewable energy investments…

    If you think they are wrong on this then put your money where your mouth is and go long the industry:

  2. Lancer says:

    Emily should go to Spain and see what their massive solar power station cost to build, what it costs to maintain and what it costs to produce a KW.

    This is a completely bogus “hit piece” without a plausible, coherent, logical fact regarding energy production. Solar cell technology isn’t as efficient as oil and coal, period. Do-gooder, non-thinkers simply cannot come to grip with these facts. Their reaction? Release the EPA and add regulations to increase costs on US, consumers to make alternative energy seem more cost efficient!

    These do-gooders are of the same mind set of the jilted lover who says,”I’ll MAKE YOU LOVE ME!”
    It would be a good joke, if not so utterly pathetic.

    Bad FlaglerLive, Bad!

  3. Sherry Epley says:

    Solar and other green energy technologies will not be fully developed unless/until the Koch brothers, et al, say so.

    Actually water is the next resource to be EXPLOITED and taken away from the people. . . and the billionaires get richer and richer. . . to hell with the environment and the people (er. . . the 99%)!

  4. Obama 2015 says:

    Renewable energy does work. Just because some companies fail doesn’t mean it doesn’t work. Apple has failed on a few tech projects but that brought on the Ipad. McDonalds tests burgers and food all the time and some don’t make the menu, should these companies just stop since they have some failurs. Not every renewable energy project is going to make it.

    The basic principle should be to support new and try to replace the old.

    If everyone had a panel on their roof that would just run their Dryer and AC and cut just 10% a year off their power bill , gas prices would stay at the 2.00 level for a long time.

    Big Oil hates progress and I don’t blame them. I wouldn’t want someone taking my job but like land lines and printing presses, you need to change your business or fade away.

    Progress has no favorites.

  5. Johnny Taxpayer says:

    “The industry is producing way more oil than consumers want”, that comment is only half the story… the other half is the “industry”, i.e. OPEC, i.e. Saudi Arabia, is doing this on purpose, by specific design. All you have to do is look at recent history. The shale oil in the Dakotas and other means of domestic oil production pose a real risk long term to the Saudis, and they know this, so they’ve done what they’ve always done, they over produce to sink the price of oil below the point where domestic oil is economically viable. We cut back on domestic production (already happening) and within a very short time, usually a around a year, OPEC manipulates the price right back up where it stays for another 4-5 years until domestic production comes back and we repeat the cycle all over again. The Saudi’s have a long term play and can afford to ride out the year or so oil prices plummet. I’m not sure why this is so hard to figure out.

  6. Sherry Epley says:

    Germany has had success with solar and other renewable energy sources. . . of course with a lot of resistance from the big power companies. This from

    Twenty-two percent of Germany’s power is generated with renewables. Solar provides close to a quarter of that. The southern German state of Bavaria, population 12.5 million, has three photovoltaic panels per resident, which adds up to more installed solar capacity than in the entire United States.

    With a long history of coal mining and heavy industry and the aforementioned winter gloom, Germany is not the country you’d naturally think of as a solar power. And yet a combination of canny regulation and widespread public support for renewables have made Germany an unlikely leader in the global green-power movement-and created a groundswell of small-scale power generation that could upend the dominance of traditional power companies.

    Twenty years ago, it was clear solar power wasn’t going to get anywhere by itself. Photovoltaic panels were expensive and inefficient. Even solar systems designed to heat water, a far less technologically tricky task, were bad buys on the open market. Producing electricity from sunlight costs 10 times more than generating power using coal or nuclear energy. “The early systems might as well have been made out of gold,” says David Wedepohl, a spokesman for Germany’s Solar Industry Association.

    In 1991, German politicians from across the political spectrum quietly passed the Erneuerbare Energien Gesetz (renewable energy law), or EEG. It was a little-heralded measure with long-lasting consequences.

    The law guaranteed small hydroelectric power generators-mostly in Bavaria, a politically conservative area I like to think of as the Texas of Germany-a market for their electricity. The EEG required utility companies to plug all renewable power producers, down to the smallest rooftop solar panel, into the national grid and buy their power at a fixed, slightly above-market rate that guaranteed a modest return over the long term. The prices were supposed to balance out the hidden costs of conventional power, from pollution to decades of coal subsidies.

    Investors began to approach solar and wind power as long-term investments, knowing there was a guaranteed future for renewable energy and a commitment to connecting it to the grid. Paperwork for renewables was streamlined-a big move in bureaucracy-loving Germany. The country invested billions in renewables research in the 1990s, and German reunification meant lots of money for energy development projects in the former East.

    Now German companies lead the world in solar research and technology. The handful of companies that make inverters, the devices that reverse the flow of electricity and feed power from rooftop solar panels back into national grids, are almost all German. On a sunny day last May, Germany produced 22 gigawatts of energy from the sun-half of the world’s total and the equivalent of 20 nuclear power plants.

  7. Lancer says:

    “experts” were dead wrong because no one knew that Saudi Arabia would start increasing production, which lowers prices….simple supply and demand.

    Saudi Arabia is doing this for numerous reasons, primarily competition:

    1. They are hurting Iran because they have more reserves.
    2. The US’ fracking has become so viable a process that even Europe is decreasing regulation to start fracking their oil shells. Something that they need to do to become less reliant on Russian NG.

  8. just me says:

    I saw something that here in Florida its against the law for company’s to install solar panels on your property and only charge you for the power you use from them??? once again it sounds like Government picking who it wants to win in the “open market” or is it that ALL our politicians get some kick back from the power company’s??

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