Creative destruction: the COVID-19 economic crisis is accelerating the demise of fossil fuels



Shutterstock

Peter Newman, Curtin University

Creative destruction “is the essential fact about capitalism”, wrote the great Austrian economist Joseph Schumpeter in 1942. New technologies and processes continuously revolutionise the economic structure from within, “incessantly destroying the old one, incessantly creating a new one”.

Change happens more quickly and creatively during times of economic disruption. Innovations meeting material and cultural needs accelerate. Structures preventing new, more efficient technologies weaken. As the old economy collapses, innovations “cluster” to become the core of the new economy.

Over the past three centuries there have been five great “waves” of economic disruption and clustering. The first was driven by harnessing water power, the second by steam power, the third by coal and electricity, the fourth by oil and gas, and the fifth by digital transformation.

We are now at the start of the sixth great wave, driven by renewable energy combined with electromobility and smart-city technology.


Graph showing six historical 'waves' of innovation.
Waves of innovation.
The author, CC BY-ND

Though 2020 will be a difficult year for the entire economy, these technology trends are faring much better than the old-energy sector. Over the longer run the COVID-19 economic disruption should accelerate the wave.

Renewable energy

In renewable energy, solar photovoltaics and onshore wind are now the most economic new form of electricity generation for at least two-thirds of the global population, according to energy research provider BloombergNEF.

In Australia, the latest analysis of electricity generation costs by the Australian Energy Market Operator and CSIRO shows solar photovoltaics and wind are already cheaper than coal and gas. Solar PV costs are also predicted to fall sharply over the next decade, reducing its generation costs from about A$50 a megawatt hour to A$30 by 2030.

The following graph for renewable energy and coal consumption in the United States shows the acceleration towards renewables is well underway.


Coal and renewables use.
The author, redrawn from IEA (2020), CC BY-ND

Statistics published last week by the US Energy Information Administration show in 2019 coal production fell to its lowest level since 1978. In 2020 coal production is projected to fall to 1960s levels.

Across all member nations of the Organisation for Economic Cooperation and Development (including Australia), the International Energy Agency’s latest monthly statistics show coal production in April was down 32% on April 2019. Electricity generation from all non-renwables was down 12%. But generation from renewables was up 3%.

Electromobility

Electromobility encompasses electric vehicles including cars, buses and trackless trams. Globally, BloombergNEF projects electric vehicles to comprise 3% of new passenger car sales in 2020, 10% in 2025, 28% in 2030 and 58% in 2040.

Leading the charge is Europe, where sales of electric vehicles actually increased 7.5% in the first quarter of 2020, bucking the global downturn for electric cars and the industry overall.

The only major car maker to increase sales was Tesla, selling 88,496 cars. Its second-quarter sales of 90,650 cars was just 5% down on a year ago, compared to falls of about 25% for other makers. Tesla’s booming share price saw it overtake Toyota in May to become the world’s most valuable car maker.

Smart-city technology

Smart-city technology involves using sensors, machine learning, artificial intelligence, block-chain and the “internet of things” to improve infrastructure efficiency. They have been growing in use for transport, energy and housing.

Road sensors can help traffic managers coordinate traffic signals to cut congestion or to guide fast electric buses and trackless trams through traffic. Apps help us navigate through cities, and to know precisely when buses or trains are due.

In energy grids, smart technology can be used to balance electricity supply and demand, and to create low-cost and localised electricity markets.

In housing, smart systems can improve all aspects of a home’s energy and environmental performance.

Curtin University has partnered with Western Australia’s land development agency to integrate these technologies into the East Village housing project in Fremantle. It will use blockchain technology to leverage photovoltiacs, batteries, electric vehicles and water heating in a micro-grid supplying 100% renewable power to a community of 36 homes. This cluster of innovations are modular, so developers can experiment and then scale up.

Brake or accelerate

The economic and cultural benefits of renewable energy generation, electromobility and smart-city technologies are clear. They will led to a cleaner, greener economy with many more new jobs.




Read more:
45,000 renewables jobs are Australia’s for the taking – but how many will go to coal workers?


Together I estimate they have the potential to reduce the use of fossil fuel by 80% in a decade.

Eliminating the last 20% – gas and coal used in industrial processes such as steel production and mineral processing, and fossil fuels used for long-haul road, sea and air transport – will be harder.




Read more:
Energy isn’t just electricity – the common mistake obscuring the mammoth task of decarbonisation


But hydrogen made with renewable energy can potentially replace fossil fuels in all these applications, though developing and commercialising the technology and needed infrastructure will likely take a decade or more.

Australia is already a global leader in uptake of solar generation and battery storage. We are also doing well in smart city technologies. But we have been slow in electromobility, and we will need to invest more in hydrogen research, development and deployment.

The only thing that will put the brake on these technologies becoming the core of the new economy sooner rather than later are backward-looking government policies that seek to prop up an obsolete fossil-fuel economy.The Conversation

Peter Newman, Professor of Sustainability, Curtin University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

As the Liberal Party continues to fracture, we may be watching its demise


James Walter, Monash University

The Liberal Party is riven by internal bickering, with various camps claiming to speak for its “true” values and traditions. The contest is leading not to any prospect of unity or discipline, but to the party’s fragmentation. The war is fought in the guise of a contest over leadership appropriate to the party’s soul and to the national interest. The Conversation

In the process, the party is incrementally diverging from popular opinion on issues essential to future electoral success. Prime Minister Malcolm Turnbull is currently in the crosshairs. But whether or not he survives to fight another election, whoever leads the party next time is unlikely to be the saviour of the party or Coalition government.

The predicament is best understood by analysing what is at the heart of this struggle: the pragmatic liberalism that was the Liberal Party’s foundation; the divergence of the party base from majority opinion; and the contemporary obsession with “the leader” as solely responsible for the party’s fortunes.

All exponents of Liberal Party values lay claim to the “Menzies” tradition. The most vehement contemporary claimants are on the party’s right wing. Their plaint is that the commitment to individualism, private enterprise, small government, lower taxes and free trade has been forgotten. Cory Bernardi split with the Liberals to establish his own party, Australian Conservatives, “to reconnect with voters and restore traditional Menzies-era values”.

Others of like mind remain in the fold — and threaten Turnbull’s leadership. The most prominent is his predecessor, Tony Abbott. Abbott continues to advocate more extreme budget austerity, climate change scepticism, immigration restriction, market fundamentalism and regressive taxation reform than even Turnbull (who has compromised on everything he once promised in an attempt to mollify the right) has yet conceded.

Such claims depart from Menzies’ principles in two core texts. The first is his famous “Forgotten People” broadcast in 1943. The second is his essay on “The revival of Liberalism in Australia” in Afternoon Light.

Menzies championed thrift, self-reliance, private enterprise, individual responsibility and freedom, and the family as the bastion of our best instincts. He warned of the danger of an “all powerful” state. But he pitched his appeal to the middle class, excluding the rich and powerful (who did not need his help) and the “unskilled people” (protected by unions and with wages safeguarded by common law). Thus he mobilised an election-winning constituency between what he saw as the extremes of exploitative financial power and the incipient socialism of the organised working class.

Yet Menzies insisted:

There is no room in Australia for a party of reaction. There is no useful place for a policy of negation.

He never claimed that his was a conservative party. On the contrary:

We took the name ‘Liberal’ because we were determined to be a progressive party, willing to make experiments, in no sense reactionary, but believing in the individual, his rights and his enterprise, and rejecting the Socialist panacea.

Still, the state had its part to play. Menzies supported protection, not free trade. He “did not … [believe] that private enterprise should have an ‘open go’. Not at all.”

He identified the state’s obligation to address unemployment, and secure economic security and material well-being through social legislation. He advocated fierce independence, but the difficulties of those who fell through the cracks were to be ameliorated:

… we have nothing but the warmest human compassion … towards those compelled to live upon the bounty of the state.

This philosophy served Menzies well. Not until the late 1980s did the party change, when it “torched its traditions” as it sacrificed ameliorative liberalism in the interests of economic reform. Only then did the split between “wets” and “drys” lead to liberal moderates being increasingly marginalised. And only then party did hardliners begin to assert their claims as “conservatives”, a term that had never been indigenous to Australian anti-Labor politics, but was appropriated from the US culture wars of the time to serve the same purpose.

The bipartisan commitment to neo-liberal reform did what was intended. It increased prosperity, but at the cost of increasing employment uncertainty and astonishing inequity in the distribution of rewards. Inflation was defeated, but some communities were devastated as industry disappeared.

By the early 2000s, surveys revealed that the “new consensus” had not won popular acceptance. By 2016, there was pervasive distrust in the institutions of the new order and an unprecedented loss of confidence in the leaders who had brought this about.

It is a collapse that has impacted both major parties. Pointedly, for the Liberal Party, Tony Abbott, after election, reverted to policies that mirrored the party’s base — now increasingly divergent from majority opinion on social issues, especially climate change.

Unable to garner public support, Abbott was supplanted by Turnbull, whose initial popularity depended on a progressive liberalism akin to a contemporary adaptation of Menzies’ stipulations.

But the “broad church” was gone. Progressive liberals have given up; the hard right has claimed Menzies’ mantle and threatens retribution if Turnbull “offends” against the much diminished and now atypical membership base. He is besieged on both sides: an uprising if he confronts those who claim to speak for the party; and a loss of popularity (and electorate support) as he compromises on the more progressive liberalism he promised the public.

It is not, finally, an argument about who is more and less Liberal, but a manifestation of the unravelling of the party. Who could break the impasse that looks likely to defeat Turnbull? Schisms between liberals and self-proclaimed conservatives will continue within, potentially with more splintering of populist, libertarian and hard-right fringe parties.

Any new leader would need to be a master tactician and negotiator without peer to achieve consensus across this morass. No-one currently in the ranks demonstrates such skills. And a return to Abbott or any of his ilk guarantees electoral oblivion. We may be witnessing the end of a once great party.

James Walter, Professor of Political Science, Monash University

This article was originally published on The Conversation. Read the original article.