This blog post originally appeared in Forbes on December 18, 2014.
2014 was a remarkable year for energy and climate issues. Oil prices are plummeting, the United States and China made a major joint climate announcement, and renewable energy reached price paritywith coal in a growing number of markets. Iconic tech companies—including Google and Apple—are playing a larger role in both renewable energy and home energy efficiency.
Against this backdrop, 2014 is on track to go down as the world’s hottest year ever recorded. Already the first 10 months of 2014 have been the hottest on record globally. And, notably nine of the 10 hottest years on record have occurred since 2000. This is a troubling trend.
Before we turn the page to 2015, let’s look at some of the major energy and climate stories from the past year.
1) Oil Price: How Low Can You Go?
The biggest energy story of the year is the dramatic drop in the price of oil. Several factors drove oil prices down in 2014, including America’s shale oil boom, which pushed U.S. oil output to 9 million barrels per day, the highest in decades, and second behind Saudi Arabia. The sudden glut helped oil prices fall from around $115 to under $60—a nearly 50 percent drop in less than seven months, with profound geopolitical and economic consequences.
OPEC countries are debating whether to cut production in order to prop up prices. More vulnerable oil-exporting countries, such as Russia and Venezuela, face economic and social upheaval. Equity markets have been hit particularly hard.
One question is whether some governments will take advantage of the drop in oil prices to begin cutting fossil fuel subsidies, estimated by the IMF at $1.9 trillion per yearglobally if you include hidden costs and externalities.
Falling oil prices will likely dampen the market for electric vehicles and could drive up the number of gas-guzzling SUVs on the road. It may also slow the rate of investment in renewable energy and shale gas. All of which, of course, would undercut efforts to reduce global greenhouse gas emissions.
2) Surprise U.S.-China Climate Agreement
The top climate story of 2014 was undoubtedly the joint U.S.-China emissions announcements in November. This was welcome news coming from the two biggest carbon emitters, accounting for 40 percent of global emissions.
China committed to peak its carbon emissions for the first time, representing a remarkable shift in just a few years. China also agreed to use non-fossil sources to meet at least 20 percent of its energy needs by 2030—which would represent an increase of 800-1,000 GW of non-fossil energy.
The U.S. also set a strong target of reducing greenhouse gas emissions 26-28 percent by 2025 (from a 2005 baseline). The announcement injected momentum into international climate action. However, in reality, without even more ambitious goals, the world will still fall short of what the science says is needed.
In the coming year, we will see if countries build on the momentum and unite around astrong global climate deal, expected to be reached in Paris in 2015.
3) The U.S. Clean Power Plan
Cutting domestic emissions hinges on the U.S. administration’s proposed rule to reduce carbon emissions from existing power plants 30 percent by 2030 (compared to 2005 levels). With emissions from power plants representing roughly one-third of total power sector emissions, EPA’s proposed standards are at the heart of the U.S. Climate Action Plan. The new standards, expected to be finalized by June 2015, will certainly face attacks, but ample evidence finds that it’s achievable, affordable, and can even spur economic growth.
WRI analysis has found that the EPA could go even further in strengthening its final rules. The question remains—how strong will the final standards be?
4) Solar Power Shines
The year’s biggest clean energy story is the continued expansion of solar power. Record-low solar photovoltaic (PV) panel prices intersected with rising electricity prices to spread renewable energy cost parity and major capacity additions.
China could install 14 GW of new solar and reach 33 GW total capacity by the end of 2014—42 times more than in 2010. Brazil surprised analysts last month with some of the lowest solar prices ever recorded. India announced last month that it would build 100 GW of solar by 2022, starting from a base of around 3 GW in 2014. And, the United States installed 3.9 GW of new solar through September to pass 16 GW in total capacity.
Solar empowers residential, commercial, and industrial consumers to lock in power prices below grid averages—consider the nearly 20 global corporations—including Walmart, GM, Cisco, and Facebook—who have committed to buying renewable energy. America’s National Renewable Energy Laboratory predicts prices will continue to drop. If so, solar should keep shining in 2015.
5) Tech Companies Bring Energy Efficiency Home
Home energy efficiency is another emerging trend in 2014—interestingly, this was led by a number of technology companies.
Google kicked things off in January by buying Nest Labs Inc. for $3.2 billion and Apple entered the field in June by releasing the HomeKit app to connect home accessories with smart phones. Microsoft announced a Ventures Accelerator for home automation startups later in the year, and Samsung acquired SmartThings to expand home automation-smart phones abilities.
Innovations like these empower consumers to benchmark their energy consumption and compare it to their peers—the “gamification” of efficiency. According to ACEEE, increased efficiency in the Information and Communication Technologies sector could cut emissions and save $340 billion in power costs.
As we close the books on the expected hottest year on record, it will be interesting to see how the tension between a warming planet and an energy system dominated by fossil fuel production plays out. It’s not too late to shift direction, but doing so will clearly take a more radical shift than what we’re seeing today.