We've previously written about how long-term forecasts of clean energy by the U.S. Energy Information Administration (EIA) have been wildly, almost laughably low. Now, a new study by Oil Change International and Greenpeace finds the same pattern for oil companies' forecasts of renewable energy, and also for electric vehicles. Here are a few key findings:
- Oil company forecasts' "track record has not been good, especially when it comes to energy sources that compete with their core products."
- "The companies have a selective scepticism about technologies that challenge oil and gas, contrasted with an optimism about technologies that advance oil and gas."
- These flawed forecasts pose significant risks to investors today. "The oil companies argue that action to limit climate change is unlikely within the 12-16 year period of their reserves/production ratios, so they will be able to shift capital later. In reality, companies are today investing shareholders’ money in projects that aim to break even in 15, 20 or 25 years’ time."
- Company forecasts undermine climate action: "Oil company forecasts not only describe the future, they influence it. By portraying the achievement of climate goals as unlikely, they can discourage action by policymakers or investors, and undermine confidence in alternatives. They can create a fatalism that fossil fuels will necessarily dominate the energy mix for decades to come."
- Not surprisingly, oil companies are consistently biased towards fossil fuels and against clean energy. "In their forecast publications of the last five years, ExxonMobil, BP and Shell mentioned the high cost or intermittency of renewables 35 times; they mentioned challenges for oil and gas only four times."
- Oil companies assume linear growth for clean energy, when exponential growth is far more likely, and the implications for future growth are enormous. "[I]f renewables sustained their current exponential growth rates, they’d catch up with oil within about 18 years. At current linear rates it would take over 80 years."
- The companies' forecasts are highly pessimistic about electric vehicles growth. That shouldn't be surprising when one considers that, "[w]hile the companies’ gas businesses are threatened by wind and solar power, oil is primarily used in transport, where the competing technology is electrification."
- Other problems include "implausible forecasts" of cleantech technology costs, "a false feeling of predictive rigour" in the companies' forecasts, "masking underlying trends," assuming the future will be just like the present, being more "advocacy" than "analysis" and ignoring "political drivers of energy change."
The combination of all these severe problems means, as the title of this report indicates, that oil companies are consistently "forecasting failure" for their competitors (clean energy) while forecasting success for themselves. While not particularly surprising, given the oil companies' powerful economic incentives to maintain fossil fuels as a significant share of the world energy mix for as long as possible, it also means that investors and others should take these "forecasts" with a huge grain - or better yet, perhaps, a pillar - of salt.