On of the world’s leading funds managers, GMO Capital co-founder Jeremy Grantham, has warned of the dangers of investing in new fossil fuels, saying it is certain they will be replaced by solar and wind – and more rapidly than most people expect.
“The potential for alternative energy sources, mainly solar and wind power, to completely replace coal and gas for utility generation globally is, I think, certain,” Grantham writes in his company’s quarterly update. GMO Capital manages $100 billion in funds for other investors.
Grantham says the dominance of solar and wind energy is simply a matter of time, and he expects oil will be replaced as well.
“The question is only whether it takes 30 years or 70 years,” he said. That we will replace oil for land transportation with electricity or fuel cells derived indirectly from electricity is also certain, and there, perhaps, the timing question is whether this will take 20 or 40 years.
Grantham says sweeping changes in China is likely to limit future growth in fossil fuels, and he says that while the concept of peak oil supply is now diminished, the concept of peak oil demand is very real.
“I have felt for some time that new investments today in coal and tar sands are highly likely to become stranded assets, and everything I have seen, in the last year particularly, increases my confidence,” Grantham writes.
“Total global oil demand at current prices or higher is likely to peak in 10 years or so. At much lower prices we would fairly quickly lose most of our high-cost production: deep offshore, fracking, and tar sands.
“Some changes seem to be always around the corner and then at long last they move faster than you expected and you are caught flat-footed.”
Top image: Liddell Power Station in NSW, by Webaware, via Wikipedia
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