A Cautionary Tale

 The balance sheet of the fracking industry holds lessons for big clean energy investments.

From 2006 to 2014, fracking companies lost $80 billion; in 2014, with oil at $100 a barrel, a level that seemed to promise a great cash-out, they lost $20 billion. These losses were mammoth and consistent, adding up to a total that “dwarfs anything in tech/V.C. in that time frame,” as the Bloomberg writer Joe Weisenthal pointed out recently. “There were all these stories written about how V.C.s were subsidizing millennial lifestyles,” he noted on Twitter. “The real story to be written is about the massive subsidy to consumers from everyone who financed Chesapeake and all the companies that lost money fracking last decade.”

At the risk of oversimplifying the never-ending complexities of energy, there is a climate lesson here — a clear contrast to draw. Fracking was nothing less than a genuine energy transition, enacted quite rapidly and at enormous upfront expense with only speculative paths to real profit, requiring large-scale infrastructure build-outs against some cultural and political resistance and yet celebrated all the while as a product of irrepressible capitalism, the almost inevitable result of the never-ending appetite Americans have for cheap energy. And yet for a decade, as fracking boomed, Americans were told again and again — and not just by climate deniers — that rushing a green transition would be too expensive, imposing a huge burden on taxpayers, who would be footing the bill to subsidize and support a renewable build-out that couldn’t possibly be justified in terms of market logic or demand. For those exact same years, though middlemen profited off fracking, sector-wide losses mounted. “The industry, you know, it destroyed a lot of wealth,” Jeffrey Currie, the head of commodities research at Goldman Sachs, said recently. “Like 10 to 20 cents on every single dollar. I think the number is actually closer to 30 cents on every dollar.”

The contrast raises a basic question: What does it mean to call one form of energy “expensive” or to say that transitioning to another would “cost too much”? Put another way: Why did the country decide it was OK to lose money on one kind of energy but anathema to lose it on another?

The question is a purposefully naïve one, of course, eliding some important differences. It’s true that the “subsidy” to fracking has come primarily from private markets and investors, not from public handouts designed to produce a particular energy-balance outcome. Measured by benefits to consumers, fracking has been a sort of bonanza. And it’s also true that renewables have received their fair share of investor support, on top of the tax subsidies and R. & D. money that came out of the 2009 Recovery and Reinvestment Act; in fact, clean tech has enjoyed its own speculative boom years lately. But at the level of policy and public discourse, we spent a decade applying an intuitive market test to green energy — remember the right-wing furor over the bankruptcy of the solar company Solyndra? — even as the dirty alternative boom was itself flailing, quarter after quarter, producing billion-dollar bankruptcy after billion-dollar bankruptcy.

the viability of green energy creation has never been greater. The International Energy Agency has declared solar photovoltaic power “the cheapest electricity in history,” and a huge majority of the world’s population lives in places where renewables are already more affordable than power from fossil fuels. Those triumphs are a result of an astonishing decade-long, investment-powered decline in the cost of solar, wind and battery power: Between 2010 and 2020, the cost of solar power fell 90 percent, and the cost of wind and battery power fell nearly as much. In June, the International Energy Agency announced that global investment in clean, green and renewable technologies had exceeded investment in fossil fuels for the first time, accounting for more than $1.4 trillion of the total global investment of $2.4 trillion.

These advances have come despite, not because of, the major oil and gas companies, which are currently contributing less than 5 percent of all investment into clean tech — even as their net income, according to the International Energy Agency, is projected to more than double in 2022 to a staggering $4 trillion. And the United States too is sitting largely on the sidelines: For example, in 2004 the country sold 13 percent of all photovoltaic cells worldwide, but in 2021 that figure had fallen to less than 1 percent, even as China’s share has grown to nearly 80 percent now.