Saudi billionaire businessman Prince Alwaleed bin Talal told me we will not see $100-a-barrel oil again. The plunge in oil prices has been one of the biggest stories of the year. And while cheap gasoline is good for consumers, the negative impact of a 50% decline in oil has been wide and deep, especially for major oil producers such as Saudi Arabia and Russia. Even oil-producing Texas has felt a hit. The astute investor and prince of the Saudi royal family spoke to me exclusively last week as prices spiraled below $50 a barrel. He also predicted the move would dampen what has been one of the big U.S. growth stories: the shale revolution. In fact, in the last two weeks, several major rig operators said they had received early cancellation notices for rig contracts. Companies apparently would rather pay to cancel rig agreements than keep drilling at these prices. His royal highness, who has been critical of Saudi Arabia’s policies that have allowed prices to fall, called the theory of a plan to hurt Russian President Putin with cheap oil “baloney” and said the sharp sell-off has put the Saudis “in bed” with the Russians. The interview has been edited for clarity and length.

Q: Can you explain Saudi Arabia’s strategy in terms of not cutting oil production?

A: Saudi Arabia and all of the countries were caught off guard. No one anticipated it was going to happen. Anyone who says they anticipated this 50% drop (in price) is not saying the truth.

Because the minister of oil in Saudi Arabia just in July publicly said $100 is a good price for consumers and producers. And less than six months later, the price of oil collapses 50%.

Having said that, the decision to not reduce production was prudent, smart and shrewd. Because had Saudi Arabia cut its production by 1 or 2 million barrels, that 1 or 2 million would have been produced by others. Which means Saudi Arabia would have had two negatives, less oil produced, and lower prices. So, at least you got slammed and slapped on the face from one angle, which is the reduction of the price of oil, but not the reduction of production.

Q: So this is about not losing market share?

A: Yes. Although I am in full disagreement with the Saudi government, and the minister of oil, and the minister of finance on most aspects, on this particular incident I agree with the Saudi government of keeping production where it is.

Q: What is moving prices? Is this a supply or a demand story? Some say there’s too much oil in the world, and that is pressuring prices. But others say the global economy is slow, so it’s weak demand.

A: It is both. We have an oversupply. Iraq right now is producing very much. Even in Libya, where they have civil war, they are still producing. The U.S. is now producing shale oil and gas. So, there’s oversupply in the market. But also demand is weak. We all know Japan is hovering around 0% growth. China said that they’ll grow 6% or 7%. India’s growth has been cut in half. Germany acknowledged just two months ago they will cut the growth potential from 2% to 1%. There’s less demand, and there’s oversupply. And both are recipes for a crash in oil. And that’s what happened. It’s a no-brainer.

Q: Will prices continue to fall?

A: If supply stays where it is, and demand remains weak, you better believe it is gonna go down more. But if some supply is taken off the market, and there’s some growth in demand, prices may go up. But I’m sure we’re never going to see $100 anymore. I said a year ago, the price of oil above $100 is artificial. It’s not correct.

Q: Wow. And you said you are in agreement with the Saudi government to not give up market share?

A: This is the only point I’m agreeing with the Saudi Arabian government on oil. That’s the only point, yes.

Q: Should the Saudis cut production if they get an agreement with other oil producing countries to take oil off the market?

A: Frankly speaking, to get all OPEC countries to approve and accept it, including Russia and Iran, and everybody else, is almost impossible You can never have an agreement whereby everybody cuts production. We can’t trust all OPEC countries. And can’t trust the non-OPEC countries. So it’s not on the table because the others will cheat. The past has proven that. When Saudi Arabia cut production in the ’80s and ’90s, everybody cheated and took market share from us. Plus, remember there is an agenda here also. Although Saudi Arabia and OPEC countries did not engineer the reduction in the price of oil, there’s a positive side effect, whereby at a certain price, we will see how many shale oil production companies run out of business. So although we are caught off guard by this, we are capitalizing on this matter whereby we’ll live with $50 temporarily, to see how much new supply there will be, because this will render many new projects economically unfeasible.

Q: What about the theory of the pressure on the Russians? There’s a theory that the U.S. and the Saudis have agreed to keep prices low to pressure Russia because of what Putin has done in Ukraine.

A: Two words: baloney and rubbish. I’m telling you, there’s no way Saudis will do this. Because Saudi Arabia is hurting as much as Russia, period. Now, we don’t show it because of our big reserves. But I’ll tell you Saudi Arabia and Russia are in bed together here. And both are being hurt simultaneously. And there’s no political conspiracy whatsoever against Russia. Because we are shooting ourselves in the foot if we do that.

Q: You said the price of oil will dampen the shale revolution in America. How?

A: Shale oil and shale gas, these are new products in the market. And we see big ranges. no one knows for sure what price is the breaking point for shale. Wells have a higher production cost. And very clearly these will run out of business, or at least not be economical. At $50, will it still be economically feasible? Unclear. This is a very much developing story.

Q: Some people believe this crash in oil will create a lot of new mergers in the energy industry. Do you agree?

A: No doubt about that. For sure there’ll be a lot of consolidation in the market. Because many small and medium-sized companies can’t afford this. Because they are very much dependent on the price of oil. Big companies like Exxon and Chevron are weathering the oil market crash because they are integrated vertically. But no doubt there’ll be some mergers and acquisitions coming in one to two years.

Read more: USA Today

Jeremy Leggett, former industry adviser, warns over plunging commodity prices and soaring costs of risky energy projects

The oil price crash coupled with growing concerns about global warming will encourage at least one of the major oil companies to turn its back on fossil fuels in the near future, predicts an award-winning scientist and former industry adviser.

Dr Jeremy Leggett, who has had consultations on climate change with senior oil company executives over 25 years, says it will not be a rerun of the BP story when the company launched its “beyond petroleum” strategy and then did a U-turn. He said:

“One of the oil companies will break ranks and this time it is going to stick. The industry is facing plunging commodity prices and soaring costs at risky projects in the Arctic, deepwater Brazil and elsewhere.

“Oil companies are also realising it is no long morally defensible to ignore the consequences of climate change.”

Leggett, now a solar energy entrepreneur and climate campaigner, points to Total of France as the kind of group that could abandon carbon fuels in the same way that E.ON, the German utility, announced plans before Christmas to spin off coal and gas interests and concentrate its future growth on renewables.

Pressure on the energy industry to pull out of fossil fuels has grown in recent months with a campaign for pension funds to disinvest from coal, oil and gas.

A new report published this week by researchers at University College London deepened the message that vast amounts of oil in the Middle East, coal in the US and gas in Russia cannot be exploited if the global temperature rise is to be held at the 2C level safety limit agreed by countries.

Leggett, who once conducted research into shale funded by BP and Shell, chairs Carbon Tracker Initiative, a thinktank which aims to raise awareness among key decision-makers about the risks that fossil fuel investments pose to wider financial stability. He believes the current 50% slump in the price of Brent crude will cause the US shale boom to go bust with potentially alarming consequences for the financial system.

“Many of the shale drillers have been feasting on junk bond finance, which was so easy when oil prices were above $100 (£66) but with prices at $50 confidence is going to collapse,”

he said.

“Should the shale narrative evaporate then it is going to be very embarrassing for all sorts of political promoters of the industry, including George Osborne.”

Leggett said that despite the price collapse due to oversupply, he remained convinced the “peak oil” theory that supplies will eventually be unable to meet demand remains intact.

This is not because there are not the oil or gas reserves in the ground to meet future growth, but because they are too costly and environmentally dangerous to produce, he argues:

“I would say to both the utility industry and the oil and gas industry: its game over, guys. You have got to identify the point at which it’s all going to be thoroughly changed and you have got to map back from it.

“You have to think strategically. The point to map back from is zero carbon in the energy system, not the electricity system, by 2050, because more than 100 governments want that in the [next UN climate change] treaty being prepared for signing in Paris.”

But he also believes the energy industry is privately aware of the problems as it watches its own costs of fossil fuel extraction going up while the costs of solar and other new technologies are coming down.

Leggett, who plans to stands down as chairman of the highly successful Solarcentury renewable business he founded to focus on climate change campaigning, holds what he calls “friendly critic” sessions with the fossil fuel sector these days. The tone of the meetings has changed significantly over the past two years, he said.

“Before it was know your enemy. Now it’s: ‘Crikey. A lot of this may be coming true on our watch. What shall we do about it?’ There are top-to-bottom strategic reviews going on in E.ON but in other companies as well, utility and oil and gas. So it will be really interesting to see which is the first of the oil and gas companies to break from the pack, although I fear BP and Shell are going backwards not forwards on carbon.”

Source: The Guardian

The big idea right now for solar and batteries is this: put solar panels on your roof, a battery in the backyard (or basement), and become utterly independent from the power grid, using free electricity from the sun. Batteries have long been looked to as a way to store energy solar energy during the day to be used at night, but they have long been too expensive to be used widely. But many companies are looking at 2015 as a very important year for the solar and battery partnership and I’ve heard the word “tipping point” being used repeatedly about this intersection recently.

Why all the excitement and why now? First off, traditional lithium-ion batteries — the kind being widely used in cell phones and laptops — are becoming cheaper than ever before. Electric car company Tesla and Japanese battery giant Panasonic have been working closely on lowering costs of their lithium-ion batteries significantly, and with Tesla’s “gigafactory” the companies expect to be able to reduce the lithium-ion battery cost by another third.

Navigant Research estimates that Tesla pays about $200 per kWh for its Panasonic battery cells today, and that price could drop as low as $130 per kWh by 2020 when Tesla’s massive factory — which is expected to more than double the world’s lithium-ion battery production — is fully up and running in Nevada. Several years ago, lithium-ion batteries cost closer to $1,000 per kWh. Tesla plans to sell some of the batteries from its factory into the power grid market, and SolarCity (the installer company chaired by Tesla CEO Elon Musk) already uses Tesla batteries for a solar panel energy storage system.

Lithium ion batteries are becoming such a clear low cost platform for energy storage that other startups beyond Tesla are adopting this idea, too. At CES last week, a startup called Gogoro launched an electric scooter and battery swapping infrastructure based around modular lithium ion batteries designed also in conjunction with Panasonic. Owners of the Gogoro scooter will some day be able to swap out their two depleted batteries at a nearby battery swap station, and they will likely pay a subscription for access to the batteries.

But it’s not just the economics of lithium ion batteries that are driving the pairing of solar and batteries. Other startups have been developing newer, low-cost battery chemistries that are optimized for the power grid, like Aquion Energy and Ambri. Aquion Energy last week announced that one of its largest battery installations to date (2 MWh) is going into a solar system on the Kona coast of Hawaii.

The surge in solar panel installations is one of the main drivers behind this grid battery trend. There’s a lot bigger market these days for solar: More than a third of all new electricity installed in the U.S. in the first three quarters of 2014 came from solar panels, both utility-scale solar and solar panels on residential rooftops. That’s second only to new natural gas plants.

Solar companies, like SunPower, SolarCity, Sunrun and others, are doing deals with battery makers, looking to offer new services. Startup Stem, which uses distributed battery packs to work like virtual power plants, is working with Kyocera Solar.

Then there’s the grid battery market that’s being opened up by the state of California’s aggressive mandates for energy storage. California utilities are being asked to buy 1,325 megawatts of energy storage services by 2020, and utility Southern California Edison has already said it will buy 250 MW of energy storage systems. Part of SCE’s plans will be made up by a huge 100 MW battery plant from AES Energy Storage and a 85 MW contract from Stem.

So clearly, utilities aren’t worried about energy storage in general, because they will some day be major users of this technology. But in the short term, some are worried about so-called grid defections. If your solar panels and battery offer you all the electricity options you need, why do you need the utility?

However, according to a recent report from Moody’s, batteries and clean power are just still too expensive to be too threatening right now. Moody’s said that even with battery prices at $200 per kWh, and solar panels at $3.50 per watt, these technologies are “an order of magnitude too expensive to substitute for grid power.” Battery prices would have to be closer to $10 per kWh to $30 per kWh range to be cost competitive widely for the power grid, said Moody’s.

Those costs might be difficult for (most) residential customers to justify, but it could be a different story for commercial building owners. GTM Research says the market for solar panels paired with batteries will surpass $1 billion in annual revenue by 2018 (up from just $42 million last year), with collectively 318 MW of solar and storage capacity installed in the U.S. by that time. One in ten new commercial solar customers will opt for an energy storage addition by 2018, predicts GTM Research.

Source: Gigaom