An iconic sculpture by George Frederic Watts stands deep inside Hyde Park in London. It’s called ‘Physical Energy’. Watts described it as a symbol for ‘that restless physical impulse to seek the still unachieved in the domain of material things’. The coiled energy of the horse evokes its readiness to leap into action. A force of nature. That force is being harnessed by humankind. The rider, an apparently heroic figure, is gazing into the distance, embodying humanity’s hopes and dreams, its quest for progress, advancement, understanding, discovery, and the spirit of adventure.
Watts expressed ideals of progress that defined the Victorian period. The sculpture, unveiled in 1907, is an allegory for ambition, for the relentless striving of humanity mobilised by nature, and for power.
In the 21st century, we now know that we can amass more power, but to be more ‘powerful’, we need to use it well. This applies to the worlds of energy and politics alike.
Energy and power
Energy and power are different. Power is a function of energy and time. Energy is the ‘capacity’ to do work, but it is not the work itself. Power, on the other hand, is the ‘rate’ at which work is done or energy is transferred. Power is energy divided by time.
But to better understand what we can do with energy and the power it gives us, we need another concept, which is exergy. This is the maximum useful work possible from energy, a measure of the ‘usefulness’ of energy and its potential to do work, or to provide ‘energy services’.
Physics explains this concept as follows (please bear with me). The law of the conservation of energy and the first law of thermodynamics both state that energy can neither be created nor destroyed but can only change from one form to another. But exergy, on the other hand, is a value that can be destroyed. It measures losses that result from the fact that when energy is converted from one form to another, not all of it can typically be used for work. This is explained by the second law of thermodynamics, which states that entropy (disorder) in an isolated system leads to exergy ‘destruction’. This helps to explain why no process involving energy transformation is 100% efficient. As energy is transformed, some of it becomes unusable for work (it loses exergy), usually through dissipation as waste heat.
In the real world and the global economy, this shows up in the difference between ‘primary energy’ and ‘final energy demand’. Primary energy is the total amount of energy harnessed from natural resources. Examples include solar, wind, hydro, bioenergy, uranium, oil, gas and coal. It is raw energy in its natural form. By contrast, final energy demand is the actual energy delivered to end users, after it has been transformed from its natural state. It is what you get at the electrical outlet, or at the petrol pump. Or the steam that industry uses. The difference between primary energy and final energy demand, like exergy, is the amount of energy that is lost on the way, in the extraction, conversion, generation, transmission and distribution processes. This is usually due to energy dissipated as waste heat.
It’s astonishing that two thirds of primary energy in the United States is lost between primary energy and final energy demand. The theory above explains why, but in round numbers and following the journey of a molecule, it works as follows in practice. Around 10% of primary energy like oil and gas is lost in the extraction and conversion process. (This matters because over 80% of the world’s energy is still sourced from oil, gas, and coal). Then around 50% of primary energy is lost in the generation process as waste heat. Think of a gas (or nuclear) power station. Thermodynamics again, this time ‘Carnot’ efficiency. In plain English, around half of fuel used in power stations converts to heat as opposed to electricity. If this heat is far from the point of use, most or all of it is typically wasted. (Similarly, most of the heat generated in petrol cars is wasted). Then another 10% of energy (however generated) can be lost in transmission and distribution processes. This is mostly down to the fact that the energy system as it stands today is centralised, with generation far from the point of use, rather than decentralised or localised, with generation at or close to the point of use. It is extraordinarily inefficient and a huge waste of money as well as carbon emissions.
As the Rocky Mountain Institute put it this month, focussing in on one feature of the inefficiency of the ‘conventional’ energy industrial complex:
‘Today’s fossil energy system is incredibly inefficient: almost two-thirds of all primary energy is wasted in energy production, transportation, and use, before fossil fuel has done any work or produced any benefit. That means over $4.6 trillion per year, almost 5% of global GDP and 40% of what we spend on energy, goes up in smoke due to fossil inefficiency. Literally’.
If the existing centralised energy system, with all of its inefficiencies, is analogous to a bonfire, then simply adding more resources into it helps to fuel it. But to do better, the lens of efficiency needs to be applied to how we look at the clean energy revolution. The mantra is that we need to focus on upgrading the grid, building out renewables and electrifying everything. But this has implications too. The International Energy Agency projects the need to add or refurbish 80 million kilometres of grids by 2040, the equivalent of the entire existing global grid – or enough power lines to wrap around the earth approximately 2,000 times. This is all before we get into the time (decades), cost (trillions), and environmental and social implications of the extraction of materials needed to build new electricity generation assets such as wind farms and solar parks, including around 5 billion tonnes of steel, a billion tons of aluminium, and more than 600 million tonnes of copper.
There are efficient energy solutions using existing technologies that are commercially and financially proven at scale today, for example through a combination of large-scale decentralisation - bringing energy closer to the point of use by buildings, industry, and transport, so most of it doesn’t get lost on the way. This reduces strain on the grid and can even shift its role from prime power to backup. Technologies include onsite renewables such as solar and renewable heat, paired with electrical and thermal storage, lower carbon cogeneration and heat recovery, recycling, and re-use. And then, at the point at which energy services are actually delivered to the end user, there are technologies that can ensure that the most work is done for the energy used in the process. According to analysis of data from the U.S. Energy Information Administration, it is estimated that around 30% of the energy consumed in commercial buildings is wasted, mainly in applications such as cooling, space heating, air conditioning, lighting and appliances. Solutions about today. Our portfolios, for example, include solutions connected to over 50,000 buildings worldwide.
But tomorrow’s efficient energy solutions will also need to encompass the energy-food nexus. We eat largely thanks to the production of ammonia for synthetic fertilisers. However, the production process, Haber-Bosch, itself consumes as much as 2% of the world’s energy resources, of which some 70% is lost as waste heat and other inefficiencies in the process. The problem is exacerbated when the fertilisers are applied to fields and lost due to runoff, leaching, and volatilisation. It is estimated that only 50-60% of applied nitrogen fertiliser is actually used by plants, with the rest lost to the environment. About the same amount of energy as is lost in the production of fertiliser is used in planting, irrigation, harvesting, and other farming operations. About the same amount of energy agains is used in cleaning, packaging, refrigeration, and other processing activities. And about the same amount of energy is used again in transporting food to shops, restaurants and homes, via air, land and sea, substantially all of which is fossil fuelled and materially none of which is electrified.
Being more efficient is extraordinarily valuable. The scale of energy loss in the system presents profound challenges leading to higher than necessary cost, carbon, pollution, exploitation and insecurity. Solving this problem, on the other hand, offers potentially transformative opportunities for improvements in productivity. Being more efficient would enable more growth, using less. In a world that loses or wastes most of its energy, half of its food and a third of its water, it is increasingly clear that it is time for a new playbook. As we enter a fifth industrial revolution, where technology is substantially increasing the demand for energy for a growing and demanding global population, this is all the more urgent. Improving resource efficiency would be the largest, fastest, cheapest, and cleanest source of greenhouse gas emission reductions, energy security and, critically, economic competitiveness and sustainable growth.
The zeitgeist is that we need more energy and power. But to be more powerful, we need to focus on what we do with it.
Politics and power
Although it hasn't been the poster child of the clean energy revolution, policymakers around the world have been promoting energy efficiency to the top of their agendas. The Dubai COP28 twinned energy efficiency with renewable energy as the first call to action to world governments. The EU has a policy of ‘energy efficiency first’ (noting that every unit of gas not used is more than 2.5 units that it doesn’t need to buy from Russia) and the United States has put energy efficiency on the roadmap for what the historic Inflation Reduction Act is meant to do for the climate. China has been promoting energy efficiency as a productivity measure since its eleventh five year plan in 2006 and is using it as a vehicle for energy intensity reduction targets for 2025.
But energy has been fuelling geopolitical conflict as well as the challenges associated with economic productivity and climate change. My previous Substacks, ‘Make Stuff Not War’ and ‘Two Years On’ explore the patterns behind this, which continue to play out in the news flow. Since my last Substack in May (forgive me for the hiatus), Russia has continued to pound Ukrainian energy assets, including its gas storage and electricity infrastructure, in its war effort. It has proposed that any peace agreement involves Ukraine’s withdrawal from territories rich in energy and natural resources: Donetsk, Luhansk, Kherson and Zaporizhzhia, as well as to give up efforts to join NATO. Ukraine has meanwhile signed its first deal to import liquified natural gas from the United States, which in turn is seeking to reduce Russia’s power in the European region and months ahead of the expiry of a 5-year deal with Russia’s Gazprom. Gazprom was formerly the Soviet Ministry of Gas Industry and is now the world’s largest producer of natural gas. Many of its largest global clients, including China, India, and Turkey, were either absent from, or abstained from signing the joint communique coming out of, this weekend’s Ukraine peace summit in Switzerland.
At regional and national level, energy has also continued to play a prominent role in the political and electoral cycle. However, ‘greenlash’ has grabbed the headlines on both sides of the Atlantic. In the United States, just as the ‘Sunshine State’ of Florida broke records for installing more solar power than any other state in the first quarter of 2024, it has announced that it is all set to erase its goal of 100% renewable energy by 2050 and (perhaps even more curiously) to roll back energy efficiency programmes. In the European region, which by most accounts is warming faster than the global average amidst more frequent heatwaves, fires and floods, green parties lost around a quarter of their seats in the European Parliament, with many voices dissenting to 2040 carbon emission reduction targets and plans to phase out sales of new vehicles with internal combustion engines before then. Estimates that the EU’s 2030 carbon emission reduction targets might require Euro 1 to 1.5 trillion per year (compared to around Euro 800 billion last decade), quickened the headwinds. But time will tell if European and UK politicians choose to prioritise policies that would reduce energy cost by reducing waste, and help to stem a tide of European de-industrialisation.
They say that politics equals power. But the opportunity is to do more with less, to be more productive, reducing costs and carbon and improving energy security. This would be make us all more powerful.
What we are doing about it
To address the problems associated with the inefficiency of the energy system and to do something about it, I founded and built Sustainable Development Capital LLP, which has so far assembled a US$2.5 billion-dollar investment portfolio focussed on efficient and decentralised generation of energy (‘EDGE’) markets. This week, we were honoured to win ‘ESG Investor of the Year’ at the UK Green Business Awards 2024 and to be highly commended in the ‘Leader of the Year’ category. We were also delighted to welcome General Atlantic’s BeyondNetZero fund, subject to regulatory clearances, and Inherent’s and Ceres’ Mr Tony Davis, to our register of investors.
I have also written a book, ‘The Edge’, and this accompanying Substack series how this largely addressable problem contributes to the ‘poly-crises’ of energy security, climate change and cost of living. Later this month, the book sets the scene for – and lends its name to – a special event at the London School of Economics (LSE) during London Climate Action Week. The event will be co-hosted by the LSE and the Grantham Research Institute (GRI) on Climate Change, and it will be chaired by Lord Stern. After a fireside chat between Dr Desné Masie (Visiting Senior Fellow, LSE) and I, we will open up to a discussion with a panel of experts, including Nigel Topping, UK High-Level Climate Champion COP28, Dr Akshat Rathi, Senior Writer Bloomberg Green & Author of ‘Climate Capitalism’, and Sarah Gordon of LSE, Visiting Professor in Practice at GRI.
Free tickets are available here.
To buy a signed copy of The Edge, push this button:
The Edge is also available at Amazon and at bookshops.
To learn more about investing in energy efficiency, visit the website of the SDCL Energy Efficiency Income Trust plc, or SDCL Group.
Very well written and to the point -- except for one thing -- your not dealing with how to fix the problem -- by using a clean electric power supply that can be installed - in quantities to fill any requirement -- that eliminate the need for any power girds or lower voltage power utilities connected to the individual consumer.
On such technology exists -- but you guys don't seem to interested in it - you'd rather sell books and have meetings.