What's the plan?
'Someone's sitting in the shade today because someone planted a tree a long time ago' - Warren Buffet
In June 1988, while working at the NASA Goddard Institute for Space Studies, Dr. James Hansen gave testimony to the US Senate Committee on Energy and Natural Resources. In doing so, he became the first scientist to warn the United States Congress about climate change. It was an opening shot in a global counter-offensive against humanity’s contribution to climate change that rages to this day.
The year before, a fictional United States Army Special Forces unit, named after the real-life Operational Detachments Alpha (‘ODA’) direct operation operations teams, nicknamed the ‘A-Team’, was retired by the NBC television network that produced it. Many of us will remember lead actor George Peppard’s iconic smouldering cigar and catchphrase, ‘I love it when a plan comes together’. James Hansen’s call to action was a war cry for sure, but 35 years later, has a plan come together?
In a warming world that loses some 75% of its energy, half of its food and a third of its water, it is hard to argue that the plan, if there is one, has yet got very far off the drawing board.
We are still pretty much as dependent as ever on the fossil fuels that are driving the 80% of excess greenhouse gases that are caused by energy. Emissions are still going up. Planetary boundaries are being crossed. This is despite growth rates in renewable energy generation that continue to smash expectations. I detail this conundrum – and what we might do about it – in my book: ‘The Edge: How competition for resources is pushing the world, and its climate, to the brink – and what we can do about it’.
The A-Team of the 1980s was known for finding its way out of tight spots and pulling off daring rescues by scraping together solutions with teamwork, creativity, know-how and whatever equipment was lying around in the garage or inside the trap that the team was stuck in at the time. This tactical and reactionary approach has the advantage of being exciting, imaginative, and compelling. It can make for good viewing. But when it comes to going to war on problems like energy and climate change, and the implications for the global economy and geopolitics, the onus gets placed on more strategic solutions.
The Dubai Agreement resulting from COP28 contains a bit of both. There are some tactical A-Team style gizmos like ‘carbon capture and utilisation and storage’ [sic] and ‘low carbon hydrogen production’ (without offering a clue as to why, or what it is intended to be used for). I have covered their potential shortcomings in previous Substacks including ‘The Hangover’ and ‘A New Dawn’, including the cost of carbon capture (often attempted at the same time as ignoring waste heat), estimated by the International Energy Agency (IEA) at $3.5 trillion, and efficiencies as low as 22% for power production from hydrogen.
Then there are some strategic calls, including phasing down unabated coal power, although this statement was not the full-throated assault that many were looking for. Climate war veterans may recall James Hansen’s words on this: ‘Coal is the single greatest threat to civilisation and all life on our planet … the dirtiest trick that governments play on their citizens is that they are working for ‘clean coal’’.
On the other hand, the Dubai Agreement amplifies the IEA’s call for a tripling of renewable energy capacity by 2030. As far as climate plans go, the renewable power one is going relatively well. As I noted in my Substack ‘Shifting Gears’, 2023 was a very big year for renewable power, with deployment surging 50% compared to 2022 and with particularly big numbers racked up in solar globally, and in China. The problem with the plan is that, given that electricity is only 20% of global energy, we have to be prepared for the fact that it will take trillions more on top of the $6 trillion spent on renewables and $3 trillion spent on the grid in the last 20 years, as well as decades of time and substantial resources to green electricity at its current level of energy service, even before electricity displaces oil, gas and coal in heat, industry and transport. It is part of a masterplan but can’t be the whole of it.
But the Dubai agreement pointed to another part of the plan, rarely discussed and never previously prioritised in a UN climate agreement: a doubling of the rate of energy efficiency. This is more than important. It’s crucial, a sine qua non. As the IEA has pointed out, only energy efficiency can deliver 50% of the carbon emission reductions needed by 2030. It is the largest, fastest, cheapest, and cleanest source of greenhouse gas emission reductions. And it reduces costs and improves security of supply. ‘The Perfect Problem’ explains why energy efficiency is such a strategic solution. Our investment portfolio in the SDCL Energy Efficiency Income Trust plc attests to its practicality. It is not a single technology or gizmo. It’s a strategy. If it’s turned into policy and a detailed, actionable proposal, then it’s a plan.
So, what’s happening? Where’s the plan.
The United States, through the Inflation Reduction Act and other federal and state policies, has a plan and the Department of Energy has tools to help to implement it. By my maths, some 20% of the Inflation Reduction Act provides for some sort of energy efficiency project or other, from efficient on-site supply, to demand reduction, to efficient distribution systems. While 80% of the funding is designated for mainstream renewables and there is a share for all the gizmos – there is still more talk about building transmission lines than building energy generation where it’s needed in the first place, another legacy of the 1980s that the United States and the UK have in common - this is a start and sends the right signals to the market.
In Europe there is a policy of ‘Energy Efficiency First’ and an ‘Energy Efficiency Directive’ that sets binding energy savings obligations for EU member states. There are clear targets, such as an 11.7% reduction in final energy consumption by 2030 and an annual energy savings rate of around 1.5% from 2024 to 2030, increased from 0.8% previously. Industrial energy efficiency should improve by 20% by 2030. Transport emissions should reduce by 55% by 2030. The worst-performing buildings should be renovated by 2030 and all new buildings should be nearly zero-energy by then. Each EU member state has submitted a National Energy and Climate Plan (NECP) covering their own measures for buildings, industry, and transport, where 70% of energy is used. Funding and financial instruments have been made available (our private infrastructure fund, the Green Energy Solutions Fund, is testimony to this as it has been backed by the European Investment Fund, part of the European Investment Banking Group). And there is a system of measurement, monitoring, and reporting. The EU knows that it can be done. In the 30 years between 1990 and 2020, EU primary energy consumption fell by 20% while the economy grew 61%. When the EU mandated a 5% cut in electricity use and a 15% cut in gas use in the autumn of 2022 after Russia’s invasion of Ukraine cut off 40% of its gas, it was achieved virtually overnight. Most energy in Europe is still wasted. This remains one of Europe’s greatest challenges. Addressing it is one of its best opportunities.
China has a plan. Indeed, it has a plan for most things. I entered the environmental infrastructure investment market in 2006 hot on the heels of China’s 11th Five-Year Plan (2006-2010), which set a binding target of a 4% per annum reduction in energy consumption per unit of GDP (energy intensity) every year and 20% over the five-year period. China exceeded its target to achieve a 40% reduction from 2005 to 2020. This helps take the 14th Five-Year Plan (2021 to 2025) very seriously. The plan sets a target to reduce energy intensity by 13.5%. Paying attention to China’s plans is invariably worthwhile. Those wondering why China owns most of the supply chain for the world’s renewable energy and critical metal and minerals could have seen it written down in black and white in the government's ‘Medium-to-Long-Term Plan for the Development of Science and Technology’ in 2006. Its slow shift from coal to gas, its dependence on Iran and Russia for oil and gas and its deployment of renewables – 60% of all new operational capacity between now and 2028 is expected to have been built in China – will continue to shape the global energy industry and the geopolitical landscape.
So, then, what’s the plan in the UK? I wrote about the malaise in the UK’s policy and planning scene in my Substacks ‘Does it matter that UK energy policy is dissolving’ and ‘Gridlock’. However, the autumn and winter political seasons have continued to deliver more dark skies and clouds than rays of hope that we have a clear plan emerging at national level. As Veolia’s CEO, Estelle Brachlianoff told The Times, energy companies want to invest more in the UK but are held back by the lack of clear policy and planning: ‘Consistency of approach is the key to having private investors invest’. With a general election looming, the promise of an energy efficiency task force having been extinguished last year, the comings and goings of green culture wars, rows and resignations over oil and gas licences and confusion about how exports can qualify as energy security, optimists may at least find more ambition and delivery capability (with our help in the case of London) at local government level.
Meanwhile, in a week when Hamas leaders visited Russia, when more threats of expansion and incursion are emanating from Russia, as tensions rise between Venezuela and Guyana and as everyone is guessing what Iran’s next move will be, it’s not just the energy sector but the whole world that it is looking on to understand what the plan is.
But when it comes to what we can do about energy, there are strategic solutions like energy efficiency that can be implemented quickly and at scale, that reduce costs and improve productivity and energy security. We just have to make a plan for it.
Picture credit: ChatGPT 4.
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