Reality Strikes Back
Now it’s time for strategic solutions to reduce climate change and conflict
It’s hotter and wetter than ever. The climate has changed and this is symptomatic of humanity’s contribution to it. Meanwhile, humanity is emitting more greenhouse gas than ever before by more burning and wasting fuels and, at the same time, fighting wars over access to them. Placed into a global and historical context, the actions that have been taken to reduce emissions, improve security and reduce inequality have been inspiring and foundational but have so far been relatively rudimentary and ineffective. They in no way measure up to the scale of the challenge or the pace required to address it. They have been largely tactical. Do more of this, make more of that. Replace one form of excessive resource consumption, such as liquid and gaseous fuels, with another, such as metals and minerals. The time, cost, and materials needed to make it happen are extraordinary and perhaps too much so. So now we need a strategy to succeed. And resource efficiency must be at the heart of it.
Rainfall has been recorded in the UK since 1836, the same year that my house, from where I am writing, was built. For a nation that is notorious for talking about the weather, right now it is well within its rights to do so. This month, the UK’s national meteorological service, the Met Office, revealed that England had its wettest 18 months since those records began. The winter season from the start of December 2023 to the end of February 2024 saw rainfall 29% above the long-term average. Wetter winters can go hand in hand with warmer ones, because as the atmosphere heats up, it can hold more moisture. Meanwhile, 2024 was the hottest year on record globally and the second warmest ever recorded in the UK. Looking back over the last decade, the UK has had 5 of its warmest winters and 4 of its wettest, included the one that we have just been through. Globally, 2023 was the hottest year for global temperatures on record. On Wednesday this week, an all-time-record high was set for the last 12 months’ global average sea surface temperature, the climax of 365 days of consecutive daily highs, according to data from the US National Atmospheric and Oceanic Administration and the Climate Reanalyzer research collaboration.
My book, ‘The Edge’, and my Substacks, including ‘Twin Peaks’, tell the story of rising emissions and energy consumption, despite the increase in renewable energy generation. This month, Michael Cembalest at JP Morgan published his annual energy paper, ‘Electravision’, including a new essay by Vaclav Smil, supporting the argument that far too little is happening to achieve anything close to net zero by 2050. This is where reality strikes back. While the global share of fossil fuels (the major contributor to around 80% of humanity’s contribution to excess emissions) is reducing by around 0.4% per annum given the increasing share taken by renewables, fossil fuels still represent over 80% of primary energy. Wind and solar, the champions of the renewable energy movement, represent only around 3% of primary energy. Combustion of fossil fuels continues to rise (nearly 55% higher in 2022 than 1997), as do global carbon emissions (54% higher over the same period). According to the International Energy Agency (IEA) World Energy Outlook 2023, by 2050 coal consumption may not have fallen below levels at the beginning of this century, both crude oil and natural gas consumption (which have not yet peaked) may be nearly as high as in 2030, and fossil fuel consumption may be around 85% of current levels. Smil’s conclusion is sobering: ‘after a quarter century of targeted energy transition, there has been no absolute global decarbonization of energy supply. Just the opposite … the world has substantially increased its dependence on fossil carbon’.
News-flow over the last week did little to portray a turning tide. The UK government added more fossil fuel to the fire last week with its announcement that it has backed new gas fired generation. In the same week, the IEA said that fossil fuel related methane emissions edged up in 2023. At the same time, Shell weakened its climate targets, jettisoning its 2035 target to facilitate continued growth in its gas business and to expand sales of liquified natural gas. Bain published the results, or ‘Reality Check’ as it put it, of its Energy and Natural Resource Transition Survey, which revealed that most energy executives expect a slower transition to net zero, well beyond 2050 and to 2060 or later. Beyond the energy sector, it was revealed that around a quarter of signatories to the Science Based Target Initiative (SBTi) failed to provide net zero targets within the agreed 24-month period.
Time’s newsletter, Time CO2, last week carried the headline: ‘America's Grid Isn't Ready for the Green Transition’, citing a Princeton University report that found that more than 80% of the emissions reductions targeted by the landmark Inflation Reduction Act’s (IRA) could be lost if transmission expansion doesn’t pick up beyond its recent rate of about 1% annually. Earlier in the week, Time published my article: ‘How Our Electric Grids are Blocking a Climate Revolution’. I pointed out that grids are a “weak link” for the energy transition and that, according to the IEA, projects equivalent to 5 times the volume of all wind and solar capacity added in 2022 are currently stuck in the queue for grid connections. Even if this current gridlock is addressed, the IEA 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, cost, and environmental and social implications of the materials needed for decarbonisation, including around 5 billion tonnes of steel, a billion tons of aluminium, and more than 600 million tonnes of copper.
Cost is another factor. Fighting the war on energy security and climate change with tactics like creating more generating capacity will, on its own, cost money and have limited impact any time soon. McKinsey’s Global Institute estimated the cost of the worldwide energy transition to be US$275 trillion between 2021 and 2050, equivalent to US$9.2 trillion a year, including US$3.5 trillion for new spending on low emission assets. To put things into context, the world has invested some US$9 trillion over the last 20 years in mostly grid connected renewables and associated grids, so McKinsey’s number is higher, by the best part of an order of magnitude. Also, somehow the costs will need to compete with natural gas, and that will be challenging. According to the US Energy Information Agency, onshore wind can compete, but nuclear is expected to cost twice as much and offshore wind triple. The trajectory for solar has been more promising, trending 9% lower than the cost of a combined cycle gas turbine. Indeed, it is in the solar sector that some of the greatest potential for cost reductions have been seen, although not everyone is celebrating. China has flooded the world market for solar panels, doubling production capacity last year to a level equivalent to nearly 3 times global demand, according to the IEA and Wood Mackenzie. Global prices fell 50% in the past year to as low as10 cents per watt. North American manufacturers, despite incentives provided by the IRA (which Donald Trump says he will ‘gut’ if he is elected in November), are pulling back, or even packing in.
Such are the battles fought to decarbonise electricity. And not to be a curmudgeon, but what if we win? If the first stage of success means greening the entire electricity sector, then we have a distance to travel. Electricity itself tends to represent only up 30% of most countries’ energy consumption. It is particularly important in residential and commercial buildings, for example in cooling, ventilation, lighting, appliances, computing, for datacentres and for some heating applications. But thermal heat dominates space heating and electricity still has only a relatively minor bit part of a role to play in industry and transport, where most energy is used.
So, while we implement tactics to green the power sector, we need a strategic approach for the energy system as a whole, one that is cheaper, as well as cleaner and more reliable, and that helps to improve energy security. But here there are real grounds for optimism. Resource efficiency. Precisely because the world is so extraordinarily inefficient, there is a generational, and environmentally and commercially sustainable, opportunity to address it.
As I describe in my previous Substacks, including ‘A Perfect Problem’, as much as three quarters of the world’s energy is lost even before it gets to the point of use (mostly as waste heat in the centralised generation process, but also in extraction, conversion, transmission, and distribution), and then more is wasted when it gets there through sub-optimal equipment for lighting, heating, and cooling, insulation, and controls. Solutions to these problems can be substantially cheaper, cleaner, more reliable than existing or new generation and at the same improve energy security, reliability, and resilience.
Decentralised generation of energy involves bringing energy to the point of use, avoiding the losses involved with centralised energy centres built far from where they are needed. This can be delivered cost-effectively with established technologies such as on-site solar, electrical and thermal storage, ground and air sourced heat and combined heat and power (CHP) systems, ideally fuelled by recycled or green gases, or at least by much more efficient use of natural gas. Energy efficiency projects can also involve the reduction of energy loss or waste at the point of use. Examples of solutions that work include LED lighting (which we have delivered at scale for banks, commercial, industrial, and retail buildings, car parks, manufacturers, and hospitals), and replacing existing equipment with better, more energy efficient heating, cooling, ventilation and air conditioning, refrigeration, building management systems, motors, and controls. Electric motors for vehicles can offer substantially improved conversion efficiencies to internal combustion engines – electric cars can go up to 4 times further on a given amount of energy to their petrol cousins. Most of these less solutions costs less, not more, because they use less. Indeed, reducing the waste of resources, doing the same or more with less, is potentially the largest source of economic competitiveness and productivity gains of our generation.
It’s now time to take a more strategic approach rather than repeating tactical mistakes. At the same time as we are fighting climate change, we are competing for the same resources that are contributing it and, as my book explains, entering geopolitical conflicts over them. If we are going to win the war, then we may do well to recall the words of a master of the art of it:
“The supreme art of war is to subdue the enemy without fighting.”
― Sun Tzu, The Art of War
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Brilliant x