The Perfect Problem
Climate change - and how trying to perfect how we do things about it risks ignoring how they could be done differently - and much better ...
François-Marie Arouet was an 18th century French Enlightenment writer, philosopher, satirist, historian, and polymath. He was better known by his nom de plume, Voltaire, an anagram of the latinised spelling of his surname, Arovet Li. Voltaire was one of the first authors to be acclaimed as well as a commercial success in his own time. He was prolific. He wrote around 15 million words in his 60-year career, covering almost every subject that he could turn his head or hand to in his day. His complete writings fill over 200 volumes. Yet somehow one of his better-known assertions is an attribution of his reference to an old Italian proverb, ‘Il meglio è l'inimico del bene’, in ‘Dictionnaire philosophique’. It also appears in his poem, ‘La Beguelle’ as ‘le mieux est l’ennemi du bien’. Literally translated, it means ‘the best is the enemy of the good’, but it is the translation into English that has stuck:
‘Perfect is the enemy of the good’.
As I discuss in my book, ‘The Edge’, this idea is often associated with the principle of the ‘golden mean’, originally proposed by Aristotle, Confucius, and other classical philosophers, as a warning against leaning on extremes. An application of the ‘Pareto principle’ or ‘80–20’ rule explains this in numbers. For example, it can take 20% of the time to complete 80% of a task, while to complete the last 20% can take 80% of the effort. Applied in a policy or business context, it encourages us to recognize if we are spending 80% of our effort on 20% of the task and, if so, consider a different approach. Achieving absolute perfection may be impossible and so, as increasing effort results in diminishing returns, the same activity becomes increasingly inefficient.
This warning reverberates in the energy sector and in the received wisdom as to how to mitigate climate change. So far, most efforts and investment to mitigate human made climate change have focussed on adding more ‘clean energy’ to the system to displace as much as practicable of the 80% of the world’s energy that comes from ‘dirty’ fossil fuels. Why? This is largely because energy related greenhouse gas emissions, mostly from fossil fuels, cause 80% of the human made emissions that exceed the planet’s ability to absorb them and cause climate change. Most focus and investment has gone into the electricity sector - around US$6 trillion into low carbon and renewable energy and US$3 trillion into the grid in the last 20 years. Electricity represents 20% of the world’s energy system (most of the rest of it being heat, transport fuels etc). So far however, there has been frustratingly little, if any material, real world impact, either on the displacement of fossil fuels or the reduction of greenhouse gas emissions. Fossil fuel demand and supply continues to grow from a higher base, just at the same time as renewable energy generation accelerates and sets new records. The scale of the challenge associated with greening the 20% represented by electricity alone is measured in the trillions and decades, at the same time as electricity is being asked to replace fossil fuels in the other 80% of the system.
The ‘perfect problem’ relates to the focus on perfecting the 20% with undue regard to the 80%. As the world continues to focus on ‘more’ of everything, rather than efficiency gains, doing the same - or more - with less, mitigation efforts remain incremental and challenging. But if they are paired with efforts to prevent or reduce the need for, of use of, the 80%, for example through efficiency, then there is a pathway to making more progress. Indeed, November’s 2023 Energy Efficiency report by the International Energy Agency (IEA) proposed that a doubling of the rate of energy efficiency could deliver half of all cumulative greenhouse gas emission reductions by 2030 and cut bills by a third. The Dubai Agreement concluding COP28 twinned this goal with trebling the rate of renewable energy generation, so the spotlight is coming. But what has taken so long?
Part of the ‘perfect problem’ is that the energy sector has almost perfected its own inefficiency. In The Edge and my previous Substacks, I discussed the processes involved in extracting, converting, generating, transmitting and distributing energy. Each stage or process has been engineered and optimised over decades by specialists, leading to mostly incremental gains. For example, one or two more percentage points of efficiency improvement is squeezed out in electricity generation from time to time, whether in gas or wind turbines or from solar panels. Sometimes bigger steps, like the promise made by some oil and gas companies at COP28 to stop routine gas flaring could reduce waste in the energy system as a whole by two or three percentage points. The problem is that when you put the whole energy system back together, it is woefully inefficient, because it is designed, optimised and ‘perfected’ in parts, and not as a coherent whole. Because the parts are optimised, but not the whole, the outcome for the system as a whole is chronic inefficiency. A waste of money as well as carbon.
All evidence points to the fact that the world loses over 70% of its primary energy in the extraction, conversion, generation, transmission, and distribution processes. Energy is pouring out of the energy system almost as fast as we can add it.
In round numbers, this consists of extraction and conversion losses (10%), generation losses (50%), and transmission and distribution losses (10%). One major cause of losses is the distance from the point of generation to the point of end use, with little if any use for the heat produced by centralised energy centres (even nukes), however well they have been optimised or ‘perfected’ for the purpose of generation. Indeed, as I detail in my last Substack, ‘Blowing Hot Air’, about 50% of the world’s primary energy is wasted in the form of heat in the generation process. Literally as hot air.
Sustainable solutions to this incumbent energy system inefficiency involve preventing the problems in the first place, addressing the root causes, not just mitigating their effects. This demands improving the efficiency of the system as a whole, rather than just trying to ‘perfect’ individual parts. For example, generating energy close to or at the point of use on a decentralised basis (even using conventional fuels), can facilitate using heat rather than wasting it, as well as unleashing the opportunity to apply a range of lower carbon solutions such as on-site renewables, heat recovery and waste gas recycling. At most 50% of the power supplied by internal combustion engines in cars is converted to mechanical energy to propel the vehicle, with the rest dissipated as heat. Electric vehicles address this problem. Changing inefficient equipment at the point of use can substantially reduce the amount of energy needed for the same level of economic output. 70% of energy is used in buildings, industry and transport and 10-30% plus can be wasted at the point of use. These problems can be solved with more efficient equipment like lights, HVAC, building management systems, motors and controls. Decentralisation and efficiency can also reduce the burden on the centralised energy system itself. Transmission and distribution networks, often needed to move energy large distances, are facing gridlock. While the world re-builds 80 million kilometres of grid by 2040, we can reduce the need for it in the first place.
Adding more energy into the system is expensive and faces planning, supply chain, resource, time and cost challenges. And in the meantime, over 70% of the primary energy the world is using is being wasted. The corollary is that every unit of energy that we save through efficiency (not doing less, but using less to do the same or more), is around 2.5 units that don’t need to be added to the system in the first place.
There are some important and urgent ramifications for business and policy:
First, the cost of ‘going green’ need not be a ‘perfect problem’. Efficiency reduces costs, improves productivity and buys time for optimised solutions to be implemented. In fact, it is a source of competitive advantage. I have long maintained that ‘if it’s not commercial, it’s not sustainable’. Energy efficiency makes commercial sense because it saves energy and therefore reduces cost. The market will have a huge role - and opportunity - to play in delivering on efficiency. But so will policymakers. It’s not OK that the world wastes so much energy and regulation has an important role in identifying the system inefficiencies that the market leaves behind it and doing something about it. I covered 5 key policy actions in my Substack on revitalising energy policy, and in the meantime Europe’s policy of ‘Energy Efficiency First’, for example, is taking major steps in the right direction. Regulation is also the answer to the so-called ‘Jevons paradox’ that consumption increases with cost efficiencies.
Second, the geopolitical context for the energy transition away from dependence on coveted resources that are wasted has rarely been as challenging or urgent. While the US is reported to have overtaken Qatar and Australia in 2023 to become the largest player in LNG in the world, adding to its supremacy in the oil and gas market, energy continues to fuel conflict overseas. The Edge chronicles Ukraine’s role in the Russia-Europe energy nexus and the resource competition story behind the conflict. The interfaces between energy, competition for resources, the economy, climate and conflict will continue to shape flashpoints globally, including the Eastern Mediterranean, the Arctic, the South China Sea, and potentially in Latin America with Venezuela (which is endowed with some of the largest oil and gas reserves in the world) and Guyana (with its fresh discoveries). As the world competes for coveted resources, it must do more to stop wasting them.
Third, energy efficiency represents a major opportunity cost. It is the largest, fastest, cheapest and cleanest source of greenhouse gas emission reductions and energy security. But neglecting the opportunity costs extremely valuable time, money and carbon that could have been saved. Adding new renewable energy capacity is critical to the long term energy transition and we need as much as practicable. However, another part of the ‘perfect problem’ is the inclination to demand what appears to be the ‘perfect’ outcome, say ‘zero carbon energy’ and ‘electrifying everything’, without full consideration to the time, cost, resource use, and the unintended consequences of inaction on efficiency and security in the meantime. There are no ‘zero carbon’ or ‘limitless’ energy sources; every energy generation technology has its limits. Whether for the climate, the economy or security, businesses and policymakers can only focus on the best available technologies in the time available to implement them. A reminder not to sacrifice the good on the altar of the perfect.
As Otto von Bismarck said a century on from Voltaire:
‘Politics is the art of the possible, the attainable — the art of the next best.’
Energy efficiency is possible, attainable, scalable, fast, clean - and profitable. That’s why there is an imperative to do something about it.
Picture credits: ChatGPT 4.
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