Time for a New Playbook
'Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.' ― Sun Tzu, The Art of War
Ask anyone interested in team sports and they will revel in giving you their favourite play from a playbook. In soccer, it might be Liverpool's quick corner taken by Trent Alexander-Arnold in the 2019 UEFA Champions League semi-final against Barcelona. In American football, it might be the ‘Philly Special’ play from Super Bowl LII in 2018, where the Philadelphia Eagles faced the New England Patriots. In basketball, it might be ‘The Last Shot’ by Michael Jordan during Game 6 of the 1998 NBA Finals between the Chicago Bulls and the Utah Jazz. In baseball, it might be the ‘squeeze play’ executed by the Los Angeles Dodgers during Game 4 of the 1988 World Series against the Oakland Athletics. In ice-hockey, it might have been the ‘Miracle on Ice’ during the 1980 Winter Olympics, where the United States’ team of amateur and collegiate players defied all the odds to beat the Soviet Union, considered the best in the world at the time.
All these plays were defined by their setup, their execution, and their outcome. The setups were pivotal moments, from which the outcomes of victory were snatched from the jaws of defeat. In each case, the execution looked spectacular and had sensational results. But it was invariably the outcome of a longer game with smaller but foundational tactical wins, together with exhaustive planning and practice from which high-energy, higher risk manoeuvres could be delivered and landed. Sports coaches all have their own way of explaining this. As American football coach Vince Lombardi put it: ‘Practice does not make perfect. Only perfect practice makes perfect’. Or as basketball coach John Wooden warned: ‘Failing to prepare is preparing to fail’.
Tune in to today’s geopolitical, climate, environmental and societal challenges and we are presented with a front-row-seat view of a world series of challenges and conflicts, with competition for resources a common denominator. The setup is such a pivotal moment that I wrote a book about it: ‘The Edge: How competition for resources is pushing the world, and its climate to the brink – and what we can do about it’. The outcome, at best, hangs in the balance.
So far, the playbook on the shelf hasn’t played out in the execution. Despite trillions of dollars of investment and attempts at a clean energy revolution, greenhouse gas emissions, global surface temperatures and use of fossil fuels have kept going up, their rise seemingly inexorable and substantially undisturbed by every defensive or offensive play to date. Indeed, global competition for oil, gas and coal has now been joined by politically and physically confrontational competition for the metals, minerals and the natural resources that make today’s world work and that would enable the next major energy transition.
So, it’s time to reach for a new playbook, and then to practice hard for the execution.
Contenders for new chapters have emerged. I pointed out some of the countries and regions that have written a strategy and some that haven’t in my Substack, ‘What’s the Plan?’. But this month, the U.S. Department of Energy (DOE) published its first ever ‘National Blueprint for Decarbonizing the Buildings Sector’, with a strategic plan to reduce emissions by 65% by 2035 and by 90% by 2050 in a sector responsible for more than third of total U.S. greenhouse gas emissions. The price tag? Well planned and executed, it would save money – up to US$100 billion per year, and a further US$17 billion in annual health costs. Oh, and up to US$1 trillion of investment in high quality jobs. How? First, stop wasting energy in buildings through energy efficiency, then reduce on-site and life-cycle emissions and ‘transform the grid edge’, reducing electrical infrastructure costs and improving demand flexibility. The Empire State Building, literally, sparkled in green last week to celebrate.
What are the tactics? The ‘blueprint’, which is about domestic, commercial, industrial, and public buildings, suggests five key solution types:
Energy efficiency: measures to create high-performance building envelopes (e.g., highly insulating windows, air and duct sealing), passive building design and retrofit. High-performance electric equipment and appliances (e.g., air- and ground-source heat pumps, and energy efficient certified appliances). Technologies for optimizing ventilation rates and thermal loads (e.g., energy recovery, demand-controlled ventilation, and occupant sensing). My margin notes add lighting of course.
Efficient electrification: Air-source heat pumps, including products optimized for cold climate performance with refrigerants that have low global warming potential. Ground-source (geothermal) heat pumps. Heat pump water heaters.
Grid-edge resource management: grid-responsive smart thermostats and building automation systems, with sensing hardware. Grid-responsive water heaters and appliances. Smart panels. Thermal storage integrated with equipment or envelope materials. Behind-the-meter battery storage. Managed EV charging and bi-directional EV charging infrastructure. On-site zero-emissions [sic] generation.
Low global warming potential (GWP) refrigerants and other fluorinated gases: development and adoption of low-GWP (<150 GWP) refrigerant, foam blowing agent, and fire suppressant alternatives and compatible equipment. Development of non-vapor compression, refrigerant-free HVAC equipment. Improved refrigerant leak detection methods and operation and maintenance practices. Refrigerant recycling. Building design that minimizes refrigerant lines.
Low embodied carbon construction: Invest in existing buildings to reduce the need for new buildings and materials. Maximize efficiency of structural design and design buildings and retrofits to use fewer materials. Use of recycled, low-carbon, and/or carbon-storing building materials. Standardized embodied carbon calculation and reporting methods.
To the extent that this blueprint relates to the third of U.S. emissions related to buildings, it also reveals the extent to which plans are needed for the other two thirds of U.S. emissions, which are, according to the document – drawing primarily on data from the U.S. Environmental Protection Agency – related to transport (29%), industry (25%), agriculture (10%), and landfill and waste services (2%). Returning to the sports analogy, winning requires a team effort. Even if the DOE’s blueprint for the building sector were entirely successful, it would reduce emissions by 20% to 30% without an equivalent effort by the other sectors. Speed is another factor. Targets to 2035 and 2050 are important, but according to analysts, the world’s carbon budget to limit global warming to 1.5C is on track to be exhausted by 2030. By 2035 and 2050, we will be playing a different game and facing a rear-guard action, if not retreat.
So, it’s not just that we need a new playbook, but that we need it – and to use it - fast.
There will, of course, be other chapters. But starting with buildings makes sense, because together with industry and transport, they are the largest consumer in the energy system, which is responsible for 75% to 80% of excess greenhouse gas emissions. The global energy system remains 80% fossil fuelled. While renewables are taking an increasing share of the energy market, it is at a rate of only around 0.4% per annum, while the overall volume of energy supply, whether ‘clean’ or ‘dirty’, continues to rise, as do the associated emissions. Buildings, on the other hand, represent a major source of demand, and particularly for electricity, the great hope of the energy transition. Whereas electricity is still yet to make its real mark on the energy used in industry (for example for heat) or transport (for example in shipping and aviation), it is a bigger part of the energy mix for commercial and residential buildings, in the U.S. representing up to 60% and 45% of demand respectively, mainly for applications such as cooling, space heating, air conditioning, lighting and appliances. At the same time, 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, primarily due to inefficiencies in exactly these applications. The DOE blueprint explains how this problem can be solved, and our investments at the SDCL Energy Efficiency Income Trust, for example, involve thousands of real outcomes in action.
Long overlooked, energy efficiency is attracting considerably more attention. The Dubai Agreement from the United Nations climate conference, COP28, calls for ‘tripling renewable energy capacity globally and doubling the global average annual rate of energy efficiency improvements by 2030’. The U.S. Inflation Reduction Act allocates roughly 20% of its huge budget to energy efficiency. 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. China’s 14th Five-Year Plan (2021 to 2025) sets a target to reduce energy intensity by 13.5%.
But like everything in the climate solutions world, where there are multiple causes that accumulate and compound towards the overall problem, it’s never about ‘all of this, or all of that’, it’s about ‘all of it’. So there will be other chapters.
For example, to risk another sporting analogy, the DOE blueprint is one of the chapters of the playbook that will deal with ‘defence’ - how to deflect challenges, to limit the effectiveness of attack, and to avoid conceding goals and other set-backs. So there will be chapters on ‘offence’, and even chapters on ‘transition’ - or in other words, strategies used to switch between defence and offence.
Chapters on offence, in energy terms, will deal with supply. And they will need a lot of work. As I have covered in most of my previous Substacks and in my book, ‘The Edge’, after $9 trillion so far invested this century in renewables and the grid, global CO2 emissions from burning fossil fuels (like global average temperatures) reached new record heights in 2023 at 37.5 billion tonnes and are expected to grow again this year. Wind and solar, the champions of the renewable energy movement, represent only around 3% of primary energy. As far as electricity – at the heart of most decarbonisation efforts so far - is concerned, despite nearly 40% of it being generated from low carbon sources today, it is still only 20% of energy. It has, for example, so far achieved relatively little penetration in industrial heat and transport. This week, the UK government released its ‘Aviation fuel plan’, but even its sustainable aviation fuel (SAF) mandate - to deliver 10% of all jet fuel in flights taking off from the UK from sustainable sources by 2030 - was described by industry experts as ambitious. It’s also more than likely that grids will be a weak link for the Clean Energy Revolution. 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 (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 will also be chapters on transition. And they will be exciting. My Substack, ‘Broken Promises’, exposes (probably) the biggest and dirtiest secret of the energy system - in that most of it is lost in generating, transmitting, distributing, and using it. (There are similar scale problems with food and water, which are interconnected with energy). The reason that these chapters will be so exciting is that there are solutions to this problem 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, low carbon cogeneration and heat recovery, re-cycling and re-use. The work that we do and the investments that we make at SDCL Group and the SDCL Energy Efficiency Income Trust plc, which have so far involved developing and investing in projects in over 50,000 buildings, industrial facilities and transport assets across Europe, the United States and Asia, attest to the fact that profitable projects that deliver cheaper, cleaner, and more reliable energy services where they are needed, can be done. Here, we will find the whole story - the setup, the execution, and the outcome.
However, as well as aligning strategies and tactics with end-game scenarios that can secure success, the playbook will have to deal with adaptations, counterattacks and retreats along the way. Today’s news flow is brim full of them. Last week, the Scottish government scrapped its target of reducing greenhouse gas emissions by 75% by 2030. The next day, Acer, the EU’s energy regulator, warned that Russian liquified natural gas (LNG) imports would still be needed to avoid an energy shock, at the same time as JPMorgan warned that the world needs a ‘reality check’ on the move away from fossil fuels in general. I addressed this in my Substack, ‘Reality Strikes Back’.
But as Mike Tyson once said: ‘Everybody has a plan until they get punched in the mouth’. The reality is that we will continue to be faced with challenges and shocks. So, now a new playbook is needed if we want to win the fight against climate change and, dare I say it, to alleviate the competition for the same resources that are causing both climate change and conflict. For the clean energy revolution to succeed, it will need more than a series of tactical wins. Right now, renewables, fossil fuels and emissions are all reaching new peaks. It doesn’t cut it to win every battle but lose the war. As I often cite and as the European Commission noted in 2014 when Russia annexed Crimea, every unit of energy that we don’t use or waste is around 2.5 units that we don’t need, whether from fossil fuels, from Russia or from any part of the extraction, generation, transmission or distribution system. Being energy and resource efficient is key to economic productivity, competitiveness and energy security, and is the largest, fastest, cheapest and cleanest source of greenhouse gas emission reductions.
Today, as I enter the second half of my first century on Earth, I will continue to work on it …
Picture credit: ChatGPT 4
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Jonathan -- very well written and totally informative - but as an alternative to all of the money that is going to be wasted as delineated here - that doesn't have to happen -- because there is an alternative / developed / US Patented / "over-unity" / electric power supply - that has been requested to apply for funding - by the EC President Ursula von der Yelen - not US President Joe Biden and is White House. -- who I will still vote for in 2024.
Europe is going to get it first -- along with the rest of the world
The US will get it -- when it changes it's position that the cost of producing electricity, presently placed solely on the back of each consumer - while incredible profits are being made at the cost to the consumer.
Happy Birthday.