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The nations of the earth are starting a significant global energy transition from fossil fuels to renewable energy sources to address climate change. The widespread daily discussion of this transition and the annual international meetings about it, like the just-completed COP27 in Sharm El Sheikh, Egypt, speaks to the enormity of the impact of this transition on economies, business risk, individual livelihoods and geopolitics.
Many strategies are being promoted with great fanfare to complete the energy transition. Most strategies suffer from severe flaws and are unlikely to be successful. Many proponents of a rapid transition wish away the role of fossil fuels in ensuring financing and energy security during the transition.
World energy transition enormity
Humankind benefited from previous energy transitions from wood to coal around 1850 and then to fossil fuels around 1950. After every transition, energy costs decreased, convenience increased, and adverse environmental impacts decreased. Our current energy transition to renewables will be dramatically more enormous in scale and more challenging to complete than previous transitions because of the following differences.
World population
The world population is much higher, as shown below. Since 1800, the world’s population has increased by 800% from approximately 1 billion to 8 billion.
Source: World Population Growth
All these people consume fossil fuel energy and derive more value from additional energy. The complex infrastructure that delivers energy seamlessly to them will change significantly during the coming energy transition at an enormous cost.
World energy consumption
As shown below, world energy consumption is dramatically higher because per capita consumption has increased even faster than population. Since 1800, the world’s energy consumption has increased 16 times from less than 10,000 TWh to over 160,000 TWh.
Source: Global direct primary energy consumption
Per capita energy consumption increases as living standards improve. In the 20th century and early 21st century, billions of people emerged from poverty. This exciting trend accounts for the dramatic increase in energy consumption. This trend also increases the enormity of the energy transition.
World energy infrastructure
The investments required to build and operate the world’s energy infrastructure are vast, as shown below. Introducing more renewable energy generation, distribution and consumption infrastructure into the mix increases total expenditures. Currently, the investments are running in the $ hundreds of billions annually. Before 2030, the investment required to avoid energy shortages and insecurity will be about $ 1 trillion annually.
These $ trillion in required investments to complete the energy transition will undoubtedly increase energy costs for individual and business consumers for many years.
Resistance to change
The change this transition will impose on individuals, businesses, and governments is significant because no one likes change. Individuals and companies eagerly adopted previous energy transitions because they offered immediate cost and convenience benefits. Neither of these benefits is apparent in the coming transition.
An excellent way to illustrate the resistance to change this time is through attitudes about spending money. The chart shows how little money people are willing to pay for the energy transition. Only half the citizens are willing to accept a mere $2.00 increase in their monthly residential electric bill.
Source: Washington Post Poll Shows Most People Unwilling to Pay $2 Per Month Tax to Fight Climate Change
None of the acceptable proposals in this survey will work even though they are popular. Taxing the rich won’t raise enough money and tends to undermine investment that leads to economic growth.
The available research says that companies only remit taxes. Company income taxes are paid indirectly by shareholders through lower dividends, employees through lower wages and customers through higher prices.
This poll and similar research suggest that the energy transition will be gradual even though that pace will increase the damage climate change inflicts on the planet.
Likely path of the energy transition
Given the enormity of the energy transition and the resistance to paying for it, what are the ineffective and practical paths forward?
Aggressive energy transition approach
The aggressive transition approach that the Liberal government has laid out for Canada and European countries have laid out for themselves should scare everyone for these reasons:
- It’s expensive for taxpayers who provide the subsidies and tax credits being doled out liberally.
- The anti-energy policies of these governments have led to under-investment in energy development, which will lead to higher energy prices and the risk of energy insecurity.
- It’s risky because some required technologies are just emerging from the lab or have never been scaled up as needed.
- The proposed speed may be faster than individuals, and businesses can be expected to change.
- It’s expensive for energy consumers as some infrastructure is being retired before its end of life.
The most significant benefit of pursuing the aggressive timeline is the leaders of these governments preening on the international stage. Is that worth it?
World energy transition reality
Will the go-fast approach being promoted so heavily turn out to be faster than a more measured pace? The following realities, illustrated on the chart below, suggest not:
- Many countries are underperforming on the public climate change commitments they’ve made.
- Even with a less ambitious commitment, China is still underperforming and is building many coal-fired electricity-generating stations.
- Many countries have made no public commitments.
- The plans of the countries that have made public commitments, plus the assumption that the remaining countries may make similar commitments, do not reach the goal of limiting the temperature increase to 1.5 – 2.0 degrees.
- The impact of the Russian invasion of Ukraine is causing some countries to decommit from their previous public commitment due to the risk of energy insecurity.
Source: Future greenhouse gas emissions scenarios
The chart projects that even if countries meet the GHG emission reduction targets for 2030 and 2050 that they have announced, the result is insufficient to address climate change.
Realistic energy transition approach
A more realistic energy transition approach is more likely to be ultimately successful. It won’t meet the GHG emission reduction targets agreed on for 2030 and 2050. A candid assessment suggests the aggressive transition approach won’t either.
A more realistic energy transition approach consists of the following elements:
- Introduce a carbon tax and use the revenue to reduce public sector debt or pay for some of the transition’s incremental costs.
- Increase automobile driving costs through higher gasoline taxes and registration fees. The increased cost will be the incentive to drive less and buy an EV or hybrid.
- Strengthen building codes toward energy efficiency and sustainability.
- Build out public transportation where ridership warrants it.
- Don’t build any more coal-fired electricity generation stations.
- Build renewable electricity generation and distribution capacity. The associated increased cost will be an incentive to conserve energy.
- Revise high GHG emission manufacturing processes.
- Reduce methane emissions from various sources, including oil & natural gas production.
- Increase the population density of cities as these are developed and redeveloped.
- Renovate buildings to reduce their GHG emission footprint.
A more realistic energy transition approach will reduce the transition cost and provide a reasonable window for individuals and businesses to make appropriate changes and investments.
About Yogi Schulz
Yogi Schulz is an information technology consultant who works extensively in the petroleum industry to select and implement administrative, operations, and geotechnical systems. He writes regular articles about developments in the energy industry and technology.
You can contact Yogi Schulz through his LinkedIn profile at this link.
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