2023-10-07 17:58:13
Kingsmill Bond: What prevents more substantial change are the exorbitant profits made by the fossil fuel sector, which amount to some 2 trillion euros per year. The World Bank speaks of rent because the countries or companies that benefit from it are sitting on enormous fossil resources that they sell for ten times more than the price of their extraction. This provides oil and gas producers with exorbitant amounts of money that allows them to actively lobby to resist change. This also leads to disinformation and dishonest analyses.
But I don’t think, as you say, that we haven’t done enough. Over the past fifteen years, but especially over the past two years, we have seen continued and rapid growth in the deployment of renewable energy. The figures speak for themselves: 50% increase in solar panels, 50% increase in electric car sales. Furthermore, we are witnessing the peak in demand for fossil fuels (According to the International Energy Agency, the peak should occur before 2030, editor’s note) And finally, the prices of renewables are now at lower levels than those of fossil fuels, because these technologies are smaller, more scalable and easier to replicate. So yes, we can always do more and we know what needs to be done. And contrary to what the fossil fuel industry wants us to believe, the path to sustainability is clear.
According to you, fossil fuels are now caught between the need for efficiency and the explosion of renewables…
40 years ago, our founder, Amory Lovins, already said that efficiency gains would reduce the demand for fossil fuels. However, at the time, we did not yet have credible alternatives to this type of energy. Efficiency gains are now closely linked to the exponential growth of renewables. As for nuclear power, it has never really progressed in terms of efficiency. The more we deployed, the more expensive it was.
Regarding nuclear power, which has been classified as green energy by the European Union, what regarding its cost?
The cost of solar and wind is becoming very attractive. The megawatt hour has fallen to 40 euros. Nuclear power is still 100 euros. And the cost of these renewable energies continues to fall. It’s 40 euros today, it will probably be 20 or 30 in ten years. With nuclear power, it’s something else: it costs 100 today and probably 120 in a decade. Currently, nuclear power generates three petawatt hours. This is the same order of magnitude as thirty years ago. Solar and wind generate 4 petawatt hours. Now we wonder if they will produce 40 or 50 petawatt hours in 30 years. What interests us today is to know how quickly we manage to deploy all these capacities to produce renewables.
Will the price of renewables fall sharply?
With modular technologies such as renewables, and specifically solar, each time we double the deployment of capacities, we reduce the price per megawatt hour by 20 to 30%. And if the price drops to such a level, it paves the way for a massive rollout elsewhere. This has surprised a lot of people until now: the drop in costs has continued to remove obstacles to renewables. However, in just over ten years, the deployment of solar panels has made it possible to go from 30 to 400 gigawatt hours. The same goes for batteries which went from 30 to 700 gigawatt hours.
What regarding the green hydrogen economy? What are the prospects and when will it take off?
The energy transition includes three phases. The first is the decarbonization of electricity. The second is the electrification of everything that can be electrified. And the third phase is hydrogenation. Green hydrogen will be used for everything that we cannot electrify. So yes, it is important, but it will only be the third phase of the transition process. The key element is to bring the price of green hydrogen down to the level of that of conventional hydrogen. But with the evolution of solar, wind and electrolyzers, there is a strong chance that price parity between the two will be achieved by the end of the decade. It’s always like this. We must first achieve price parity which then opens the way to exponential growth, causing a change in the system. However, many people make the mistake of believing that the system will change before prices adjust.
Does green hydrogen have great potential to decarbonize heavy industry?
Currently, only 40 out of 100 units of the useful energy we benefit from comes from renewable energy. If we go to 90% of useful energy, we can easily go from 40% to 100% of the decarbonization of electricity. There would then remain a 10% slice for which green hydrogen can be very useful. One thing is certain: there will be real competition between electrification, hydrogenation and fossil fuels with carbon capture. But we can say this with a high degree of certainty: carbon capture for fossil fuels is unlikely to be the solution.
Regarding the boom in electric cars, is it a real revolution or are we just postponing the problem given that we still have to produce electricity…
The question is not relevant. When you put gasoline in your car, you lose 80% of the fuel in thermodynamic forces. Only 20% is used to move the car. If you put electricity into a battery, 90% is used. Electric cars consume between three and four times less energy than cars with combustion engines. They are much more efficient. With these cars, we are facing an S-curve, an exponential curve for the growth of the electric car market. Look at the largest market for such cars, China. More than 30% of sales are electric vehicles. And there is a good chance that this will rise to 90% by 2030. Other markets will follow. In terms of sales, Scandinavian countries lead with China. The United States is regarding three years behind. In terms of electric car production, China largely dominates. Europe has been too bureaucratic. She must now react.
Regarding the energy transition, you combat certain myths…
Among them is the question of minerals. Do we have enough to build a system focused on renewable energies? The answer is categorical: yes. But we must act intelligently. We must continue to innovate and recycle. New mines must be opened. Another myth concerns the variability of renewable energy production. If we don’t do something, we will have a problem. But if we act flexibly by integrating renewables into a much larger system, we can get there. Finally, proponents of fossil fuels keep saying that renewable energies are too expensive. But the International Energy Agency says it: it is cheaper to deploy renewables. With them, we spend money to save it later. In Europe, an electric car costs around 5,000 euros more than a gasoline car. But if you save 1000 euros on gas per year, following five years you start saving money. What we realize is that it is less costly to save the planet than to destroy it.
What role should the State play in the energy transition? The Chinese government strongly supports its green revolution and electric car industry. In the United States, the Inflation Reduction Act is a considerable incentive. Europe, for its part, criticizes Beijing and Washington for their state support. Shouldn’t she do the same?
If we want to be competitive with these technologies of the future, the State must play an important role. This does not necessarily involve subsidies. The State can act with intelligent regulations.
What might be the main incentives for a company heavily dependent on fossil fuels to change?
The answer is simple: profit and fear. Fifteen years ago, when you asked a company that used coal what it thought regarding renewable energies, it would throw a wrench in the face. Today, such a company can no longer ignore the growth prospects that these new energies offer. As for fear, it’s simple. If we don’t participate in the transition, others will.
Profile
1967 Birth in Ireland
1989 Master’s degree in History and Chartered Financial Analyst (CFA) diploma at Cambridge
1996-2015 Works as a private equity analyst and global strategist at Deutsche Bank and Citibank
2016-21. Energy Strategist at Trusted Sources and Carbon Tracker
2022 Energy Strategist at the Rocky Mountain Institute.
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