← Shift Key with Robinson Meyer
Shift Key with Robinson Meyer
Nobody in the West Knows How to Respond to the ‘Electrotech Revolution’
01:12:04
Rob and Jesse talk to Ember’s Kingsmill Bond about how electricity is reshaping global geopolitics.
Loading summary
Transcript132 lines
- [00:00]
A
You are listening to ShiftKey Heat Maps weekly podcast about decarbonization and the shift away from fossil fuels. On this week's show, we are talking about the global electrotech revolution. What is it? Is China the unstoppable energy hegemon of the future? And if so, what should the US and Europe and the rest of the planet do about that, if anything? Well, it's all coming up on a great episode of 50 after this. America's future depends on reliable power provided where and when it's needed. It depends, in other words, on long duration energy storage. Hydrostor's advanced compressed air energy storage technology is helping build the grid of tomorrow. With secure, reliable power and thousands of American jobs. With bipartisan support and a flexible supply chain, long duration energy storage is the missing puzzle piece to scale energy independence. Learn more about Hydrogen Hydrostor's Willow Rock project and the future of energy storage@hydrostore.ca hi, I'm Robert Zemeyer, the founding executive editor of Heat Map News.
- [01:15]
B
And I'm Jesse Jenkins, a professor of energy systems engineering at Princeton University.
- [01:19]
A
And you are listening to Shift Key, Heat Map's weekly podcast about decarbonization and the shift away from fossil fuels. On this week's show, we are talking about one of the biggest questions in climate and energy right now. Now, I think, and that is, is the electrotech revolution unstoppable? Are fossil fuels being unstoppably replaced, irreversibly replaced, by manufactured energy technologies such as solar panels, wind turbines, batteries and EVs, or are we watching something more particular happen that has more to do with the specifics of China as a country and as an economy phenomenon, driven as much by China's foreign policy and its domestic policy and its industrial policy as it is, say, by the physics or economics of energy? Our guest today argues that we are, in fact, in the middle of an unstoppable electric tech revolution and that the whole stack of technologies that allow sunlight and electricity to be harnessed to do useful work, I think particularly in the power, transportation and residential sector, that is the power grid, cars and homes are irreversible, that this transition is irreversible and that furthermore, although it's led by China right now, it's not inevitable that this would be led by China. Other countries could step up and do their part too. Our guest today is Kingsbond. He's an energy strategist at the British think tank Ember, where he runs the Energy Futures Initiative. But he's had an interesting career. He studied history at Cambridge. He's a chartered financial analyst. And for 20 years he worked as an analyst and strategist in finance in London, Moscow and Hong Kong for Deutsche bank and Citibank, among others. But for the past 10 years he's been an interesting voice, I would say, in the energy transition. He worked for many years at the American energy and environmental think tank Rocky Mountain Institute, now known as rmi, which is where I first learned his work. And he's now at Ember. He's the C.O. author of a new report from Ember called the Electrotech Revolution the Shape of Things to Come, where he and his co authors argue, quote, humanity is graduating from burning fossil commodities to harnessing manufactured technologies, from hunting scarce fossils to farming the inexhaustible sun, from consuming Earth's resources to merely borrowing them. This isn't marginal climate substitution, it's an energy revolution. Well, here to talk about the energy revolution with us today is Kingsmill Bond. Kingsmill, welcome to Shift Key.
- [03:43]
C
Great, thanks for having me.
- [03:45]
B
So I'm excited to chat with you. You have a fascinating new report out from Ember on the electrotech revolution. Can you start us off by just explaining what do you mean by electrotechnic and why do you think countries, namely China, but others are following this path to sort of electrostatehood as a strategy for their energy future.
- [04:04]
C
So electrotech, as the name suggests, is technology around electricity, essentially. And it is in structural terms the supply of electricity, that's solar, wind, the demand for electricity, that's electric vehicles, heat pumps and industrial electrification. And then this other piece, this key piece in the middle, which is the connection of supply and demand. And that's all kinds of technology. So be it batteries or HVDC lines or software or demand side management, it's all the technologies that we have to connect, or AI for that matter, supply and demand of electricity. And the point is that there is extraordinary amounts of technology innovation going on in all three areas. And specifically our argument is that a century of evolution is converging into, as it were, a decade of revolution. To bring a tiny bit of poetic framing, but the point to me is that you needed all, and you do need all of these technologies to come together to drive change.
- [05:08]
B
And so part of the thesis here is that this is not just something driven by climate policy. We've gotten to this tipping point, maybe perhaps thanks to those kinds of interventions. But there's a bit of a inevitability in the story that you're telling here that these electro techs have developed to a point where they are Going to take over the future. Sort of a question of how fast can you lay that out for us? Why should we believe that these technologies are ascendant and are going to take over from fossil fuels and combustion technology?
- [05:34]
C
Well, to start off with, as you say, these technologies been growing long before climate was the primary driver. So electrification, I hardly need to tell an American, electrification's been going since Edison in the 1880s. And what we've been doing essentially is electrifying one sector after the next. Solar and wind have been falling in cost since the 1970s and of course it's been a long standing human dream to tap the sun. And now finally we got to the sort of moment in time where we can do precisely that. We can harness the extraordinary energy of sunshine and convert it into electricity and then power everything from electricity. So the reason why countries are following this path is really because it's in their own self interest. And in the report we look at this in terms of three primary fundamental drivers, which we think are the tides of change rather than the kind of waves of day to day problems that we all have to get over. And there's three tides of physics, economics and geopolitics. And if you think of physics, it's the fact that this stuff is much more efficient, about three times more efficient. If you think of economics, it's on learning curves whereby costs falling by around 20% for every doubling of deployment. And then on geopolitics, it's all about the fact that everyone, every country in the world's got plenty of sun and wind, but only a few countries have got fossil fuels. So for most countries, under most circumstances, it pays just to harness the sun.
- [07:03]
B
Let's talk about the physics first. You make the case, which is obviously accurate from a thermodynamics perspective, that most of the electrified technologies we're talking about, whether it is producing electricity with solar or wind, rather than combustion of fossil fuels and thermal power plants, or heating our buildings with heat pumps, or driving our vehicles with electric motors and drive trains rather than combustion technologies. These are all much more efficient pathways to harness primary energy, convert it to the final energy, and then take that final energy and turn it into what we actually care about, which is, you know, was it cold beers and hot showers, as you put it, Rob? The kinds of energy services that we like, Right. And so there's certainly much more efficient across that pathway. Why does efficiency matter though? Is this an important driver? I mean, it's elegant, it's great from an engineer's perspective, but is economics really the only thing that we should be focused on here, or is there sort of a separate case for why a process is more efficient necessarily wins?
- [07:55]
C
Well, I think you're right. Economics is ultimately the primary driver. But efficiency, as with all things, leads to economic results, or usually leads, I should say, to economic results. So if something is more efficient, then it's likely eventually over time to be cheaper. And a classic example of that, if you think of solar versus lng, the LNG supply chain is incredibly complex and difficult and takes a long time and expensive and lots of capex and lots of kit. Whilst if you just put a solar panel on your roof, just much simpler, it's just much more efficient way of extracting energy. So as it were, the. I'm sorry, the other point is, and we've done quite a lot of historical analysis in this piece, you go back to 1900, there is this kind of constant increase in the efficiency of energy. Early energy technologies, extremely inefficient. And then we humans are actually very, very good at maximizing efficiency of our technologies over time. We go back to what famously in the and his invention of the steam engine actually was optimized by engineers over the following 50 or 60 years to be five or 10 times more efficient. And it's exactly the same thing. We humans are very good at optimizing efficiency of our systems. And sorry, one other point in efficiency, if I may, what's very interesting is that the primary to final efficiency of our energy system has been basically stagnant for about 30 years. So this offers us a chance to improve our overall efficiency once more.
- [09:23]
A
You have this great stat in the report. Electrotech costs fall by around 20% every time deployment doubles. And my sense is that's because electrotech is a manufactured technology and we get better at manufacturing over time as compared to the kind of latent energy potential in like the fossil stack of technologies per se. I guess one question I'd ask is, is efficiency what matters here or is abundance what matters here? Because when you look at the European economies, for instance, they're extremely efficient. They produce a huge amount of GDP for every unit of energy you put into their economy. In the US we're less efficient, but that's partially because we have fewer constraints on our energy supply. And I think in China it's a similar story is what matters about these technologies, the fact that they let you be super efficient and that kind of wins out economically in the end, particularly globally. Or is what matters that you build a lot of solar panels, you get a Lot of free electricity.
- [10:17]
C
I guess you're right. It's both of the things. And this is why we have sort of three drivers, efficiency and cost and energy security or ubiquity. But just to riff off this point about manufactured technology versus extracted technology, I think it's really important. And Doane Farmer and Oxford did the best analysis of dozens of different technologies. And his point, again, it's like absolutely intuitive and we see it around us all the time. His point is that manufactured technologies tend to get cheaper over time, particularly if they're small and modular. None of this is new, obviously to you folks. Jesse teach you this all the time.
- [10:55]
B
Well, and you have some nice numbers on this in the report as well, about the total number of cumulative units produced of different types. Right. Where coal plants have gone from the hundreds to the tens of thousands between 1950 and now, whereas solar panels have gone from the tens of thousands in the eighties to the billions of individual solar panels or tens of millions of EVs or wind turbines produced, it really is orders of magnitude more units for these types of equipment. And that's a rather telling point.
- [11:21]
C
Yeah, I mean, ultimately it's technology versus commodities. And the reason why we moved out of the Stone Age is because technology beats commodities ultimately. And that's why we can be so confident here that these technologies which are manufactured have millions of individuals seeking to optimize them at any given moment are highly likely over time to continue to defeat the current incumbent fossil system.
- [11:46]
B
There's got to be something else going on here though, about economies of scale. There's no reason why we couldn't be manufacturing tens of billions or billions of tiny little combustion devices. Right. That were consuming gasoline and then burning it. I think rather we don't do that because of there are important economies of unit scale, both in the transport of fossil fuels through pipelines or tankers or other infrastructure and in the actual equipment itself. It's cheaper and usually more efficient to build very large scale power plants rather than many, many, many smaller ones, which seems to contribute to this dynamic as well. And I'm trying to decide if this is a feature outgrowth of the efficiency story as well. There's. But it's maybe more about the simplicity of electric drives and electric motors, electric generators, that they can, with a relatively small number of moving parts or even an entirely solid state system like a solar panel can produce useful energy without a huge number of moving parts and without the need for this fuel delivery infrastructure, and so are able to become much smaller and more modularized kind of inherently, due to their technological design, this.
- [12:47]
C
Is all completely right. And molecules, of course, are very heavy. We're having to shift around 15,000 million tons of fossil fuels every year versus 1 50th of that amount for the total infrastructure required for the cleantech system. So it's just dramatically smaller amount of stuff that's required. And of course then the other point again, as we all know, is that in the case of fossil fuels, as the IEA recently pointed out, you're constantly fighting against decline rates, so you have to go further and deeper and more expensive and more difficult. So there is definitely learning curves taking place in our extraction technologies, but they're fighting every day against decline rates and net net. As Doyne Farmer shows, over the last century, actually fossil costs have gone up. So it's just quite hard to compete when your costs don't fall structurally against a technology which has got structurally falling costs.
- [13:39]
A
Let's talk about geosecurity for a bit. So I think the classic actor here is China, which has been the dominant country bringing these technologies to scale. Is that the right way to understand the electrotech revolution or do you see this as primarily kind of a China plus story?
- [13:56]
C
Well, actually, the glorious thing about electrotech, just for a moment is that it had many countries in its gestation. The United States, most notably amongst them, was one of the absolute leaders in the development of solar technologies. Australia played a major role. Japan played a major role. Germany then played a major role in terms of driving down costs and getting volume up. At the moment, China's in the lead, but that lead may also change once more as new people get involved. So it's really important to stress that this is a marathon. China's doing pretty well in the marathon, but it's certainly not the only country which contributed to getting these country, these technologies off the ground. And of course everyone else can join in the race. So, yeah, they're moving on to the. I think the deeper question of why are many countries likely to want to deploy electronic technologies? It's very simple. 80% of the world or 3/4 of the world lives in countries which are importers of fossil fuels. And here I'm thinking Europe, where it's two thirds of our primary energy demand is from imported fossil fuels, or China or India or much of Southeast Asia or half of Africa and about half of Latin America. Most people live in countries import a lot of fossil fuels. So when you finally get the chance to get your energy from solar and wind and electrification, if you can get it cheaper and quicker, and you no longer have to spend hundreds of billions of dollars a year on imports, then you seize it. So it's kind of another reason why people are likely to go down the electrotech route.
- [15:41]
B
So all this seems to point towards a potential peak in global fossil fuel use. That's sort of the turning point that you see happening in this next decade, critical decade, as this confluence of technologies comes together. What I thought was one of the most striking things about the report is that much of you can see that peak happening sector by sector in pretty concrete ways already. So you mentioned, you know, electrification has been going on for quite a while. Of course, industry is one of the first places where we started to use electric motors from the very beginning to increase productivity in primary industry. And there's a pretty fascinating chart here that shows that most of the industrial sectors of the world, in fact all but 6% of energy demand in industrial sectors already occurs in sectors that have already either peaked or reached a plateau in their fossil energy consumption. With basically all of the growth in energy demand, final energy demand in these industrial sectors coming from electrification, from electricity, rather than from combustion. Do you want to walk us through that for a second?
- [16:38]
C
I think we made the observation, again, anyone could go out and do this. You take the International Energy Agency data from their World Energy Balance database and you have a look at the amount of electricity and fossil fuels going into industrial demand. And what you find is that industrial demand peaks in 2014 because of the very rapid growth of electricity. Sorry, industrial demand for fossil Fuels peaks in 2014 because of the very rapid growth of electricity. Most people don't believe this. So we then disaggregated it. We looked at The, I think, 14 or 15 different sectors that the IEA gives you data for, and we found that basically for all of light industry, so that's to say textiles and food and light manufacturing, all of growth for years has come from electricity. And then we've. Then we noticed that actually even in the sectors most people point to as being very hard to solve, iron and steel. Actually, you have a peak about seven or eight years ago of fossil fuel demand. And all the growth there is also coming from electricity. Because before you get to the really hardest to solve pieces of plenty of other pieces that can get electrified. And therefore, all in all, as you say, 90, 94% of demand in the industrial system by sector is already in sectors which have seen a peak, which is, I think, a little bit surprising to a lot of folks. And it's a similar story in the building sector. You get a peak in fossil fuels in the building sector in about 2018. And the reason again why is because there's not a lot of population growth going on in coal countries and all of the growth in demand, particularly for air conditioning, is coming from, sorry, all the growth in population is coming from hotter countries where you don't need so much fossil fuels for heating. And in the meantime you're seeing efficiency and electrification rising and therefore cutting down on fossil fuel demand. So again, it's quite a clear picture.
- [18:30]
B
And it seems that transport might be next right, which is the critical driver we thought would be the critical driver of demand growth for oil around the world as emerging economies, China, India, et cetera, followed the path of the US and Europe to start driving billions of new vehicles. It turns out though that at least already half of those in China are electrified and not fossil fuels. And so they seem to be skipping past that step. Globally speaking, it's still a pretty imperceptibly small amount of the total final energy demand, given the enormity of our internal combustion engine vehicle stock. But you look out, as many have over the next few years and see also a peak in road transportation oil demand as well, driven by electric vehicles.
- [19:07]
C
Again, stepping back for a second, there are three parts to final energy demand. So you've got buildings, about 35 or 40% electrify's share of final energy, more than 50% as a share of useful industry, about 30% final, also 40, 50% of useful. And then you've got transport where it's almost nothing. So transport is the one piece of the system which had resisted electrification. But in the meantime a huge amount of torque has built up because transport is incredibly inefficient. So it's a 3 or 4 to 1 efficiency gain. It's the most expensive fuel oil, it's the most deeply concentrated, it's the one which is the source of most dependency. And now finally we've got this technology which allows people to come up with a new solution, sorry to deploy electric solutions. So the electrification, the transport sector is simply the latest piece of a long of 150 year story of electrification. And if I may be a tiny bit geeky for a second, that's what.
- [20:09]
B
This is for, not an issue.
- [20:10]
A
Yeah, no, that's what this show is for. That's what the show is for.
- [20:13]
C
But no, but if you take Nicair's framing of dividing energy, final energy use into heat and work, then every other aspect of work type demand has already been electrified. So lighting, appliances, they're all work type demand appliances, simply stationary power. And now that is happening in the mobile power sector, which is transport. So it would be absolutely reasonable and normal to expect that the whole sector gets converted into electricity in just 20 years, because that's what happened with the appliance sector after around 1920 or early.
- [20:51]
B
On in the automotive sector, as the internal combustion engine vehicle took over from an array of different early transport options. You had steam driven vehicles, you had electric cars, you had internal combustion cars. Very quickly they sort of sorted themselves out with internal combustion taking over in the 1910s and 20s. So if the fulcrum here in terms of global fossil fuel demand, then is the transport sector, which is the one that has yet to solidly peak the national fulcrum there is China, where you have the world's largest automotive market, which has very rapidly been taken over by electric vehicles, and which seems to be the key driving this sort of near term outlook of a potential peak in both oil transport on road, motor fuel demand from oil, but also broadly fossil fuel demand. Is that fair to say?
- [21:34]
C
It's absolutely fair. When we look at the world, you can kind of divide it in its simplest ways, oecd, China and the emerging markets. And if you're really cute about it, you can split out the petro regions from the rest of the emerging markets. But anyway, the point, Sydney, is that for the last seven years, since 2018, you've had falling demand for fossil fuels in the OECD. It's more or less matched rising demand in the emerging markets. And China's been, as you say, China's been the source of growth. So like 95% of the growth in fossil fuel demand since 2018 has come from China. So what that means is that the moment that China goes from growth to decline will be the kind of fulcrum moment for the entire system. And then what we're seeing, and again, this is not just from Ember, but from sources such as craya, we're starting to see very clear signs of peaking fossil demand in China. So in the electricity sector, which has been the primary driver of fossil demand growth in China since 2018, responsible for about three quarters of the total, we've seen for the first time that the amount of new solar and wind coming into the system has been sufficient to supply all of the growth in demand and therefore fossil demand, coal demand has been falling again, as is widely appreciated this year, by a couple of percent. And that's a very interesting moment because it's a fulcrum moment for China. Fulcrum moment for the world. It's too early to say we're off the plateau. I mean, we've said for a very long time that in retrospect it will be obvious that we'd be in a peak plateau and that will then eventually lead to a decline in fossil fuels. If you play around with the numbers, it gets a bit bumpy, but by the end of this decade, we'll be off that plateau and fossils will be in decline. If, and this is the key, if this kind of growth that we have been seeing for the last 15 years.
- [23:13]
B
Continues this growth for solar in particular. Solar and wind in the electricity sector in particular.
- [23:19]
C
Yeah. So it's solar and wind and electric vehicles, electrification, transport, and incidentally to be clear, electricity is about 40% of fossil demand. Road transport's about another 20. So these incredibly material giant sectors, we're Talking about roughly 60% of fossil demand.
- [23:39]
B
And then buildings and industry are the remainder and they've already peaked, as you.
- [23:42]
C
Noted, quite a bit. Then you've got low temperature heat where it's about another 10%. But the point to me is that, and this is a very key point we're trying to make in this report, that people often focus on the hard to solve sectors and that's great, and I salute the folks who are working night and day to find solutions in these sectors. But actually we shouldn't forget that we can already get solar and wind to around 70 or 80% of electricity demand and we can already electrify around 75% of our economy from our calculations. So, you know, there's a huge hinterland of opportunity.
- [24:14]
A
You mean we can get it globally there just by distribution of those technologies primarily to countries that don't have as reliable electricity yet?
- [24:22]
C
Well, so the stat of 70 to 80% of electricity can be supplied applied by solar and wind. It's actually a statistic from the Energy Transitions Commission. Again, we and like many others have also done the calculations and at the moment there are the leading regions and countries already around 60% solar and wind and have plans to get to 70 or 80. So it clearly can be done. What we also did, and this is a moment to plug a little piece of Dulles, is done by my colleague Costanza. She looked at how much, what share of your electricity you could get from just solar and batteries. The point, Sydney, is that from her calculations you can get to around 80% in most locations, particularly in the global Sun Belt, from solar and batteries at a price comparable to fossils. But specifically, if you look at a price clearly lower than fossil fuels, around $60 per megawatt hour. Our calculations show that you can get 35% from solar plus batteries today alone. And then if costs continue to fall, then by 2030 that's going to be about 65%. So again, sorry, I don't want to be too nerdy and technical, but the point certainly is that these technologies are allowing for the solutions to the impediments that people talk about to be solved.
- [25:40]
B
I certainly see in our modeling that we do at zero lab and elsewhere, we do often see the wind and solar contributing 50 to 70% of electricity supply in kind of optimized cases. And of course that changes depending on the local resource potential and your assumptions about future cost declines. I do want to stress that I think we haven't yet seen those kinds of penetrations on the grid in the world yet. There isn't really a sign that we're plateauing, that we're not on track for that. But if you look at sort of the grid scale, not individual countries, you can point to Denmark being 69% solar and wind as of 2024, but Denmark's a tiny part of a much bigger regional grid. I think the telling cases are places like the Iberian Peninsula, that's largely isolated from the rest of Europe and is roughly 45% wind and solar between both SP and Portugal or Ireland, which is now over 40% wind and solar, mostly wind. The UK is about 36% and even North Central European grid, including Germany, the Netherlands, Belgium, Denmark, etc. Is well over 40% collectively, even though it can trade with some of its neighbors. So we have a lot of examples in that 30 to 40% range. Now that itself is a remarkable shift from just a few years ago where it was hard to find countries above 20% wind and solar share. But we are a ways from seeing in the real world a 70% wind and solar energy on an annual basis energy grid. And there are challenges that remain to get there. I think in terms of the practical operations of grids like that, lots of solutions and lots of engineering going on to solve those. But I think you're making a kind of a core economic argument that sort of putting aside, assuming we solve those technical challenges, that the sort of least cost mix of resources in much of the world is going to entail something like 70, 75% renewable electricity supply.
- [27:20]
C
I think I might even go a little bit further because the point to me is that this, as you point out, has been going for a very long time, that we keep on lifting up the ceiling of the possible, because we have all these new very brilliant technologies and engineers who are solving them. And of course an engineering solution in one country can then be rolled out globally quite quickly. So the point simply is that we know how to get to high levels. There is very strong reasons to argue that the costs of solar and batteries specifically will continue to fall. And as that happens, that just continues to open more and more doors. So I think again, I guess the key point we had here is that we can have a very obscure debate about whether or not the peak is 60 or 70 or 80, but actually the world today is sub 20 and therefore the ceiling of the possible is still far above our heads. And yeah, yeah.
- [28:16]
B
And even these leading countries are 30 to 40%, so there is room for them to continue. And if you look at the trend lines, none of them show a sign of abating. There was this sort of moment in the early 2000s where. And another one in the early 2012 era where it looked like perhaps some of these early leaders were entering the top of the S curve at only like 20, 25%. I think that was largely a pullback in policy support because at that point these technologies still were quite a bit more expensive and that led to these early plateaus. But it wasn't necessarily a fundamental limit on the penetration of wind and solar. And I think some over interpreted that initial plateau. Now, if you look at recent trends, a number of countries are just on the upward trajectory, climbing from 10, 20, 30, 40% with no real sign of an abatement. And that's due largely to this fundamental shift in the relative economics of solar, wind and batteries, which has only occurred very recently in the last few years. So there's room even for the leaders to continue to go. If you look at it that way, you could say on the one hand, we've never yet seen a country get to 70%, so we're not sure where the limit is. But if you look at the trend lines, it's also clear we're far from that limit or no one appears to be butting up against it at the moment, including leaders like Portugal, Spain, Ireland, et cetera.
- [29:25]
C
So here we should also talk about the point that needs to be made right now. This is not easy and it does require policy to be clever and very proactive. And so you have these wonderful new technologies coming in. You have engineers solving problems, but you also desperately need regulators to clear the path and to allow for the deployment of these technologies. And if you don't, you're going to get more blackouts. But I think the key distinction to be made here is between problems which we can solve versus insoluble barriers that we cannot solve. And so far it's hard to see those. Yeah, yeah, it's hard to see those. And it's looking like these are problems within human capacity to solve because people often say, well, there are all these barriers can't be solved. This is why we come up with this kind of framework of three fundamental drivers. And there's a subsection which I failed to mention in the geopolitics driver, which is simply that folks, China's doing this anyway and therefore if you don't do it, you're going to fall further and further behind in the technologies of the future on learning curves. So it's almost an extra additional point from the geopolitical perspective that when your strategic competitor is getting on with deploying cheaper, superior technologies, you just have to find a way. And I think this is a very key message to policymakers.
- [30:51]
A
This episode of Shipkey is brought to you by Hydrostor. The US economy is growing fast and so is its demand for reliable energy. But generation alone isn't enough. Long duration energy storage is the key to building a resilient, secure grid that can meet tomorrow's needs. Hydrostor's advanced compressed air energy storage technology stores clean energy for hours at a time and then delivers baseload power when it's needed most. Hydrostor's Willow Rock energy storage center in California will provide 500 megawatts of storage, enough to power a city of half a million people for more than eight hours and employ over 6,500 people during construction. Backed by bipartisan support at all levels of government, Hydrostor is leading the charge in utility scale storage. With projects underway across the across America, we're helping communities unlock economic growth and achieve energy independence. Learn more about Hydrostor's unique technology and how it's powering America's future@hydrostore.ca I do want to ask about this question about China doing it anyway, because I think in the charts you can tell solar batteries, EVs, I think especially small two wheeled vehicles are being adopted en masse globally. However, when you look at the charts, you also see that China is the prime actor here. It's China that's massively, massively building solar farms. It's China that's created this extremely competitive and sometimes unprofitable domestic EV industry. It's China that's gotten down the cost curve for lithium ion batteries. Starting with smartphones and then working its way into EVs. And China's doing this not only because it has some internal desire to reduce global emissions or that it wants to create technologies to export to the rest of the world, although I think it actually does have tendencies in its domestic politics that want these things. It's also doing it because it knows it's in strategic competition with the US and it knows that the easiest thing the US would do if we were to wind up in some kind of economic or catastrophic break, God forbid, to be clear, would be to try to curtail the amount of oil, liquid fuel entering China's economy. And so because of this, it's invest in oil, it's an extremely oil intensive economy because of it's invested in solar, but it's also invested in coal, it's also invested in nuclear. And so my question kind of is, is there a dark electro tech story too, or a mirror world electrotech story where yes, we are very happy about solar, batteries, EVs and electrified technologies penetrating the grid and driving out fossil technologies. But in China the story is as much a story about coal as it is about solar. And coal is quite abundant globally. Lots of countries could burn coal or coal is more abundant globally. Many more countries have coal than they have oil per se. And so you could see countries kind of embracing a coal led domestic development pathway as opposed to a solar one, which is not really what we want either. How do we know this is a true solar battery EV led revolution like with the full electrotech, the full beautiful zero carbon electrotech stack. And not just in the continued march of electrification, which is happy to accept energy from giant coal plants as it is to accept energy from solar panels.
- [34:26]
C
It's always fun to debate this, but I mean the point, I think you nearly said countries don't have solar, but they do have coal. And that's the whole point. Everyone's got lots of solar and solar today, unless you're talking about mine mouth coal and existing assets. Solar also beats coal. And that's why we're spending $400 billion a year on expanding our solar and $40 billion a year, whatever it is, on expanding coal in a very small number of locations. The coal pathway to development was the China path after 2000, but they've kind of opened up a new pathway that other countries can now take. And the classic example now is India, which is clearly taking a very different pathway to that taken by China 2020, 25 years ago. And incidentally, it's a similar story in the transport market, certainly until recently and Even now, for those who haven't got the memo are still forecasting that the emerging markets will follow the US development path and have 16 barrels of oil per person per day of demand. But actually China's peaked at 2 and is already falling. And you're going to see other countries following that path simply because it's a lot cheaper. And I think this is the whether or not this was by genius or design or luck, but the Chinese happen to have stumbled into a very, very successful path of finding a cheaper energy source or a better mousetrap, as it were. And I think that that's what's now happening right across the emerging markets. So if I may make one other point, let us not forget that the emerging markets are going down this path very quickly. And to give you a couple of stats on this, the classic one is the fact that from our calculations, two thirds of the emerging markets by design already have a higher share of solar in their electricity system than the United States, which is astonishing given that the United States is a global leader in so many other respects. And in terms of electrification, it's a quarter of the emerging markets, also ahead of the US or Europe for that matter. And so we're seeing here that the emerging markets are going down a new path which was not expected. And if you contrast that with the Internet, for example, after 2000, the Internet was pretty clear standard graph of US leads. And then Japan follows and Western Europe and then China and then, you know, the other emerging markets. But this time round, these folks are steaming into these technologies much earlier than expected.
- [36:54]
A
It does sound though like this development pathway is somewhat dependent on third party countries. Let's say the emerging markets, Sub Saharan Africa, primarily Southeast Asia. It does depend on their willingness to accept manufactured goods and to trust. The Chinese supply chain, which I'm not noting here, is neither here nor there. But it does kind of depend on your willingness to basically have Chinese companies sell you the rudimentary equipment with which you will use to then build the kind of base energy layer of your economy.
- [37:27]
C
This is true, but you have to look at this from the perspective of choice. So for most countries you have a choice. You can either buy fossil fuels or you put up an electrotech system. And the difference is the same as the difference between renting and buying. So if you're renting, your landlord could kick you out at any moment, depending on your jurisdiction. But if you buy the house, you've got it. And it's similar here. You buy the solar panel, you've got it for 30 years, your supplier cuts you off, you've got 30 years to find a new supplier. If your oil supply cuts you off, your factories stop running the next day. So it's completely different, the degree of dependency. But again, do not imagine for a second that our entire framing is all rosy. What this means is it is very important to build up alternative suppliers to China. And this is why, again, the west needs to do what China itself did 30 years ago and strategically and intelligently cooperate with people who can teach us how to do this stuff. So, you know, build up those people.
- [38:35]
B
Outside of China, though, at this point, I mean, to some degree, it's Japan and Korea has been who the US has turned to Japanese and South Korean companies to come here and help us, at least with the battery and EV supply chain, although the current administration is making that even more difficult as well. I guess there's two challenges with that problem. One is China has such a dominant position in these industries that it is difficult to get that know how without at least starting an initial collaborative relationship where you welcome foreign direct investment from Chinese firms in the country. Second, there's already so much overcapacity in the world market. There's a shocking graph in here about how much solar and battery manufacturing capacity there already is in the world relative to current demand and even projected future demands. And it's many multiples of what we actually need today. So are we going to build even more overcapacity in order to have our own domestic supply chains? These are tough challenges, I think, that aren't quite as straightforward. There's certainly a cost to building additional redundant capacity, and that was sort of the cost that the US was incurring under the Inflation Reduction Act's industrial policy strategy around manufacturing in these sectors. But there's also this strategic collaboration question where the US has very much walled itself off from foreign direct investment from Chinese firms. It made it very difficult for them to operate here and to transfer technology and know how.
- [39:50]
C
I mean, to state the obvious, the US is not the only country in the world. Yeah, yeah.
- [39:54]
B
No, I'm just saying this is one example of a way in which the US has grappled with this challenge. Other countries will have to make the same choices.
- [40:00]
C
So I think here again, there are certainly grounds for hope. And for most people, collaboration is a fairly clever way forward to get foreign technology. And why wouldn't you? And we now have, again, data I read out of the US is that we've now got more than $200 billion of Chinese FDI going into building Our electrotech solutions essentially, and factories and fabs all over the world. And for most people under most circumstances, that just makes a lot of sense.
- [40:28]
B
And from a climate perspective, right, I mean, that's probably one of the most optimistic slides in the entire slide. Climate doesn't care if China becomes a global hegemon, but if they're doing it by exporting electric tech, so be it. But there certainly are implications for soft power and influence around the world.
- [40:43]
C
Yeah, undoubtedly. And that's why again, I'm not the only person to say it's kind of weird to cede leadership to a strategic competitor. But again, leaving that point aside, it really is worth emphasizing that we are early in this transition. Roughly 20% of our electricity is coming from solar and wind. Roughly 20% of our electricity, sorry. If our final energy is electrified, that means you've got 80 and 80 folks. It cannot be beyond the wit of the thousands of millions of people living outside China to put us on competition. And indeed, if you take for example the software sector, actually global exports of software from the US are US got biggest market share. European cable companies, the Japanese companies, in the various different electrotech sectors like Hitachi. There are plenty of areas for competition where people can lean in and dominate. And sorry, the final point, let us not forget the amount of capital you require to build out all of these solar fabs. Jesse, you'll correct me if I'm wrong here, but it's really small. It's something like $40 billion in a 100, $100 trillion economy. I mean, it's not that capital intensive, this stuff.
- [42:01]
B
No, it really isn't. In fact, someone was, I shared a link to. You could actually buy a whole little 40 megawatt solar fab like turnkey kit to be delivered from China to your door to be set up on one of these online retail websites. Now it's like, who wants to start a solar company? It was like remarkably cheap to set up this production line. Of course, there's no way, Jesse Solar Inc. Would compete with Chinese producers having done that. But if that's not my goal, if I'm say Brazil or Morocco, and my goal is simply to reduce my dependence on imports panels, then certainly I can do that and maybe I pay a little bit more for them. Or to look at the import substitution is a classic. Yeah, is a classic alternative here. I do want to just highlight one recent report that Clearpath just put out the think tank and advocacy group on Chinese foreign direct investment versus the United States with a case study in Brazil where They showed that official Chinese entities, meaning policy banks, international development banks and state owned Enterprises, have made $60 billion of energy investment in Brazil since 2015, compared to less than half a billion from U.S. government sources. The Chinese state owned entities now own about 12% of Brazil's power system assets, as well as a significant share in the mining and upstream oil and gas sector. And to this point about soft power, they note that in Brazil, these lending practices that China attaches to these kinds of investments also have led to strategic export contracts of very particular key commodities to Chinese domestic manufacturers, including fossil fuels and iron ore and other inputs to their manufacturing. So it really is a two way street, right? China is going out into the world, it's exporting its products, it's setting up direct manufacturing investment overseas, and in return it's often getting access to the very materials it needs to sort of cement its clean tech hegemon status around the world. And this is a very obvious strategy that seems to be playing out right in front of us. I appreciate Clearpath's effort to put some numbers on this in the, in the Brazilian case, but it's not just Brazil. This is happening in Morocco, it's happening in the Congo, it's happening in Australia, it's happening all over the world. And like you said, where is the competition, right? The US at the moment anyway is walking away from the game, let alone just standing on the sidelines. Can I push on one critical, like one counterargument maybe to your story here, which is the one we hear a lot from, maybe the Vaclav Smeals of the world or others who have just looked at the data to be fair so far and seen that for all of the vaunted growth in electric tech, in solar and wind and EVs and batteries, et cetera, what we've mostly seen so far is we've entered into a plateau in global fossil energy consumption, but not yet a decline, a structural decline. And so the argument goes, we actually aren't seeing an energy transition, we're seeing energy addition. That's what we saw when coal began to not displace but add on top of biomass. In fact, we consume as much biomass in the world as we did the pre industrial revolution when oil began to supplement but not really replace coal when natural gas came later. Each of these new sources of energy basically add on to the last one and power the growth of the next decade and grow in energy share terms and percentage terms, which is what we're certainly seeing here again with solar and wind. But they don't actually drive a structural decline in the incumbent technology. They add to it.
- [45:11]
C
It.
- [45:11]
B
So what would you say to that argument? What are there. Is it just sort of an open question at this point whether we're in a plateau or entering a decline or what are the. Some of the signposts that you see that would give you more confidence that this is actually different this time? This is a structural decline we're about to enter for fossil fuels?
- [45:27]
C
Well, as you know, Jesse, different this time is a kind of mark of failure in the city. But actually, with all due respect, this framing is completely incorrect. From everyone's experience, we always as humans move on to the next best thing. Where's your Nokia phone? Where's your horse? Where's your gas lighting? We always actually use the new to replace the old. So the standard way that technology works is precisely this, to replace the old. The second example is that there are these very carefully curated examples that more and more and more folks talk about. They are completely the exception and not the rule. So one thing they don't talk about is fodder. So fodder, that is to say, food for horses, used to be a primary source, a key source of primary energy, about 20% of primary energy in 1800. It's now so small we don't even count it.
- [46:28]
B
Just to that, I've been listening to Richard Rhodes Energy History, and there is a fascinating section on that and on the transition from workhorses and horses for transport to internal combustion. That's actually where biofuels came from. There was such a decline in demand in the United States for fodder that the agricultural markets collapsed and they began to turn to producing fuel alcohol for the new internal combustion vehicles as a way to prop up the agricultural markets and avoid a depression in the agricultural market sector. And to this day, we continue to do the same thing with over 40% of our corn supply in the US going to ethanol production. It actually goes back much further than I even appreciated into the 19 teens, when we first began to basically drive out the demand for fodder, which used to be enormous.
- [47:14]
C
That's a fascinating example. But if I may just come to the difference between our perspective and that of the kind of fossil. More and more and more folks is you've got to look under the hood, guys. You've got to look at what happens in each individual country. And what you do when you do that, you see it absolutely plain as night and day, is that a country will peak its fodder demand and then it peaks its wood demand, and then it peaks its coal demand, then it peaks its oil demand one after the next. And the reason it hasn't happened yet at a global level is because China was so enormous, was completely skewing the numbers. So like OECD, fossil fuel demand, as you know, peaks or nearly 20 years ago and has been in decline ever since, the only reason the numbers get to rise is China. The emerging markets were growing. But of course, now that China has also gone over that pivot point and other countries are following down the same path, it's completely delusional to rely upon these statistics of more and more and more. If I may also address the point that Vaclav Smil and his supporters in JP Morgan and elsewhere make that energy transitions take a very long time. They take a century. Again, guys, this is the academic view, right? Nobody cares that we still got a few horses or a few gas lights knocking around. The key point is when you shift from growth to decline, that's when the old system gets wiped out. And therefore, it's actually a distinction between my background, which is in financial analysis, looking at peaks and turning points and realizing that the money is to be made the second derivative of change, not the fact that we might still have a lot of oil, coal and gas in the system in 2050, completely irrelevant if they're in structural decline by that point.
- [49:04]
B
That is a huge point. And that's the point I keep waiting for as well. I mean, competing for a diminishing share of a diminishing market is a terrible business to be in, right? That is a cutthroat price war forever, right until the last man standing. It's a very challenging business environment. Whereas a market of structural demand growth means there's opportunities from pricing at the margin of the cost of incremental demand and profit margins throughout the industry. It's just a completely different picture. And that doesn't require you to go from 100% share to 0% share. It requires you to go from plus 1% per year to negative 1% per year.
- [49:38]
A
Can I push back on this a little, though? Only because the existing solar market, like the solar market as it exists today, is also a terrible business. Like it is a terrible, terrible business because of the policies that China has set up basically to drive massive deployment of these of panels. And because the way the Chinese economy seems to be set up at the current moment is that. And I'm. This is a somewhat friendly view, I would say, but there's other ways you could describe this. But instead of returning free Cash to shareholders. It seems to devote all that free cash either to investing in continued competitive advantage or scale in the business. Some of it goes to consumer surplus and some of it goes to graft. And like.
- [50:17]
C
It's not fair, is it? It's not fair.
- [50:19]
A
Well, no, I don't know whether it's fair or not. I think it poses distinct policy issues for Western companies and Western countries to compete.
- [50:27]
B
I think that's a policy choice. Right, which is a policy choice, which.
- [50:30]
A
I guess I just want to say that as compared to the existing fossil system, which is extremely profitable and which seems to me could continue to remain profitable even with facing declining market share because profits emerge mechanically from how much you spend on drilling versus what you can sell the fuel for. And so even if we're in.
- [50:52]
C
Yeah, well, can I take you up on all of these?
- [50:54]
A
Please do, please do know, this is good.
- [50:56]
C
Well, because think of a very large sector which plowed all of its profits into continuous growth and seeking to dominate the future. That's what the Internet story was in the 1990s. And that for what it's about what it's worth is the AI story today. All these countries are plowing massive amounts of capital into growth. So it is completely normal actually in technology shifts for people to what are.
- [51:23]
B
The most valuable companies in the world right now? They're all the companies that won that race, right?
- [51:27]
C
Yeah, exactly. So this argument about it's not fair or they're doing the wrong thing. I mean again, people seek to invest in dominating the industry. That's normal.
- [51:38]
B
I think the difference. Sorry to interrupt the flow, but the difference here is that China is basically putting a brake on the natural process there of consolidation which would occur.
- [51:47]
A
Right.
- [51:47]
B
And you have a great chart in here about the early auto industry and the same thing happening where there was dozens and dozens of producers and then eventually they consolidate into the major auto companies which are still some of the world's most valuable companies. The challenge is that in China that consolidation process is shortcut by a number of provincial and national level policy interventions that make it very difficult for the market to contract and for older, less efficient production to phase out and leading companies to acquire their competitors or at least to acquire dominant top 3, 4 market status.
- [52:18]
C
The thing is, all this stuff is true, but at the end of the day, if somebody in China is happy to sell me a solar panel for 50 bucks, I'm going to take it. What's the problem? So I think coming back to this fossil point actually, if I may, Robinson, you said we know, fossil companies are profitable. Well, actually we don't because fossil companies, let us not forget, have been operating in an environment of continuous growth for over a century. They've never operated in an environment of structural decline. And the only period when in fact they had essentially zero growth was of course after like 1979. We all remember the misery of the 80s and 90s in the oil market. So actually it's only true to say that it's only adequately profitable business model in a growth environment.
- [53:06]
B
It's also, I should say, highly volatile. I'm just looking at the stats right now and it's almost as likely to have made a 20% annual return, to have lost a 20% annual return.
- [53:14]
A
It's the volatility that ensures. Sorry, I want to let Kingsmill finish because I, I think volatility is actually core to the asset.
- [53:22]
C
Well, it is.
- [53:23]
B
Well, it is challenging long run business.
- [53:25]
C
Well, exactly. So I mean, again, it depends what kind of investor you are. If you're a day trader, it's a fantastic business. When people are depressed and hope that Putin goes and invades another country and then the price goes up a lot and then reality kind of returns. But we've had cyclicality on the way up and there will undoubtedly be cyclicality on the way down. But for long term strategic investment of assets and asset allocation, it's going to be a really tough business and sorry, the final reason it's particularly difficult is because the industry continues to plan for growth and they're hoping for LNG to be far above current expectations for demand in 2030. And if they're wrong, that is indeed, as Jesse, you say, a recipe for a bloodbath.
- [54:10]
A
The only thing though is I think we lose money nine years in a row and then if you're fabulously profitable in your 10th year, and that happens every decade, then there's reasons to kind of keep you around in a portfolio, not in a day trader sense. I understand why they're sticky. We were making relatively similar arguments. I guess I say this as someone who's been burned before, right. Because we all made arguments going up to 2021 that well, these ESG portfolios performing extremely well. And then it turned out there's a reason you stick fossil in your portfolio, which is that in that 10th year Putin's going to invade Ukraine, Ukraine and you're going to have bonanza fossil profits and it's going to counterweight other. Anyway, I'm just like, they're countercyclical. I just want to. It's a Little countercyclical. Exactly. And also. Yeah, it's a little countercyclical, but I don't disagree. It just seems to me that where this all kind of leads is that it does seem to me that, you know, here we are in America, and I realize it's not the same position in other Western countries, but we are a little bit in the wilderness, climate policy wise. And it seems to me the path back is actually not clear. Maybe you disagree and I would welcome your disagreement because setting up the kind of financing structures that would allow in the United States, an American company, to compete with China in these, in these industries will be quite tough. But it just seems to me the path here, given the scale, the sophistication of the Chinese manufacturing industry in these industries and the level of state support, it's quite tricky to figure out what their Western policy response should be.
- [55:47]
C
I think here again, we're not the only people out there saying the time has come to move on from Net Zero as the kind of lodestar of the climate movement. And I would suggest the time has come to move from Net Zero to this kind of technology race to the top and to return to this example of the Internet. So in 2000 and for many years to come thereafter, the United States dominated the technology and the rollout of the Internet, and China and other countries figured out how to take part and have actually learned how to compete and dominate new areas. And it's exactly the same thing here. The real drivers for us to get into these industries are completely bipartisan, for what it's worth. They are what I started with their physics and their economics and their geopolitics. And we all want cheaper stuff, more efficient stuff, local stuff, energy security and economic advantage and all the jobs that flow from that. And that's, I would suggest, what we need to be shifting to as a driver of action.
- [56:53]
B
Should we leave it there?
- [56:54]
A
I think we should leave it there. Kingsbond, thank you so much for joining us. This was great. We should. We should check back in in the future.
- [57:01]
B
Yeah, we'll have you back on for season 12 to see how we go.
- [57:04]
C
Season 12, guys. I mean, I'm genuinely nervous as a member of the west that we just allowing our strategic competitor to just run away with the future and we just got to stop it.
- [57:17]
A
Oh, yeah. I just have no idea what you do about it. I don't know what you do about it.
- [57:20]
B
I mean, I do. You passed the Inflation Reduction act and then you stick with it for five or 10 years. But we didn't do that. And so, I mean, that's the issue. I don't know.
- [57:28]
A
It's not. It didn't stick. It didn't stick. Like that's the issue. Right. And it did stick in some.
- [57:36]
C
But I think we miss. Sold it. I think we kind of sold it. We sold it to people as. You got to do this, the right thing. It's a hair shirt and. Yeah, or didn't sell it at all. But if we sold it, we've gone out there and go, like, you know, guys, this is how we beat Chinese and get rich and dominate the industries of the future and also provide cheap energy to everybody. I mean, like, okay, fine, yeah, I'll sign up. Where do I sign?
- [57:57]
A
That was an argument that was made and partially the issue. The conundrum of the 2024 election will always be what if we had a president who could talk? Because ours couldn't at the time. But the other thing for me is that where it's hard is that the Republican Party by geography and by interest, is married to the fossil fuel supply.
- [58:18]
B
Chain, but also the growing electrocheck manufacturing base. So I don't know.
- [58:23]
A
It's true. I just sort of. But look who the energies are. I mean, it's, it's tricky. I mean, maybe the cross divisions are larger there and can be exploited. I mean, I do think that the kind of other concern here that I don't know when it comes to fruition is that like simply by dint of China's scale and policy mix is very hard to compete. And we wind up in this crazy position of decarbonization globally being structurally dependent on China.
- [58:50]
C
But we're in that position. What can we do? But again, it's why we're trying to move the conversation away from carbon. I mean, like everyone, I'm.
- [58:57]
B
Yeah, look, it's a question. Are we going to give up? Yeah, I just think this is the question now, right? This is the world we now live in. It's not that China is competing with us, is neck and neck, we're falling behind. No, we are behind. We are far behind and we're getting further behind every day. And the question is, does the United States give up and become a full petro state and ally ourselves with those fighting over the dwindling scraps of the fossil future, or do we compete like we always do in every sector? Right. For the future? And again, that's sort of like at its core, the simple message, it's not going to be easy, and maybe we need to be strategic about where we lay our chips on the table and which areas we do compete in versus sea.
- [59:35]
C
Yeah, exactly.
- [59:36]
A
I think that's exactly.
- [59:36]
B
Walking away from the game entirely as we are now is just like very un American.
- [59:40]
C
But it is un American.
- [59:42]
A
But I think the question here for policy wise is like recognizing the real position the US is in, recognizing that we imagine the us, Europe, the West would play certain roles in global decarbonization that it is not going to play. It is not playing right now. Maybe we will play those roles in the future, but we're not playing them. And we're also behind technologically in ways that I think present actually salient problems for our national security. And by the way, our ability to create governing majorities in Western politics is melting away. But what are we good at? We're good at oil and gas, we're good at chemicals, we're good at services, we're good at software.
- [60:20]
C
Well, there's a lot of services and software in electrotech.
- [60:23]
A
And a lot of services and software in electrotech.
- [60:27]
C
Yeah. Google could be selling me my interface with my battery. Like I failed to mention this, but we're all going to end up in the same ways. We all ended up with fridges, we're all going to end up with batteries in our homes. Someone's got to manage it. I'd much rather have American software than Chinese, with all due respect. And that's the point we all obsess about who makes the stupid soda puddles, who makes this laptop Chinese, I should think. Nobody cares. They can make all the stupid solar panels. Good luck. Let's get involved in the high margin stuff. Just like Apple.
- [60:57]
B
Yeah, that's a good point. Where's the software? I run, I mean, cell phone made in China. But where's the software coming from?
- [61:03]
A
Or companies? India. But I think the issue is that at the high margin, and this is what's happened with China, right. Is that companies and countries who are operating the lower end of the business, first of all have more process expertise that puts them at the leading edge of innovation. But then second of all are constantly fighting to move up the value chain. So you can't confidently sit at the top of the value chain alone and be like, we're here, it's very secure because there's always process innovation below you. That's coming up. And it's coming up.
- [61:31]
C
Yeah, that is true. That is true. We do need to make some stuff. I agree with that.
- [61:35]
A
Yeah. So then I guess my question is what would be the truly unsayable things in U.S. energy policy. But that would create a real like, do we need to talk about. The U.S. is the world's largest producer of oil and natural gas. If you put it together with Canada, then. And in Mexico, we're a huge position in the global fossil fuel markets. In a dwindling market. Do we need to talk about becoming a swing producer that actually uses interacts in the market in a systematic way, in the same way, say, a new opaque.
- [62:07]
C
So look, the thing is like, all this stuff is great, but it is, as Jesse says, this is managing decline and it's not the America way. I mean, it's like, let's just.
- [62:15]
B
We don't want to be in managed decline.
- [62:17]
C
Exactly. It sees the future. And that surely is the real opportunity because actually the US has got far more solar and wind potential than China does. It's got all the technology. It's got the manufacturing capacity. It's got. Actually, you can do what China did. China's pretty cute. They use their coal to build the solar system. Fine. So America can use its gas to do the same thing. This is why, as I say, ultimately this surely should be a very bipartisan issue is that what is right for the country is not the profits of Exxon. What's right for the country is getting cheap energy. And I do feel that we need to kind of pivot away from carbon and a kind of obsession with the status quo to figuring out how we get cheapest energy long term. Anyway, sorry, guys, I keep on boring.
- [63:01]
A
I completely agree, but I actually think that that's a major transition in American politics. I completely agree. And I think if we want to say, look, we wanted the US we're.
- [63:09]
B
Serious about cheap energy.
- [63:10]
A
We're serious about cheap energy. We thought the US Was going to play a leading role in global decarbonization. That's why we valued carbon. But the US is 13% of global emissions and falling. We are no longer the hegemonic actor in global climate politics. And we care about cheap energy. That's actually what we care about. And it's. And everything we need to do to make admissions fall like we have to do.
- [63:31]
C
I think you've nailed it. That's the pivot. Let's pivot to cheap energy.
- [63:34]
A
But that means.
- [63:35]
B
Truly, I think what Rob's saying is it's not just a rhetorical pivot. Right. I think what Rob giving us on climate.
- [63:40]
A
It.
- [63:40]
B
Yeah. Is it?
- [63:42]
C
Is it? And sorry, this is where I kind of start to rely upon my analysis, which is that if we're right and this stuff is this technology on learning curves then actually, and we're already definitely in the zone where it's competing.
- [63:55]
B
I mean, it's already true in the United States that basically all growth in electricity demand can be met by wind and solar at a cost lower than anything else.
- [64:03]
A
And I agree with you that there are 15 things the US needs to do on energy and 13 of them would be good for the climate. And I'm pulling these numbers off the top of my head and, and, and 13 of them can be justified on competitive basis alone. But there's two or three more policies we could be doing to lower energy costs for consumers. And I'll just put the thing on the table. We could be building new gas generation. Right. We could argue about whether it's cheaper or not. Jesse has his own thoughts here. But like I think that where Democrats, where this is going to become tough for Democrats in a coalition management sense is like these questions around new gas, questions around gas pipelines. Those are going to be.
- [64:46]
C
Yeah, you're right, you're right. I'm being a little bit glib because it's, you know, three bucks, what is it? Three bucks per mmb to you is times eight dollar 24 per megawatt hour. That's pretty cheap because solar IP.
- [64:56]
B
Yeah, that's. And uniquely so outside of the Middle east and the United States, it's such a unique position compared to everywhere else in the world to have that cheap access to natural gas.
- [65:04]
C
Although again, the US Is in a very unusual position, as you say here. So from a global perspective, you can't.
- [65:12]
B
The world is going a different place.
- [65:14]
C
Well, not so much happen. Energy is always going to struggle because it's very complex. So we're talking. That equation isn't a problem for the global story. It is clearly an issue for the U.S. but again, the U.S. could just be clever about this and do what Chinese done is use this really cheap resource, build out the system, build other.
- [65:28]
B
Endowment to invest in the future.
- [65:30]
C
Yeah, yeah, very nicely put. I should have used that line. It's a brilliant line.
- [65:35]
A
No, but I think that this is the, is that if you really think, if we are willing to say China is creating this new development model and it's so important, then coal is essential to that. But this. And then we should say, okay, well, U.S. gas would be essential. But this is where I do think these questions about decline, about how decline happens become quite, quite important because we were talking at the beginning of the call about whales, right? Whaling peaks in the US in 1840 but it peaks globally in 1960 because the Soviets were whaling for basically machine lubricants. And they found that whales were the best provider of this. And the other thing that happened was that the Soviet whaling apparatus was endowed with the uneconomical planning benefits and petroleum. And so suddenly the Arctic Ocean opened to whalers and the Soviet whaling fleet just killed an appalling number of whales in the 1950s and 1960s, which only ends because the world agrees that we are not going to whale anymore.
- [66:36]
C
But then again, what happened to the Soviet Union, it didn't do too well. So, I mean, actually leaning into very inefficient technology. Ultimately, that's what a whale is, a very, very inefficient way of converting sunlight into plankton into whale meat and all the rest of it. You're always going to struggle again, see superior technology. Meanwhile, the United States have moved on to something else. So much better use of the talents of the good folks of Nantucket who probably all became software engineers or something. So, yeah, I guess this is the difference though, between thinking in absolute terms and just thinking in relative terms. We have a relatively superior solution. We might as well lean into it. And you know, I get there are all these legacy industries and the other massive problem the US is going to find if we're right in five or 10 years time, when you've got falling demand for oil and gas, all these wonderful industries and all this capital that's been poured into the expansion of the LNG industry is just going to be wasted capital. Nobody wants this stuff anymore. It's not the price of the backers bid for it. So again, this is just a very poor use of your resources when you could be building future industries.
- [67:35]
A
I agree. I think the fascinating question that hangs over all of this for me, well, we can go into in a future episode, but I think there's basic questions about economic planning, about the kind of governments that can handle climate change, and about the kind of government that the United States is that hover all over all of these things. I guess the only other thing I'd say is that the US if it wants to maintain anything like its current level of wealth, period, is going to have to figure out some kind of financing mechanism that rival the Chinese financing mechanism, because right now none of the tools we have are succeeding when we try them. With that though, we need to wrap up. Wrap up.
- [68:16]
C
Fantastic. Fantastic. Sorry to bang on a bit, guys.
- [68:18]
A
I'm so sorry. No, this was great. This is a great episode.
- [68:21]
B
This is a good question.
- [68:22]
A
Kingsmill Bond yes, thank you so much. Kingsville Bond, thank you for joining us. Keep us posted. Always love to hear about your work. And now it's time for the world's greatest, quickest version of upshift, Downshift, our weekly look at climate news. Every week, Jesse and I pull one item of climate energy news from the big wide world and we present it here. If it's making us feel more upbeat about the energy transition, it's an upshift. If it's making us feel more downbeat, it's a downshift. Jesse, what you got?
- [68:55]
B
Well in keeping with one of the points that Kingsmill's report makes, which is that the global transition is often much smoother than the bumpy road that we find at a country by country level, Here's a quick look from RO Motion, a global transport analysis firm, on the status of the global EV industry as of August of this year, which saw 1.7 million electric vehicles sold globally in August. That's up 25% year to date. So for the first eight months of the year, growth of 25% versus the previous year, up 15% in the month of August versus August 2024 and up 5% month on month just between July, August and August. And in keeping with that bumpier road below the top line headline story, if we kind of dive in a little bit deeper, the growth is up 25% year to date in China, 31% actually in Europe, only 6% in North America, I think where we've spent a lot of our time lately talking about the bumps in the road in the US EV market. But perhaps most optimistically, again with the theme of broader transitions and leapfrogging, rest of the world market up 44% with 1 million EVs sold outside of those primary driver markets of North America, Europe and China. If that kind of trend rate continues, all of a sudden we're going to be seeing emerging economies buying more EVs than North America combined, which I guess is a good trend. Again, from a global perspective, an upshift. If you were maybe not so much from the North American or US perspective.
- [70:17]
A
I have an upshift, which is that the Chinese automaker BYD's vehicle, the U9 Extreme EV just hit a land top speed of 308 mph at Germany's ATP proving Ground, which makes it the fastest production car in the world, beating the Bugatti Chiron. Zoom, zoom, zoom, zoom. I think what's interesting here, I mean first of all, I think it's especially salient at this moment for the European economy for a Chinese EV to become the fastest car in the world, not a European car, a certain passing of the torch, so to speak. I think the other interesting thing here is that that that car had an 80 kilowatt hour LFP lithium ion phosphate battery and not a cobalt, a cobalt nickel battery which has been previously seen as the kind of highest power, yeah, high power performance battery. LFP is usually the kind of described as like the cheaper, easier to mass produce but lower performance alternative. And the fact that this BYD EV has an LFP battery and it just set the land speed record for a production vehicle means that that era is over. It's clearly a message from BYD that LFP batteries have now reached a level of performance that you don't need to worry about the differential between that and cobalt. So that's pretty remarkable. Yeah thanks for listening so much to this episode of Shift Key. You can find me on X at Obinsmeyer. You can find or on Bluesky or LinkedIn under my name.
- [71:40]
B
You can find me on Bluesky at Jesse djenkins.com and on X@essiejenkins.
- [71:46]
A
If you enjoyed Shift Key, leave us a review on your favorite podcast app. It helps a lot. Shift Key is a production of heatmap News. Our editors are Jillian Goodman and Nicoloricella. Multimedia editing, audio engineering is by Jacob Lambert and by Nick Woodbury. Our music is by Adam Kramolow. Thank you so much for listening and see you next week.