The New Normal in Energy Systems

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In this time of rapid change, that which was new, different, not normal, is now the new normal. Can we drop the title “green” energy and just call it energy? Electric cars are not just greener, they are better technology than internal combustion engine vehicles, just as the Ford Model T was better than a horse in the early 20th century. Horseless carriages just became cars, and the iron horse was normalized.

The major green energy technologies — wind, solar, electric vehicles, batteries, and ancillary technologies — have become the new energy system. Not just green, but better. A recent blog by Carbon Tracker highlights this well.

Wind and solar are already 12% of the global industry and EVs are 15% of global new car sales. We are well past the tipping point of technology disruption. The least developed countries are leapfrogging right over fossil fuels and straight to solar-powered minigrids.

By 2030, Carbon Tracker expects that wind and solar with battery backup will have four times the market share that they do now, and that is ten times the share they had in 2000. You can’t fight the math. Green energy is energy.

Bloomberg New Energy Finance (BNEF) noted this month that investment in new energy technology — mostly wind, solar, EVs, and batteries — reached over a trillion dollars in a single year for the first time, the same amount as was invested in fossil fuels! 
Fifty percent (50%) of this growth is investment in electric vehicles, 50% in wind, solar, and batteries. New energy development at this scale pushes it to the centre of global industrial strategy. “Green” no longer means fringe.

Global capital expenditure by type of project, excluding exploration ($bn). Chart courtesy of Carbon Tracker.

In 2022, wind and solar added between 600 and 700 terawatt-hours of new generation globally, about as much as Canada or Brazil generate in a year.

“That is more incremental generation than natural gas has ever added in a year; it is twice as much as nuclear added at its peak in the mid-1980s. It is even more than any year of incremental growth in coal-fired power in the past three decades, with the exception of 2021 when generation increased as part of the post-2020 rebound in economic activity and power consumption,” tech entrepreneur Azeem Azhar notes.

According to Saur Energy, India is another renewables success story. “Solar and wind dominated India’s power generation capacity growth in 2022, accounting for 92% of total capacity additions. Coal accounted for only 5%. … Combined, solar and wind added 15.7 GW of new generation capacity in 2022, 17% more than additions in 2021. Coal added less than 1 GW, showing a 78% decrease in additions in comparison to 2021.” The figures say it all: solar 13.9 GW; wind 1.828 GW; coal 823 MW. India’s additions in 2022 are comparable to the UK’s entire solar capacity in 2021. “Rajasthan and Gujarat, the top two states for total solar deployment, together added 8.6 GW, slightly more than Türkiye’s entire solar fleet as of 2021. Installations in all the other states combined were still sizable at 5.3 GW, larger than Chile’s entire solar fleet.”

China’s latest five-year plan, released June 2022, targets 33% more power from renewable technology by 2025 and a sharp focus on electric vehicles.

The new normal
Wind and solar grow, coal reacts, gas peaked. Chart courtesy of Carbon Tracker.

Carbon Tracker continues: “The US Inflation Reduction Act (IRA) has placed up to a $1 trillion dollar bet on this new home-grown energy opportunity, the EU has reacted in kind with its own $1 trillion investment plan over the next decade.”

The new technologies are not just greener, “they are cheaper, more local, provide more jobs, provide more energy options for the future and almost as an aside, emit far less carbon.” No longer a woke, tree-hugging sideshow, the new technologies can stand on their own feet as economically and socially viable. You put solar on your roof to save money and be independent, you buy an EV because it is fun to drive. There is no basis for a culture war.

The International Energy Agency (IEA) states that 55% of global energy jobs are in the new technology sector and expects that this will grow at a rate of 1.5 million jobs per year up till 2030, while fossil fuel jobs decline at a rate of half a million per year. More jobs, lower emissions, less net risk, and greater energy security.

Now we need to change the way the market prices energy. At present, electricity is priced at the “highest marginal cost of technology.” If gas is expensive (due to shortages caused by Russia’s war on Ukraine), then all electricity is expensive no matter how it is produced. Eventually, the grids will be fully renewable, though — the best protection against fossil fuel price hikes.

Markets will have to find ways to circumvent the foot dragging of the fossil fuel companies. Perhaps shareholders need to ask the following questions, as suggested by Carbon Tracker:

  1. What steps are you taking to accelerate your renewables build?
  2. What are you doing to push for governments and regulators to produce a regulatory framework for the remuneration of biomethane and hydrogen?
  3. What measures are you taking to reduce scope 3 emissions by 2030?

Company executives and shareholders need to be aware of the risks posed by stranded assets at this time when peak oil and gas demand is so close (there are those who already think it has passed). Certainly, peak ICEV was achieved in 2017. Fossil fuel use in the energy sector is reaching or has passed its peak.

The new normal
Global energy sector employment by technology. Chart courtesy of Carbon Tracker.

“The energy transition is happening rapidly. Clean technologies are on S-curves of rapid, exponential growth, displacing fossil fuel demand. The two things to look for, and we’ve seen it in coal, is firstly when demand peaks for a core fossil fuel product. The key ones are obviously oil and gas because that’s where the most capital is tied up,” said Mark Campanale.

“When you see millions of barrels of oil demand destruction a day, then you’ll see a very strong negative sentiment in the investment community toward oil and gas. When that happens, the market will punish you by de-rating you. But at this point, with electrification happening all the way through the energy and transportation systems, it will be permanent and structural, not cyclical and temporary,” added Campanale.

It won’t be long before an electric car is a “normal” car and “green” energy is just energy. Language will change as the reality changes.

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David Waterworth

David Waterworth is a retired teacher who divides his time between looking after his grandchildren and trying to make sure they have a planet to live on. He is long on Tesla [NASDAQ:TSLA].

David Waterworth has 750 posts and counting. See all posts by David Waterworth