Is the ‘energy transition’ a real thing?

“Twice in the last several hundred years, there has been a transition in the way people use energy,” President Jimmy Carter told the nation in a televised address from the Oval Office in 1977.

First, Carter explained, came the change away from wood to coal; then another from coal to oil. Now it was time for a third historic shift, to reduce US reliance on unreliable supplies of oil and gas.

Carter’s logic was not environmental but economic — a response to declining US oil output and projections of diminishing global supply. Yet the “energy transition” narrative that he helped popularise has become central to global discussions about tackling climate change.

The problem, as French academic Jean-Baptiste Fressoz points out, is that Carter’s narrative was faulty. Coal didn’t replace wood in energy systems, nor did oil replace coal. Rather, each new energy source has been stacked on top of existing ones, with demand for all of them continuing to rise.

Could the same thing happen again with low-carbon energy? Is it time to dump the “energy transition” concept for something else — and if so, what? Let us know your thoughts at [email protected].

An inconvenient history lesson

“Energy amputation” is not the kind of phrase that will sit comfortably in policy speeches or corporate presentations.

But that — rather than the friendlier-sounding “energy transition” — is the best way to understand what’s needed to prevent catastrophic levels of climate change, according to an important recent book in this field.

In More and More and More, French academic Jean-Baptiste Fressoz argues that the “transition” concept misrepresents both the long-term history of energy, and what’s happening in the world today.

Even as new forms of energy have arrived, he notes, usage of the existing ones has continued to increase. Today’s Europe burns three times as much wood as it did at the start of the 20th century. And even as low-carbon energy generation has surged, global fossil fuel combustion continues to increase each year, along with planet-warming carbon emissions.

“The concept of energy transition is preventing us from thinking properly about climate change,” Fressoz writes. “A ‘transition’ towards renewables that would see fossil fuels diminish in relative terms but [not] in terms of tonnes would solve nothing.”

This is a useful frame through which to read today’s annual report on the global coal industry from the International Energy Agency. More than a century after the “age of coal” supposedly gave way to the “age of oil”, as Fressoz’s history relates — and after more than three decades of UN climate COP summits — global coal consumption is still creeping upwards.

This year’s demand for coal — the biggest greenhouse gas contributor of all fossil fuels — will rise 0.5 per cent to hit a new record of 8.85bn tonnes, the IEA estimates. That’s quite a contrast with the agency’s bearish coal predictions a few years ago, amid the disruption of the Covid-19 pandemic and seeming momentum around global climate action. The 2020 edition of this report had predicted that coal demand would decline from 2021 to just 7.4bn tonnes this year.

The earlier IEA research gave too much credence to Beijing’s talk about a gradual shift away from coal, of which China is by far the world’s biggest consumer. Coal-rich India and Indonesia continue to rely heavily on the fuel as they pursue rapid power expansion. And the analysts can’t have anticipated the Russian invasion of Ukraine, which gave a boost to the coal sector by causing turmoil in the oil and gas markets.

Their latest report does point to slowing coal demand growth: this year’s expansion is the weakest since an anomalous pandemic-driven fall in 2020. Notably, coal-fired power generation has declined slightly this year in China, the analysts reckon — even as the country’s electricity consumption grew by about 5 per cent — thanks to continuing growth in renewable generation. The IEA is still predicting that global coal consumption will enter long-term decline before the end of this decade.

Any such decline would be historically extraordinary, as Fressoz’s book explains. Throughout modern history, the rise of new technologies and industries has spurred demand for existing energy sources, rather than supplanting them.

“To think that we can draw some useful analogies from history dramatically underestimates the novelty and scale of the climate challenge,” Fressoz writes. “The climate imperative does not call for a new energy transition, but it does require us to voluntarily carry out an enormous energy amputation [of fossil fuel energy].”

Fressoz’s book has helped to fuel a fascinating debate over whether the “transition” concept is fit for purpose.

“What has been unfolding is not so much an ‘energy transition’ as an ‘energy addition’,” the influential energy analyst and consultant Daniel Yergin argued in a co-authored piece earlier this year.

Yergin concludes that, even if low-carbon investment continues to grow, oil and gas will play a major role for longer than was anticipated — and that this means continued new investment in hydrocarbon supplies and infrastructure.

Not so, argues Michael Liebreich, founder of New Energy Finance (now BloombergNEF). What seems to Yergin like an “energy addition”, he asserts, is actually what a transition looks like in its early stage.

The key point, Liebreich writes, is that clean energy supply is growing at a faster rate than overall energy demand. For a while, that dynamic can coexist with rising fossil fuel consumption — but not indefinitely.

The Liebreich/BloombergNEF chart above illustrates a scenario in which clean energy supply grows at an annual rate of 5 per cent, while real energy demand grows at 2 per cent — both reasonably conservative estimates. For a long time, it looks like renewable and nuclear energy are simply complementing fossil fuel usage, which continues to grow. But thanks to the remorseless dynamic of compound growth, clean energy eventually squeezes out fossil fuels completely.

“All the transition requires is a growth rate in clean energy that remains a few per cent above the growth in energy demand for long enough — an approach which is much more plausible than walking away from our existing energy infrastructure,” Liebreich writes.

Liebreich’s simple model is of course intended to illustrate a fundamental point, rather than giving a detailed picture of how future economic and policy developments could play out. For the latter we have the IEA, which last month published the latest set of its long-term energy scenarios — a key reference point for policymakers and businesses.

Under its “net zero emissions” scenario, where the world takes aggressive action to tackle climate change in line with the Paris Agreement goals, demand for all fossil fuels enters a dramatic decline very soon. Under another, based on IEA assessments of the direction of policy movement, demand for oil and gas peaks in 2035 and 2030 respectively, though it declines only very modestly by 2050.

Then there’s the “current policies” scenario, which takes a “cautious” view of clean technology adoption and assumes governments introduce no new policies to tackle climate change. Under this one, oil and gas consumption continues to grow right through to 2050 — though coal demand, as in all these scenarios, is already in steady decline by 2030.

The energy transition, in short, can’t be taken for granted — and arguably hasn’t really even begun. Such a replacement of — rather than addition to — existing energy sources would be unprecedented in modern history. But none of this proves that it’s impossible.

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