[Music] hello I'm Michael Libre and this is cleaning up welcome to the second part of my two-parter exploring the bull and be cases for the Net Zero transition in part one last week I laid out the bear case highlighting the five Horsemen of the transition that will make achieving Net Zero difficult perhaps Impossible by way of reminder these were the poor economics of clean Solutions Beyond wind solar and batteries the inadequacy of our current electrical grid soaring demand for critical minerals political and social inertia and predatory delay by powerful players who are going to lose out from the transition I finished that episode by noting that the five Horsemen of the transition were not necessarily showstoppers each of them might be overcome with the right leadership Focus Innovation and resources and turned into no more than the five speed bumps and now it's time to present the bull case five forces even more powerful than the five Horsemen which give cause for optimism get ready to meet the five superheroes of the Net Zero transition this week's episode is based on the second of a pair of essays I wrote for Bloomberg nef the first of which appeared last September and the second in February this year as always my gratitude goes to my former colleagues for letting me release this audio adaptation cleaning up is brought to you by our lead supporter Capricorn Investment Group the liebre foundation the gilardini foundation and ecoo pragma capital so let's get started and say hello to the five superheroes of the transition superhero number one is exponential growth 20 years ago in 2004 it took an entire year to install a single gwatt of solar photovoltaics by 2010 a gigawatt was being installed every month by 2016 it was a gwatt every week last year for the first time we saw single days on which a gigawatt of solar fedal TCH was installed during that period cumulative solar fedal Tech installations have doubled 10 times and it's doublings that drive down costs solo fed voltaics have been delivering a learning rate of around 25% per doubling for theast past five decades chopping the cost of modules from $106 per watt of capacity in 1975 to 13 cents per watt in November 2023 that's according to Bloomberg nef's solar price index and that's a reduction by a factor of 820 the wind sector has doubled six times over the past 20 years relatively stayed but only by comparison with Solo photovoltaics in 2004 8 gaw of wind power were installed in 2023 the figure was around 110 gaw including 12 gaw of offshore wind winds costs too have plummeted from 12 cents per kilowatt hour for the best projects 20 years ago to around 2 cents per kilowatt hour for onshore wind and 5 cents per kilowatt hour for offshore as a result of these dramatic cost reductions wind and solar together now make up the fastest growing source of electricity in history 20 years ago they accounted for less than 1% of global power 10 years ago the figure edged up to 3% by the end of last year it had surged to 15% the growth of nuclear in the 1980s is often held up as the fastest growing source of clean energy not even close in its best year nuclear power output increased by 230 tatt hours adding 2.6% to the global electricity Supply but last year enough new wind and solar capacity was installed to deliver an expected 800 tatt hours per year which would fulfill 2.8% of what is now three times more global power demand and unlike nuclear power after the 1980s the rate of adding wind and solar the second derivative is clearly continuing to accelerate in 2004 the largest operating wind turbine had a capacity of 2.5 megawatt 10 years ago it was 8 megawatt today it's 15 megaw the Next Generation wind platform being developed principally in China will deliver more than 20 megawatt per turbine in solar manufacturing capacity which was around 1.5 GW in 2004 and 48 GW at the end of 2014 is expected to pass the terawatt mark by 2025 at the cop 28 meeting in Dubai the world agreed to Triple installed Renewables by 2030 but you know what in its latest Renewables report the International Energy agency forecasts that achieving two and a half times would not even require new policies the same thing has been happening for Batteries they have in fact been racing through the doublings even faster than solar five of them in the last8 years in 2015 some 36 gwatt hours of lithium ion batteries were produced last year the total was around 1 ter hour over the past decade cell costs have come down from $1,000 to just $72 per kilowatt hour and at the same time energy density has doubled and degradation per cycle has halved we're also seeing new battery chemistries such as ion air and sodium ion that promise to be even cheaper than lithium ion now before you reach for your keyboard board to object that no physical technology can exhibit exponential growth it can only follow a logistic S curve with eventual saturation please stop I know I calculated my first S curve for the replacement of cellulose packaging with oriented polypropylene nearly 40 years ago it turned out that polypropylene was so much cheaper and better than cellulose that it kept creating new markets for itself and outstripped our forecasts by several orders of magnitude the lesson I learned is that until you know the ultimate Market size for a new technology don't hang your hat on what I call saturation theory in 1993 a group of German utilities placed fullpage ads in German newspapers stating that quote renewable energies like sun water and wind will not be able to cover more than 4% of our power demand even in the long term in 2023 Renewables provided over 57% of German electricity in 2017 a group of Norwegian academics wrote a paper entitled limits to growth in the renewable energy sector see limits to growth get it in which they predicted that global wind and solar capacity would saturate in 2030 at 1.7 terawatts just 6 years later at the halfway mark of their forecast the figure had already surpassed 2.1 terawatts and by 2030 installations could well be four times higher than their saturation figure and still growing saturation theory is systemically embedded in the models run by official energy forecasters like the International Energy agency the US's Energy Information Administration and the governmental panel on climate change which is why their forecasts have repeatedly proven worthless deep in the small print you'll find either explicit limits to the extent or growth of any resource or floor prices below which cost curves are not allowed to fall the developers of these models come up with all sorts of justifications for these manual limits but the real reason is simple if they didn't include them solar wind and batteries would dominate all scenarios to an extent the modelers believe would be either implausible or career limiting or both the real world however doesn't care about such concerns Industries can and do pass through singularities to become ubiquitous there are no limits to learning curves doublings may slow as Industries mature but cost reductions never reach an end point there is also no fundamental lack in the Earth's crust of the critical minerals needed for the transition taken together this means that there are no fundamental limits to the penetration of Clean Energy Technologies into the world's Energy System now I'm the last person to claim we're headed to a world of 100% wind water and solar nuclear and geothermal Power biobased Solutions carbon capture and storage carbon removal they will play a role I'm just saying that the growth of wind and solar is likely to look exponential for a long time to come superhero number two is system Solutions many people find it hard to accept the idea of a power system with cheap abundant wind and solar batteries at its heart citing the inability of batteries to cover periods over a day or so when wind and solar output Fall Away dramatically the answer to variability however is not batteries it's a system solution a combination of demand response interconnections excess generating capacity pumped storage nuclear power carbon capture and sequestration hydrogen and biogas long duration storage all integrated by means of an extensive grid and managed using the latest digital Technologies each of these constituent Technologies is seeing remarkable growth and investment and they're slowly being knitted together by successive iterations of Regulation making system Solutions the second superhero of the transition the need to build a vast amount of new grid capacity $21.4 trillion Worth to get to Net Zero according to Bloomberg nef was of course my second Horseman of the transition there are however five reasons to think it can be vanquished first there are no physical limits to the amount of transmission that can be built over the past 50 years Global power transmission capacity grew by a factor of five we can certainly grow the grid by another factor of five over coming decades even if we miss the near-term targets for 2030 second technology digitization is already enabling us to get more from Less in terms of grid capacity hvdc technology is scaling rapidly and superconductors will at some point do to Conventional power cables what fiber optics did to Conventional telephone cables third price signals as an example in the UK we have a single wholesale power price covering the whole country when it's windy in the North the forward price plummets companies like octopus tell their users to switch on their appliances France buys power to import via the interconnector across the channel and demands SES but because there's inadequate north south transmission capacity with 1 hour to go National Grid has to pay gas and diesel generators in the South to fill the shortfall it's Madness one solution lies in relentlessly driving through new transmission lines the alternative however is to switch to locational pricing building transmission only where the economics make sense power generators hate the idea they like to be paid top dollar for power wherever it's generated and whether it's used or curtailed but the analysis is clear the more localized your pricing the less transmission you need to build and the lower the cost of getting to Net Zero the fourth reason why the grid buildout challenge is smaller than you might think is the changing location of power demand like it or not de-industrialization is going to move demand to where the renewable energy is plentiful the renewable superpowers as I've called them reducing the need for wires the fifth and final reason for grid optimism is the electri ification of land transport and space heating already just over a decade since the launch of the Tesla S nearly one new car in five globally is electric all major car manufacturers have put electrification at the heart of their Futures much was made last year of a supposed slowdown in EV demand but I'm not seeing it Global sales Grew From 10.5 to 14 million an increase of 33 % and Us sales in fact grew by 48% heat pumps too are flying off the shelves sales in Europe grew 2.5 times between 2017 and 2022 in the US for the past 2 years more heat pumps were sold than gas furnaces only the UK lags installing just 55,000 heat pumps in 2023 against France's 600,000 using an industrial heat pump a factory can use a modest amount of power to upgrade its own waste heat back to the temperature needed for its processors circularity of industrial heat how cool is that and here's how this helps the grid EVs and heat pumps are the natural complimentary Technologies to wind and solar in that their use can be time shifted by a few hours or days to accommodate Mis matches in supply and demand faced with a grid that's curtailed instead of building costly and unpopular transmission lines or running a hydrogen electrolyzer for a few hours a week and blending the exorbitantly expensive results into the gas grid for little value let the power price drop locally and watch people rush out to buy EVs and heat pumps even without subsidies we have learned time and again over the past 20 years price signals matter get them right and things move much faster than you might expect superhero number three great power competition in 2018 I wrote a piece entitled beyond 3/3 the road to deep decarbonization in it I explained that the trends in Renewable Power electric vehicles and Energy Efficiency would be sufficient to see emissions Plateau but driving them towards zero would require solutions for heat industry chemicals Aviation shipping steel cement and agriculture which soon began to be called the hard to Abate sectors it is interesting rereading that piece to see that while I was optimistic about new technologies I couldn't say which ones would win if you want a smile read the section on hydrogen which clearly predates the detailed work that resulted in the hydrogen ladder in any case today there are no more hard to Abate sectors for even the most challenging Industries we now have line of sight to decarbonization in many cases we are seeing not just Pilots but in steel fertilizers Midstream oil and gas shipping even cement billions of dollars are being invested with a bit of help from supportive governments and programs like the US inflation reduction act there are of course still substantial uncertainties in shipping battle lines are drawn between ammonia toxic and dangerous and methanol easy to handle but requires a carbon molecule primary steel has plumped for hydrogen though direct electrical reduction biochar or carbon capture might ultimately prove cheaper green and blue hydrogen are fighting for the fertilizer sector though biological and other novel approaches might eventually eat their lunch for Aviation e fuels have their fans but look like staying prohibitively expensive versus biobased sustainable Airline fuel or saff possibly made with biogenic carbon but green hydrogen so-called power and biot to liquid or pbtl and any of these approaches could be wrong-footed if carbon dioxide removal that CDR can generate enough cheap permanent offsets in many of these sectors clean Solutions are not projected to undercut their fossil-based Alternatives anytime soon perhaps ever they'll require a carbon price but it's an affordable carbon price one that we are wealthy enough to pay should we so decide for even the most challenging sectors we're now seeing more than one competing pathway viable at Carbon prices in the range of $75 to $250 per ton of carbon dioxide equivalent this is a far cry from 2018 when it looked like they might need carbon prices of $500 or even $1,000 per ton of carbon dioxide equivalent and this is where great power rivalry comes in we're in a new era of intern AAL competition between the US China Europe and emerging industrial powerhouses such as India Brazil Mexico and turkey the conditions are set for a race to own the Net Zero industries of the future and no country can afford to fall behind for want of a relatively modest carbon price and this makes great power competition and the self- fueling momentum of the no longer hard to Abate sectors the Third superhero of the transition superhero number four disappearing demand the fourth superhero of the transition is the fact that achieving Net Zero will require a lot less in the way of minerals than we think and they will be cheaper than we fear the five-fold increase in demand for critical minerals from the energy sector was you may recall my third Horseman of the Apocalypse however ever estimates of critical mineral demand from Clean Energy Technologies have been very substantially overestimated even well- constructed mainstream forecasts are missing the impacts on demand of technological improvements material substitution and critically recycling it is a truth universally acknowledged that only 5% of lithium ion batteries are recycled with the rest going to land fill it is however false it has been traced back to a report written in 2011 by friends of the earth which divided volumes of collection by volumes of manufacturing at the time but prior to the arrival of any EV batteries at the end of their life collection rates for lithium iron batteries were of course minuscule however as recycling expert Hans Eric melan points out EV batteries are packed with valuable materials in fact battery waste currently commands prices of ,000 to $5,000 per ton by 2019 melon was estimating that 59% of eligible endof life batteries were already being recycled he thinks it's currently 90% and will in due course reach 99% we are simply not going to send EV batteries to landfills anymore than we do so with lead acid batteries in addition to the collection rate what is important is the recovery rate that's the proportion of materials recovered for use and of course in particular the proportion of critical minerals and here the news is very good with reports by incumbent materials companies and Challenger startups like Redwood materials of recovery rates of as much as 95% and this is very significant suppose your battery has a lifespan of 15 years and taken together collection and Recovery rates exceed 90% then as long as battery energy density improves by 10% every 15 years and remember it doubled in the last decade your initial battery minerals will continue providing the same storage Services forever this is what circularity looks like and it's not taken into account in any of the big energy and mineral demand models in fact most current EV lifetime carbon assessments do not include recycling at all at the same time the old adage in the Commodities business business is the cure for high prices is high prices and it will apply to transition minerals every bit as much as it does to traditional Metals we're already seeing some of this in the prices of critical minerals down by 80% from their highs two years ago despite soaring demand we're also seeing it in the regular announcements of new finds of lithium copper and rare Earths and perhaps more importantly new ways of processing electrochemically to exploit what would recently have been unprofitable or qualities just as all this is playing out the transition will also be causing demand for resources from the fossil fuel industry to fall away as explained by independent energy analyst Michael Barnard the 15% of global energy use in oil and gas extraction and refinement mostly gone the 40% or so of Blue Water Shipping that current moves oil gas and coal around the world sold for Salvage 15% of shipping used to move iron or largely made redundant by low carbon primary steel manufacturer near to where the ore is mined hydrogen demand from hydrocracking to make petrol and Diesel gone oil and gas pipelines recycled even cement and steel demand will start to shrink too in the end after all we''ve past Peak child and Peak Urban migration and we will at some point pass Peak population but it's not just about physical stuff it's also about people for a century and a half the fossil fuel and internal combustion-based vehicle Industries have attracted the smartest scientists and Engineers they offered fascinating and socially valuable work looked set for Endless growth and paid the highest salaries around fast forward to today Global coal use plateaued over a decade ago it's only a matter of time before its collapse in the developed world is mirrored in the developing World oil and gas are near their peak in due course they too will flip into long-term and painful Decline and the world's past Peak internal combustion vehicle sales in 2017 the number of students studying coal mining has already fallen off a cliff and oil and gas is going the same way according to Texas Tech Professor Lloyd hiny the number of undergraduates enrolling for the University's petroleum engineering courses are down 75% since 2014 and 5 years ago daim laben announced that for the first time since 1892 it would no longer be working on the next generation of internal combustion engines for its cars all that Talent is being freed up to study electrochemistry and batteries Composites Material Science synthetic biology Precision fermentation and of course big data and machine learning which hold the key to Energy Efficiency and improved asset utilization so when you hear macroeconomists claim that the transition to Net Zero will be inflationary it may just be because they're not paying attention the fifth and final superhero of the transition is an absolute Zinger it's the primary energy fallacy the entire decarbonization challenge is far smaller than is made out by its critics the reason lies in the nature of primary energy demand the metric that dominates public debate about the transition the history of primary energy demand dates back to the 19 70s when Western countries feared they would be starved of the raw energy needed by their economies and began to cast around the world for energy resources to make sure they controlled a big enough proportion the agency created to do this was of course the International Energy agency and their key metric was primary energy demand you'll still find it called that in iea reports today despite its name however primary energy demand is not in fact a measure of demand at all let's use an example say you light your hallway with a 75 wat incandescent light bulb illuminated 2,000 hours a year and consuming 150 kwatt hours power it with electricity from a coal plant with 35% efficiency add 10% grid loss and you have created primary energy demand of 476 kwatt hours you could however deliver the same amount of light with a single 10 wat LED bulb allow the same 10% grid loss and it uses just 22 KW hours run that led on wind solar or hydr power and you have reduced your primary energy Demand by 95% and eliminated its CO2 two emissions with crucially no reduction in lighting use take a second example switching from an internal combustion car to an electric car say your Volkswagen Golf is managing 40 m per gallon a pretty normal figure for real life usage this translates to 1 kwatt hour per mile or after accounting for losses in extracting refining and distributing your fuel 1.2 kwatt hours per mile the equivalent electric Volkswagen ID3 after adjusting for GD and charging losses uses just 0.3 KW hours per mile so by switching you have achieved a 75% reduction in primary energy demand and opened up a route to eliminate 100% of emissions from driving with again crucially no reduction in Mobility a third example heating the average us home requires 57 million British thermal units per year if you're heating with gas or oil after adjusting for 15% Upstream losses and 90% furnace efficiency that converts into primary energy demand of 21 megawatt hours per year but if you switch to a heat pump and you achieve a yearr round coefficient of performance of four allowed 10% for grid losses and your energy use is reduced to just 4.6 megawatt hours per year powering that heat pump with clean electricity can reduce your primary energy Demand by 78% and eliminate CO2 emissions and your contribution to methane leaks entirely once again crucially with no reduction in Comfort see the pattern the transition is not about replacing all all of primary energy Demand with something cleaner it just needs to deliver the Energy Services which is a vastly smaller Quantum in a clean way each year Lawrence livermon National Lab produces a wonderful sanky diagram showing how the US's primary energy flows through its energy system fully 2/3 ends up as what it calls rejected energy that's waste the majority of it from from fossil fueled power stations and transportation in other words from burning stuff and that's the exact same process as produces CO2 emissions just onethird of the energy that goes into the US system ends up as the Energy Services that are actually used by American consumers and businesses it's worth remembering this next time bjor lomborg vatslav smill or Alex Epstein point out how renewable energy still meets just 5% of our energy needs based on International agency figures for primary energy demand of course we want everyone in the world to have light Mobility Heating and so on but that does not mean that everyone needs to have incandescent light bulbs powered by Coal Fired power stations petrol or diesel cars or gasf fired heating it is Energy Services not primary energy demand that fuels human program ress each time anyone uses the ia's primary energy demand data as a metric intentionally or not they are inflating the importance of fossil fuels to be fair the US Energy Information Administration BP's statistical review of world energy now curated by the energy Institute and a few others apply an adjustment to the output of wind solar and hydr power to put them on a similar footing as thermal resources the so-called substitution method it's better than nothing but still inadequate the use of a single fiddle factor obscures for instance whether Renewables are displacing efficient or inefficient alternative sources of power worse than that though it maintains the Primacy in people's minds of increasing energy Supply over efficiently meeting real demand the Japan have a word mortini for the reverence that should be paid to efficiency and the sadness caused by waste this should be our guide as we build the Energy System of the future A system that makes use of every last unit of energy from the resources we extract as well as every last unit of exergy which we met in my Bloomberg NF essay last year on the electrification of heat and its audio adaptation cleaning up audio log 10 we need to be identifying the Energy Services needed to power the global economy and figuring out how to deliver them in the cheapest cleanest and most reliable way where primary energy demand increases or decreases irrespective of How It's defined is simply not a matter of any importance so there you have it the five superheroes of the trans position the five Mega trends that will help get the world to Net Zero exponential growth system Solutions great power rivalry disappearing demand and the primary energy fallacy while the five Horsemen are naughty problems of the here and now the five superheroes are powerful long-term trends which gives them the advantage there is is in fact a sixth superhero or rather a superpower that lies within all of us I believe Society has reached a Tipping Point Beyond which it is Unthinkable not to deal with climate change pollution and environmental degradation in the same way that there came a point when discharging untreated sewage into the street or smoking in public buildings became unacceptable it is becoming unacceptable to burn fossil fuels the generation that regarded it as normal Irreplaceable even a kind of Birthright is losing its place at the head of the table and being replaced by a generation that is in no doubt about the need to stop burning stuff that may not make the technical challenges any easier but it creates a vicious circle between the inevitability of the transition the the attraction of talent The Tipping of the balance of risk in favor of Net Zero Solutions and progress towards net zero and that leaves just one question particularly in the light of last year's deeply troubling temperature anomalies will we get there in time thank you for listening as always we've put links in the show notes to Res mentioned during the episode so that is part two of my two-part essay for Bloomberg nef on which this audio blog is based entitled Net Zero will be harder than you think and easier part two easier the latest International Energy agency Renewables report 2023 limits to growth in the renewable energy sector Hansen and Nal 2016 my March 2018 essay for Bloomberg nef on hard to Abate sectors entitled beyond 3/3 the road to deep decarbonization the research review by Hance Eric melon on behalf of the Swedish energy agency which should have killed the myth back in 2019 that only 5% of lithium ion batteries are recycled Michael Barnard's analysis of the prop portion of global Shipping linked to the fossil fuel industry the Lawrence Livermore National lab's famous sanki diagram for us energy consumption in 2022 showing how much is wasted and finally for those who missed it the first part of the two-part essay for Bloomberg nef on which this pair of audio blogs are based entitled Net Zero will be harder than you think and easier part one harder as well as last week's audio adaptation of it cleaning up audio blog number 11 in which we met the five Horsemen if you've enjoyed this episode of cleaning up please give it a five-star review on your podcast platform or a thumbs up on YouTube that really helps us a lot and if you know anyone wanting to learn about the Net Zero transition please recommend cleaning up to them to make sure you never miss episode follow us on Twitter which I still refuse to call X Instagram or LinkedIn or sign up for our free newsletter by visiting ml cleanup. substack do.com or cleaning up. live where you'll also find our Archive of over 160 hours of conversations with extraordinary climate leaders that's ml cleaning up. substack doccom or cleaning up. live cleaning up is brought to you by our lead supporter Capricorn Investment Group the Lee Foundation the gilardini foundation and Ecco pragma capital