226. Energy trends and shocks: from “range anxiety” to “pump anxiety” - Apr26

With ron segle and from London and Gerard read from Berlin. This is Redefining Energy. Today. On Redefining Energy, we're going to talk about energy trends and shocks.

Yeah, and we published this episode at the same time as our friends at MBER. We just put out last week to fantastic report, one on energy trends and one on energy shocks. But first of all, from my partner. A b Loco Energy is Europe's premier leaser of ten foot container mobile batteries built in Europe with COTL best LFP cells.

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The one they put last Tuesday is the annual Global Electricity Review, And we also had a report a few days earlier called twin Shocks. And to do that we brought a special friend on to talk about this. Yeah. He is lead energy strategist at Amber and he is someone we really like to have great conversation with and that is.

Mister Bond. Let's bring in on the show. Kings Well, good to see you again. I'm glad to have you on the show.

Thanks to Rob, Thanks Lohole, good to be here. King's Mill. We have a lot of our play today, but we're going to start by the great report that EMBER publishes every year, which is the Global Electricity Review to twenty six, one hundred and eighteen pages. What are the main takeaway?

There are four key takeaways I want to highlight. First of all, the moment has come finally. Renewables are all of the growth in electricity generation in twenty twenty five. It's been a long time coming, but that key milestone has been crossed.

Secondly, and linked to it, we have seen peak fossil fuel demand in electricity generation, which I should remind you comes on top of peak fossils in industry in twenty fourteen and buildings in twenty eighteen and cars in twenty nineteen. Now electricity twenty twenty five key moment. Thirdly, we've seen peak China fossil fuels in electricity generation specifically down by fifty six terrible hours again Cray has been talking about this for a long time, but these are the numbers, the official or semi official I guess numbers.

And it's extreme neat material because China's been the primary driver of fossil demand. Then fourth, a slightly new angle is the growth of batteries is so big. The batteries are now shifting fourteen percent of the solar which is being installed. Wow, fourteen percent of the solar globally.

That's just so many batteries coming to the system, and they're basically doubling every year. So we can look forward to well over probably a corsure of new solar install lations in twenty twenty six are going to be time shifted by batteries. The electricity demand in the world is still growing, and we grew two point seven percent to twenty five for our list. Now basically we grew a Japan so solar grew by thirty percent.

I think it grew more because I'm I'm pretty sure there's a lot of behind the metal which is difficult to account for. And WIN grew by eight percent, and all the rest nuclear, hydro cold gas, and that's all flat. Of course, it depends zone by zone we'll go there after that. But yeah, that's it.

Just give you a bit of context on this. So soda and when basically are adding eight hundred and fifty terowa hours last year. Just when nuclear was being added to the system in the nineteen seventies, which is the last giant new thing that was added, it was adding around one hundred terower hours a year. So this stuff, it's eight times bigger things.

When it goes back to the point that I always say is that we've never had an energy technology come to market as quickly. It's older because it's just so easy to install. It's cheap to install. And back to Lauran's point is when I want to get lost, but it's very clear it's underestimated because we've now got massive amounts of balcony solar, plug and play sol that goes in the system, which means that grid operators actually just don't even see the stuff, right.

Yeah, And this is particularly true of course in the Global South. And we put out a report last week with the Climate Vulnerable Nations which identified the fact that there are dozens of countries in the Global South where the imports of solar panels are three times higher than the official numbers. The most famous is Pakistan. There's plenty of other countries out there where people are just putting this stuff up on their route.

So it really is an opportunity for those who are energy poor to get energy and rescue themselves from energy poverty. Basically, you're telling all the guys that week, guys, they're not going to put gas, they're going solar. They need to leap specifically this kind of weird narrative that we need to bring fossil fuels to the peoples of the global self who have been let down, incidentally by the fossil fuel system for the last fifty years. And actually, no, we don't.

We've got this thing called the Sun which goes past every single morning and provides you with electricity, and you can now get their electricity cheap, store it cheap, and massively increase the energy capture of the people who've never had it before under the fossil system. Now, if we dig deep into the excellent report, and we'll put lead in the show notes, let's dive into China, US, Europe and India because it's kind of a different picture. So China two third of the growth last year, came from China, and it was entirely met with wind, hydro and soa.

And as you said, call is down. Do you want to comment to beat down China? China is particularly material to the global debate because the world ex China has had essentially flat fossil fuel demand since twenty eighteen, and it's China which has been the principal driver, and it's specifically the Chinese electricity sector which has been the principal driver of fossil fuel demand over the last seven years. So the fact that it now reached a long awaited peak in China and is starting to fall is therefore extremely material to the global debate.

And no, when it comes to China and they're just throwing up solo and wind and hydro, and they've got some nuclear in the mix, but you know, it's just enough to push out fossil fuel. What's also really interesting about China is that they've figured out ways to get these low solar and wind prices into electricity prices, which because Europe has so far failed to do, and because they've enabled these low prices to come into electricity prices, that then is helping electricity push other alternatives such as gas or coal out of the final energy demand as well.

So it's an impressive story. What's going on in China, Kingsman. What I'll also had is they incentivize by doing that electrification. That's what they do, which we in certainly in European perspective, we don't do it because our electricity is so expensive.

I'm talking about the end consumer price, but the end consumer price in China is so low that you're going to electrify your automobile, You're going to inject electrifyer heating, you're going to electrify industrialization. Right. Yeah. This is the error that we've made in the Western general, Europe specifically, is we haven't got electricity prices down, which is load all these extra costs on to it, and this SECONDO is going to one.

If you load also costs on, then the relative cost of fifty is just too high. And people don't let fight. And that is one of the key messages. Now we have to get their fifty prices down in order to electrify, in order to get fossils out of the rest of the system.

Let's move to the US and the US it's really puzzling because yeah, we've seen theman growing, and we've seen more unoables. But what's very intriguing is that the gas consumption in the power system went down despite the fact that it's their cheap and coal went up. Now, if you look at the US system, it's divided into different main grids, so where coal has been going up was a bit in ARCOT and a lot in PGM and PGM this is where most of the data centers have been installed. So in fact, it looks like the data centers have triggered more col consumption.

What's your take on the US system. The first point to be made about the US, and this is the one that people don't necessarily realize, is that two thousands of the growth from solar and three quarters is from wind and solar together. So you wouldn't have expected that given what's going on with the current administration. Basically what's going on in the rest of the world is still happening in America in spite of the administration's attempts to cap it.

Europe so eure up. Last year we add eydro down, so Eidro is more and more fragile, and this year we have it. In Norway, for instance, I was going to go down. Call is down, wind was down because you had a wind draft.

Solar fantastic up, but also gas was up. So what's your take on Europe? Europe is an awful lot of apparently conflicting things going on at the same time, but there's still a narrative here. Don't forget European demand increased last year was only about fourteen terrible hours, and solar added sixty.

So let's be clear, solar is still absolutely dominant and is helping to push all other alternatives out of the system. And a visit this gas to coal issue. It's because of the European zeal to push coal out of the system, which is given current circumstances, possibly a little bit misplaced in its speed, and as a result they've had to use a bit more gas at the margin in order to make up for the show fall which came through in hydro. But it's still a very powerful story that Europe is deploying sorrow wind at scale over time, is pushing this other stuff out, and you do get these specific shocks to hydro nuclear which then require people to use a little bit more fossil fuels, but that's just temporary.

Issue and then Las, but not least India called down wind Salah hydra up. India is a poster child of the electrotic revolution. They are deploying as you say, wind, sober and hydro space. So total Indian demongro is around fifty terawa hours last year, and solar alone added fifty three wins another twenty and hydros another twenty.

So last year, for the first time in a structural manner, coal demand was actually pushed out of the system in India. We're not calling a coal top in India yet because actually last year total demand growth in India is relatively low, So if you'd go back to normal levels of growth, you still have a small amount of opportunity. But the key and the wider point that we made in a report a month ago is that India is taking a very different path to the path the West took fifty years ago, or China to around twenty to twenty.

They are close to their peak demand of coal per capita at around one megua hour, whilst of course China famously peaked around four. So India is taking a new path because they can, because they've got the solar in the wind, and therefore they are deploying those new technologies at massive scale. So overall, it's a picture of the trends that you have identified a few years ago when you coined the term with some of your colleague electoral state. These are long term trains.

But on the top of that, you've got the shocks which are eating the system. And you published a few days ago a second report called the twin Shock. So what's your name thesis around the twin. Shocks in the energy world.

The twin oil shocks of the nineteen seventies are very well remembered, so nineteen seventy three nineteen seventy nine, and the lessons learned from that era was that it really took two big shocks to drive change. So, for example, oil in electricity generation actually rose from nineteen seventy three to nineteen seventy nine. But after the second shock, people said, right, enough's enough, we're going to take it out of electricity generation, and they made the necessary investments and they drove change.

And our argument today in twenty twenty six is we've had another dual oil shock. Twenty twenty two put into legal invasion of Ukraine twenty twenty six, Trump's attack on Iran both times are driving massive spikes in fossil fuel prices, and the combination of those in a world where American power is waning and the packs Americana is falling apart, means that people need to have a very radically different approach to the way they are. Dealing with energy right now. That's the kind of the scene setting, and the consequence of this framing is that change will be sped up.

So the changes that we have been talking about for many years, the deployment of solar wind, the electrication of transport, and home heat electrification in general, those shifts will be sped up inevitably by high fossil fuel prices. Kingsmill, I think you're right if we look at this from a global scale, but I'd really just look at it maybe from European perspectives, and I'm going to particularly look at Germany. Germany seems to be on the exact opsis way. So what we've got as an economics minister and her cabinet who really believe that the oppositer is true, that actually all this renewables as post energy prices up too much, the grid costs are too expensive.

What we need to do is build more gas. So what do you think of that now narrative? Why would you build more gas from the price is twenty dollars per be to you, it's just stupid, beyond belief. But anyway, leaving that minor point aside, you've got to distinguish between short term and long term.

In the short term, when you get a shock, you have to do whatever you can do to keep the lights on, saying you flick back on your coal fired power, you drive slower, you deploy any source you can find to keep the lights on temporarily. That's the short term action that people take. But much more importantly is what is the long term consequence of yet another oil shock. And there is this fight out between those who would have us go back to the old playbook of saying, look, there's been a shot, let's just extract more, versus those who say, there's been a shock, let's do things differently this time.

The reason why it makes absolutely no sense to go back to the old fossil playbook is, for the first time in history at the time of an oil shock, we have a massive superior solution in all of these electrotech technologies, so solar and wind and batteries, electric vehicles, and electrication, so no way to learn it eight times bigger than nuclear was in the nineteen seventies. Electrication solutions that we have today we didn't have in the nineteen seventies. We pushed oil out of electricity generation that was ten percent.

This time we're going to push oil out of transport forty nine percent of oil demand. So it's a completely different world with completely different tools. And those who want to go back to the past, really it's beyond Beney. And then final observation.

You have supply reaction to high prices, which is, let's get more fossils and more electrotech, more renewables. But you also folks have a demand response, and the demand response is let's use less expensive stuff, which in this instance is fossil fuels and more cheap stuff which is renewable. It's absolutely simple, clean, clear moment for people to get out of the old into the new. One remark, I believe that in the head of decision maker, they always think that there will be a return to the status quante.

They always think, as you said, it's temporary, we'll go back to But now if you look at the fact and you pointed it well, and it's not a climate debate anymore. It's a really energy security debate. At some point when the tank are empty. The tank are empty because a Ukrainian have courageously taken on the oil infrastructure of Russia, and because the idea that you could pass one hundred ships per day through the bit of almost without paying anything to anybody freely, that's gone.

There is this recalibration that needs to happen, and it's happening much faster. At the consumer level. Even my wife will love her car, say start looking at Eve's. Okay, it's a bit of an anecdote, but two three years ago she would not even consider IV and now she's looking at EV's.

But the decision maker, they take more time because of incubancy, because of lobbying, because of intellectual laziness, sometimes stupidity. I don't want to say that some guys are nefarious, but sometimes they even wonder the change in paradigm, it's now in the head of the people. It also is worth while remembering that we in Europe have been like the frog in the pot. We have increased our fossil fuel input dependency consistently over decades and it's now sixty percent so out of ten units of energy, and it's eight out of ten in Ireland by the way that people use our imported fossil fuels.

And suddenly we are now shifting very obviously to an environment where that degree of import dependency is far too risky. So the starting point we are well beyond where we need to be, and we absolutely have to dramatically reduce that level of fossil fuel import dependency. The good news is that for the first time ever we can do this thing. Got the solutions and they're cheaper and they can be deployed quickly.

When people start to make fundamental strategic plans for how to get out of this mess now and for the next few decades, this will be their very clear answer. Renewables, electrification and the other absolutely key point Now during this crisis, we should not waste the prices. We have lots of inertia and old rules propping up the fossil system. This is the moment, folks, to clear those away, to clear away the massive undergrowth of regulatory infrastructure with holds back change.

So things about and laurn. I want to add one other thing that you didn't really talk about it. Is what we've got now is an economic driver for electrification that we didn't have before. And what I mean by that is you sort of hinted at it.

The reality is, why do you electrify your automobile because it's cheaper, Why do you electrify industrial processes because it's cheaper. Because the technologies that we have in the hardware side enable us to actually lower the cost of producing stuff and running stuff. I think that's the big difference than maybe ten years ago. And I'd also add to that as well, is that the speed of innovation in and around the hardware in the whole energy space is off the charts.

The other day, I was in the Netherlands and I drove a Chinese car called a Neil eight hundred kilometer range. I've never been in a car like it, I must admit in terms of what I couldn't couldn't do to me. It gave me a massage. But battery swapping capabilities, Okay, you pull in the car, swaps the battery out.

Two minutes you're ready to go another eight hundred kilometers. And I'm only using as an example of the innovation that we're not really seeing because the speed of it is so good. And the reason I also bring that forward is because that's the opportunity as well, is to be part of that revolution. Yeah, you're sitting there in Dublin, and if Island wants to reduce its massive import dependency, the solution is not give away oil at lower prices.

A solution is help people shift across to electric vehicles and never buy the oider gain. Instead of buying diesel two pounds a liter, you can buy electricity effectively at about twenty pla. I mean, it's just dramatically cheaper to go down this route, and you can do it quickly. So I think that's the other difference between this and let's say the nineteen seventies and nineteen seventies was all governmental lead, massive programs in nuclear and so and so forth.

This time around, this can be a consumer led revolution. You trin't go out there and bioletric vehicle and put some solar panels on your roof. These things take weeks, not decades. Kingsman, what do you think this all means?

Three for very profound implications of these twin shocks. The first is specifically that Asia, which is where all the growth is coming from. Asia is going to pivot to electrotech. I mean, if you've seen, as we all have, the cues in the streets and the lack of energy for cooking and transport, and the four day weeks and so on and so forth.

Asia has been sold the lie that fossil fuels would be cheap and available and give them independence. That's clearly not true. They're going Asia clearly now is already electrifying, is going to electrify fast and deploy renewables faster. So Alisia goes to electritic fast.

As the first conclusion. The second conclusion is the weakest pieces of the fossil fuel system will now see more rapid change. And the weakest piece of the fossil system right now is oil in transport, So we're going to see oil in transport, which is nearly half of transport demand road transport, oil pushed out of road transport. And the third piece where you're going to see change is the other solution at the very top end of the costco of LNG in electricity generation.

Around one third of LNG is going into electricity generation, and that's just far too expensive. Is going to be pushed out by solar and wind. And then the final conclusion really worth highlighting is pre coil demand is not a very big call given the fact we can't even get the oil, but pea coil and peak fossil fuel demand, we've been bumping along a plateau for a while. We're not going back.

This is it. I love it, my friend, Can I end with sort of? The thing that keeps me awake is that if I really gone to push electrification, we need new regulations, new legislation in this space. What's your view on that?

This is a moment that policymakers should not waste. Are four things, rather than a long laundry list, four things we would focus on they need to do. The first is they need to, as I say, sweep away the regulatory undergrowth which props up the current system. Secondly, they need to prioritize electrication, not just generation.

Don't make the same mistake we made in twenty twenty two. We have to electrify as well. The third thing is they have to get the price of electricity down. And then the fourth, and this is I think we're making a big call here, is to say we need new institutions in nineteen seventy three, we set up the Strategic Petolium Reserve, the International Energy Agency, lots of ways of improving efficiency.

We need to think bigger. We need new institutions which will drive renewables and efficiency and electrication like in. Particular point because there's so much best practice that needs to be shared across the world and at. Present it's not being done well, said mister Bond.

Mister King's mid Bond, so always a treat to have you on the PUD. Thank you so much for coming. Thank you very much for coming on the show again. Thanks folks, thanks the opportunity.

Well, Ron, So I think you know my view already, and there's some very clear in my head that you know. The way forward is to move towards becoming an electrostras. That's just as simple as that. I know that's not necessarily an easy transformation, but it is the way forward.

And I don't think just from a European perspective. I think from a global perspective, right. And whoever takes that leap will take also big economic leap as well. I'm very interested by King's middle conclusion, which are as, yeah, we'll electrify faster, than the rest of the world.

Number two, transport electrification is going to accelerate. Len G will be pushed out of the power sector and coil job. One thing is to have to fill your tank for one hundred and fifty dollars when you used to do it at sixty dollars a few months before. One thing is to have to pay double for your paying ticket.

But another thing is to have you arrive at the pump and it's sorry, no gas, or your plane is canceled because there's not enough jet fuel. Price is one thing, but physical shortage DAD is really triggering a lot of acceleration of trends. And we've seen that already. We've seen report that in March the salar panel sales is up fifty percent.

We see that evy volume is reaching twenty five percent in certain markets. Literally everywhere, shocks are accelerating trends. You're totally right. And actually, if I look at what's going on around, is quividi R and as patch like in the seventy second Old crisis.

First of all, crisis. Came along, nothing really changed. Second oil on second nineteen seventy nine, by the way, and guess what major change is in a large part of the world, particularly in certain countries in like your own country France where you were born, but Sweden all this day electrifized, they built nuclear et cetera, and it up really quickly. And I think we're at that moment as well.

The difference between now in nineteen seventy nine is we've actually got much more tools on our hand. And what I mean by that is nuclear was at that point in time, Jesus. What France did was absolutely incredible in terms of the nuclear buildout and the speed they did it, but it was like the only tool that was available at the time. Really, where today there's so many technologies.

You mentioned evs, but also all the renewable technology is very low cost. You've got grid enhancing technologies, You've got. Yeah, you can go on and on and on in terms of what's available there that makes economic sense. You are always the uptimy sky and I'm always the guy.

So that's probably why we make a good duo. There was a new term that just came out recently, and it's fascinating. Remember a few years ago, we used to talk about range anxiety, and now we're talking about pump anxiety. I didn't hear that one.

I like that pump excited, and so I gome back to the thing about. One of the reflections I've had over the last few weeks myself is that. Nobody learns anything in the school about energy, so nobody understands it. The only thing they know is you go to the tank, you go to the pump, and you're able to fill up, You plug in, and you get electricity until you can't and then the world falls apart.

It's really the job of it's a job of governments to make sure that they prepare for this situation and that because if the average person the street doesn't understand the other rests, then there needs to be somebody else to tell us. Yeah, and look, we've heard it before. When the market is sufficiently supply, that's where the private doctor can organize themselves. But whenever there's a shortage, government have to step in.

That's their job. You're absolutely right. We thank mister Bond for coming on the show. What was a pleasure.

That's a blue flame thinker. KINGSWLD as ever great and looking forward to seeing you very so. And John, I'll talk to you next week. Looking forward to thank you for listening to Redefining Energy, don't forget to rate the show and subscribe on Apple Podcast, Spotify, or the platform of your choice.