Charged Conversations - Energy Transition or Energy Expansion?

Episode Transcript

(00:00):
You're listening to charged conversations. I'myour host, Brigham McCown. This week,
we're going to explore whether or notwe are in the midst of an
energy transition, as some have said, or whether we're actually in an energy
expansion. And I got this ideafrom sitting back thinking and looking at everybody
sang, or at least certain peoplesaying the energy transition. The energy transition.

(00:24):
If you google it or you watchthe news, it is everywhere all
the time. So I got tothinking, let's look at the data and
the statistics and see where exactly arewe. So I just came back from
Berlin, Germany, a couple ofweeks ago, where I delivered a keynote

(00:45):
speech in front of a thousand energyexperts representing fifty different countries. And that
includes not only the developed European countriesNorth America, but also what's fondly called
the Global South and Asia. AndI put this question to them. But
before we get to that answer,we'll let me back up right now.

(01:07):
We are living in a very unusualera of our history. We've come out
of the Cold War and thought everythingwas hunky dory, only to find out
that Cold War and American what's calledhedgemy or hegemonic meaning unilateral world actor didn't

(01:32):
last, and there are threats emerging. Geopolitical risk is that the term is
used by countries such as Russia,China, Iran, terrorist activities in Africa,
the Middle East. It just kindof goes on. And if we've
learned anything it is that energy canbe a geopolitical risk. We all need

(01:55):
it like air and food. Energyis that one constant in life because next
to the cost of raw materials andthe cost of people in making things,
energy is the third component of thatsecret sauce. So in order to understand

(02:17):
kind of where things are, we'verealized that America has begun to become very
much insulated from all the crazy aroundthe world because of our energy independence.
We now have a surplus of energy, and by the at least scientific and

(02:40):
policy terms, where energy independent.Yes we still import some energy, but
we actually export more than we import. A lot of that goes to Canada,
and we'll have more on that ina future episode. But we trade
and bartered back and forth across theborder based on where energy, roads are
where they're not. But energy,let's define energy. Energy is the capacity

(03:05):
or power to do work. Inphysics terms, we talk about it's the
capacity to move a certain mass objectby the application of force. Energy exists
in a variety of forms, andluckily for us, they can be transformed
from one form into another. Whenwe pair that up with a term called
energy security, we are really talkingabout the uninterruptible availability of energy sources at

(03:32):
an affordable price. Now that isthe traditional definition of energy security. And
why do I point this out,Well, because we've seen movement as of
late, after fifty years of agreeingto what the terminology is, for somebody
to say, no, no,no, there's a fourth leg to the

(03:53):
stool. Okay, great. Wehave to have accessible and available supply,
right, that's plank one or stoolleg number one if you prefer two.
We have to have reliability. Ithas to be reliable and it has to
be uninterruptible. Third, it's gotto be available and there has to be

(04:15):
a competitive supply. But some ofour friends in Europe have wanted to put
a fourth term on there, andthat fourth leg of the stool, if
you will, is acceptability. Ah. As a political scientist and scholar myself,
I have a problem with that.Because the first three are very objective.
The fourth term that some are wantingto add is very subjective. Objective

(04:43):
subjective. What is acceptable to youmay not be what's acceptable to me.
So that can be a bit ofa problem. And you know where I'm
going with this. It's the hydrocarbonsare not acceptable to some. But let's
talk about that. Then. Arewe in the midst of an energy transition

(05:08):
away from fossil fuels I like touse the term hydrocarbons, or are we
in the midst of an energy expansion? You've heard me before talk about some
leading scholars that say the world hasnever throughout human history used less energy,
only more. And so when Iput this question to the experts and leaders

(05:31):
from around the world, some setenergy transition, other set energy expansion.
The real answer, though, probablyis both, Well, how can that
be? Well, we live ina what's called a first world country.

(05:53):
We are mature, our markets aredeveloped, our economy is strong, and
I think we tend to forget thatmost of the world doesn't live the way
we do. Take out Western insome parts of Central and Eastern Europe,
the US and Canada, Australia,New Zealand, the oceanic countries, parts

(06:17):
of Asia, Japan, Korea,and the rest of the world is on
a different trajectory than we are.The developing world is still trying to catch
up to the developed world, andthen there's the underdeveloped world which is trying
to catch up to the developing world. And for them, they want what

(06:42):
we have. We had our industrialrevolution, we had our century of coal
and oil, and frankly, they'resaying, Okay, are these renewable things.
Are you're going to give them tous? The answer is no,
you need to buy them. Andthe answer is, well, we have
plenty of coal, we have plentyof gas, we have lots of oil.

(07:05):
So if we already have something that, in essence we can mind for
next to free, why on Earthwould we purchase power that is far more
expensive and still has reliability issues.And the answer is they won't because the
answer is as these other nations aredeveloping, take Africa, South America,

(07:30):
most of Asia, they will continueto use more energy. Now that doesn't
mean that the energy transition is doomedforever, But I like to say that
physics and engineering and science beats policyall the time, or stayed another way,

(07:51):
physics eats policy for lunch seven daysout of the week. It's about
realism, about being fastened to therealities of life. For these countries,
they're going to use whatever they haveat their disposal. We'll stop and unless
and until renewables can equal the power, the BTUs of energy, the density

(08:22):
of energy as we like to callit, and the cost of hydrocarbons,
they're not interested. I think weonly need to look China and India to
see that. But energy is measuredin something that we call jewels. A
jewel jou l e is the unitof energy in the International system of units.

(08:43):
It is equal to the amount ofwork done when a force of one
Newton, remember that guy, SirIsaac Newton, displaces a mass through a
distance of exactly one meter in anydirection. That's the technical definition. And
remember a meter is what two pointfive four feet, right, so a

(09:03):
little bit less than a yard.So you're going to take something and you're
going to move it about two anda half feet, and that's a jewel.
Well, let's take a look athow much energy is used, or
I'll tell you what even better,because the numbers get pretty darn big.
Let's take a look for a momentat how much hole is used. Now

(09:26):
Here is a really interesting fact talkingabout the energy transition. Since the two
thy fifteen Paris Climate Change Agreement,cumulative worldwide coal power has not decreased spoiler
alert, it has increased. Saywhat, Well, the United States has

(09:50):
reduced coal consumption by ninety six gigawatts. It's a lot of power. The
UK down about twenty. Germany,yeah, it was down about twenty.
But with the retirement of its nuclearfacilities. Yes, even a very progressive
Germany is cranking up coal production.Spain is down, most of Europe is

(10:13):
down. Russia is down, butthat's not out of the goodness of their
hearts. That's due to a flaggingeconomy. And Australia has cut Okay,
so that sounds like we're going inthe right direction. How could we be
adding? Well, South Africa hasadded a little bit, Turkey's added a
little bit. Some other smaller countries. Japan is up almost ten gigawatts because

(10:37):
of their nuclear issues. Indonesia's uptwenty gigawatts, Philippines up six gigawatts,
Vietnam, Malaysia, India up fortysix gigawatts, more than pretty much equal
to Europe's decline spoiler alert. Chinaup two hundred and thirty three gigawatts in
coal power. Wait, say whatthese guys are saying all the right things.

(11:01):
We want to get a handle onthe environment. We want to clean
up now, guys now, andthat is why we have had a cumulative
total of two hundred and six gigawantsof more power. All right, speaking
of coal specifically, let's go backto our jewels. Jewels aren't really large
enough to measure global coal consumption,so we have to use something called exit

(11:26):
jewels. Exit jewels are one jewelto the eighteenth power, all right,
So it is way beyond millions andbillions. I don't even if somebody knows
what ten to the eighteenth power is. It'd be great if they would email
me, because I would love tobe able to tell. So. In

(11:48):
two thy and twenty two, globalcoal consumption was one hundred and sixty one
point five exa jewels. Right,China accounts for two thirds a little more
in two thirds, two thirds toalmost seventy percent of all the coal consumed.

(12:13):
China's at eighty eight. The USis under ten. All of the
Americas combined are under twenty. Russia'sat three, the rest of Africa A
minus South Africa is less than one, Germany's at two point three, Turkey

(12:33):
is a little over one, holdsabout one point eight. The rest of
Europe's at four. So basically theEurope and the US are less than ten.
India's double that. So India producesmore coal than Europe and the US
combined, and then four times morethan that. China weighs in at almost

(12:54):
ninety. It's crazy, right,And it is a one one percent increase
from twenty twenty one to twenty twentytwo, and it's a one percent increase
from twenty twenty two to twenty twentythree, and we expect it to be
about a one point four percent increasecoming into twenty twenty four. What that

(13:15):
actually means is that cold consumption isnot going down around the world. It's
going up. And for some that'sa huge problem because if you look at
what is necessary to reach Paris climatechange greenhouse gas emission reductions by twenty thirty,

(13:39):
we need it to go the otherway, and it's just not going
to This is where policy doesn't matchup with reality. In fact, we
need to see almost an eighty percenttrajectory downward by twenty fifty to meet these
goals. It's not going to happenbecause it can't happen because the simple reason

(14:03):
is that renewables aren't ready yet.The transition I actually think will happen someday,
but it's not going to happen overnight, and it's not going to happen
according to any artificial ideological political deadlines. And what I find even more interesting,
having been a corporate CEO and beingin government, is the people who

(14:28):
are making these promises today are notgoing to be here when they fail.
It'd be easy for me to say, or for you to say tomorrow.
Let's say, let's just pretend I'mthe CEO of pick your favorite company,
and you're the CEO pick your favoritecompany. We pledge to be carbon neutral
by twenty forty. Great, well, I'm not going to be here.

(14:52):
We're going to be retired, right, We're going to be living up to
life in Florida or somewhere else bythat. And governments are doing the same
thing. Except for governments, andI'd argue companies, not only is it
not going to happen, but it'sbad business. It's bad policy because companies

(15:13):
are spending a lot of money thatthey are not going to recoup. As
a company president or CEO, youhave a fiduciary duty to both your board
and to your shareholders who want youto maximize the value of their investment over
time. We should treat the governmentthe same way. We are spending billions

(15:35):
upon billions on an energy transition thatcannot occur, that will not benefit the
economy, and that will not ensureenergy security for decades. There's an old
saying fake it till you make itin business that actually came out of Silicon

(15:56):
Valley in the beginning is it's likeI don't know, but I don't nobody
else knows either, So we'll justfake it till we make it, and
then we'll be successful someday. Theproblem with the energy transition and some of
these very aggressive policies, I thinkalmost like a religion, this ideology of

(16:17):
the hydrocarbon's bad and renewables good.And again, somebody's probably saying right now,
well, what about these global supplychain and China as that and kids
are having are being forced labor inthe Congo to get the nickel and cobalt
that we need for batteries, andthere's a huge amount of energy that goes

(16:37):
into produce. Yeah, yeah,I agree, I agree. We'll leave
that for another episode, but I'mgoing to say, and my sense is
that it's not fake it till youmake it. It's faked until you break
it. And the policies that we'vebeen pursuing are leading us toward a path
of breaking things, not making it. And I simply point to the Arab

(17:03):
oil embargo, which was fifty yearsago last year and the policy of every
president, Democrat, Republican didn't matterto become energy independent. People laugh,
people laugh, people off stage,you know, Carter said, Oh,
we're going to become energy independent.Like, no, that's not possible,
And so he said, we're sweater. Turn down your thermostat, and people
like, really, now they're tellingyou to get the range out of your

(17:26):
electric vehicle. Just put on asweater and don't turn on the heat.
Really, that's what we've come to. Energy prices for renewables are supposed to
get cheaper as we produce more.The ugly truth is, wholesale power for
renewables is up. It's more thandoubled in the last few years and it's

(17:48):
continuing to rise, so we're payingmore for less. That is not folks,
That is not a winning recipe.That is a recipe for disaster.
Well closer to home, the USEnergy Information Administration just came out with their
monthly energy review for March. It'sretroactive, right, you have to wait

(18:11):
till the end of the month tosee how it all shakes out. And
they are suggesting that we are notonly using more oil and gas, but
we're producing more of it, andthat's a good thing. Our natural gas
prices are near historic lows, andthat's even in the face of exporting massive

(18:36):
quantities of natural gas to Europe tomake to make up for this shortfall in
Russian supplies following their invasion of Ukraineand kicking the can off of Russian oil
and gas. We exported three pointfive exdules in twenty twenty two to Europe

(18:56):
and everywhere I go they're very thankfulfor that. But US energy production,
we've not only gotten to the place, and I think this is the important
point not only of energy independence,but of energy dominance. The dominant player
on the world stage, surpassing SaudiArabia and Russia, for both oil and

(19:18):
gas production. You know, whenyou're the biggest player, you set the
policy, you help set the price. And to think that America could stand
up to a Middle Eastern and afew players including Russia and some South America

(19:41):
folks, OPEC plus or Bricks theBricks Nations, br ICs. Look it
up. You'll be surprised. Who'sin it. Yeah, it's a cartel.
We don't allow cartels in the UnitedStates. It's illegal. It's a
monopoly. A monopoly where basically andpeople get together and say, Tony,

(20:03):
you got this territory, how muchyou want to charge? Billy Sally,
you got this territory. Let's allagree on how much we're going to produce
and what we're going to force peopleto pay for it. That's not a
capitalist market. That's not free enterprise. Oh, oil price has been set
by dictators despots for the last fiftyyears. But even with a lot of

(20:27):
the unrest in the Middle East,Yes, our gas price has gone up.
But I got to be honest withyou, if we were in the
eighties or nineties or early two thousandsright now, gas would be well over
five dollars, probably six dollars agallon. Sadly, though, our heyday

(20:48):
for I would say being able tominimize the geopolitical impacts of unrest around the
world ended January one with President Biden, who frankly does not like oiler gas.
And so despite these policies, we'rehanging in there. Imagine what could

(21:11):
happen if we actually had friendly policies. We can be back to gasoline under
two dollars a barrel. Now othersare going to go, WHOA, what
about the environment? Well, okay, let's talk about that. The United
States has cut environmental pollution more thanWestern Europe. Really, yeah, have

(21:32):
we done that. We've added alot of natural gas into the mix.
Natural gas is fifty percent less pollutingthan coal. That easy. We've on
our electric production. We've swapped outa lot of coal for natural gas,
and we figured out ways to burncoal cleaner than in the past. If
you look at our air quality,it is the best on record since records

(21:57):
were being kept. Our waters arecleaner today than they have been at any
time since records were being kept.Well, when we're records being kept starting
around nineteen seventy three. Because andnot trying to get political here, but
here's the truth, it's the Republicansthat created the Environmental Protection Agency. But

(22:25):
yeah, the Republicans and the administrationof Nixon, if we tend to forget
that, I said, yeah,look, having rivers on fire no offense
to our friends in Cleveland, havingall these different problems, the soot,
the asthma, the tainted water.No, no, not good. We

(22:45):
can do better than that because wecan walk in chew gum. We can
produce things and be environmentally responsible atthe same time. Folks, that's what
we need to get back to becausewith current policies, especially by some friends
on the far left, it's theanarchist It's the same people from the sixties

(23:07):
and seventies who believe that that industrializationis bad, that believe that the Western
economy is bad, that I believethat capitalism is bad, and you know,
they've latched onto anything that is notgreen is bad. But again,
as we talked about earlier, alot of energy, a lot of chemicals,

(23:29):
a lot of stuff goes into producingthose green things. So those are
my thoughts for today. Join meback for the next podcast episode and we'll
explore this more. I'm Brighan McCown, the host of Charge conversations Joe Strucker
Production, I'll see you next time.