In light of a recent presentation on the energy transition at MoneyShow in Las Vegas, this article highlights the key points of that presentation.
The concept of the ‘energy transition’ emerged after the 1973 oil crisis and was widely promoted by President Jimmy Carter. The concept refers to the global shift from fossil fuels to renewable energy sources, with the aim of reducing greenhouse-gas emissions and combating climate change. This shift is due to government policies and international agreements such as the Paris Agreement and technological advances in energy storage and efficiency.
The United States has previously undergone an energy transition. As coal consumption began to increase around 1850, it eventually replaced wood as the primary source of energy for Americans.
Over the previous century, the use of oil and natural gas had steadily increased. As this happened, coal consumption initially declined, before reappearing in the second half of the century. Nuclear power began to rise in the mid-sixties.
Some may argue that there was a partial transition from coal to oil and natural gas during the previous century, before coal consumption began to rise again. This pattern has been repeated this century as coal consumption began to decline again. However, this decline is largely due to the displacement of natural gas to coal in power plants, with the contribution of renewable energy rising.
This pattern shows that there is a transition from coal, but it is not a comprehensive transition from fossil fuels to renewable energy that many believe. In fact, global energy demand has consistently grown faster than the increase in renewable energy.
Data shows that in nine of the past ten years, total energy demand has outpaced the capacity of renewable energy to keep pace with this demand. The only exception was in 2020 when the COVID-19 pandemic significantly affected energy production.
These trends have important implications. If renewables do not keep up with or even gain significantly the growth of overall energy demand, other energy sources must make up the deficit. This means that fossil fuel growth – and therefore global carbon dioxide emissions – continues to rise.
So what has happened so far is not the energy transition that some have envisioned. Coal consumption is declining, but overall fossil fuel consumption continues to grow. As a result, some have referred to the current situation as an ‘energy expansion’ rather than an ‘energy transition’.
The reason this matters is that energy policies must reflect stark realities. It is good to pass policies that encourage and stimulate the energy transition. But, if policies are put in place that assume an energy transition and this transition does not materialize, it could lead to a future of energy shortages and sky-high energy prices. In conclusion, while the concept of an energy transition remains a critical goal in the fight against climate change, the reality is that we are still far from achieving a real shift away from fossil fuels.
The data shows that global energy demand continues to outpace renewable energy growth, leading to continued increased reliance on fossil fuels and rising carbon emissions. As such, it is critical that energy policies be based on the realities of the current energy landscape.
Policymakers must balance the pursuit of promoting renewable energy with the practical needs to maintain
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