Competing world views

Happy, healthy and successful New Year to all my readers. Given what is happening in Washington DC today I could not resist diving back into commenting on developments in the USA.

I was struck by several recent articles about the views of the nominee for US Energy Secretary Chris Wright. As has been widely reported he has said: “There is no climate crisis, and we’re not in the midst of an energy transition either”.

He has also claimed that any negative impacts of climate change are “clearly overwhelmed by the benefits of increasing energy consumption.” Given the importance of his future role, (subject to Senate confirmation), for the US, and global energy scene, I decided to do some more research for myself and went to the source. In 2024 Chris Wright’s oil services company, Liberty Energy, published a 177 page ‘Bettering Human Lives’ report¹ which includes a lot of data and thought provoking analysis about the global energy picture.

Liberty Energy’s, and clearly Chris Wright’s, key takeaways are as follows:

1. Energy is essential to life and the world needs more of it!
2. The modern world today is powered by and made of hydrocarbons.
3. Hydrocarbons are essential to improving the wealth, health, and life opportunities for the less energized seven billion people who aspire to be
4. Hydrocarbons supply more than 80% of global energy and thousands of critical materials and products.
5. The American Shale Revolution transformed energy markets, energy security, and geopolitics.
6. Global demand for oil, natural gas, and coal are all at record levels and rising — no energy transition has begun.
7. Modern alternatives, like solar and wind, provide only a part of electricity demand and do not replace the most critical uses of hydrocarbons. Energy dense, reliable nuclear could be more impactful.
8. Making energy more expensive or unreliable compromises people, national security, and the environment.
9. Climate change is a global challenge but is far from the world’s greatest threat to human life.
10. Zero Energy Poverty by 2050 is a superior goal compared to Net Zero 2050.
    

Several of these points are indisputable. Throughout the report there is an emphasis on the link between energy use and economic development with all its massive benefits in health, education and welfare, and an admirable commitment, in words and actions through a Foundation, to reducing energy poverty and increase the use of clean cooking.

Overcoming energy poverty, and poverty in general, is without a doubt one of the major global challenges we face – we need to make everyone wealthier. But the argument that this can only be done by using more fossil fuels seems to be another example of the primary energy fallacy. It is not primary energy that drives development but rather the level of services being delivered, and those services need energy which can be delivered in different ways using different technologies. Take a remote village in a developing economy, it is clear that the people in the village want to have more lighting, which directly improves education and safety; more pumped water, which directly improves health, education and women’s safety; more cooling for AC and cold chains, which directly improves nutrition, health and incomes through reducing food loss; more computing and internet services which helps education, and farmers check prices, avoid middle-men and access markets; and more mobility for commerce and leisure. These are all services that require energy input. The point is that we do have a choice over the technologies we use to provide them.

We can either hook them up to a conventional grid or provide a local fossil fuel generator, or we can install solar, batteries, LED lighting, micro-grids, induction cooking and efficient cooling systems. The first has a capex, takes money out of the local economy, exposes people to volatile fuel prices, and produces carbon emissions, and air pollution. The second version still requires capex of course, but has no fuel costs, no exposure to volatile energy prices, and produces no carbon emissions or air pollution. Are the people of the village better or worse off? At a very real level they don’t care where their energy come from, they just want more services at the lowest cost. Chris Wright’s view is that the lowest cost always comes from fossil fuels but, even ignoring externalities, the rapidly falling cost of solar, batteries and related technologies make this at least questionable – and something that should be questioned in every situation.

Of course we may not be able to provide 100% of those energy services in the renewable scenario in all cases quite yet, but there is more evidence that we can and are increasingly likely to be able to do it routinely at less cost than the fossil fuel/grid approach. Work in India and elsewhere demonstrate that the rapid declines in the cost of solar and batteries can mean that the total delivered energy cost can be less than that of connecting to the grid.

The Bettering Human Lives report goes on to say:

‘The reality is that these politically favored technologies’ [referring to renewables and batteries] ‘have not, will not, and cannot replace most of the energy services and raw materials provided by hydrocarbons. Today they are deployed almost exclusively in the electricity sector, which delivers only 20% of total primary energy consumption. Manufacturing is the largest user of energy globally, mostly in the form of process heat that cannot effectively be supplied via electricity’.

Well of course it is true that renewables and batteries are mainly in the electricity sector. But here again we see the primary energy fallacy, we should be focused on end-use energy not primary energy. Also the statement about manufacturing process heat is rapidly being overtaken by events, at least for low and medium-temperature process heat, with electrification and heat pumps increasingly being deployed into these applications. Industrial heat pumps are well suited to many applications in the food and beverage, pulp and paper, and chemicals sectors, which collectively account for c.15% of global industrial emissions. McKinsey expect the market for industrial heat pumps to grow at more than 15% per annum up until 2030². At the moment most of the installations are up to 5 MWt but the trend is towards larger machines and higher temperatures. A 2024 study by Fraunhofer ISI showed that more than 60% of EU industrial heat demand could, in theory, be met by electrification and that with technologies that will be available by 2035 this could rise to more than 90%³. Now, having written my PhD on the potential for energy efficiency in industry I am the first one to challenge the definition of potentials, technical potentials are definitely not the same as economic potentials, which are not the same as achievable potentials, but the opportunity is clear. When we look at investment decisions being made we see signs of real investment in these technologies happening, examples include:

UPM announced it will install eight 50-60 MW electrode high pressure steam boilers across paper mills in Germany and France⁴ .

A pilot electric steam cracker in a BASF refinery that produces the 850^oC temperature to produce ethylene has gone into operation, the technology has been developed in a collaboration between BASF, Linde and Sabic⁵.

According to data from Global Energy Monitor’s (GEM) Global Steel Plant Tracker, 93% of the new steel plant capacity announced in 2023 was for electric arc furnace (EAF). According to GEM this is part of ‘a transition away from coal based steel making’ and that if these developments and planned retirements take effect ‘global operating steel capacity should sit just under the IEA’s net zero-aligned target of 37% EAF steelmaking by 2030, and with heightened momentum the goal is increasingly attainable’⁶ .

A 2 MWh heat energy battery is supplying 1,000oC heat to an ethanol plant in California on a commercial Heat-as-a-Service (HaaS) basis, supplying energy at a cost per MMBtu lower than gas-fired heat⁷ .

It is true that some of these developments, like the electric steam cracker, are being supported by governments or concessionary finance and that the viability of electrification depends on the relative price of power to fuels but the trends are clear.

The Liberty Energy report also says:

aviation, global shipping, long-haul trucking, and mobile mining equipment have no viable replacements in sight.

With the rapid developments in electric heavy goods vehicles⁸, and a good economic case, it is clear that EHGVs are the future⁹, we will of course need more investment in the rapid charging network but that is starting to happen¹⁰. As for mining equipment, in December 2024 Australian mining company Fortescue placed a $400m order for more than 100 electric mining vehicles with Chinese manufacturer XCMG¹¹. This order follows a $2.8 billion deal with Liebherr for 360 autonomous electric trucks, 55 electric excavators and 60 electric dozers in September 2024 and a deal to buy 30 electric graders in October 2024 from Canadian manufacturer Maclean. Fortescue has invested heavily in developing its own electric vehicle technology which will be incorporated into these machines¹². Aviation and shipping are more difficult of course but again progress is being made in electrification and alternative fuels.

The Bettering Human Lives report goes on to say:

Some retort that we don’t need more energy, we just need to use energy more efficiently. The pioneering 19th century English Economist, William Stanley Jevons, addressed this conjecture in his 1865 book The Coal Question. He concluded that increases in energy efficiency led to more, not less, coal consumption.

[referring to a graph] we can see two centuries of increasing efficiency in energy usage to generate economic value (GDP) combined with two centuries of growing demand for energy. Since 1990, energy efficiency has increased 36% and total energy consumption has increased 63%.

There is no highly energized poor country, and no low-energized rich country. Health, prosperity, and opportunity require energy.

Just how bad these energy and climate policy decisions are can be gauged by falling energy consumption in many Western countries. In the United Kingdom, energy use has fallen by 30% to levels not seen since the 1950s, while the rest of Europe has declined to 1990s levels. British electricity consumption, amazingly, has fallen by about a quarter since 2003 and is now back at levels last seen in the late 1980s.

I have addressed the Jevons paradox too many times to do it again here, it resurfaces about every decade and is often mis-used. The literature is extensive. Yes of course there is a rebound effect but it is less than one. The really interesting graph is what our energy use would have been if we had maintained the same energy intensity as in the 1970s. See page 5 of the 2012 ACEE report by Skip Laitner et.al¹³.

As for the statement about there being no highly energized poor country and no low-energized rich country this again makes the primary energy fallacy. Energy intensity is a matter of technology choice. Denmark for instance aggressively introduced energy efficiency and wind power after the oil crises¹⁴ and in 2023 wind made up 58% of total generation¹⁵. You cannot say that Denmark is a poor country.

It is true of course that UK energy use has fallen by 30% to levels not seen since the 1950s and that electricity consumption is now at levels last seen in the late 1980s. But in those time periods the adoption of energy using appliances, central heating, cars, foreign holidays etc. has grown enormously – as has GDP. We are not less well off because energy use has fallen. We may be less well off than we could have been because of many factors, including the price of energy, but much of the change has happened through improved efficiency and changes in underlying technologies.

The nominee Secretary of Energy’s thinking seems to mirror the prevailing views of the late 1970s and early 1980s when I first studied the energy system. Then forecasts, global and national, all showed ever increasing energy use as GDP increased – the underlying assumption was that the relationship between energy use and GDP was fixed. Forty years on we have seen economic growth but energy use has not risen in step. In fact in the US and the UK energy use has remained nearly constant despite forty years of economic growth – as I wrote in 2013, we are living in what in the early 1980s was considered by nearly all experts and energy industry gurus as a totally impossible ‘low energy future’ – and we did it almost without trying¹⁶. The relationship between energy use and GDP has changed because of the effect of energy efficiency and changes in industrial structure. What’s more the relationship between GDP and fossil fuel use is changing because of the rise of renewables. We can decouple fossil fuel energy use and GDP. Our energy statistics system, established as it was in the fossil fuel age, with its focus on primary energy and millions of tonnes of oil equivalent does not help our understanding.

These energy supply dominated views still all too often dominate the energy debate and energy policy. Whether they are simply because people have not changed their views, or are examples of people ‘talking their own book’, who knows. The nominee does at least have a technical energy background and experience investing in alternatives such as geothermal and fusion power, which is a positive.

We do need to acknowledge the reality of our dependence on petrochemical derived materials and fertilisers, and ask ourselves the tough question whether alternatives are realistic. We cannot argue with the fact that hydrocarbons have delivered most of the improvement in economic well being, health etc. to date – but that was the past, it does not mean the future will be the same. There are two clearly competing world views here – one being the ‘you can only drive economic development with more fossil fuels’, the other being ‘you can drive economic development with energy efficiency and renewables’. Time will tell which of the competing world views is correct.

References

1. http://libertyenergy.com/wp-content/uploads/2024/02/Bettering-Human-Lives-2024-Web-Liberty-Energy.pdf
2. https://www.mckinsey.com/industries/industrials-and-electronics/our-insights/industrial-heat-pumps-five-considerations-for-future-growth
3. https://www.agora-industry.org/fileadmin/Projects/2023/2023-20_IND_Electrification_Industrial_Heat/A-IND_329_04_Electrification_Industrial_Heat_WEB.pdf
4. https://www.upm.com/about-us/for-media/releases/2023/04/upm-electrifies-heat-and-steam-production-at-its-mills-in-finland-and-germany/
5. https://www.chemistryworld.com/news/basfs-electric-cracker-demonstrator-goes-online/4019439.article
6. https://globalenergymonitor.org/report/pedal-to-the-metal-2024/
7. https://rondo.com/calgren-case-study
8. For example: https://www.scania.com/group/en/home/products-and-services/trucks/battery-electric-truck.html
9. https://electriccarguide.co.uk/the-electric-hgv-guide/
10. For example: https://www.pragmacharge.com
11. https://www.electrive.com/2024/11/28/fortescue-orders-xcmg-electric-mining-equipment-worth-400-million/
12. https://zero.fortescue.com/en
13. http://www.garrisoninstitute.org/downloads/ecology/cmb/Laitner_Long-Term_E_E_Potential.pdf
14. https://www.whatthedenmark.com/blog-post/green-transition
15. https://www.iea.org/countries/denmark/energy-mix
16. https://www.onlyelevenpercent.com/surprise-you-are-living-in-a-low-energy-future-almost/