💡 Energy Transition
Signal #06 - Weekly Insights to rise above the sea of noise.
📊 Trend - The energy transition underway
You wake up to rays of sunshine streaming through your curtains. Stepping out of bed, you flick on the light, instantly turning night to day. You head down to the kitchen, flipping more switches as you go. In the kitchen, you reach into your fridge for some eggs, French onions, and Spanish tomatoes to whip up some breakfast. As you catch up on today's news on your phone, the world outside buzzes silently with energy. You finish your morning routine with a warm shower, brush your teeth with a month-old plastic toothbrush and drive off to work.
Within just the first hour of your morning, you've probably consumed around 10 kWh of energy—less if you skip the drive. That's the energy equivalent of what 100 humans could produce in the same amount of time. We barely notice it, yet, as Jean-Marc Jancovici suggests, using energy is like wearing Iron Man’s suit.
Energy represents the capacity to perform work, whether in the form of motion with cars, light with LEDs, or heat with the fridge. Energy cannot be created or destroyed, states the first law of thermodynamics, it can only be converted from one form to another.
Energy Today
Most of the energy we use today comes from finite sources (petroleum, coal, and gas), that are polluting and inefficient. About two-thirds of the energy extracted is wasted, with only one-third being converted into "useful energy."
US energy consumption, by Lawrence Livermore National Laboratory, available here.
The energy transition is the global shift from traditional energy sources, to renewable and sustainable energy sources like solar, wind, hydro, and biomass, enabling an unlimited supply, decarbonization, and improved efficiency. Today, renewable energy production, as seen above, is dwarfed by fossil sources, but the transition is well underway:
Incumbents are reducing investments in a fossil future.
Cash spending by the oil and gas industry, slide 44 of Nat Bullard annual presentation.
We are investing heavily across sectors in the energy transition.
Energy transition investments, slide 33 of Nat Bullard annual presentation.
And, renewable energy supply is increasing exponentially.
Renewable energy supply trends, slide 20 of Nat Bullard annual presentation.
The Energy of Tomorrow
What will the energy systems of tomorrow look like? As each country has unique resources and faces different trade-offs, energy transition strategies will vary widely.
For instance, England, with its limited sunshine, might lean more on wind turbines, on-land and off-shore. Space-constrained Singapore may interconnect with neighbors or import hydrogen for energy. Conversely, vast and sunny Australia could decentralize its grid with rooftop solar, allowing individuals to produce their own power and lighten the national grid's load. However, the common denominator of the sustainable energy transition, across borders and cultures, is electrification and diversification.
Electrification enhances energy efficiency and reduces environmental impact across sectors. While internal combustion engines typically convert only about 20-30% of the energy from fuel into useful work, electric vehicles can convert 70%-80% of grid electrical energy to useful work, without directly emitting a single particle. Not all industries can be fully electrified; processes like steel production currently require high-temperature heat that electric methods struggle to supply, but most will.
Diversification of energy sources is crucial not only to manage risks—ensuring energy availability when, for instance, there is no sun but ample wind—but also to optimize the use of resources where they are most suited. For example, nuclear power, known for its capability to provide stable baseload power, complements intermittent renewable sources such as solar and wind.
Conclusion - Infinite energy
Energy is everywhere, intermingled in our daily life and society to such an extent that we take it for granted and can’t imagine a world without it. We rely on fossil sources, powerful yet polluting and inefficient, to power the growing fleet of machines catering to our every needs. But a shift is underway; the energy transition is the electrification and decarbonisation of those energy sources for a cleaner and more efficient world.
More fundamentally, the energy transition is about shifting from finite sources of energy to infinite, or renewable, sources to satisfy our insatiable thirst for power.
As Spider-Man taught us, “with great power comes great responsibility”, so it’s up to us, as a society, to leverage our soon-to-be, god-like powers to the best of our abilities.
💡 Concept - Zero Marginal Cost Energy
To solidify your understanding of the energy transition, let me leave you with the concept of zero marginal cost applied to energy.
Zero marginal cost is the powerful phenomenon on which the internet is built. Whereas in the physical world producing an additional unit of a product requires money, energy, and time (for example to produce a newspaper, Rubik’s Cube, or a chair), in the digital world one more subscription, one more download of an app, or one more song streamed is nearly free. This shift has spurred innovative business models like Software-as-a-Service (SaaS), Freemium products, and gigantic online marketplaces.
Similarly, the shift to renewable energy mirrors this digital transformation. Once infrastructure like solar panels, wind turbines, or hydroelectric dams is built, the cost to produce an additional electron is virtually nil. This is a significant change from current energy production, which requires continuous extraction of resources like coal, oil, or gas to increase output.
🔗 - Check these out
Electrify by Saul Griffith - A detailed action plan, with a lot of data, on fighting climate change by electrfying everything.
Nat Bullard's annual slide deck- 200 slides to visualise the state of decarbonization with climate, capital markets, technology, and sector data.
Spark - AI-powered workflows for large-scale clean energy.