How and when will we transition to a clean energy future? How will the transition empower individuals and transform global power dynamics? How did China become the world’s first electrostate, leading the drive for renewable energy, and what can we learn from this?
Richard Black spent 15 years as a science and environment correspondent for the BBC World Service and BBC News, before setting up the Energy & Climate Intelligence Unit. He now lives in Berlin and is the Director of Policy and Strategy at the global clean energy think tank Ember, which aims to accelerate the clean energy transition with data and policy. He is the author of The Future of Energy; Denied:The Rise and Fall of Climate Contrarianism, and is an Honorary Research Fellow at Imperial College London.
The Economics of Production and Cost Reduction
In 1936, [Theodore]Wright published his first academic paper, in the Journal of the Aeronautical Sciences. The contents are as functional as the title, ‘Factors Affecting the Cost of Airplanes’. In it, he lays out his key finding: when the volume of production doubles, the cost comes down. Double it again, and the cost comes down again, by the same percentage. Doubling it yet again produces another proportional price drop.
The reasons why encompass the costs of labour, raw materials and overheads. On the labour side, Wright tells us, his costs fell because the workforce became more proficient as the design became more familiar, and because cheaper, less skilled workers could per- form more standardised tasks. With materials, a larger production run meant the factory could buy things like sheet metal in bulk, and waste less of it. Finally, a bigger operation reduced overheads such as back-office costs. Wright concluded that doubling the production volume reduced the labour cost by 20 per cent and the material cost by a little less.
Operating as the company was, in a competitive market where sales and income were the bottom lines that mattered, Wright went on to surmise that the relationship he described would have a circular effect: ‘Simplicity and cheapness of design will make possible gradual reductions in prices which will make possible the sale of somewhat greater quantities with cheaper prices brought about by virtue of such quantity increase.’
Production at volume brings the unit cost down. A lower cost means more demand. More people buying the planes increases the production volume. The price falls further. People buy even more. More demand, more production, lower prices, more demand, more production . . . the cycle turns, push- ing forward the growth in ownership of any given aeroplane. Sales increase exponentially as prices fall.
Now here’s the point: Wright’s Law applies equally to any manufactured good.
This is not just a theory. Analysts have plotted the sales volumes and costs of washing machines, mobile phones, cars, dishwashers, and many other items. They have looked at both national and global markets. Whatever and wherever it is, it seems that as standard, the combination of a new desirable mass-produced product and a free competitive market leads to an exponential growth in sales accompanied by a symbiotic fall in the cost.
– The Future of Energy, p.25-26
RICHARD BLACK
China's Role in the Clean Energy Transition
The fact is you've got a lot of industrial and political muscle now coming behind clean energy, especially from China, which is the leading country deploying wind energy, the leading country deploying solar, and the leading manufacturer and user of electric vehicles by miles. As one recent report put it, "We have petrostates in the world. China is the first electrostate." And China is on its way to becoming the world's most powerful country. So, where China leads, the rest of the world is almost certain to follow.
Yes, there are massive air pollution problems in China, of course, but I think it's more than that. It's also about seeing that this is the future that the world is going to have. And if these goods are going to be made anywhere, well, the Chinese government clearly would like them to be made in China. And they've set out, you know, industrial policies and all kinds of other policies for, well, at least a decade now, in pursuit of that aim. It's interesting now to see other countries, India, for example, and the United States now sort of deploying muscle to try and carve out a slice of the pie themselves as well.
Why Oil and Gas Companies Can't Contribute Meaningfully to the Clean Energy Transition
My friend and former oil industry employee, Harry Benham, who helped me a bit with the book and has contributed many ideas, has a view, and it's one I share, that the oil and gas companies actually can't really contribute meaningfully to the clean energy transition. Currently, they return pretty high amounts of money to their shareholders.
And if one company says, "okay, we're going to move out of that now, we're going to move into renewables," the actual year-by-year or month-by-month cash returns probably go down because it's just not as cash-rich a business, and you have to have longer time horizons. So the company that does that, and the CEO who drives that, will be outcompeted by these more short-term views. Either the company will start losing market share, or the CEO will get sacked by the shareholders who are not earning as much money from that company as they are from other companies. So, that's why in the book I suggest that they won't play a major part in the transition. And in fact, they're the people that are most likely to try to block it.
THE CREATIVE PROCESS · ONE PLANET PODCAST
Help us unpack this statistic. According to the International Monetary Fund, on average, the total amount we pay annually in subsidies to the fossil fuel industry is around 5 trillion dollars, equivalent to about a thousand dollars per year for every man, woman, and child.
BLACK
Yes, when I broke it down for every inhabitant of planet Earth, I was staggered at how much money it is. So, if you take things like subsidies, and they could be consumption or production subsidies, it's less than a trillion. But then if you add in the costs of climate change and other damages done by using the fossil fuels, we come up to this figure of five trillion. And actually, in the last few years, it's been more than that. It's been up six and seven trillion, as well. For example, if we compare it with the amount that the governments of the West are supposed to supply each year in climate finance, which is a hundred billion, it's approximately one fiftieth of the amount that we're actually subsidizing the fossil fuel industry, which is the major cause of the problem.
THE CREATIVE PROCESS · ONE PLANET PODCAST
Ending our dependence on fossil fuels is also linked to environmental peacebuilding and conflict resolution, as you’ve wrote about in Environment of Peace.
BLACK
Environment of Peace: Security in a New Era of Risk is a report that I was fortunate enough to take part in writing a couple of years ago, courtesy of the Stockholm International Peace Research Institute. The report is out there, available for download. It's a landmark report linking environmental destruction to conflict risk through all kinds of mechanisms and linking peace building and environmental restoration. The links, some of them are quite obvious, and others are a little bit more subtle. There are short-term things, and there are long-term things, and there's a role for international institutions, as well as national governments. So, in the short term, let's put a sticking plaster on the issue. The main recommendations that come out of the report, for example, environmental peace building, where you try and tackle an environmental issue alongside conflict resolution and so on, is something that could be used a lot more and United Nations agencies and other organizations can really take this on board and build this into all of their operations. But the longer-term stuff, the number one thing is to just get off fossil fuels. Because all the while we're using fossil fuels, we're going to be emitting carbon dioxide into the air and causing climate change to progress further.
Over two decades, Vladimir Putin and his circle of oligarchs played a very smart game. Incrementally, they built up Europe’s dependence on energy imports from Russia, particularly gas. Once oil and gas pipelines are in place, supplying and receiving companies sign long-term deals with the blessing of their governments, and the assumption is that the fuel will always flow. Which means there is no reason to develop a Plan B.
This all worked fine . . . until it didn’t. We use the phrase ‘over a barrel’. ‘Over a pipeline’ would surely be more appropriate.
For every barrel of oil and therm of gas flowing east to west, money flowed west to east, building up the personal wealth of oligarchs and filling Russia’s war chest. Perhaps Putin learned from the earliest years of his KGB career, when the Soviet Union’s international sales of oil and gas funded its Cold War arsenal and the 1979 invasion of Afghanistan. Meanwhile his ambition to re-fold Ukraine into some kind of ‘Greater Russia’ was solidifying. Whether European politicians genuinely didn’t see it or chose not to, who knows. Did reliance on Russian fuel imports make it harder to see?…
While European citizens worried about the lights going out due to lack of gas, in parts of Asia that actually happened, with governments unable to pay as much as Europeans for precious tankers of LNG. The invasion has pushed up food prices across the world, with dire consequences for the poorest…
In a world already running on clean energy, businesses, citizens and governments would only be buying solar panels and batteries to replace those that were getting old. So if a supplier tried this kind of blackmail, we would simply put upgrade plans on hold, give the units a bit of TLC, and soldier on – just as we do now when we can’t quite afford that new car, fridge or T-shirt. You make do.
…So I rest on the contention that in a world that had already gone through the clean energy transition, Vladimir Putin could not have nurtured Europe’s dependence on Russia; could not have filled his war chests; could not have attempted to blackmail the EU into submission; and would not have been able, therefore, to attempt the invasion of Ukraine.
– The Future of Energy, p.73-76
THE CREATIVE PROCESS · ONE PLANET PODCAST
Tell us about the five-pronged clean energy future.
BLACK
I thought about it, and I was wondering, what do we actually need in the world? Because we don't need petrol and we don't need coal. We need energy to power various things. So, we need these energy services. So, what's the simplest way of providing all of the energy services? And it really seems to me that we can basically do it all with about five different types of goods. So the system of the future I put out in the book is first of all, you have the generation of electricity, which is mainly going to be with renewables, mainly with wind and solar because they are the cheapest and they're getting cheaper thanks to Wright's Law. Then you need energy storage and other means of sharing matching demand to supply. So, storage is the one that people will be most familiar with, which can be batteries, for example. And again, the price of batteries has also plummeted about 85 percent price reduction in a decade. And it continues because, again, we have mounting volumes. In a competitive market, there's lots of innovation going on in terms of battery design, in terms of construction, and all of this stuff, new materials coming into batteries. So, that's your first two, that's your renewable generation and your battery storage.
Electric vehicles will be the main method of transportation. Already, they dominate sales in the two-wheeler market in China and India. They're already eating into global oil demand. They're taking about 1.5 percent of global oil demand already, and the sales are increasing exponentially in China and other countries as well. They are cost-competitive. It's just on the purchase price in some markets with some models now. And it's going to get cheaper again because battery costs will fall. Heating and cooling, which is a big demand for energy. We can use heat pumps, which are super efficient running on electricity. They don't actually generate heat. What they do is move heat from the outside world into your house, rather like a fridge. It moves heat from the inside of the fridge to the outside of the fridge. The heat pump is a bit like that. Very, very efficient low running costs and so on. So with that, you've got, trusty cover, you've got all the things like computers and lights and so on, electric cookers to make you coffee. You've got ways of evening out supplies and demand, you've got transport, and you've got heating. And you've got a lot of industry as well. You can't probably do all of the industry with this with this four-prong prescription, so you need a fifth prong. And the fifth prong is going to be hydrogen. There's a lot of hype around hydrogen, and the idea that the world will be running on a hydrogen economy is just wrong. It's far more efficient to do things with electricity if you can, but those few things which you can't use electricity, probably hydrogen, made from renewable electricity by splitting water into oxygen and hydrogen, that will probably be the fifth prong, but a smaller prong, rather like the little finger on your hand.
THE CREATIVE PROCESS · ONE PLANET PODCAST
With the rise of synthetic media and deep fakes, we are witnessing an increasing impact on our elections. So I wonder what your reflections are on AI and its effects on public trust in institutions and journalism? On the other hand, AI could potentially democratize education and open us new educational pathways. As we discuss the end of oil, there’s a parallel emergence of a new great game for the ownership of AI, largely dominated by a handful of major multinationals.
BLACK
Potentially true, but I guess no one needs AI in the same way that we need oil or food. So, from that point of view, it's a lot easier. AI is fascinating, slightly scary. I find that the amount of discussion of setting it off in a carefully thought through direction is way lower than the amount of fascination with the latest thing that it can do. Often fiction should be our guide to these things or can be a valuable guide to these things. And if we go back to Isaac Asimov and his three laws of robotics, and to all these three very fundamental points that he said should be embedded in all automata, there's no discussion of that around AI, like none. I personally find that quite a hole in the discourse that we're having.
THE CREATIVE PROCESS · ONE PLANET PODCAST
As you think about the future, the importance of telling stories and the kind of world we’re leaving to the next generation, what would you like young people to know, preserve, and remember?
BLACK
I would like young people to have the sort of growing up experience that allows them to be children as long as they need to be children. It's a very pure way of looking at the world. And I think that childhoods now have become a little bit compressed. By the time it's a good idea for a child to have a mobile phone, then that's already stuff that's now coming into their life that can be a pressure. So, I just want them to have the freedom to grow up basically as kids and just not be forced into an early adulthood. I grew up, as you mentioned, in radio, and really brilliant speech radio is eavesdropping on a conversation where someone is telling the story about something. And in this field of energy and climate change, the contrarians have got the easy job because the ingredients of their stories resonate. "It won't work, it's going to cost too much, they're trying to make you have something that you don't want, let's stick with the old ways, the ones that we know are safe," as opposed to "this can work."
A lot of the biggest insights I've ever had in any parts of my life have come from literature. Literature takes the world and looks at it through a certain window and tells a story in a way that you might not have thought of doing it yourself. And so by engaging in it, you just get richer, I think, in terms of the way that you look at the world yourself.
