‘Energy transition” remains the over-riding objective for addressing climate change, shaping everything from government policy and spending to what people pay for electricity at home. The aim is something monumental: to drive down emissions by transforming the world’s energy system from conventional energy, oil, natural gas and coal, to such renewables and alternatives as wind, solar, biofuels, batteries, electric cars and hydrogen. But experience shows this transition will take longer than expected, will be more challenging and expensive, and will require trade-offs that tend to be downplayed.
To get some context, it is helpful to go back more than three centuries to Coalbrookdale on the River Severn in Shropshire, where an iron-working industry was starting to develop. For Coalbrookdale, one can say, was where the energy transition began.
This first transition was the move from wood to coal. While coal was used for heating in Britain in the Middle Ages, especially when the price of wood surged with the cutting down of forests, the decisive moment for energy transition took place in a furnace in Coalbrookdale in January 1709. That was when Abraham Darby I, a metal worker who specialised in cast-iron pots, figured out that coal was, as he wrote, “a more effective means of iron production” than wood.
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Events would prove him right — just not right away. It took most of the rest of that century before the steam engine meant take-off for the Industrial Revolution. And despite the 19th century being known as “the century of coal”, it was not until the beginning of the 20th century, two centuries after Darby’s breakthrough, that coal overtook wood as the world’s number one energy source.
Oil, discovered commercially in western Pennsylvania in 1859, did not overtake coal as the world’s number one energy source until the 1960s. Yet last year the world used three times as much coal as it did in the 1960s. This makes a basic point about the energy transition: it’s also energy addition. Last year, the world used more wind and solar energy than ever before. But it also used more oil and coal than ever before. And the same would have applied to natural gas, save for the market disruption resulting from Russia’s war on Ukraine.
Much of the current thinking about the energy transition was articulated during the Covid-19 pandemic, when both energy demand and prices had plummeted. Yet still the prevailing view remains that of the May 2021 scenario by the International Energy Agency, summarised in a graph that plotted a smooth line to “net zero emissions” by 2050.
That linear view was defined by a series of milestones. But the prospect of achieving many of those milestones in the allotted time frame is receding. For example, the development of a scaled hydrogen industry, to replace natural gas, is far behind schedule. And earlier this month the association representing the European offshore wind industry warned that “the political targets for offshore wind for 2030-2035 will not be met”.
This week, Keir Starmer reiterated at the energy security summit in London that the UK will go “all out” in pursuit of net zero by 2050. But around the world there remains a need to reassess plans in order to align with what is proving to be a more complicated reality. There are signs that this is happening. Japan’s new Seventh Strategic Energy Plan differs from the previous six in that, for the first time, it has a “not net zero by 2050” scenario that includes growing demand for liquefied natural gas (LNG).
Starmer himself observed in February: “I’ll be open with you, oil and gas is part of the future mix for decades.” Both examples point to a revised way to conceptualise the energy transition: it is going to be multidimensional, unfolding at different rates in different countries with different mixes of technology and, of critical importance, with different priorities.
What is driving the reassessment? To begin with, there is the simple fact of size: the sheer scale of decarbonising what today is a $115 trillion-plus world economy that will continue to grow. Seeking to transform such a behemoth and get to “net zero emissions” by 2050 seems farther away as 2050 grows closer. The 2050 target is enshrined in British law. But it is not embraced by others. Countries representing about 45 per cent of global emissions, including China and India, which are two of the three top-emitting countries, never even signed up to a 2050 target but rather have pushed out their ambitions to 2060 or 2070.
Overall, according to the authoritative Energy Institute Statistical Review of World Energy, between 2022 and 2023, the latest years for which we have numbers, the world’s dependence on conventional energy declined by less than one half of one per cent, from 81.9 to 81.5 per cent.
Britain stands out for how swiftly it has transitioned its electric power sector. Until 2010, it depended on coal and gas for three quarters of its power. Today, it gets about 43 per cent of its electricity from renewables, led by wind. But there is a price to be paid: among the highest electricity prices in Europe, although with much debate as to the reasons. It is still not clear how Britain can attain its stated goal of completely decarbonising its electric power sector by 2030, which after all is only five years away.
Cost of replacing energy system
Owing to its shift in electricity, Britain is somewhat ahead of the overall world in decarbonising. Between 2022 and 2023, the share of hydrocarbons in Britain’s total energy declined from 74.5 per cent to 74.2 per cent. The global impact is not so great when measured against other countries. China’s CO2 emissions are 30 times greater than Britain’s.
Cost is also a constraint. Replacing the existing energy system would require a vast outlay of capital for the infrastructure of a new system. The economic analysis that underpinned last year’s UN climate conference in Baku posited that the global investment required to achieve net zero by 2050 would be $6.5 trillion per year between now and 2030, reaching as much as $8 trillion by 2035.
That would translate into about 5 per cent of global GDP devoted to achieving the 2050 goals. But the developing world doesn’t have the wherewithal to funnel 5 per cent of its GDP into climate investment. Would developed nations pick up the slack and devote 10 per cent of their GDP to climate investment? Not with the tight constraints of Rachel Reeves’s latest budget. Nor for European nations struggling to increase defence spending and, at the same time, regain global economic competitiveness. And not a United States preoccupied with a $36 trillion debt for which interest payments now outpace defence spending.
There is a political cost as well, what the European Council on Foreign Relations calls “greenlash”: the growing support for populist parties in Europe that oppose green initiatives, in addition to immigration. This will weigh on political processes across Europe and is already more than obvious in the United States.
And then there is the return of energy security. During the pandemic, many countries fell asleep to supply risks. The wake-up call came on February 24, 2022, when Russia invaded Ukraine, disrupting global energy supplies. Governments suddenly confronted the need to secure conventional energy supplies at affordable costs.
Even as the German government continued to promote the energy transition, the chancellor Olaf Scholz shuttled to Senegal and Canada to plead for new supplies of LNG and then to Kazakhstan for oil. Energy security and the urgency of economic growth appear to be why the Starmer government is not opposing the development of the Rosebank and Jackdaw projects in the North Sea.
The near blackout in Britain in January this year, caused by the conjunction of cold weather, low wind production and unavailable cross-border transmission lines, demonstrated the glaring imbalance between rapid growth in renewable energy on the one hand, and insufficient infrastructure and lack of alternative supplies on the other. Natural gas is an essential component of an electric power system that is heavy on intermittent renewables that depend on wind and sun. The shutdown of Heathrow airport last month provided a bracing preview of what can happen when electric power is disrupted.
The path to energy transition faces another kind of disruption: the sharp divide in priorities between the developed countries of the Global North and the developing countries of the Global South.
Wealthy countries can seek to make climate a top issue. But not developing countries. With per capita incomes only 5 to 10 per cent that of developed countries, they also have to focus on economic growth, reducing poverty and improving health. Malaysia’s prime minister Anwar Ibrahim summed up the divide this way: “The need for transition”, he said, must be balanced against the “need to survive, to ensure that our present policies eliminating poverty, in providing education health and basic infrastructure [are not] frustrated because of the dictates of others that do not place adequate consideration on what we have to face”. There is no doubt who he meant by the “others”.
For many developing countries, oil and gas are critical components of their economic strategies, and for some it is not easy to forsake inexpensive coal. An estimated 30 per cent of the world’s people do not have access to modern energy but rather use wood and waste for indoor heating and cooking – at a terrible cost in terms of health, including, according to the World Health Organisation, over three million premature deaths. For many of those people, the most urgent transition is not to wind and solar but shifting away from wood and waste to cylinders filled with liquefied petroleum gases for cooking and heating.
Minerals have recently been recognised as an unanticipated constraint on energy transition. The shift to wind, solar, electric vehicles and batteries requires a great increase in the availability of minerals. The International Energy Agency describes the energy transition as a shift from a “fuel-intensive” to a “mineral-intensive” energy system. Electric cars, for example, use between two and a half and three times as much copper as a conventional car. A fast transition would put inordinate stress on the global mining supply system. The capacity to respond quickly is simply not there. It takes, on average, about 16 years to bring a major new mine from discovery to production, owing to technical, political and permitting challenges.
Geopolitics — great power rivalry between China and the US — compounds the mineral constraint. Chinese companies have a leading role in global mining, and China dominates the crucial processing that turns minerals into metals. The tension is already evident in President Trump’s March 20 executive order calling critical minerals a “national emergency” and in China’s new controls on rare earths exports to the US on the grounds they are also used in the manufacture of weapon systems.
And now there is a new factor: the huge AI-driven race to build data centres, which will require outsized growth in electric power supplies. It is estimated that data centre electricity use in the US will increase from 4 per cent of total electricity supply to about 10 per cent by 2030. Similar calculations are being made in other countries.
Small nuclear reactors are something for the 2030s. For now, some of the new supplies will be generated by wind and solar. But a significant increase in natural gas-generated electricity will be necessary, and that is one reason for increasing projections for future global demand for LNG. And then, on top of all the other challenges, new turbulence and barriers are arising from trade wars, tariffs, protectionism and the increasingly shaky relationships between nations.
Technological advance is central
These are the realities that are impelling the rethink of the energy transition, which will be balanced against the need for energy access, security and affordability. The restructuring of energy demand and flows in the coming years creates difficult choices between higher costs on the one hand, and protecting consumers and halting the deindustrialisation of Britain and Europe on the other.
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Building the supply chains to support the transition and energy security will demand co-ordination by governments and the private sector to improve logistics and infrastructure, permitting and regulatory processes, technology flows, finance and worker training. As these supply chains are reconfigured in the future, it makes sense that they be diverse rather than geographically concentrated. But all of that will be more difficult in this new, more volatile and fragmenting world.
Ever since Darby’s breakthrough in Coalbrookdale more than three centuries ago, technological advance has been central to the continuing evolution in energy production. Wind and solar and electric cars are now well-established industries, although the heavy dependence on China is becoming problematic amidst rising geopolitical and trade tensions and offshore wind has run into headwinds of its own in terms of supply chains and costs. Competitive new low and zero-emission technologies are needed, and that will require technical and commercial advances in such technologies as carbon capture, hydrogen, geothermal, large-scale electricity storage and biofuels.
The renewed support for nuclear energy, after years of dormancy, is timely, owing to what nuclear offers: carbon-free baseload electricity generation. Public and private investment in both fission and fusion is growing, including from venture capital and large tech firms. Digitalisation and AI could have much impact on energy supply and energy use. Also essential is investment in new ideas and technologies that are still at a very early stage.
Today’s energy transition is meant to be fundamentally different from all preceding energy transitions, being transformative rather than additive. For the most part worldwide, it is proving to be, as in the past, a case of addition not replacement. The wide range of challenges facing the transition mean that it will not unfold in a linear way.
Instead, it will continue as it already is: multidimensional, developing at varying rates of speed in different regions with different mixes of technologies and, definitely, with different priorities. That reflects the complexities of the energy system that is foundational for the modern world. It also makes clear that continuing investment in conventional energy will be a necessary part of the energy transition, for it is not well understood that oil and gas fields decline every year.
The energy transition is likely to be more successful if it also addresses economic growth and energy security, as well as energy access for the billions of people in the developing world who currently do not have it.
Daniel Yergin is co-author with Peter Orszag and Atul Arya of The Troubled Energy Transition in the new issue of Foreign Affairs. His most recent book is The New Map: Energy, Climate, and the Clash of Nations (Penguin). He is vice-chairman of S&P Global
