An Insufficient Decade

We are entering a decade of insufficiency. We’ll at once feel like we’re making insufficient progress on the climate problem and, simultaneously, we’ll have exited the era of plentiful (but destructive) power and entered an era of insufficient electrical power. The evidence is all around us. The consequences are complex.

New York joins California in sunsetting sales of new cars using fossil fuels. The US Federal Government (belatedly) commits to building a nationwide grid of EV charging stations. It seems every week brings further news of large companies building factories to make batteries for homes and vehicles.

The good news, for the world, for the environment, and for innovators, entrepreneurs and investors betting their energy and money on this transition, is that, at last, the switch-off of fossil fuels is starting.

Now the bad news. There will be a decade of insufficient power in many countries. The exit from fossil fuels seems inevitably becoming a mad dash rather than an ordered transition. This is driven by two factors:

• The growing global understanding that the climate IS being destroyed, and fossil fuels are to blame. Heat waves and droughts; hurricanes and flooding; disappearing ice caps and snow caps; dry river beds and empty reservoirs. All this year, we’ve seen apocalyptic, shocking, utterly-predictable evidence that we’re doomed unless we act fast.
• The unilateral actions of Putin’s government to invade Ukraine seem to have been bolstered by some idea that Western Europe’s dependence on Russian natural gas would be a factor cushioning it from the most severe reprisals. Instead, Europe — particularly Eastern European countries, from Germany to Macedonia and eastwards — decided to help Ukraine on the bloody battlefields, and to tough it out and do without much of the Russian energy that kept its homes warm and its factories humming. That’s going to be a monster sacrifice, come this winter, but at this time seems inevitable.
• Saudi Arabia and OPEC then dug in their heels, cutting production and boosting oil prices with the apparent aim of hurting governments in the West that aim to wind down use of oil.

Even if — as is currently wildly unlikely — Russia abandons its Ukraine mistakes and somehow returns to the table of international affairs, and even if OPEC moderates its position, the point is made: relying on fossil fuels from autocratic regimes is playing with fire. Major countries will be loath to make that mistake again.

Instead, we’ll enter a period — a decade — during which leading economies will emphasize building the post-fossil fuel future, and will start to wind down their reliance on imported fossil fuels, even before new, nation-scale renewable infrastructures are ready to take their place.

Consider the following as unconnected threads in a common narrative:

• California, struggling with a record-breaking heat wave, beseeched people to lower their power use. That this came days after the State had set a mandate to halt ICE-powered vehicle sales in favor of EVs created a juxtaposition too cute for critics to overlook. However, this is best seen, surely, as the first of such challenges, not a bumper-sticker slogan of contradiction.
• A couple of years ago, the list of EVs on sale or, even, in development was short enough that any observer could recite all players and all models. In January of this year, Car and Driver magazine attempted to list, in its words, every electric vehicle in development. It’s a very long list and one that, surely, already is out of date. This list, and the astonishing list of joint ventures between battery makers and car OEMs make it plain (this is but one example): all car makers have now made the decision to wind down or exit ICE. It’s over. Unfortunately, the same cannot yet be said for power grids and charging infrastructures.
• Pakistan saw an entire ⅓ of the country underwater, as Himalayan glaciers gave way to record melting. It relied before on natural gas from Russia and now … has few options. A request for proposal to fill much of the nation’s power needs received: zero proposals. The perhaps inevitable but miserable consequence was Pakistan negotiating with Russia to meet its energy needs. (FYI: Pakistan has a population of 236 million people.)
• As European countries saw their supply of inexpensive natural gas from Russia fall away, utilities were forced to buy supplies on open markets. Prices to consumers in many countries have risen 5-fold or more. Even large businesses are not exempt. One massive corporation conceded privately that its major businesses are, in theory protected by long-term contracts. But if their utility vendors cannot afford to deliver energy at the contracted price … Meanwhile, its minor businesses buy energy at spot prices, and have already seen prices soaring, at consumer rates.

Meanwhile, a brewing crisis: “No policy response will be able to replace the energy previously provided by gas quickly, and this reality will come to a head in the winter.” And so, we enter a decade of insufficiency. We’ll at once feel like we’re making insufficient progress on the climate problem and, simultaneously, we’ll have exited the era of plentiful (but destructive) power and entered an era of insufficient electrical power.

A decade? Politico wrote: “But the next couple of years won’t be easy. The invasion caught the EU mid-straddle in its energy transformation. A lot of the groundwork for a greener future is in place, but capacity in everything from training workers to insulate buildings and install wind towers, to cutting red tape for wind and solar permitting, redesigning grids to handle renewables and ramping up hydrogen production, is still a work in progress.” But a couple of years, even with an emergency, wartime footing, won’t get through even the partial list of hurdles the article mentions. Add to its list: ramping up infrastructures for EVs; replacing gas heaters with heat pumps; enabling green hydrogen for fleets; and more.

The expression “won’t be easy” is, to put it lightly, covering a lot of ground. In old cities in Europe, overheated cities in summer result in deaths, mainly among the elderly. In winter, the inadequate heat already available in some cities is causing deaths. Scarce energy means higher costs for consumers, and that means death. From the Economist: “Our modelling suggests that, in a normal winter, a 10% rise in real energy prices is associated with a 0.6% increase in deaths. Hence the energy crunch this year could cause over 100,000 extra deaths of elderly people across Europe.” The decade of power insufficiency means there will be plenty of pain to go around.

But it underscores the urgency now of moving beyond the dependency on cheap, but not inexpensive, fossil fuels. What does this unplanned, urgent transition mean for investors and inventors and entrepreneurs?

• Much thinking must go into valuing things by the horizons within which they’ll deliver: this winter? Within a year or 18 months. 5 years. A decade: these are the long-term ones that will erase the era of insufficiency.
• Technologies that can reliably deliver efficiencies in the very short term will have high and immediate value.
• You’ve a technology that can eke out more watts even in gas-fueled power plants? A technology that’ll get cars to go further on a liter of gasoline? If the history of past energy crises is any guide, consumers still buying internal-combustion engine vehicles will emphasize efficiency, especially as EVs start to take over the market. Similarly, software that’ll better optimize the balance of consumer solar and grid power. A generation of data center computers that guzzled power is giving way to real concerns about efficiency.
• Green technology will grow alongside complements to dirty technology — grey technologies that wring more efficiency out of existing fossil fuel use will provide short-term benefits that will be, in some instances, irresistible. Such grey technologies will gain importance, at least in the short term.

I’m uncertain how to value technologies that, while amazing, guzzle more than an appropriate share of power.

• Okay, bitcoin’s relatively easy: even before the era of scarcity, it was possible to calculate that Bitcoin’s price wasn’t far different from its cost, including climate damage. Ethereum’s transition to proof-of-stake seemed prescient and well-timed, resulting in power savings some estimate as much as 99.95%.
• What about 5G? 6G? More bandwidth, and lower latency (roundtrip delays)? But at the cost of higher, sometimes far higher power consumption.
• If one believes in a decade of transition, that includes enough time to deploy, for example, a set of step-down transformers that deliver a few percentage points more efficiency to a power grid. That perhaps wasn’t important before: it’s critical now.
• Technologies — wind turbines and solar panels — that are already efficient and widely deployed will receive, um, wind in their sails, via large-scale contracts to increase their use multifold.
• Home uses: so much to be done here. Using the moment to encourage people to watch their power usage. Use smart plugs — vampire power consumption of devices that should be idled draws the equivalent of 50 power plants. Move to heat pumps rather than either fossil-fuel heat or standard air conditioning. Computer makers and more need to be more assertive in moving to ‘sleep’ modes.
• Batteries: Already, at the end of 2021, battery projects with total output by 2025 in excess of 300 GWh/year were in the works. Subsequent announcements by Honda and Tesla and LG and GM and more have likely doubled that. Strains on supply and know-how will remain; the challenges associated with clean and ethical supply of raw materials are grave, but this is beyond doubt a focus of a decade of growth, with battery production rising more than 10-fold in the next three years alone.
• Cultural attitudes. Expect to see a wave of “how to” articles and experts and videos, YouTube channels and more: how to save energy; how to stay warm in the face of cold; how to stay cool in the face of heat; how to invest best to deal with these. Some will be corny and some will be silly, but they’ll all be a part of the turning about of culture.
• One thing that surely must emerge in the decade of insufficiency is a real understanding of the consequences of our actions. We’re faced with cataclysmic risk, and — if we’re at all lucky — one outcome must be that consumers, particularly but not only in the rich world, must learn that their actions always have consequences. No energy source comes without environmental and social cost. Thus, fearmongering should be replaced by, or at least supplemented with, appreciation of the balance of risks.

And then, politicians. Some, one hopes, will call upon banks and industry and allies and people and get the problem squarely in sight. Tax policies will encourage efficiency and discourage waste. Others, one knows, will use this to monger fears and jealousies. And wars. Ugh. Decades ago, during the OPEC energy crisis of the (decade), president Jimmy Carter urged wearing sweaters to stay warm. He also installed the first set of solar panels on the White House roof. Somehow, these activities led to him being lampooned. The challenge is real: how can political leaders be seen as strong while leading in lower energy consumption.

.(Though, then, there is a new opportunity for treaties and alignments for problem solving.)