Decarbon Daily - Issue for June 14, 2021
Inside this issue
How is the global energy transition going? Taken together, the aggregate impact of nuclear, hydroelectric and solar/wind generation reduced global reliance on fossil fuels from ~95% of primary energy in 1975 to ~85% in 2020. In other words, energy transitions take a long time and lots of money. The IEA expects fossil fuel reliance to decline at a more rapid pace now, fueled in part by “Big Oil” companies becoming “Big Energy” companies and by a faster global EV transition. In 2021 renewables are for the first time expected to garner more capital spending than upstream oil & gas. This process is influenced by diverging costs of capital: 3%-5% for solar and wind, 10%-15% for natural gas and up to 20% for oil projects.
From JP Morgan Annual Energy Paper
However, the IEA still projects that 70%-75% of global primary energy consumption may be met via fossil fuels in the year 2040. Why don’t rapid wind and solar price declines translate into faster decarbonization? As we will discuss, renewable energy is still mostly used to generate electricity, and electricity as a share of final energy consumption on a global basis is still just 18%. In other words, direct use of fossil fuels is still the primary mover in the modern world, as the demise of fossil fuels continues to be prematurely declared by energy futurists2. As shown in the last three charts, wind/solar capacity is growing and gains in renewable electricity generation are impressive, but in primary energy terms they are much smaller.
Articles in this issue