Energy Addition is what’s required

Transition is moving from one state or activity to another. Within energy, transition is directed toward the destruction of the fossil fuel industry and accelerating solar and wind. Moreover, faster is only helpful, if you are headed in the right direction. Our world needs both traditional fossil and renewable energies! 

GOVERNMENTAL “GUIDANCE” AND PRIMING THE TRANSITION PUMP 

The United Nations Framework Convention on Climate Change (UNFCCC) entered into force on March 21, 1994. Today, 198 countries, including the U.S.,¹ have ratified the Convention with the stated goal of preventing “dangerous” human interference with the climate system.² In December 2015, at the UN Climate Change Conference (COP21) in Paris, France, 196 of the 198 parties entered a legally binding international treaty on climate change. The Paris Agreement’s overarching goal is to hold “the increase in the global average temperature to well below 2°C above pre-industrial levels” and pursue efforts “to limit the temperature increase to 1.5°C above pre-industrial levels.³ 

At COP25 (Conference to the Parties) in Chile, when it was noted that commitments to that point under the Paris Agreement were not enough to limit global rise to 1.5°C, a Climate Ambition Alliance was formed, working towards achieving net-zero CO2 emissions by 2050. Other initiatives continued to emerge, such as the Breakthrough Agenda, which was launched at COP26 with 45 members, including the U.S. This collaboration of the International Energy Agency (IEA), International Renewable Energy Agency (IRENA),⁴ and the Marrakech Partnership is committed to work together to accelerate innovation and deployment of clean technologies, making them accessible and affordable for all.⁵  

Breakthrough’s 179-page 2023 Report⁶ provides details on the members’ progress, summarizing that the world needs to rapidly increase the number of demonstration projects of clean energy. This included the World Bank aligning all new operations with the Paris Agreement by July 1, 2023, with the International Finance Corporation and Multilateral Investment Guarantee Agency aligning 85% of their sectoral operations in the same period, rising to 100% by July 1, 2025. In practice, since money is fungible, emerging countries that also are growing their oil and gas industries can be denied funding for non-oil and gas projects, such as port expansion in Guyana.⁷    

Transition groups are popping up, seemingly everywhere, including the Race To Zero (RTZ). This UN-backed organization is rallying non-state actors to take rigorous and immediate action to halve global emissions within this decade.⁸ TRZ has enjoyed explosive growth in its two years, with more than 10,000 members, including 7,000 companies and 530 financial institutions, and others representing over 12% of the global population, 15% of GDP and more than 10% of global CO2 emissions.  

RTZ’s charter calls for members to Pledge, Plan, Proceed and Publish. The Pledge calls to reach net zero greenhouse gas (GHGs) as soon as possible, and by mid-century, 2050 at the latest, to limit warming to 1.5°C, with no or limited overshot. Key goals call for members to: 

• Develop targets that must cover all GHG emissions: including scopes 1, 2 and 3  
• Phase down and out unabated fossil fuels as part of a global transition 
• Publicly disclose a Transition Plan (or equivalent for relevant actor types). 

Just-published RTZ Report 3.09 introduced a fifth “P” of “Persuade” to align member policy lobbying and advocacy activities with their net zero operations. In an open letter, the global giant coal producer, Fortescue, jumped on the persuading requirement with their statement, “There is scientific consensus that rising humidity and heat pose a serious and growing threat to humanity. At temperatures as low as 30  ̊C, under conditions of high humidity, the human body struggles to cool down by sweating. Death can result. Our actions today will determine how many millions of people die or are forced to migrate.¹⁰ 

The International Renewable Energy Agency (IRENA) and Climate Policy Initiative (CPI) analyzes investment trends by technology, sector, region, and source of finance, and identifies financing gaps to support informed policymaking for the deployment of renewables to accelerate the energy transition. They report investments are not flowing at the pace or scale needed to accelerate progress towards universal energy access; investments in off-grid renewable energy solutions in 2021, at $0.5 billion, fell far short of the $2.3 billion needed annually in off-grid solar products alone.¹¹ 

Fig. 1. International Energy Agency Executive Director Fatih Birol castigates oil and gas producers at COP 28. Image: COP 28.

While I was writing this piece, IEA Executive Director Fatih Birol (Fig. 1) said at COP28 in Dubai, “The oil and gas industry is facing a moment of truth. With the world suffering the impacts of a worsening climate crisis, continuing with business as usual is neither socially nor environmentally responsible. Producers must choose between contributing to a deepening climate crisis or becoming part of the solution by embracing the shift to clean energy.”¹²  

To meet the Paris Agreement’s 1.5°C target, the oil and gas sector must devote 50% of its investments on clean energy projects by 2030. IEA states that the industry’s engagement has been minimal so far, accounting for less than 1% of global clean energy investment. It invested $20 billion in clean energy last year, or just 2.7% of its total capital spending. Producers are taking it on the chin and being blasted that one of their most significant efforts, Carbon Capture and Storage, is somehow a sabotage effort to be able to prolong production, considered a major source of the problem.  

Fig. 2. During remarks at COP 28, U.S. Special Presidential Envoy for Climate John Kerry failed to give due credit to oil and gas operators’ efforts to reduce GHG emissions. Image: COP 28.

Mr. John Kerry (Fig. 2), the U.S. special presidential envoy for climate, a position in the Executive Office of the President of the United States, with authority over energy policy and climate policy stated, “We have no real evidence that {Chevron} and a lot of others are doing what every company needs to do.”¹³   

MIND THE GAP, BETWEEN VISION AND PROBABLE REALITY 

Contrary to Mr. Kerry’s remarks, the U.S., in particular, has made substantial progress in reducing its net GHG emissions since 2005, almost entirely due to falling energy-related CO2 emissions. Recent stagnation of overall energy demand, plus the rapid displacement of coal in power generation by natural gas, with the addition of renewable energy, have been the key energy drivers.  

The Houston-based Baker Institute for Public Policy report¹⁴ states that while continued reductions are likely, it will still be difficult for the U.S. to meet its 2025 Paris commitment of reducing net GHG emissions by 26–28% (from base 2005), much less its updated commitment of 50–52% reduction by 2030. The U.S. Environmental Protection Agency’s (EPA’s) latest report is that, as of 2021, U.S. net GHG emissions had fallen by 16.6% since 2005, and that CO2 emissions had fallen by 17.9%.¹⁵  

The Baker report projects the decline in coal (CO2 emissions) will slow, relative to the rapid descent seen since 2005. Further, with the push to electrify seemingly everything, power demand will continue to increase and, consequently, bolster demand for natural gas, and in turn boost gas-related CO2 emissions. In the longer term, growth in electric vehicles (EVs) and investment in new energy technologies and greater fuel efficiency hold tremendous promise, but they are unlikely to materially rebalance the U.S. energy system in the near term.  

Similarly, BP’s Energy Outlook¹⁶ states that while government support for the energy transition has significantly increased, CO2 emissions have increased every year since the Paris COP in 2015. The scale of the decarbonization challenge suggests greater support is required globally, including policies to facilitate quicker permitting and approval of low-carbon energy and infrastructure. Further, while oil demand declines over the period, driven by vehicle efficiency improvements and electrification of vehicles accelerate, oil will continue to play a major role in the global energy system for the next 15-20 years. 

WHAT’S DRIVING TRANSITION IS NOT ECONOMICS 

Major investors are deserting wind and solar installations, and writing off billions of dollars, as their share prices plummet.^17,18,19,20 The “Green Dream” is morphing into a nightmare of failure and financial loss.^21,22  Ford cuts EV investment after losing $36,000 on every EV it sold in third-quarter 2023,²³ and GM delayed and “rationalized” its EV plans, as consumer adoption has wavered.²⁴  

No wonder, electric vehicles are losing value at twice the rate of internal combustion engines (ICE), while insurance policies rise at twice the rate.²⁵ Hertz is losing on its EV fleet, and Australia’s Drive magazine²⁶ writes that more EV sales will actually increase demand for coal, because solar and wind generation is not up to the job of charging these batteries.  

Even after “rationalizing” travel plans with range anxiety and locating a charging station, there is a high likelihood of disappointment, even in California, of all places. “Of 126 charging stalls inspected in Los Angeles, 27% were out of order, or out of service. Others inexplicably stated, “Cash only” (with no capacity to accept) and had other payment rejection issues or charger/car incompatibilities.²⁷  

The push to electrification has an underlying premise of solar and wind generation. But, of course, neither is continuous. With renewables, storage must be part of the solution. “Battery companies are really, really risky,” says Donald Sadoway, an MIT professor, who has started a few battery ventures. He added, “many are 15 years away from a product and most will fail.”²⁸ 

COSTS 

Cost estimates to reach net zero by 2050 range from $110 trillion (per the Energy Transitions Commission²⁹) to $275 trillion (McKinsey & Co.), the latter of which represents roughly 2.6 times total global GDP for 2023. Global consultancy Deloitte estimates $5-$7 trillion per year through 2050. These are truly mindboggling numbers, even in government speak.  

For some context, the U.S. Inflation Reduction Act (IRA) contained about $369 billion in subsidies and tax breaks for green energy investments over a 10-year time, or about 1/90th of the total global investment required during that timeframe, according to the estimate by the Energy Transitions Committee. It would take almost 250 IRA-sized tranches of money to meet the levels of investment envisioned by McKinsey & Co.’s estimate.  

Now, consider that the cost of raising capital has more than doubled since the McKinsey estimate published in early 2022, and the magnitude of the real problem is shocking. The challenges of raising this level of capital, most of which would come from developed nations already mired in near-overwhelming levels of national debt, is just staggering. As for the rest of the world, particularly those with petroleum resources, Mr. N.J. Ayuk, Executive Chairman, African Energy Chamber (AEC), sums it up at COP28: ”African nations must reject promises of aid and handouts to abandon their oil and gas.” ³⁰  

If it was somehow possible to replace all fossil fuel power plants with wind and solar, think about it. We have spent trillions of dollars, but we have no more power than we had before. The Heritage Foundation, using an EPA model, has shown that even completely eliminating all fossil fuels from the United States would result in less than 0.2oC in temperature mitigation by 2100.³¹ It’s time to quit throwing taxpayers’ money into these projects and let the market dictate the solutions. 

WAY FORWARD 

First, do no harm. Recently a utility company sought permission to invest $2.54 billion to replace 1,140 mi of leak-prone pipelines. The regulators instead only authorized $900 million for 400 mi.³² There is a growing tension between utilities investing to maintain safety and reliability and regulators’ concerns over prolonging the life of gas infrastructure, locking in future use. Safety first! 

Second, add renewables without taking away fossil energy. As I outlined in my 2022 op-ed,³³ secure, reliable and low-cost energy has done more than anything else to lift the world’s standard of living. We could do well following AEC’s path, using what we have and adding renewables. They endorse an energy mix approach that allows Africa to use and sell its own hydrocarbon reserves to alleviate energy poverty, while at the same time moving toward a future in which renewable energy sources power the continent.  

The energy mix method can help more people, more quickly, because it takes a practical, people-first approach to helping those who have traditionally been left behind by the energy sector, while moving the continent towards greener energy sources. Executive Chairman Ayuk states that “600 million people on the continent have no access to electricity, and 900 million people lack access to clean cooking technologies; it’s impossible, if not altogether inhumane, to discuss climate change without looking at energy poverty.” Wise words.  

1. Michael D. Shear, “Trump Will Withdraw U.S. From Paris Climate Agreement,” New York Times, June 1, 2017, https://www.nytimes.com/2017/06/01/climate/trump-paris-climate-agreement.html; Matt McGrath, “Climate Change: US Formally Withdraws From Paris Agreement,” BBC, November 4, 2020, https://www.bbc.com/news/science-environment-54797743; and “The United States Officially Rejoins the Paris Agreement,” press statement, February 19, 2021, https://www.state.gov/the-united-states-officially-rejoins-the-paris-agreement/#:~:text=On%20January%2020%2C%20on%20his,becomes%20a%20Party%20again%20today 
2. https://unfccc.int/process-and-meetings/what-is-the-united-nations-framework-convention-on-climate-change 
3. https://unfccc.int/process-and-meetings/the-paris-agreement 
4. https://www.irena.org/, 169 member States, including the U.S. 
5. https://climatechampions.unfccc.int/wp-content/uploads/2023/09/THEBREAKTHROUGHAGENDAREPORT2023.pdf?_gl=1*1ceu06z*_ga*MTkwNTkxMjUzMi4xNzAyMTQxMzcy*_ga_7ZZWT14N79*MTcwMjE0MTM3NC4xLjEuMTcwMjE0NjQ4MS4wLjAuMA 
6. https://climatechampions.unfccc.int/wp-content/uploads/2023/09/THEBREAKTHROUGHAGENDAREPORT2023.pdf?_gl=1*1ceu06z*_ga*MTkwNTkxMjUzMi4xNzAyMTQxMzcy*_ga_7ZZWT14N79*MTcwMjE0MTM3NC4xLjEuMTcwMjE0NjQ4MS4wLjAuMA. 
7. OTC 2023, Guyana minister of energy 
8. https://racetozero.unfccc.int/system/race-to-zero/?_gl=1*vi3ymn*_ga*MTkwNTkxMjUzMi4xNzAyMTQxMzcy*_ga_7ZZWT14N79*MTcwMjE0MTM3NC4xLjEuMTcwMjE0NDQ2MS4wLjAuMA 
9. https://climatechampions.unfccc.int/wp-content/uploads/2022/06/Summary-of-and-reflections-on-Race-to-Zero-criteria-consultations-2022-2.pdf?_gl=1*1sdy1nn*_ga*MTkwNTkxMjUzMi4xNzAyMTQxMzcy*_ga_7ZZWT14N79*MTcwMjE0MTM3NC4xLjEuMTcwMjE0NjQ0NS4wLjAuMA. 
10.  https://fortescue.com/news-and-media/news/2023/12/02/open-letter-lethal-humidity-and-heat-are-already-upon-us.-our-actions-today-will-determine-how-many-millions-of-people-die-or-are-forced-to-migrate 
11. https://www.irena.org/Publications/2023/Feb/Global-landscape-of-renewable-energy-finance-2023 
12. https://energynewsbeat.co/oil-firms-face-moment-of-truth-in-climate-crisis-iea/ 
13. Wall Street Journal, 2023-12-08, ‘John Kerry and CO2 Emissions Reality’ 
14. https://www.bakerinstitute.org/research/us-cannot-meet-its-paris-commitments-through-energy-alone?utm_source=Baker+Institute+for+Public+Policy&utm_campaign=4714ec01d1-EMAIL_CAMPAIGN_2023_11_17_06_28&utm_medium=email&utm_term=0_-4714ec01d1-%5BLIST_EMAIL_ID%5D#_edn1 
15. U.S. Environmental Protection Agency (EPA), “Inventory of U.S. Greenhouse Gas Emissions and Sinks,” https://www.epa.gov/ghgemissions/inventory-us-greenhouse-gas-emissions-and-sinks. 
16. https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/energy-economics/energy-outlook/bp-energy-outlook-2023.pdf 
17. Wall Street Journal 2023-11-01, ‘Wind-Power Projects Hit by Rising Costs’ 
18. Wall Street Journal, 2023-11-02, ‘Wind Power Write-Down Cast Shadow’ 
19. Wall Street Journal, 2023-11-03, Rising Costs Present New Hurdles for Clean Energy’ 
20. Wall Street Journal, 2023-11-16,’Siemans Wind Business Stumbles’ 
21. Wall Street Journal, 2023-1-14, ‘Trade Backfires for Fuel Exporter, Wood Pellets Price Nose-Dived’ 
22. Barron’s, Vol CII,No. 46, 2023-11-13, ‘The Clean-Energy Crash: What Comes Next.’ 
23. https://insideevs.com/news/693626/ford-cuts-ev-investment-after-losing-36000-usd-every-ev-sold-q3/ 
24. Wall Street Journal, 2023-11-30, ‘GM Gives Investors $10 Billion Apology’ 
25. Wall Street Journal, 2023-11-20, “Americans Fall Out of Love With EVs’ 
26. https://thedriven.io/ 
27. Wall Street Journal, 2023-11-16, ‘A City of Broken EV Chargers in LA’ 
28. Barron’s Vol CII,No. 46, 2023-11-13, ‘How Koch’s Green Push Ended in The Red’ 
29. https://www.energy-transitions.org/financing-the-transition-the-costs-of-avoiding-deforestation/ 
30. https://energychamber.org/african-nations-must-reject-promises-of-aid-and-handouts-to-abandon-their-oil-and-gas-as-cop28-wraps-up/ 
31. https://www.heritage.org/sites/default/files/2022-06/BG3713_0.pdf The Unsustainable Costs of President Biden’s Climate Agenda Kevin D. Dayaratna, PhD, Katie Tubb, and David Kreutzer. 
32. Wall Street Journal, 2023-11-27, ‘Utilities’ Gas Investments Meet Hurdles in Some States’ 
33. https://www.worldoil.com/magazine/2022/december-2022/industry-leaders-outlook-2023/no-good-deed-goes-unpunished-1431/ 

About the Authors

Art Schroeder

Safe Marine Transfer

Art Schroeder co-founded Safe Marine Transfer, LLC in 2012, where he serves as a board member and CEO. He also co-founded Subsea Shuttle, LLC in 2019 and serves as a board member and CEO. Previously he founded Energy Valley in 2000, a company that provides money, marketing and management to commercialize and advance energy-related technologies. Prior to that, Mr. Schroeder worked 25 years for a major integrated oil company, serving in operations, engineering, construction, strategy development, and crisis management roles, both domestic and internationally. He has served on numerous civic, corporate and professional boards, including Offshore Technology Conference and the AIChE Program subcommittee since 1989. He has published over 100 technical papers and has been granted 63 patents. Mr. Schroeder is the recipient of numerous awards, including OTC’s Special Citation, Engineering, Science and Technology Council of Houston’s Lifetime Achievement Award, U.S. Department of Energy recognition for leadership building, Offshore Technology Roadmap, designation by Society of Petroleum Engineers as a Distinguished Member, SPE’s Management and Information Award, and election as a Fellow of American Institute of Chemical Engineers. He graduated from Georgia Tech with BS and MS degrees in chemical engineering, with a minor in environmental engineering, and from the University of Houston with an MBA, majoring in finance and international business.