Yergin’s Warning: Is the Energy Transition in Trouble?

I am a little late to the party, but I had to spend some time reflecting on Daniel Yergin et al.’s “The Troubled Energy Transition”. One of the benefits of being late is that I could also read Kingsmill Bond et al.’s electrotech critique on Substack.

I found value in both articles. Team Yergin are correct that the investments needed for rapid decarbonization are massive and unlikely to materialize on time. Their basic assumption that emerging countries will always choose short-term economic growth over long-term sustainability is also correct.

But Team Bond also make a number of good points. If the crux of the matter is in emerging countries, then clean technology will play a critical role in the deployment of new capacity. Electric technologies are improving rapidly, widely available in global markets, and a great boost to energy security in countries that do not have fossil fuels.

As usual, the reality is somewhere in the middle. The glass is half empty, half full.

1. The troubled energy transition and its detractors

Team Yergin make a range of arguments. If you do not have access to Foreign Affairs, I recommend Yergin’s LinkedIn post that summarizes the main points:

· The scale of the energy transition challenge is massive, up to 5% of global GDP every year. Achieving such investment at the global level is unlikely.

· Replacing fossil fuels is hard because countries need uninterrupted energy supply.

· Emerging countries prioritize economic growth over all other goals.

· China’s dominant role in mineral processing and clean technology manufacturing is a geopolitical risk.

All four points are valid to an extent, but the first one is the critical one. Countries around the world are drowning in public debt, and their ability to invest in anything is minimal. Aging populations, slowing productivity growth, and populist politics are creating a long-term debt crisis.

In this situation, the energy transition proceeds mostly based on private investment that is largely unrelated to decarbonization (China is the most notable exception to this). That pace will not be fast enough to reach net zero by 2050.

The three other points are less important. Replacing fossil fuels is hard, but solutions are increasingly available and we are learning fast.

Prioritizing economic growth does not mean rejecting clean technology. Quite to the contrary, a government that does not have abundant domestic fossil fuels can improve energy ...