By Jo Nova
Chris Wright, the United States Secretary of Energy, marvels that people can spend so much to achieve so little:
“Germany invested half a trillion dollars, more than doubled the capacity of its electricity grid — and today produces 20% less electricity than before that investment, selling it at three times the price.” — 13 min
“The lucky one billion — including everyone in this room — consumes about 13 barrels of oil per person per year. The other seven billion want to live like we do, but they consume about three barrels per person per year.”
It’s so nice to hear grownups talking:
Some extracts of his interview:
The tale of a remarkable transition from energy importer to energy exporter:
“Look at what’s happened in the United States. We’ve tripled liquids production in less than two decades. We are by far the world’s largest producer. We’ve more than doubled natural gas production, and it’s still growing fast.
This is phenomenal. Lower costs, lower prices — it has transformed the world. It’s hard to overstate the impact of the U.S. shale revolution and what all of you have done.
Total energy use in the US is still 72% oil and gas:
“One thing you never hear about: total primary energy consumption in the United States — over 72% now comes from just two energy sources: oil and natural gas. Record-high market share, in addition to record volumes. That doesn’t sound like a dying industry I’ve been hearing about for the last 15 years.
But when you roll over to the electricity sector, it’s a very different story.
In oil and gas production we’ve seen declining capital intensity, increasing efficiencies, and surging production. In electricity? Surging investment — gigantic amounts of money flowing in — and what’s the net result?
Almost no growth in electricity production, but significant growth in electricity prices.
The world isn’t going to copy the UK and Germany (or Australia):
“If you make electricity more expensive, and people don’t know where policy is heading, energy-intensive industry leaves your country. The United Kingdom and Germany are experts at that.
Germany invested half a trillion dollars, more than doubled the capacity of its electricity grid — and today produces 20% less electricity than before that investment, selling it at three times the price.
That is not a winning model. That is not what the world is going to duplicate.
We spend $10 trillion dollars to convert about 6% of global energy to solar and wind power:
Our industry is about physics, numbers, math — but when it comes to climate change, we check rationality at the door.
It’s only about decarbonizing and claiming we’re in the middle of an energy transition. I think we’re actually in the midst of the greatest malinvestment in human history.
Globally, about $10 trillion has been invested nominally in fighting climate change. What did we get for $10 trillion?
About 6% of global energy comes from these sources after $10 trillion of investment — and everywhere penetration is high, prices have gone up and industry has left.
If you close a factory in the Midlands and move it to Asia where it runs on coal, then ship the goods on diesel ships — that’s not fighting climate change. That’s de-industrializing your nation.
Oil, gas, and coal run the world. Full stop.
At the time of the Yom Kippur War, 85% of global energy came from hydrocarbons. That crisis launched the energy transition movement over 50 years ago.
Today? 85% hydrocarbons.
Let’s engage with reality. Oil, gas, and coal run the world. Full stop.
You can’t make a wind turbine, a solar panel, or a nuclear power plant without massive amounts of oil, gas, and coal. That’s how the world works.
The lucky one billion — including everyone in this room — consumes about 13 barrels of oil per person per year. The other seven billion want to live like we do, but they consume about three barrels per person per year…
Electricity should be getting cheaper:
For a century, electricity got cheaper and more reliable. We reversed that. Now it’s more expensive and less reliable.
If current trends continue, by 2030 blackouts could be 100 times more common.
Half the states have renewable portfolio standards. Those states have over 50% higher electricity prices than states without them.
If you do crazy things, you get bad results. See Germany. See the UK. See California.
Energy costs should be rising lower than inflation:
States with renewable portfolio standards have seen electricity prices increase at twice the rate of inflation. States that don’t have RPSs — unfortunately they also had increasing nominal electricity prices — but below the rate of inflation.
We should be seeing trends in electricity prices way below inflation.
The biggest source of electricity in the United States by far is natural gas. What has the price of natural gas done over the last 10 or 20 years? It’s plummeted. What has availability done? It’s surged.
More demand for electricity makes electricity cheaper
When people worry that AI demand will push up costs, Chris Wright points out that the US states that have grown their electricity output have also reduced their price of electricity. (Presumably this is because the states that depend on industry and manufacturing build serious generators instead of dancing around the renewable maypole.)
If you plot states that have grown their output of electricity — meaning re-industrialization or new demand — the faster the growth in demand for electricity, the lower the rise in price.
North Dakota is the champion: over 30% growth in electricity output, and electricity prices have actually declined. All the other states that have had flat or below-inflation price increases have had growing production of electricity.
And the champions on the other end — California, New York, Massachusetts, Maryland — that have had skyrocketing electricity prices: all of them produce less electricity today than they did five years ago.
There is something prosaic about ministerial titles in the USA. Chris Wright, is the Secretary of Energy and knows exactly what his primary task is, unlike the Australian Minister for Coal, Oil, Gas, Corals, Koalas and Weather Control.
h/t Scott