WEBVTT - How Asia’s ‘Ukraine moment’ is supercharging the energy transition 0:00:00.080 --> 0:00:05.000 Welcome to Zero. I am Akshatrati. This week Asia's Ukraine Moment. 0:00:19.280 --> 0:00:21.640 It's been more than three months since the US attacked 0:00:21.640 --> 0:00:25.400 Iran and Iran responded by closing the Strait of hormones. 0:00:26.640 --> 0:00:29.000 The world has moved beyond the idea that this is 0:00:29.040 --> 0:00:32.440 a short term crisis, and many countries are now beginning 0:00:32.479 --> 0:00:35.400 to take longer term measures to cope with the disruption 0:00:35.640 --> 0:00:38.360 to nearly twenty percent of the world's oil and gas 0:00:38.360 --> 0:00:42.720 supply that used to flow through the strait. I've been 0:00:42.760 --> 0:00:46.239 tracking what kind of measures countries are taking, and all 0:00:46.280 --> 0:00:48.920 that reporting, I'm pleased to say, is now a big 0:00:48.920 --> 0:00:52.199 feature for Bloomberg News, with great charts and photos that 0:00:52.320 --> 0:00:54.440 I hope you will read. We will link it in 0:00:54.480 --> 0:00:58.080 the show notes. But as with any story, there's much 0:00:58.120 --> 0:01:01.480 more to talk about than ends up on the page. 0:01:02.240 --> 0:01:05.959 This energy shock, after all, comes just four years after 0:01:06.000 --> 0:01:09.640 the other one that was precipitated by Russia's attack on Ukraine, 0:01:10.480 --> 0:01:13.360 and dual shocks of this kind, like those in the 0:01:13.440 --> 0:01:18.000 nineteen seventies, can have a deep impact on the energy system. 0:01:18.280 --> 0:01:21.039 So to discuss the story, I have invited my editor 0:01:21.080 --> 0:01:24.639 Peter Guest to ask me the questions instead, Peter, welcome 0:01:24.640 --> 0:01:25.600 to the show. Thank you. 0:01:26.240 --> 0:01:29.400 So actually we're recording this May twenty seven, and things 0:01:29.440 --> 0:01:32.080 may change. But what's the state of the closure of 0:01:32.120 --> 0:01:32.920 the Strait of Hormones. 0:01:33.480 --> 0:01:38.160 It is virtually closed. So we are colleagues here track 0:01:38.480 --> 0:01:41.039 the ships that go through the Strait of Hormues, but 0:01:41.080 --> 0:01:45.040 the numbers are something like ninety to ninety five percent closure. 0:01:45.200 --> 0:01:49.480 So some ships still go through, but almost no oil 0:01:49.520 --> 0:01:53.400 and gas from the inside of the strait is getting 0:01:53.400 --> 0:01:55.760 out these days. And it's been the case for the 0:01:55.800 --> 0:01:57.000 last three months. 0:01:57.480 --> 0:02:00.520 And even if the strait was to open in immediately, 0:02:00.720 --> 0:02:02.360 how serious would just that three months be. 0:02:02.800 --> 0:02:06.640 So before the closure there were about one hundred ships 0:02:06.680 --> 0:02:10.520 going in and out on a daily basis. It's going 0:02:10.560 --> 0:02:13.520 to take months if the street was completely open, for 0:02:13.639 --> 0:02:16.520 all the hundreds of ships that are trapped inside the 0:02:16.520 --> 0:02:20.040 street just to get out. And so the soonest you 0:02:20.040 --> 0:02:23.799 could see relief is months out. And if you look 0:02:23.840 --> 0:02:27.120 at the future price of oil, which is a good 0:02:27.160 --> 0:02:32.440 indicator of how the market thinks this disruption will play out, well, 0:02:32.919 --> 0:02:35.800 oil prices are not expected to fall below the seventy 0:02:35.880 --> 0:02:38.520 dollars a barrel, which is what it was before the 0:02:38.560 --> 0:02:41.920 war till until twenty twenty eight. And it isn't just 0:02:42.000 --> 0:02:44.720 high prices, right, it's also volatile. These things have swung 0:02:45.400 --> 0:02:47.840 often just on the basis of a news report from 0:02:47.840 --> 0:02:50.359 the Iranian media or a Trump tweet. Yes, I mean 0:02:50.639 --> 0:02:52.880 the last three months, you know, we could say the 0:02:52.919 --> 0:02:56.000 oil price has hovered around one hundred dollars a barrel, 0:02:56.360 --> 0:03:01.280 but really a post from Trump on truth social will 0:03:01.360 --> 0:03:04.120 drop it five to ten percent sometimes, and then a 0:03:04.200 --> 0:03:08.800 denial from the Iranian semi official Fars news agency will 0:03:08.800 --> 0:03:11.640 increase it again two to four percent. And it just 0:03:11.760 --> 0:03:15.040 happens far too often. But I think one hundred dollars 0:03:15.160 --> 0:03:19.840 is sort of a psychological number that plays on people's 0:03:19.880 --> 0:03:24.760 mind that energy has become far too expensive. 0:03:24.760 --> 0:03:28.160 To use given the scale of that disruption. Now, why 0:03:28.200 --> 0:03:29.680 hasn't the price gone up even more? 0:03:29.960 --> 0:03:34.280 Yeah? So, we had Jason Border of Columbia University on 0:03:34.280 --> 0:03:38.840 the podcast one week after the war began, and he 0:03:38.960 --> 0:03:43.000 described the closure of the strait as the nightmare of 0:03:43.200 --> 0:03:47.120 all scenarios for the oil and gas markets, and he 0:03:47.240 --> 0:03:50.080 expected the price to grow up. And you know, since 0:03:50.080 --> 0:03:52.680 then he's been giving many more interviews about this, and 0:03:52.720 --> 0:03:56.040 he's like I am still surprised why the price has 0:03:56.080 --> 0:03:59.080 not gone up to two hundred dollars a barrel. Now 0:03:59.200 --> 0:04:01.440 we know there are a few factors that have played 0:04:01.480 --> 0:04:04.360 a role to keep the price at only about one 0:04:04.400 --> 0:04:08.720 hundred dollars a barrel. One is that before the war started, 0:04:08.760 --> 0:04:12.480 there was already more supply on the market than there 0:04:12.560 --> 0:04:15.440 was demand, so there was an expectation something like three 0:04:15.480 --> 0:04:19.360 million barrels a day higher supply this year relative to 0:04:19.400 --> 0:04:22.440 how much demand there was. There was a bunch of 0:04:22.920 --> 0:04:27.839 oil sanctioned oil that was floating on ships in the ocean, 0:04:28.760 --> 0:04:33.880 mostly Russian and Iranian oil. That oil was then unsanctioned 0:04:33.880 --> 0:04:37.760 by America during the week's past, and much of that 0:04:37.839 --> 0:04:42.680 oil found buyers in Asia, including in India. And there 0:04:42.680 --> 0:04:46.520 are two pipelines, one from Saudi Arabia going to the 0:04:46.560 --> 0:04:50.479 Red Sea which is not blocked, and one from the 0:04:50.600 --> 0:04:53.760 Ue going into the Arabian Sea, which is allowed for 0:04:53.920 --> 0:04:57.680 something like five to seven million barrels of oil per 0:04:57.800 --> 0:05:02.480 day to get out. Still, before the war, nearly twenty 0:05:02.560 --> 0:05:06.080 million barrels per day was coming out. So it's still 0:05:06.120 --> 0:05:10.039 a pretty bad shock, but the price doesn't reflect it, 0:05:10.279 --> 0:05:12.880 and we keep getting told by analysts that at some 0:05:13.000 --> 0:05:16.360 point this physical shortage will show up in price. 0:05:17.240 --> 0:05:19.760 Let's see, and as we say, the price isn't necessarily 0:05:20.520 --> 0:05:23.359 the deepest signal of what's going on. It tends not 0:05:23.560 --> 0:05:26.000 all of other things. But how are we actually done 0:05:26.000 --> 0:05:31.719 to see supply shortages impact countries, economies, individuals, businesses around 0:05:31.760 --> 0:05:33.680 the world. Where are we seeing the greatest impact? 0:05:33.800 --> 0:05:36.480 As you know, the fossil fuel industry just has these 0:05:36.520 --> 0:05:39.560 boom and bus cycles, and they go through a high 0:05:39.560 --> 0:05:43.400 price and a low price environment pretty much cyclically. Almost 0:05:43.440 --> 0:05:46.400 every decade, there'll be a point where prices go up 0:05:46.760 --> 0:05:51.640 a lot, and countries, especially feel importing countries have developed 0:05:51.640 --> 0:05:54.719 a playbook on how to deal with high energy prices, 0:05:55.440 --> 0:05:58.520 and so what we typically see is rich countries that 0:05:58.880 --> 0:06:03.360 have money to spend will try and help consumers not 0:06:03.400 --> 0:06:07.279 feel that shock by either cutting fuel taxes or directly 0:06:07.320 --> 0:06:10.880 subsidizing fuels at some point, and poorer countries, which do 0:06:10.960 --> 0:06:15.640 not have that physical capacity, will typically put out notifications 0:06:15.680 --> 0:06:19.080 around be more frugal with your energy used, try to 0:06:19.120 --> 0:06:22.320 work from home, if you can, make public transport cheaper 0:06:22.360 --> 0:06:25.800 for people to use. And we saw in the aftermath 0:06:25.839 --> 0:06:29.320 of the war, within the first few weeks those types 0:06:29.400 --> 0:06:33.159 of immediate, short term measures being put in place. The 0:06:33.279 --> 0:06:37.480 International Energy Agency has put a policy tracker where it 0:06:37.520 --> 0:06:39.480 looks at all the countries that are doing it, and 0:06:39.520 --> 0:06:42.919 we put that in our story and we see something 0:06:43.000 --> 0:06:47.680 like eighty countries have had some form of energy conservation 0:06:47.839 --> 0:06:53.080 measure or some form of pricing management measure. But these 0:06:53.120 --> 0:06:56.960 are short term measures, and the longer this crisis lasts, 0:06:58.160 --> 0:07:01.880 the weaker they are in impactors on actually doing the 0:07:01.960 --> 0:07:04.240 job that they're supposed to do, which is protect the consumer. 0:07:04.560 --> 0:07:06.320 Maybe took me through some of those measures, all sort 0:07:06.360 --> 0:07:07.040 of things that we've seen. 0:07:07.279 --> 0:07:10.640 So Philippines is a good example because it probably deployed 0:07:10.760 --> 0:07:14.960 some of the most number of these measures. They instituted 0:07:15.080 --> 0:07:19.080 a four day work week for public officials. They encourage 0:07:19.120 --> 0:07:22.440 that people limit the use of air conditioning to twenty 0:07:22.440 --> 0:07:28.360 four degrees celsius. They said all government officials should end 0:07:28.520 --> 0:07:32.880 any non essential travel. You know, in some cases, and 0:07:32.920 --> 0:07:35.560 there's not just the Philippines, but a few countries have 0:07:35.640 --> 0:07:39.240 declared a national energy emergency, allowing them to do things 0:07:39.320 --> 0:07:42.720 that in normal operation they won't be able to. Philippines 0:07:42.760 --> 0:07:47.280 has also made bus rides free and has tried to 0:07:47.760 --> 0:07:50.600 encourage people to work from home if they can. 0:07:50.840 --> 0:07:52.680 Well, I mean these aren't quite short term measures, right 0:07:52.720 --> 0:07:54.800 as you say, there's a limited amount of fiscal space 0:07:54.840 --> 0:07:56.960 to keep on subsidizing. So am we starting to see 0:07:57.560 --> 0:08:00.880 now three months in more comprehensive long term shifts start 0:08:00.880 --> 0:08:01.520 to come into play. 0:08:01.760 --> 0:08:05.600 Yeah, So this is something that right on the weekend 0:08:05.640 --> 0:08:07.760 of the war is something that we and the Green 0:08:07.800 --> 0:08:13.480 team started discussing because we experienced what happened when Russia 0:08:13.480 --> 0:08:17.160 attacked Ukraine and the policy response that came from European 0:08:17.200 --> 0:08:20.520 governments within weeks, and so this time we wanted to 0:08:20.520 --> 0:08:25.920 be prepared because if countries put policies in place, that 0:08:26.000 --> 0:08:29.720 has much longer term impact on how the energy system works. 0:08:30.200 --> 0:08:33.040 So you know, all of the team was like looking 0:08:33.120 --> 0:08:36.200 for places where countries start to make these policy changes. 0:08:36.880 --> 0:08:41.240 And unlike in twenty twenty two, where there was a 0:08:41.360 --> 0:08:45.439 clear aggressor in Russia and there was a clear dependence 0:08:45.480 --> 0:08:48.120 in Europe from Russia for all the fossil fuels they 0:08:48.160 --> 0:08:52.319 were importing, and there was some form of coordination within Europe, 0:08:52.800 --> 0:08:57.200 it took much longer for Asia to react in policy 0:08:57.280 --> 0:09:00.920 terms than it took Europe to react when the twenty 0:09:00.960 --> 0:09:04.640 twenty two crisis played out, but we have seen policies 0:09:04.640 --> 0:09:07.240 come through. So again I'll bring up the example of 0:09:07.240 --> 0:09:10.440 Philippines because it's an example where it didn't just do 0:09:10.520 --> 0:09:13.600 the short term things. It started thinking long term. So 0:09:13.960 --> 0:09:17.000 it put out loan programs for people to get rooftop 0:09:17.080 --> 0:09:22.360 solar and to get electric bikes. It had a bunch 0:09:22.440 --> 0:09:25.320 of renewable projects that it had approved and some of 0:09:25.320 --> 0:09:29.280 them were even constructed, and it put out a dictat 0:09:29.360 --> 0:09:31.920 saying we will connect all these to the grid by 0:09:31.920 --> 0:09:35.000 the end of April twenty twenty six. Not all of 0:09:35.000 --> 0:09:37.640 them happened, but we know from on the ground reporting 0:09:37.679 --> 0:09:40.880 that many of them did get sped up as a result. 0:09:41.600 --> 0:09:45.360 We also saw long term measures in Europe because despite 0:09:45.640 --> 0:09:51.320 the crisis hitting Asia the hardest this time around, European 0:09:51.679 --> 0:09:54.240 oil and gas prices have also gone up. So the 0:09:54.320 --> 0:09:58.000 EU came out with a large plan called Accelerate EU, 0:09:58.520 --> 0:10:02.160 which looks at trying to electric the economy as fast 0:10:02.160 --> 0:10:05.040 as possible. But it's the European Union they're putting out 0:10:05.080 --> 0:10:07.760 a statement. It's countries that have to put out the policies. 0:10:08.280 --> 0:10:10.840 The first one to come out with a clear policy 0:10:11.240 --> 0:10:16.600 stance was France, and France has for the past few 0:10:16.640 --> 0:10:21.720 years since the Ukraine crisis, actually have more electricity than 0:10:21.720 --> 0:10:23.439 it consumes. So it has become one of the biggest 0:10:23.480 --> 0:10:27.480 exporters of electricity to the rest of Europe, and it 0:10:27.520 --> 0:10:30.800 would much prefer if that electricity was used domestically, and 0:10:30.880 --> 0:10:32.800 so it came out with a plan to try and 0:10:33.000 --> 0:10:36.400 increase the deployment of electricity consuming devices. So there are 0:10:36.440 --> 0:10:39.959 now subsidies that they already had on electric cars and 0:10:40.120 --> 0:10:42.960 on heat pumps, but they've been doubled in price. They've 0:10:43.000 --> 0:10:47.240 also become more targeted. So new homes that are being 0:10:47.240 --> 0:10:50.120 built in France can no longer as of the end 0:10:50.160 --> 0:10:52.640 of this year, have a gas boiler in them. They 0:10:52.679 --> 0:10:55.640 will have to come up with a heat pump. Similar 0:10:55.679 --> 0:10:58.520 policies were also brought in here in the UK where 0:10:58.520 --> 0:11:02.040 we are where new homes cannot have gas boilers now 0:11:02.080 --> 0:11:04.720 they'll have to have heat pumps. There's also been pushed 0:11:04.760 --> 0:11:07.600 to try and increase the sale of electric cars, so 0:11:07.640 --> 0:11:11.600 we saw policy changes in Germany and Spain where governments 0:11:11.600 --> 0:11:16.000 are spinning up the network for electric car charging, and 0:11:16.040 --> 0:11:20.559 that alongside the existing incentive that they have to buy 0:11:20.600 --> 0:11:25.439 electric cars. We've already seen electric car sales numbers skyrocket, 0:11:25.960 --> 0:11:29.720 so it is still early days, but we are starting 0:11:29.720 --> 0:11:31.960 to see policy change, and this policy change is what 0:11:32.080 --> 0:11:33.840 will really make a difference. 0:11:34.640 --> 0:11:37.600 So we'll come back to twenty twenty two, but in 0:11:37.640 --> 0:11:40.240 your PC, we actually start further back and look at 0:11:40.240 --> 0:11:43.240 the energy stock that happened in the nineteen seventies and 0:11:43.280 --> 0:11:46.720 how structural changes happened. Then maybe come back to that comparison. 0:11:47.480 --> 0:11:49.440 First of all, what happened then how did it reshape 0:11:49.440 --> 0:11:50.040 the energy mix? 0:11:50.320 --> 0:11:53.360 So the nineteen seventies oil shock, two of them, one 0:11:53.400 --> 0:11:56.320 in nineteen seventy three because of the Yom Kippur War, 0:11:56.800 --> 0:11:59.959 and then the nineteen seventy nine oil crisis was precipitated 0:12:00.040 --> 0:12:03.559 by the Iranian Revolution. Both those shocks are talked about 0:12:04.000 --> 0:12:08.800 a lot because of the share of the global oil 0:12:08.880 --> 0:12:14.319 supply that was disrupted as a result. So really, until 0:12:14.520 --> 0:12:19.320 this energy crisis in twenty twenty six, no energy supply 0:12:19.400 --> 0:12:21.959 shock had been as large as the supply shocks in 0:12:21.960 --> 0:12:25.240 the nineteen seventies. And I wanted to look at the 0:12:25.320 --> 0:12:29.640 nineteen seventies because there is something powerful that happens when 0:12:29.640 --> 0:12:34.280 there are these deep shocks coming in quick succession, so 0:12:34.320 --> 0:12:40.000 seventy three seventy nine, six years apart. We have very 0:12:40.120 --> 0:12:44.640 oil dependent economies, and so what we saw after the 0:12:44.679 --> 0:12:49.000 seventies is a series of policy changes, both in America 0:12:49.040 --> 0:12:53.080 and Europe that led to, for example, in the electricity mix, 0:12:53.480 --> 0:12:57.440 a rapid decline in oil consumption. So countries like France 0:12:57.520 --> 0:13:02.880 and Japan put their government might behind building nuclear power plants. 0:13:03.280 --> 0:13:06.760 Nuclear had just started to become a real source of 0:13:07.679 --> 0:13:11.120 power for the world Atoms for Peace program that started 0:13:11.120 --> 0:13:14.960 after World War Two, but really France and Japan and 0:13:15.040 --> 0:13:19.160 the scale of their deployment tens of reactors within a 0:13:19.200 --> 0:13:22.920 decade that were built, allowed nuclear to become cheap and 0:13:22.960 --> 0:13:28.800 more widely accessible, and oil disappeared from the European electricity 0:13:28.880 --> 0:13:34.080 mix within a decade. In the US and in Canada, 0:13:34.280 --> 0:13:38.240 we saw some nuclear deployment but also the return of coal. 0:13:38.559 --> 0:13:42.000 So oil had started to replace coal because oil was 0:13:42.080 --> 0:13:46.079 a better energy source and was cheaper. So there were 0:13:46.120 --> 0:13:49.160 both sort of positive things because you got a non 0:13:49.240 --> 0:13:51.840 carbon source in nuclear, but a negative thing in that 0:13:51.960 --> 0:13:57.400 coal returned. We also saw that countries used the moment 0:13:57.840 --> 0:14:01.400 to come up with fuel efficiency standard so before the seventies, 0:14:02.280 --> 0:14:05.480 car makers could make whatever cars they wanted. But after 0:14:05.520 --> 0:14:08.120 the seventies and nineteen seventy four is when the US 0:14:08.200 --> 0:14:13.240 introduces the car fuel efficiency standards. Suddenly, within a decade, 0:14:13.640 --> 0:14:18.120 cars are essentially going twice the distance per gallon compared 0:14:18.120 --> 0:14:20.400 to the cars that you could buy in the nineteen seventies, 0:14:20.840 --> 0:14:25.240 and the numbers are rather astonishing. US oil consumption actually 0:14:25.280 --> 0:14:28.480 declined in the eighties before it started to rise again 0:14:28.520 --> 0:14:31.360 because oil became cheap again in the eighties, But that 0:14:31.520 --> 0:14:36.160 policy had an impact not just in America, in Europe too, 0:14:36.240 --> 0:14:40.000 So Europe did not come up with fuel efficiency standards 0:14:40.000 --> 0:14:43.920 still the nineties, and yet because of high fuel prices 0:14:44.200 --> 0:14:47.840 and the availability of more fuel efficient cars and smaller cars, 0:14:48.480 --> 0:14:51.840 even the mileage of European cars improved in that time. 0:14:52.400 --> 0:14:55.239 So to me, the nineteen seventies were just an astonishing 0:14:55.400 --> 0:14:59.040 time to see how the energy makes can rapidly change 0:14:59.600 --> 0:15:02.960 when with a crisis, and I wanted to see if 0:15:03.000 --> 0:15:06.160 there were parallels from that time to now. 0:15:06.440 --> 0:15:09.920 And that change comes as a result of combination of policy, 0:15:10.600 --> 0:15:15.600 consumer action, and technology. Right, fuel efficiency this time around, 0:15:16.080 --> 0:15:17.720 it's going to be the same. Right this time the 0:15:17.720 --> 0:15:21.360 technology is electric correct. This time it is the same 0:15:21.440 --> 0:15:26.560 three steps, but more options to play for. So yes, 0:15:26.680 --> 0:15:29.520 you could, if you're a country so committed to nuclear, 0:15:30.280 --> 0:15:33.480 choose to move away from natural gas to nuclear. But really, 0:15:33.800 --> 0:15:37.360 right now most countries are looking to an option that 0:15:37.600 --> 0:15:40.520 was not available in the nineteen seventies, which is being 0:15:40.520 --> 0:15:43.960 able to build cheap solar and wind and combine them 0:15:44.000 --> 0:15:48.520 with batteries. So on the electricity mix there are more fuel. 0:15:48.320 --> 0:15:53.720 Switching choices available. And then on efficiency side, it's not 0:15:53.840 --> 0:15:56.560 just trying to make your internal combustion engine, which is 0:15:56.600 --> 0:16:00.560 now one hundred and fifty years old, that much more efficient. 0:16:01.560 --> 0:16:04.760 It is going electric. So now with an electric car 0:16:04.880 --> 0:16:07.080 you can use the same unit of energy to go 0:16:07.280 --> 0:16:10.600 three times the distance compared to a fossil fuel car. 0:16:11.440 --> 0:16:15.480 And for the first time, these electric cars are affordable, 0:16:15.560 --> 0:16:18.520 so even more than the twenty twenty two shock, twenty 0:16:18.560 --> 0:16:21.520 twenty six is a time when the number of car 0:16:21.560 --> 0:16:25.120 models that are available, the affordability of those car models, 0:16:25.440 --> 0:16:27.880 and the number of countries where we are seeing the 0:16:27.920 --> 0:16:33.440 sales is astonishingly large. So you get this difference in 0:16:33.480 --> 0:16:37.480 the twenty twenty shock, which allows you to have more options, 0:16:38.120 --> 0:16:43.040 and that is likely to shape reshape the energy system. 0:16:43.120 --> 0:16:45.760 And when we're talking about the economics of electrification and 0:16:45.800 --> 0:16:48.840 renewable energy, we're talking about China. Right, China's changed the game. 0:16:48.920 --> 0:16:49.720 Maybe you don't be through that. 0:16:50.080 --> 0:16:53.080 So China's case, which we've talked about a lot on 0:16:53.120 --> 0:16:56.800 this podcast, is one that we typically say, oh, it's 0:16:56.840 --> 0:17:02.000 the world's largest deployer of these clean andergy technologies, makes 0:17:02.000 --> 0:17:04.440 the most amount of solar and batteries and electric cars, 0:17:04.440 --> 0:17:07.639 and makes it the cheapest, and does it not just 0:17:07.640 --> 0:17:11.240 for domestic consumption, which is huge, but really for exports 0:17:11.640 --> 0:17:16.160 and makes billions of dollars as a result of those exports. 0:17:17.119 --> 0:17:21.000 But those decisions took a long time to bear fruit. 0:17:21.400 --> 0:17:25.040 And China was thinking about the disclosure of the Strait 0:17:25.040 --> 0:17:28.160 of Hormones or other choke points like the Strait of Malaca, 0:17:28.160 --> 0:17:31.760 which is close to Singapore, and what that might do 0:17:32.119 --> 0:17:35.880 to it because in a war save with America, these 0:17:35.960 --> 0:17:39.160 choke points that used to be controlled by America could 0:17:39.200 --> 0:17:43.320 be shut and suddenly this fossil fuel import dependent country 0:17:43.359 --> 0:17:45.720 that is China, which has cold but really doesn't have 0:17:45.800 --> 0:17:48.840 much oil and gas, will have to find ways to 0:17:49.240 --> 0:17:52.000 get those fuels. And so it started to do a 0:17:52.040 --> 0:17:56.520 bunch of things. One, it built a huge storage network 0:17:56.560 --> 0:18:00.600 for its oil. It also created a huge numbers of 0:18:00.880 --> 0:18:04.840 plants that convert coal right now into chemicals but can 0:18:04.880 --> 0:18:09.640 be really quickly switched to making liquid fuels or gaseous fuels, 0:18:09.800 --> 0:18:13.840 depending on whatever you want. But it also had these 0:18:14.640 --> 0:18:19.600 five year plans to create new industries that would convert 0:18:19.840 --> 0:18:24.560 its usage of energy from fossil fuels to renewables, and 0:18:24.680 --> 0:18:27.680 that took a while, but it's paying off. The energy 0:18:27.680 --> 0:18:30.719 prices in China compared to other economies, haven't gone up 0:18:30.720 --> 0:18:33.520 that much. The government has been able to absorb a 0:18:33.560 --> 0:18:37.000 bunch of it. We had reporting in April, for example, 0:18:37.080 --> 0:18:40.560 that some of the Chinese oil companies were actually selling 0:18:40.600 --> 0:18:44.560 off their cargoes to European countries where they could make 0:18:44.640 --> 0:18:47.320 more money because they had plenty of oil for themselves 0:18:47.359 --> 0:18:52.119 at that time. It's a vindication of an energy security strategy, 0:18:52.280 --> 0:18:54.320 because that is how China's thought about this. It's not 0:18:54.359 --> 0:18:58.240 really for climate goals. It's from an economic perspective and 0:18:58.280 --> 0:19:02.480 from a security perspective that it's worked out for them, 0:19:02.560 --> 0:19:04.679 and I think other countries may not be able to 0:19:04.720 --> 0:19:08.960 replicate what China has done but can certainly take advantage 0:19:09.200 --> 0:19:11.199 and learn from what China has been able to do. 0:19:15.920 --> 0:19:18.560 After the break, Peter and I discussed whether this crisis 0:19:18.640 --> 0:19:20.879 is the kick up the backside the world needed to 0:19:20.920 --> 0:19:24.320 begin the transition away from fossil fuels. And Hey, if 0:19:24.359 --> 0:19:26.280 you like what you're listening to and want to help 0:19:26.320 --> 0:19:29.159 support zero, please take a couple of seconds, give us 0:19:29.160 --> 0:19:31.920 a rating, write us a review, and share this episode 0:19:32.200 --> 0:19:35.320 with someone else who think might enjoy it. It helps 0:19:35.400 --> 0:19:37.240 new listeners find the show. Thank you. 0:19:51.000 --> 0:19:54.359 For so long the conversation has been inflected very heavily 0:19:54.400 --> 0:19:56.520 by the idea of climate concerns, But what is really 0:19:56.600 --> 0:19:59.600 driving the shifts that are kind of macro scale is security. 0:20:00.520 --> 0:20:02.720 So let's look go back to twenty twenty twenty two, 0:20:02.960 --> 0:20:07.399 because we mentioned earlier Europe has been talking about shifting 0:20:07.400 --> 0:20:10.280 to renewable energy for a variety of reasons for some time. 0:20:10.840 --> 0:20:13.840 Then February twenty twenty two, Russia launched a fall scale 0:20:13.880 --> 0:20:17.280 invasion of Ukraine. Europe is very dependent on Russian gas 0:20:17.320 --> 0:20:19.639 and suddenly has a choice to make. So it's February, 0:20:19.680 --> 0:20:22.560 it's cold. What did they do well? 0:20:22.840 --> 0:20:26.320 We had within two weeks a plan from the International 0:20:26.440 --> 0:20:29.600 Energy Agency and then from the European Union itself laying 0:20:29.640 --> 0:20:33.080 out the steps that they will take to wean the 0:20:33.160 --> 0:20:36.919 block from Russian fossil fuels. So about forty percent of 0:20:37.000 --> 0:20:40.879 its natural gas came from piped natural gas from Russia, 0:20:41.240 --> 0:20:44.239 which is a huge amount, and so the first thing 0:20:44.280 --> 0:20:47.440 they did was try to find gas from other places. 0:20:47.480 --> 0:20:51.920 There are some pipe gas networks in northern Africa, some 0:20:51.960 --> 0:20:55.040 in the Mediterranean, but that was only going to solve 0:20:55.040 --> 0:20:58.080 five ten percent of the problem. So they looked to 0:20:58.320 --> 0:21:02.120 the US, which had become the world's largest gas supplier, 0:21:02.480 --> 0:21:06.600 partly because of the nineteen seventies, where the one of 0:21:06.600 --> 0:21:09.480 the policies that the government invested in was to try 0:21:09.480 --> 0:21:13.400 and invest in the invention of fracking as we know it, 0:21:13.560 --> 0:21:16.960 so drilling for shale, and that has allowed America to 0:21:16.960 --> 0:21:19.520 become the world's largest producer of oil and gas. And 0:21:19.560 --> 0:21:21.680 so to go to America for some of its gas 0:21:21.760 --> 0:21:25.439 supplies through liquified natural gas, or to Katar, which is 0:21:25.480 --> 0:21:28.520 the other large gas supplier, then it did the thing 0:21:28.600 --> 0:21:31.360 that we expect countries in the twenty twenties to do now, 0:21:31.440 --> 0:21:34.399 which is to look to other fields like renewables and 0:21:34.440 --> 0:21:38.360 start to deploy them faster. So Europe already had one 0:21:38.400 --> 0:21:41.160 of the world's most ambitious climate goals and had targets 0:21:41.160 --> 0:21:44.560 to reach these renewables figures. But the thing that was 0:21:44.680 --> 0:21:47.600 holding it back was not money or target setting. It 0:21:47.640 --> 0:21:52.000 was bureaucracy. The like most governments are bureaucratic. You have 0:21:52.040 --> 0:21:55.400 to go through a bunch of permitting processes, environmental assessments 0:21:55.440 --> 0:21:58.879 before you can deploy your renewables solar or wind, or 0:21:58.920 --> 0:22:02.440 even transmission network that is necessary, and so we saw 0:22:02.600 --> 0:22:05.960 lots of countries really speed up the deployment. Germany is 0:22:06.000 --> 0:22:08.639 the example I reported on in twenty twenty three, which 0:22:08.720 --> 0:22:12.040 I think did the most. So we saw it past 0:22:12.160 --> 0:22:17.119 laws that made the states in Germany dedicate two percent 0:22:17.200 --> 0:22:20.840 of their land to clean energy. They reduced the number 0:22:20.880 --> 0:22:23.640 of environmental assessments that need to be done for clean 0:22:23.720 --> 0:22:27.680 energy projects. They declared many clean energy projects as national 0:22:27.720 --> 0:22:30.960 security importance. That allowed them to go through the bureaucracy faster, 0:22:31.800 --> 0:22:34.040 and suddenly we could see in the numbers. There was 0:22:34.080 --> 0:22:37.920 a boom in solar in Europe in twenty twenty two 0:22:37.920 --> 0:22:40.439 and twenty three, and then after that there was in 0:22:40.480 --> 0:22:43.400 twenty three and twenty four a boom in battery deployment, 0:22:44.200 --> 0:22:47.080 and within four years of these deployments, Europe is already 0:22:47.080 --> 0:22:52.359 taking advantage of this cheap power. So power prices in 0:22:52.440 --> 0:22:56.399 places like Spain and Portugal and Germany and even in 0:22:56.440 --> 0:23:00.000 the UK have not gone anywhere close to the levels 0:23:00.080 --> 0:23:03.320 that they had reached during the Ukraine crisis. In this 0:23:03.400 --> 0:23:06.879 Iran War crisis, so you know, we saw three hundred 0:23:06.880 --> 0:23:10.480 and four hundred percent increase in power prices in twenty 0:23:10.480 --> 0:23:13.560 twenty two. This time they went up maybe one hundred 0:23:13.600 --> 0:23:15.600 percent at one point, but for a very little period, 0:23:15.640 --> 0:23:20.080 and now they're about fifty percent higher for gas consumption today. 0:23:20.480 --> 0:23:24.040 So you can see that the playbook is changing and 0:23:24.280 --> 0:23:27.560 countries are learning that the new technology set allows you 0:23:27.680 --> 0:23:31.119 to speed up the change in the energy system in 0:23:31.240 --> 0:23:33.280 ways that wasn't possible in the past. 0:23:33.560 --> 0:23:35.479 And you say in the piece that this is this 0:23:35.560 --> 0:23:39.240 is Asia's Ukraine moment. So they're following the same pathway. 0:23:38.920 --> 0:23:44.639 Now, yes, except that unlike Ukraine, Asia doesn't have one enemy. 0:23:44.760 --> 0:23:46.560 It's not like the Middle East is the enemy, and 0:23:46.640 --> 0:23:50.000 so there isn't as much coordination and there isn't as 0:23:50.119 --> 0:23:54.480 much planning across governments as would happen in the EU, 0:23:54.640 --> 0:23:57.359 but we know there are blocks in Asia. So the 0:23:57.480 --> 0:24:00.679 RCN block is trying to build an interc cocted grid 0:24:00.800 --> 0:24:03.359 that would allow countries to be able to trade a 0:24:03.359 --> 0:24:07.239 lot of their clean energy resources that they're starting to deploy. 0:24:07.359 --> 0:24:10.320 We heard from world leaders, we heard from the South 0:24:10.400 --> 0:24:14.600 Korean president, from the Indonesian president, from the Vietnamese prime minister, 0:24:15.320 --> 0:24:19.960 all saying we want more renewables, we want more electrification. 0:24:20.560 --> 0:24:22.520 We'll see if they are able to deploy it at 0:24:22.520 --> 0:24:26.520 the scale that Europe managed. These are not countries that 0:24:26.600 --> 0:24:32.400