Speaker 1: This is Dana Perkins and you're listening to Switched on
Speaker 1: the BNF podcast. The New Energy Outlook contains BNF's long
Speaker 1: term energy and climate scenarios for the transition to a
Speaker 1: low carbon economy. They're anchored in the real world, looking
Speaker 1: at economics but ignoring politics, which can be a hard
Speaker 1: thing to do in a year with so many elections.
Speaker 1: It takes a full year across nearly all of benf's
Speaker 1: teams to get it done. They look at electricity, industry
Speaker 1: and buildings in transport as some of the key drivers
Speaker 1: for this transition. We hope the research helps people think
Speaker 1: about how the future might play out all the way
Speaker 1: to twenty fifty as one planet on spaceship Earth and
Speaker 1: also as individual countries. Today we have David Hastert on
Speaker 1: the show. He is the global head of Economics and
Speaker 1: Modeling at BENEF and I've asked tomerlands Reese to come
Speaker 1: back as my co host so we can grill David
Speaker 1: a bit and make him tell us why it is
Speaker 1: important to think so far out into the future, as
Speaker 1: well as a bit more about the nine technologies that
Speaker 1: could make or break the low carbon transition and which
Speaker 1: ones are succeeding, and which ones might need a bit
Speaker 1: more work to put it lightly. If you like our show,
Speaker 1: make sure to subscribe or give us a review. And
Speaker 1: right now, let's listen to Tom and my conversation with
Speaker 1: David about the New Energy Outlook for twenty twenty four.
Speaker 1: So we're joined again today on Switched On with a
Speaker 1: co host. So say hello to everybody. Tom, Hi, everyone,
Speaker 1: and our guest today is David. So David, welcome to
Speaker 1: the show.
Speaker 2: Hey Dana, Hey Tom, it's great to be here. It's
Speaker 2: like talking with old friends since we've been working together
Speaker 2: for such a long time.
Speaker 1: I agree, And we're here to talk about this year's
Speaker 1: edition of the New Energy Outlook. And we're not going
Speaker 1: to comprehensively go through the key findings. That's something that
Speaker 1: someone can find from a webinar and is better supported
Speaker 1: by a chart or two or twenty in any case.
Speaker 1: But we're here to talk actually about scenarios generally and
Speaker 1: also what we're trying to accomplish here with our neo report.
Speaker 1: But when we're talking about the New Energy Outlook, why
Speaker 1: is it that in this case, well laying the groundwork,
Speaker 1: why is it a scenario rather than a forecast.
Speaker 2: Yeah, so the new energy outlook is Bloomberg's Energy and
Speaker 2: Climate scenarios. So it's a huge body of work that
Speaker 2: brings together the work that our analysts do across the
Speaker 2: different teams. So across being for we have three hundred
Speaker 2: people and of those seventy you just involved with this project.
Speaker 2: It's a huge exercise. And fundamentally, when you do these
Speaker 2: big sweeping analysis you can do them in two ways.
Speaker 2: You can either lock up a team of ten PhDs
Speaker 2: in the room and they hash it out and they
Speaker 2: tell the business what is the solution. But the way
Speaker 2: that we've been doing it, which has been really good
Speaker 2: for our internal alignment, is to say, let's bring everybody
Speaker 2: on board and build the scenario together. And as the
Speaker 2: listeners who work in any group have worked in any
Speaker 2: big projects, know, having internal alignment is about the hardest
Speaker 2: thing you can do. So once we have that, we're
Speaker 2: able to build a bottom up, piece by piece picture
Speaker 2: of how the energy transition can play out. When we
Speaker 2: say that any transition, what we mean is the power sector,
Speaker 2: We mean transport, aviation, shipping, road, transport. We talk about buildings,
Speaker 2: we talk about industry, chemicals, cement, aluminium, and these emissions
Speaker 2: together make up about two thirds of global emissions, so
Speaker 2: it's a huge chunk of kind of man made emissions.
Speaker 2: And our role as scenarios makers is to go out
Speaker 2: and say, well, based on what we know today, based
Speaker 2: on what we as being, what our teams know about
Speaker 2: technology costs, about consumer uptake, about how decision making happens
Speaker 2: to the process, what is a reasonable assumption of how
Speaker 2: these sectors can evolve between today and twenty fifty in
Speaker 2: our base case. And we can talk about scenario kind
Speaker 2: of cases in a moment, and then what would this
Speaker 2: have to look like if we wanted to get to
Speaker 2: net zero. Scenarios can be explorative. They can just say well,
Speaker 2: let's just see what the model tells us. We dial
Speaker 2: in policies, soaris are a policy light. We take a
Speaker 2: quait conservative view on policies in that they need to
Speaker 2: be fully funded, they need to be have actual mechanisms
Speaker 2: that affect prices, so not statements of intent, not kind
Speaker 2: of lofty targets, but actual kind of mechanisms. And then
Speaker 2: after that we say, well, let's just take as much
Speaker 2: as possible look at what is the kind of a
Speaker 2: cost based solution, What is an optimal set up here
Speaker 2: like that that really is just in the money. And
Speaker 2: once you let the play out, you start seeing some
Speaker 2: very interesting things. And then yeah, and in the in
Speaker 2: the natzero scenario, we then apply a carbon budget and say, okay,
Speaker 2: now let's do the same thing the same demand. People
Speaker 2: travel by air, they will want to go someday, they
Speaker 2: come home, they turn on the kettle. How can we
Speaker 2: deliver these same utilities the same final energy demand, but
Speaker 2: in a way that doesn't emit carbon or emits less carbon,
Speaker 2: and soo fundamentally, these are two scenarios. We have a
Speaker 2: base case that is exploratory, and then we have a
Speaker 2: NAT zero scenario that is normative. And yeah, the whole
Speaker 2: act of scenario making in itself, you have to accept
Speaker 2: that you'll definitely be wrong.
Speaker 3: That's fine, Like, these are scenarios.
Speaker 2: They're not forecasts, they're not what we necessarily believe will
Speaker 2: actually happen. But what they can tell you is a
Speaker 2: glimpse into a future that you can't just project based
Speaker 2: on announcements. Because when you start modeling things, you start
Speaker 2: finding new things and new surprising things, and you start
Speaker 2: finding those tipping points that are so hard to predict right.
Speaker 2: Things sometimes change slowly and then they change rapidly, and
Speaker 2: we've seen that in the solar sector. We've seen that
Speaker 2: in a way within the ev actually vehicle sector. So
Speaker 2: there's a lot of kind of nonlinear stuff going on
Speaker 2: that's just really really hard to just forecasts or predict.
Speaker 2: And then in turn, our scenarios can then guide us
Speaker 2: to come back to and say, well, okay, given that
Speaker 2: we think that's going to be a higher of renewables,
Speaker 2: let's just say that's a no regrets decision to more enneables.
Speaker 2: What in turn is then needed to integrate them? What
Speaker 2: are the kind of market designs that we need? What
Speaker 2: does it actually mean to level the playing field? So
Speaker 2: you can have an informed debate, and you know, in
Speaker 2: a year's time we'll do another scenario, we'll find new things,
Speaker 2: we'll adapt our of you, and this way we can kind.
Speaker 3: Of slowly slowly cross the river.
Speaker 2: Feeling the stones, as the famous Chinese proverb goes, can.
Speaker 4: I just push back on this a little bit or
Speaker 4: really probe it?
Speaker 3: So?
Speaker 5: Sebhen Best, who used to run Neo and at different
Speaker 5: points in time, was everyone on this podcast's boss, although
Speaker 5: weirdly never all at the same time, which is interesting.
Speaker 5: This whole scenarios versus forecasts was his favorite little narrative
Speaker 5: and any difficult question you ever asked him, Like you say, Seb,
Speaker 5: you know, is there such a thing as free will?
Speaker 5: And be like, oh, well, you have to understand the
Speaker 5: difference between a forecast and a scenario. Like and by
Speaker 5: the way, I am about to go and have coffee
Speaker 5: with Seb after we finish this podcast.
Speaker 4: We're all friends.
Speaker 5: It's okay that I'm pulling him under the bus here,
Speaker 5: But isn't that a bit of a cop out? I mean,
Speaker 5: wouldn't it be much more useful if we had a
Speaker 5: forecast like this scenario is it? Couldn't it be that
Speaker 5: we just tried a little bit harder to make a
Speaker 5: forecast like our scenario is? Like, really, can you explain
Speaker 5: why a scenario is really useful?
Speaker 3: Yeah?
Speaker 2: No, thanks to Tom, and I appreciate the amount of
Speaker 2: stank in that question that we're not trying so first up,
Speaker 2: even putting together a scenario, you know, how however unreliable.
Speaker 2: You think it requires a huge amount of work and
Speaker 2: set up. So do you even get to the stage
Speaker 2: where you have a scenario that's vaguely credible. That's that's
Speaker 2: in itself as a huge step. The second is that
Speaker 2: when you when you do these kind of forecasts, you say,
Speaker 2: we want to be when we do this scenario, we
Speaker 2: want to be really really sure about the next five years.
Speaker 2: Right in scenario making you care about the next five years,
Speaker 2: and then you have this kind of hot, steamy reality
Speaker 2: where stuff happens, there's politics, there's policy, there's kind of
Speaker 2: weird pandemics thrown in supply chain disruption. Things happen, So so
Speaker 2: we want to be as right as possible on that front.
Speaker 2: But then it's point you have to transition it into
Speaker 2: this kind of cold modeling reality and where most of
Speaker 2: the scenario work happens. And the team, if you think
Speaker 2: about what do we spend most time on, it's that
Speaker 2: interface between this kind of messy, hot reality and then
Speaker 2: this cold modeling world. And when these two fronts meet,
Speaker 2: you have thunderstorms, you just get a lot of messy interactions.
Speaker 2: So so a lot of time is spent kind of
Speaker 2: threading our forecast, which we do tom and you know
Speaker 2: on a quarterly basis, we up at our renewables forecast,
Speaker 2: we take it into consideration all of these things, but
Speaker 2: at some points you have to thread in where you
Speaker 2: go beyond what you know today, and then you come
Speaker 2: into an even a bigger assumption than free will, which
Speaker 2: is rationality. You have to make an assumption that to
Speaker 2: a degree, we will take rational decisions. Because if you
Speaker 2: start dialing in all the things we already know or
Speaker 2: think we know, like you know, say, for example, vehicle
Speaker 2: ev phase outdates Germany, it's a huge European car manufacturer.
Speaker 2: They had a phase outdate for evs that got put
Speaker 2: into question again, so policids. We thought, oh, surely Germany,
Speaker 2: which in our G twenty policy rankings is one of
Speaker 2: the highest ranking countries, very firm policies, very kind of
Speaker 2: good track record. But there's walking back on these commitments.
Speaker 2: When you dial all of these in and think they're
Speaker 2: magically happen, you're just going to overshoot what happens, and
Speaker 2: you just end as the correcting and adapting. So that
Speaker 2: this is where I think no good forecast would be
Speaker 2: good without becoming for policy, and I think us stepping
Speaker 2: away from that and saying, look, we're not going to
Speaker 2: look at that, we really look at the economics and
Speaker 2: assume there's a level playing field already gives us more
Speaker 2: insightful answers rather than seventy people kind of coming together
Speaker 2: and guessing what they think is going to be the
Speaker 2: right mix.
Speaker 5: So we're imagining a world that could be real and
Speaker 5: that we have is self consistent in the way we
Speaker 5: think about it, and there's some useful insights we can
Speaker 5: derive from that. So it's like it's maybe like nineteen
Speaker 5: eighty four rather than Star Wars.
Speaker 1: It's a world in the multiverse that you know, if
Speaker 1: all certain things lined up to be true. But I
Speaker 1: actually want to talk about the year that we go
Speaker 1: out to. So this year twenty fifty is something that
Speaker 1: everybody's really in the climate space when they're thinking about
Speaker 1: emissions targets. We're really comfortable with talking about twenty fifty
Speaker 1: like it's tomorrow, But it's not tomorrow. Maybe we would
Speaker 1: like it to be further away. Would we think about
Speaker 1: how quickly the entire economy needs to transition from an
Speaker 1: emission standpoint. But when it comes to election cycles and
Speaker 1: what any policy maker may really be thinking about in
Speaker 1: terms of getting re elected or investors in how long
Speaker 1: they're going to hold an asset or a position, or
Speaker 1: any sort of investment that they're looking to see to
Speaker 1: make a return on. It's much much nearer. So what
Speaker 1: is it about twenty fifty? Why should those individuals be
Speaker 1: looking at something so far into the future. Is it
Speaker 1: the tipping points? Or is it something else?
Speaker 2: We collectively get sucked into a debate where we have
Speaker 2: a few kind of NOV starts that no everybody knows.
Speaker 2: It's one point five. That's a NOV style that we
Speaker 2: now have. It's twenty to fifty, and then if you
Speaker 2: want to add a word, it's net zero. So all
Speaker 2: of these dates in minds are self reinforcing. The range
Speaker 2: for us to have a one point five degree outcome
Speaker 2: is huge. If you look at the actual climate science
Speaker 2: behind it, there's a huge range. It could be as
Speaker 2: early as twenty thirty, it could be as late as
Speaker 2: twenty sixty's. There's just a lot of uncertainty. The same
Speaker 2: is with the year twenty fifty. That's not a date
Speaker 2: set in stone. It is just a coerescing point for
Speaker 2: us to think about the question and have a certain
Speaker 2: common timeframe about it. I get stressed when I think
Speaker 2: about twenty fifty. I get stressed when I think about
Speaker 2: twenty thirty. But the point is not to get hang
Speaker 2: up on these individual dates. The point is to say,
Speaker 2: let's have a common frame and create a sense of urgency,
Speaker 2: not panic, just urgency, because if we think about our
Speaker 2: emissions curves in our net zero scenario, a lot of
Speaker 2: the emissions that we save in the next five to
Speaker 2: ten years are.
Speaker 3: So much more worth, so much more.
Speaker 2: Than the emissions that we save in the twenty forties.
Speaker 2: I give you an example in our net zero scenario,
Speaker 2: which is a one point seven five degree scenario, and
Speaker 2: we can talk maybe why we didn't pick a one
Speaker 2: point five degree scenario. In that scenario, the energy sector
Speaker 2: reduces emissions ninety three percent by twenty thirty five, so
Speaker 2: it is just around the corner. It's a very short time.
Speaker 2: So in order to we need to think about twenty fifty,
Speaker 2: because we need to think backwards about the technologies that
Speaker 2: we need by them, or the types of solutions that
Speaker 2: we need by then, and so that we can start
Speaker 2: getting them up to speed, because these things take time,
Speaker 2: and every year that we emit at peak emissions as
Speaker 2: we're doing at the moment, we're losing time to enact them.
Speaker 2: And that's why I think twenty fifty to one point
Speaker 2: five are such useful narratives for everybody to keep in mind.
Speaker 2: Behind that, the reality is much more complicated and much
Speaker 2: more nuanced.
Speaker 5: Can I just follo up on this question of twenty
Speaker 5: fifty and you mention you're stressed about twenty thirty, and
Speaker 5: you mention you're stressed about twenty fifty. I also imagine
Speaker 5: you're stressed because you have to deliver a neo report
Speaker 5: every year. This is like a huge amount of work
Speaker 5: a cross BNF, but for you personally and your team individually.
Speaker 5: And I know that you know every year we add
Speaker 5: new nuances and features the analysis, but a lot of
Speaker 5: the analysis is the same at its core, maybe with
Speaker 5: different assumptions. So given the twenty fifty times scale, like
Speaker 5: what differs year on year in the core analysis? What
Speaker 5: new insights do we get?
Speaker 4: Typically? Why are we doing this to ourselves?
Speaker 2: Yeah, that's a question that I get asked a lot
Speaker 2: by my family. The value of doing it regularly is
Speaker 2: that new information comes to light. That risk is that
Speaker 2: actually the downside of redoing it every year can be
Speaker 2: higher than the reward. The issue with more complexity and
Speaker 2: more topics is apart from the fact that there's more
Speaker 2: room for errors is also that you might lose of
Speaker 2: the things that actually are matter, just because there's so
Speaker 2: much complexity and so much interaction. So that's another thing
Speaker 2: we're very mindful about to say, sure, we can add
Speaker 2: more countries, add more feedback loops, more complexity. But some
Speaker 2: of the strong messages that we've gotten from new they
Speaker 2: have evolved over the years. They haven't necessarily changed radically,
Speaker 2: but there is some new stuff like this. This year,
Speaker 2: for example, we did much more work about the limits
Speaker 2: of solar power, so we now have much more better
Speaker 2: idea of what are the economic limits of sola wide?
Speaker 2: Don't more batteries just help? And we're not in a
Speaker 2: curious position where we, as Baniev have a lower solo
Speaker 2: forecast than the IA, the International Energy Agency, And for
Speaker 2: years that was the other way around. For years Baniev
Speaker 2: was super bullish and soler the IA was catching up.
Speaker 2: And now we're reversed. And this is again because you
Speaker 2: keep looking at you you find these new dynamics that
Speaker 2: tell you something new.
Speaker 5: Maybe it's now a good time to ask the question.
Speaker 5: My pop culture reference, so in the novel Foundation by
Speaker 5: Isaac Asimov, which has recently been converted to a very
Speaker 5: excellent series on Apple TV. The core character is this guy,
Speaker 5: Harry Selden, who's a mathematician who invents this field of
Speaker 5: mathematics called psychohistory, where basically he models everything and predicts
Speaker 5: the future. In the series, he predicts the downfall of
Speaker 5: the Galactic Empire and years of chaos, and then he
Speaker 5: promotes this alternative scenario if he gets some funding to
Speaker 5: go and set up a sort of a foundation hence
Speaker 5: the name, with all the knowledge of humanity, he can
Speaker 5: help usher humankind through those dark ages and have them
Speaker 5: bounce back a lot quicker. And the thing I found
Speaker 5: a bit ridiculous, and it kind of alludes to this
Speaker 5: question of the challenge of forecasts. Is throughout the series,
Speaker 5: like with unerring accuracy, a little hologram of Harry Selden
Speaker 5: five hundred years after he's died pops up and he's like,
Speaker 5: I guess you've just navigated this particular crisis.
Speaker 4: This version of history.
Speaker 5: That he's modeled includes his own interventions, and so therefore
Speaker 5: he has a much better chance of getting it right.
Speaker 5: I suppose what I'm saying is because our net zero scenario,
Speaker 5: for example, involves a bunch of interventions. Are we I
Speaker 5: suppose giving a map for policymakers around the world industry
Speaker 5: to say, like, this isn't going to happen. But it
Speaker 5: could be that this is a forecast of the future.
Speaker 5: If you look at this and see the interventions you
Speaker 5: need to make Like, is it like a circular logic
Speaker 5: that we're offering to the market.
Speaker 3: Yeah.
Speaker 2: So what Asimov talks a lot about is kind of
Speaker 2: questions of ethics and moral philosophy. And if the question
Speaker 2: is kind of what does it mean? Then the kind
Speaker 2: of ethical or moral question is what should we do?
Speaker 2: So as as Beanie of what we try to do
Speaker 2: is show like this is a here's an outcome that
Speaker 2: makes sense just from a monetor perspective. You know, we
Speaker 2: haven't factored in human health. We haven't factored in obviously
Speaker 2: they're good implications for keeping temperatures slow, for human health
Speaker 2: and migration and all these other well dimensions of well being.
Speaker 2: But just from a kind of cost perspective, which is narrow,
Speaker 2: here's a solution that just makes sense and it works,
Speaker 2: and it works in the case of the power system
Speaker 2: at an hourly level. And we looked at this in
Speaker 2: great detail. This can work. We also then go and say,
Speaker 2: here's a bunch of barriers that are in the way
Speaker 2: that we didn't model in it before because we didn't
Speaker 2: want to presuppose what will happen. I give you an example.
Speaker 2: We need a lot of batteries in our scenario. These
Speaker 2: batteries need metals. We know these critical metals and minerals
Speaker 2: are in short supply, but we also believe that technology
Speaker 2: change can help adapt some of them. So the amount
Speaker 2: of cobalt, for example, which is say critical mineral that
Speaker 2: is needed in matteries, the amount we forecast is needed
Speaker 2: has come down every year, even though we increase of
Speaker 2: battery focus every year, simply because battery chemistry is changed.
Speaker 2: So we need to acknowledge that there's the technological change
Speaker 2: can also remove some barriers. It's important to talk about them,
Speaker 2: but it's also important, I believe, not to bake them
Speaker 2: in too much into your model because you then don't
Speaker 2: learn something. So when we think about these barriers, there's
Speaker 2: also grids. There is kind of the amount of manufacturing
Speaker 2: that we need. You need to look at these questions
Speaker 2: and then you need to apply another lens, which is
Speaker 2: the country level it's no good to have global scenarios.
Speaker 2: You need to have country scenarios because countries is where
Speaker 2: the action happens, where the policies happen, or the change happens.
Speaker 2: And then you need to look at the country picture
Speaker 2: and say, well, given these barriers, given this you know,
Speaker 2: glorious future that could happen, what is it you should
Speaker 2: be then thinking about. And then that's when it comes
Speaker 2: to market design. So if we have a bunch of
Speaker 2: zero costs or like low cost generators I'm running, that'll
Speaker 2: do things to the power price. So you need to
Speaker 2: think about these things. So we're not trying to be
Speaker 2: normative in the sense of saying that here's the truth
Speaker 2: by BNIF and and you know, if you follow this
Speaker 2: map you'll find the golden treasure. We're trying to say,
Speaker 2: here's like a rational future that we maybe can work towards.
Speaker 2: And I said earlier that rationality is a huge assumption
Speaker 2: in all of this, because energy policy has been anything
Speaker 2: but rational.
Speaker 1: This is a report really for techno optimists, and if
Speaker 1: we're thinking about it, it's a story of technology and
Speaker 1: economics that are associated with this technology. But this fundamental
Speaker 1: premise that the right technologies at the right price are
Speaker 1: going to lead us to this much lower emissions future.
Speaker 3: Yeah, totally.
Speaker 2: And you can overlay behavioral change on that, and you know,
Speaker 2: you can say, well, if I wanted to look at
Speaker 2: my personal footprint, I should be doing this and this
Speaker 2: and this and but fundamentally it's an optimistic view and
Speaker 2: technology and an agnostic view and policy. Policy is a
Speaker 2: very import important role to play as an enabler of this,
Speaker 2: but it's not a driver of this scenario.
Speaker 1: Well, And one of the things that's important when setting
Speaker 1: a target of any kind is to kind of rally
Speaker 1: behind a few things, to just still it down to
Speaker 1: just a list in order for us to be able
Speaker 1: to concentrate. For the same reasons that you're pointing out
Speaker 1: that twenty fifty and twenty thirty and one point five
Speaker 1: are really important things for us to see as benchmarks
Speaker 1: that we start to create a narrative around.
Speaker 4: So within this.
Speaker 1: Report, you actually identified nine technologies that are make or
Speaker 1: break for the low carbon transition. Within these nine technologies
Speaker 1: that you've identified, some are getting a lot of traction
Speaker 1: and some are doing less well. So let's talk about
Speaker 1: first that basket of technologies that are how the wind
Speaker 1: at they're back.
Speaker 2: Let's say yeah, so when I mean we kind of
Speaker 2: blockout it put it out. There's nine key technologies. You
Speaker 2: could say it's ten, depending how you cut it. But
Speaker 2: fundamentally there are two groups of technologies. And this becomes
Speaker 2: very clear when you compare the uptake in our base
Speaker 2: case and in our net zero scenario. The technologies that
Speaker 2: are already doing well in our base case, which is
Speaker 2: solar power, it's wind power, both offshore wind and on
Speaker 2: shore wind. It's electric vehicles, it's batteries and its heat pumps.
Speaker 2: So these are these are technologies that are already on
Speaker 2: the app And if you look at the additional effort
Speaker 2: that's needed to get in its zero, if you squint,
Speaker 2: like if you stand back and squint, you can just
Speaker 2: about see how that can work. Like, okay, we need
Speaker 2: to double solar again, but you know this, we can
Speaker 2: do this, Like we know how this can work. We
Speaker 2: obviously need to massively ramp up evs, and we just
Speaker 2: published our Electric Vehicle Outlook and they've seen some headwinds
Speaker 2: in the short term, but still we know how this
Speaker 2: can work. Where it gets more interesting is when when
Speaker 2: you look at the technologies that are needed that we
Speaker 2: see could be needed for and it's a transition that
Speaker 2: are currently not in the money, whether they're just in infancy.
Speaker 2: I'm thinking about the same aviation fuels. When we looked
Speaker 2: at the kind of types of routes that are being flown,
Speaker 2: the types of planes that are used on these routes.
Speaker 2: When you go down the options, what is it that
Speaker 2: actually can feasibly scale very quickly. You just left with
Speaker 2: the sustainable aviation fuels, which is a drop in jet
Speaker 2: fuel alternative, and we did a bunch of research looking
Speaker 2: into the types of technologies and types of fuels that
Speaker 2: could fill this cup. And then you end up with
Speaker 2: a very narrow band of solutions that can be deployed
Speaker 2: very quickly, but they also need to scale at a
Speaker 2: level that is just exceeding current feedstock levels, so you
Speaker 2: have kind of a scaling challenge. Then we have carbon
Speaker 2: capture and storage, which also could play a big role
Speaker 2: in across a number of different sectors, and this year
Speaker 2: has come up higher than honestly we expected, and that's
Speaker 2: to do with the maturity the technology and the fact
Speaker 2: that it could be deployed quickly. But there too, there's
Speaker 2: a huge scaling challenge. Then we have hydrogen, which this
Speaker 2: year we actually downgraded our forecasts, so there's less hydrogen
Speaker 2: our forecasts now than last year, simply because from our perspective,
Speaker 2: the applications that hydrogen can play and have just become
Speaker 2: much more clear. And then you have grids which need
Speaker 2: to double in length, and then to make matters even
Speaker 2: more complicated, these are not insular technologies. They are connected.
Speaker 2: If you want sustainable aviation fuels, you need to have
Speaker 2: clean hydrogen because aviation fuels need four times more hydrogen
Speaker 2: than conventional jet fuels to crack. If you want clean hydrogen,
Speaker 2: you need to have huge amounts of wind and solar
Speaker 2: so they can produce a clean hydrogen. So each of
Speaker 2: these individually is a failure point, but also collectively they
Speaker 2: are connected. So we use this kind of pillar narrative
Speaker 2: like pillar picture to show that they're all needed.
Speaker 3: You don't can't just have one or the other.
Speaker 1: And you specifically did not mention nuclear. Now is that
Speaker 1: the mystery tenth one or is that a forgotten ninth
Speaker 1: It just needs more?
Speaker 2: Nuclear should not be forgotten like I didn't mention it
Speaker 2: because I well, let's put it this way like if
Speaker 2: you go to nuclear conferences these days, there's huge amounts
Speaker 2: of exiety because now that we find we need a
Speaker 2: whole host of solutions, nuclear is back on the table.
Speaker 2: In our net zero scenario, we're tripling nuclear capacity and
Speaker 2: we're also letting some degree of small modular reactors play,
Speaker 2: in which people are very excited about. It is also
Speaker 2: one of those technologies where a real scaler would need
Speaker 2: a huge effort to even produce the manufacturing capacity.
Speaker 5: This pillar framing, I really like it because it's really
Speaker 5: kind of clear, and it also this division between the
Speaker 5: maturing and the sort of the next wave pillars is
Speaker 5: really clear. And what it makes me think of is,
Speaker 5: I mean, we all started our careers in this space
Speaker 5: at around the same time. I think we all got
Speaker 5: involved because we cared about the environment. And I remember
Speaker 5: back then is if you were working on an area
Speaker 5: like wind or solar, it was sort of like you
Speaker 5: were like purer than pure. There's like very little baggage
Speaker 5: associated with those technologies compared to things like nuclear ccs,
Speaker 5: sustainable aviation fuels, maybe heat pumps. To some extent, these
Speaker 5: things that we've said are the maturing things, whereas now
Speaker 5: with this framing. It feels to me like if you
Speaker 5: jump into wind and solar. Yeah, maybe you're not going
Speaker 5: to get your hands to see, but maybe it's more
Speaker 5: like you're jumping on something that is already maturing. It's
Speaker 5: like you're on the right bandwagon, but you're on the bandwagon. Whereas,
Speaker 5: if you really want to crack the nut, if you
Speaker 5: really want to make the difference, you're going to have
Speaker 5: to go and help the deployment of and I'll read
Speaker 5: them out again, nuclear, ccs, hydrogen, sustainable aviation fuel, and
Speaker 5: heat pumps. Would you agree with that read that this
Speaker 5: is this is where you go if you're really hardcore
Speaker 5: on the energy transition.
Speaker 3: Yes, and no.
Speaker 2: So I would agree that we should focus on the
Speaker 2: problems that are hard, but the heart problems that aren't
Speaker 2: necessarily technologies like individual clouds like hydrogen or ccs. They
Speaker 2: are concepts like how do we how can we get clean,
Speaker 2: reliable backup power? And then it's not about hydrogen per
Speaker 2: se or.
Speaker 3: Ccs, it's what is the actual solution.
Speaker 2: So I think it's rather than coming from the technology
Speaker 2: stampot is coming from what is what is the problem
Speaker 2: we want to solve? Because there's a number of technologies
Speaker 2: that for lack of cost data, for lack of kind
Speaker 2: of just real world data we could model like direct
Speaker 2: air capture, like long duration storage, like different types of batteries,
Speaker 2: Like all of these are important. We didn't model them.
Speaker 2: That doesn't mean they don't exist. They're more than nine pillars,
Speaker 2: and we modeled twenty six different technologies. We could have
Speaker 2: done fifty. So like if somebody says, I want to
Speaker 2: look into advance to your thermal because I think this
Speaker 2: is kind of a sleeping beauty that has to be awoken,
Speaker 2: then that's that's great. So I think that's the first point,
Speaker 2: like we shouldn't going to hang up about these specific technologies.
Speaker 2: The second is on the pushback on what, in our
Speaker 2: view are already mature solutions, but in the with the
Speaker 2: wider world might not seen be seen that way. And
Speaker 2: my personal experience, I don't know if you experiences as
Speaker 2: well some is that in the last eighteen months there
Speaker 2: just has been a lot of kind of concerted pushback
Speaker 2: on things that we thought were already in the bag,
Speaker 2: thinking about solar and kind of articles about the metals
Speaker 2: impact the material, you know, lithium mines in Chile, thinking
Speaker 2: about wind turbines and bird strike and they don't work.
Speaker 1: And we've written articles there, yeah, and.
Speaker 2: We've written plenty about it, and then yeah, but we
Speaker 2: there's just because when we started, when when you and
Speaker 2: I started, solar and wind were inconsequential, so they were
Speaker 2: kind of odd and nice and weird. Now that they're
Speaker 2: making a real impact and now they're really scaling, they're
Speaker 2: treading on people's toes and and and these people are
Speaker 2: not happy.
Speaker 5: That's a really good point, and I think I think
Speaker 5: I'm a really satisfying answer to my question, and so
Speaker 5: I retract it. If anyone was scared off wind and
Speaker 5: solar is not a bandwagon that you're jumping on. There
Speaker 5: is still a fight to be fought there.
Speaker 2: For the right and as the in the formal life
Speaker 2: at being here, for setting the wind service, the wind
Speaker 2: research service. So there's still plenty of things that that
Speaker 2: can be done and can be done better. And also
Speaker 2: like for these technologies to play nicely on the grid. Now,
Speaker 2: if you are kind of an oddity and afterthought, then
Speaker 2: it's fine to not be a good citizen on the grid,
Speaker 2: But when you when when you are the dominant technology
Speaker 2: and increasingly the UK and Denmark and other places. You know,
Speaker 2: Texas and the US think that is the case. So
Speaker 2: now there's a new new frontier to actually play nicely
Speaker 2: on the grid.
Speaker 1: So, given that none of the pillars are a foregone conclusion,
Speaker 1: let's talk a little bit about investment and whether or
Speaker 1: not we're really seeing the levels of investment that are
Speaker 1: required to reach any of the scenarios that we put forward.
Speaker 2: One of the things we do, which again helps the framing,
Speaker 2: is to think about in investment the investment requirements, and
Speaker 2: what we do is we look at the capex which
Speaker 2: has got capital expenders the initial investment needed for these technologies.
Speaker 2: The uncomfortable news is that a lot of the technologies
Speaker 2: that we need are CAPEX heavy, so they require a
Speaker 2: favorit of upfront investment, but then their opic slide, so
Speaker 2: the operational cost of running them is quite low. But
Speaker 2: it's a different type of mobilization of money than like
Speaker 2: a conventional fossil fuel energy system. So that means that
Speaker 2: the energy transition has a kind of front loaded investment
Speaker 2: need for a long term benefit, and that's a challenging proposition.
Speaker 2: So in our base case scenario, investments keep rising and
Speaker 2: I think they go up fifty percent by twenty thirty,
Speaker 2: so it's not like a huge jump. Obviously, what we're
Speaker 2: posing is quite radical from any we're saying renewables will
Speaker 2: dominate the energy system. In our base case, that's already
Speaker 2: a conclusion we can drop. But then in the net
Speaker 2: zero scenario, the investment need goes.
Speaker 3: Up by a factor of three four.
Speaker 2: So we're not nowhere near the levels we need to
Speaker 2: be investing, and we're not investing in the types of
Speaker 2: solutions that we need to bring that about. So it's
Speaker 2: not just wind and solar, it's also you know, this
Speaker 2: whole basket of technologies that the pillars of the technology
Speaker 2: pillars that we just talked about. So given that we
Speaker 2: ran the numbers and we came up to a total
Speaker 2: of one hundred and eighty one trillion dollars investment need
Speaker 2: between today and twenty fifteen our economic transition scenario, which
Speaker 2: is a base case, and then two hundred and fifteen trillion.
Speaker 3: Dollars in our net zero scenary. Mind boggling numbers.
Speaker 2: But if we break those down, what struck us was
Speaker 2: that a on the demand side, like which is the
Speaker 2: types of applications that demand energy mostly vehicles, buying electric
Speaker 2: vehicles buying ice vehicles. It's almost the same spend in
Speaker 2: those scenarios, and there's just a substitution going on on
Speaker 2: a global level. There's a substitution going on between US
Speaker 2: buying evs versus US buying conventional vehicles. And if we
Speaker 2: believe that EV's got cheaper than net, it should be
Speaker 2: about the same. The regional stories are a little bit different,
Speaker 2: but globally it's the same. What's striking then, is that
Speaker 2: on the supply side it is just an increase of
Speaker 2: fifty percent between the two scenarios, so not a lot
Speaker 2: in absolute terms, but the challenges that a lot of
Speaker 2: these investments are simply not in the money yet because
Speaker 2: we're lacking the route to market. We're lacking the kind
Speaker 2: of mechanisms that bring this about. And I, for one,
Speaker 2: I don't think at any point there's an issue here
Speaker 2: that there's a shortage of capital. There's no shortage of
Speaker 2: capital to want to support this. What's lacking is the
Speaker 2: types of projects that are bankable and the route to
Speaker 2: market for those projects. And then the third observation is
Speaker 2: between one hundred and eighty one trillion, the two and
Speaker 2: fifteen trillion. It's just a different of nineteen percent. It's
Speaker 2: just like we were so surprised. We looked at we
Speaker 2: lock the numbers, and with these scenarios, when you build them,
Speaker 2: nothing is done until everything's done, so you need to
Speaker 2: lock everything in and then you run the numbers and
Speaker 2: then you look, oh, this is interesting. It's just nineteen
Speaker 2: percent more. And what this means for from my perspectives
Speaker 2: to say that they're so closed, if we added the opics,
Speaker 2: probably it would be cheap virtual transition than not a transition.
Speaker 2: And this is the kind of the next work we
Speaker 2: want to do to figure out what is the best
Speaker 2: way for us to run the all in cost and
Speaker 2: then we can have a proper conversation and on all
Speaker 2: these investment numbers, by the way, don't account for a
Speaker 2: lot of indicators that we also care about. So we
Speaker 2: care about human health, we care about the environment, like
Speaker 2: the wide environment, we care about well being. So a
Speaker 2: world where we spend one hundred and eighty one trillion
Speaker 2: to get a two point sixty degree outcome and two
Speaker 2: hundred fifteen trillion to get a well below two degree outcome,
Speaker 2: it's pretty clear to me where we should go.
Speaker 5: That is incredibly exciting and inspiring, because our net zero
Speaker 5: scenario is like in a way, certainly to a cynic
Speaker 5: would say that it's a fantasy, because we've just said,
Speaker 5: what if, we're just we're just going to do it.
Speaker 4: We're going to get to net zero by twenty fifty, whatever.
Speaker 5: Happens, And then to learn that it only costs nineteen
Speaker 5: percent more, and that's before we've taken into account various
Speaker 5: things that would actually make the net zera scenari even
Speaker 5: more economically favorable. I find that quite inspiring because it's
Speaker 5: a very small price to pay, if any price at all,
Speaker 5: for a planet we can live on.
Speaker 1: And it's always nice to end a show on a high.
Speaker 1: Thanks for joining Tom and me today.
Speaker 5: Well, thanks for having me, guys, and I'm going to
Speaker 5: go and have a coffee with Seb and tell him
Speaker 5: the good news about the nineteen percent.
Speaker 1: Today's episode of Switched On was produced by Cam Gray
Speaker 1: with production assistance from Kamala Shelling. Bloomberg NEIF is a
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