Whether we like it or not, modern civilisation is built on fossil fuels. Oil, natural gas and coal still account for around 85% of the world’s primary energy inputs. While these represent a small fraction of reported global GDP, they support all other economic activities. Ending our dependence on hydrocarbons was always going to be a tough call. The ongoing process of deglobalisation makes it even harder.

In his new book, “Grand Transitions, the Canadian scientist Vaclav Smil describes how the modern carbon-based energy system supplies fuels for transportation, and inputs for what he calls the “four pillars” of our modern economy: iron, cement, plastics and ammonia. Currently there are no readily available mass-scale alternatives for the use of petrochemicals in feedstocks or fuel for bulk shipping and air travel. Despite increasing concern over the risks posed by climate change, the use of fossil fuels has increased by around 20% since the turn of the century.

To date we have taken only tiny steps away from hydrocarbons. Electric vehicles accounted for 5% of global car sales last year. Wind and solar power still only account for a small share of electricity generation. If history is any guide, the transition is likely to be painfully slow. It took more than a century for crude oil, which was first extracted in the United States, Canada and Russia in the 1850s, to overtake coal as the world’s largest energy source. “Large energy transitions,” writes Smil, “have always been gradual, prolonged affairs unfolding across generations, and the shift from carbon to non-carbon energies will be no exception.”

Nevertheless, governments around the world have committed themselves to drastically cutting carbon emissions over the coming decades. Smil doubts whether this timeframe is feasible. For a start, every historical transition has been facilitated by using the previously dominant fuel. Early British coal mines used lumber for their pit shafts and props, while coal was transported from mines in wooden carts on wooden rails. In the 19th century, steel, produced with coke, was required to construct oil rigs and pipelines.

Likewise, the transition to clean energy will require lots of fossil fuels. Chinese solar panels are made with electricity generated by burning coal. The trouble is that the oil market is in tight supply. As energy prices rise, the cost of investing in renewables is rising in tandem.

Thanks to recent technological advances, the price of electricity generated from renewables has reached parity with power from fossil fuels. Sometimes it’s cheaper. But ease of storage has always been a key factor in successful energy transitions. Currently there’s no cost-effective method of storing electricity produced by wind and solar, whose supply is intermittent. Owing to the vagaries of the weather, renewables in Europe operate at only 20% of potential capacity, according to Andy Lees of MacroStrategy. As the contribution from renewables increases, the intermittency of their supply is causing severe problems for electricity grids across the world.

Decarbonisation will spur demand for clean energy materials. We’ll need more lithium, nickel, cobalt and manganese for electric vehicles, vanadium for energy storage, silver and polysilicon for solar panels, iron and zinc for wind turbines, and copper for everything. But some of these materials are in short supply, and it’s not clear that there are sufficient deposits of copper and nickel to meet projected demand.

Lithium is a key material for electric vehicle batteries. This element is not rare, but extraction is a messy business and new mines often face opposition from local environmentalists. If Tesla reaches its projected demand for lithium-ion batteries in 2030, Elon Musk’s electric-car maker would consume 75% of the world’s current nickel production and four times the current supply of lithium. Over the past year, the cost of lithium has risen sharply, pushing up battery prices.

Russia’s invasion of Ukraine and its status as a global pariah further complicate a speedy transition to clean energy. Not only is Russia a major producer of oil and natural gas, its raw materials – zinc, copper, nickel and so forth – are essential inputs for the next generation of motor vehicles. The country is the world’s largest producer of platinum group metals that are used in hybrid and hydrogen-powered vehicles. Norilsk Nickel, the Russian mining giant, is the leading supplier of the battery-quality chemical for lithium-ion batteries.

Ostracised from the West, Russia could be driven into China’s arms. If the People’s Republic gets favoured access to Russian fossil fuels and raw materials, its own energy transition could accelerate. But if tensions between China and the United States erupt in a full-blown breach the West will find it trickier to switch.

“China is the Saudi Arabia of clean tech,” says London-based commodity analyst Sean Maher of Entext. The People’s Republic controls more than half the world’s current supply of lithium-ion batteries, lithium mining capacity, cobalt and zinc, according to Maher. It makes most of the world’s solar panels. The country is also the main supplier of so-called “rare earths” used in the manufacture of magnets in wind turbines.

Rising costs of raw materials for green energy and electric cars will further slow the shift away from burning carbon. Given that previous transitions have lasted decades, if not centuries, the world will remain dependent on fossil fuels for the foreseeable future. In the past, oil companies responded to rising energy prices by boosting investment. But that’s not happening this time. The global rig count, currently at around 1,600, is less than half its level of 10 years ago, according to oil services company Baker Hughes.
Policymakers now face some hard choices. Will they help to ease the cost-of-living crisis by boosting the supply of fossil fuels, or will they continue on their current path to net-zero emissions? Furthermore, the West must soon choose between decarbonisation and deglobalisation: it can’t have both.
Source: Reuters (Editing by Peter Thal Larsen and Oliver Taslic)