The 'energy transition' is not visible in the data

June 1, 2022

Pundits and politicians are eager to assert that there is an inevitable and accelerating “energy transition” away from hydrocarbons.

It’s true that there are record sales of electric cars and massive plans for solar and wind installations. But a rapid transition away from the existing energy infrastructures isn’t visible in the data.

During the past two decades, global governments have spent over $5 trillion to avoid using fossil fuels. But oil, natural gas, and coal still supply 84% of global energy, just two percentage points lower than 20 years ago. Meanwhile, burning wood supplies more global energy than solar power. Oil still fuels nearly 97% of global transportation. Crop-derived liquids supply most of the rest with batteries powering under 1%.

But from Washington to Brussels, policymakers propose doubling down on an energy transition. Now the goal is also to delink from Russian oil and natural gas. Never mind the cost of forcing a faster transition, the narrative ignores two big wildcards: Building the hardware for transition aspirations will require an unprecedented increase in global mining at scales almost certainly unachievable in the time frames proposed, and no one accounts for increasing energy demands yet to come from the kinds of innovations everyone wants.

On the first point: It requires more than a ten-fold increase in the use of minerals and metals to build alternative energy machines capable of delivering the same amount of energy as hydrocarbon-based machines. As the International Energy Agency (IEA) documented, energy transition plans will require a 700% to 4,000% increase in the global production of minerals such as rare nickel, copper, cobalt, lithium, and rare earths. One World Bank study observed that “clean energy” technologies “are in fact significantly more material intensive.” Until now, that hasn’t mattered because wind, solar and batteries still account for only a few percentage points of global energy. 

The world doesn’t have enough mines operating or planned to meet such demand. Chasing such unprecedented quantities will stress global supply chains and inflate mineral prices. That will, in turn, make anything built from those minerals more expensive, which is pretty much everything. It also inflates the price tag of the energy transition because raw materials account for at least 20% of the cost of wind turbines and 60-70% of the costs of solar panels, and batteries.

Last year, average lithium battery prices declined by six percent, but this was a dramatic slowdown from the decadal trend. Those prices are forecast to rise again this year. Solar module prices are up nearly 50% since 2020 because of higher commodity costs. And higher materials costs have destroyed profits for wind turbine manufacturers with turbine prices forecast to rise 10% this year.

It bears noting that China is the largest source for a majority of the essential energy materials, while the US imports 100% of 17 minerals and depends on imports for over half of 28 others. The US has plenty of minerals, but expanding mining here, increasingly everywhere, meets fierce opposition and thus constrains supply and inflates prices. Many of those who want more solar panels and electric cars are the same who oppose mining.

As for trying to replace all hydrocarbons, not just a big fraction, consider a Geological Survey of Finland study that calculated that the aggregate quantity of minerals needed would be greater than all the known global reserves of the relevant minerals. While the physical resources certainly exist on the planet, they must be discovered, validated, and then mines built. All of which takes more time and money than considered in any plans.

In addition to ignoring the physics of energy materials, the aspirants of a transition underestimate how much more energy the world will yet need. The future will see more innovations as well as billions more people who will be more prosperous and want what others already have, from better medical care to cars and vacations.

More than 80% of the world population has yet to take a single flight. Over 80% of air travel is for personal purposes. That’s already two billion barrels of oil a year, for fun.

In America there are about 80 cars for every 100 citizens. In most of the world, it’s about five per hundred citizens.

Hospitals use 250% more energy per square foot than average commercial buildings. And drug manufacturing is far more energy intensive than fabricating cars or aircraft.

The global information infrastructure, the Cloud, uses twice as much electricity as the entire country of Japan, and the former is expanding at a torrid pace. Over the next few years alone, the semiconductor industry plans to spend $300 billion on new manufacturing plants that will, once built, use twice as much electricity as the county of Denmark.

These are the known trends. Ignored in the calculus of the energy future is the fact that entrepreneurs are far better at inventing ways to use energy than to produce it. The future will see the commercialization of far more innovation—robots, drones, metaverse machines, augmented reality, cryptocurrencies, quantum computers, biotechnology, and things not yet imagined. It’s obvious but worth stating: Before the invention of automobiles, airplanes, pharmaceuticals, or computers, there was no energy needed to build or power them.

Global energy transitions are very slow. There won’t be a transition eliminating hydrocarbons for a long, long time. 

Mark P. Mills,
Manhattan Institute senior fellow
Strategic partner, Montrose Lane

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