Daniel Yergin Talks CERAWeek, Energy Security And The Energy Transition

When I sat down for the third in a continuing series of interviews with S&P Global Vice Chairman Daniel Yergin (author of “The New Map: Energy, Climate, and the Clash of Nations”) recently, I wanted to see if he would preview the agenda for the annual CERAWeek conference, which runs in Houston from March 6 through 10.

Global Events Drive The Agenda

“It’s been a very dramatic year for the energy industry, so much has changed – everything from the war in Ukraine to the IRA Act in the United States,” Yergin says. “And of course, we’ve seen some political changes in the United States as well. So, I think the basic theme is trying to capture how companies and others navigate in a much more turbulent and confusing energy picture and setting within the political and geopolitical as well as economic context.”

The CERAWeek conference annually attracts thousands of registrants from across the globe, serving as one of the most important educational and networking events held in the United States each year. This year, Yergin says the delegate attendance is 7,500, along with a number of additional registrants, providing a significant economic impact to the local Houston economy. It’s a welcome return to something close to full strength after the event had to be cancelled in 2020, held digitally in 2021 and saw attendance still somewhat impacted by the COVID pandemic even last year.

The past year in the energy space has without doubt been one of most turbulent ever seen in the global energy space. The Russian invasion of Ukraine disrupted and largely reset global trade, geopolitics, national politics and all other aspects of the energy equation, and it will take years for things to begin settling back into some semblance of normality.

Yergin indicated the events of the past year drive the CERAWeek Executive Conference agenda. “Something that happened over the last year is the return of energy security, which had partly fallen off the table in the United States thanks to the success of the shale revolution,” he said. “If you remember, seven or eight US presidents talked about becoming energy independent, and it often seemed like, oh, well, that’s just a campaign slogan, but it will never happen.

“But then, lo and behold, over a decade or so, the US became energy independent. And that had a big economic impact. It’s also had a big political impact. And it also meant that people sort of forgot about security. But that sure is back on the table today.”

The State Of The Transition

Obviously, much of the agenda is centered around the energy transition and all its myriad moving parts. I asked Yergin to provide his assessment of the pace of the transition – is it developing at a rapid enough pace to enable the world to achieve its net-zero targets?

“It’s an interesting question,” he begins. “First of all, that one thing I puzzle over is that the goal is supposed to be ‘net zero by 2050,’ but China’s goal is ‘net zero by 2060.’ And India’s goal is ‘net zero by 2070.’ Right there, with those two countries, I think you’re talking about something like 40% of emissions. You know, I just struggle with that. 2060, 2070 – that’s not the same as 2050.”

Ok, but are we at least headed in the desired direction?

“I think that the direction towards decarbonization is there,” he says. “But one of the things I did in “The New Map” was to look at how long the previous transitions took.”

What he found, Yergin said, was that these transitions tend to just continue developing indefinitely. “Take what happened since, well, January 1709, which I argued in ‘The New Map’ was when the energy transition began from wood to coal for industrial purposes. That unfolded over a century or more and no, the other energy didn’t just disappear.”

He notes that the same dynamic holds true for the transition from coal to oil, which started in the 1860s. “Oil took the number one place from coal in the 1960s and today the world used three times as much Coal in 2022 – it’s the highest use of coal ever. So, this energy transition is really going to be a different thing than, say, a quarter century. You’re going to change the energy foundation of a $100 trillion world economy that today is over 80% hydrocarbons.”

He pauses before adding, with emphasis, “That is a big deal.”

A Transition, Or Just An Addition?

That it is all a “big deal” is a bit of an understatement, and I asked Yergin if he thought, to this point in time, whether we have achieved any real “transition” at all, or whether it would be more accurately characterized as an “energy addition,” i.e., we’ve added more of pretty much everything.

“Yes, I think that’s right,” he nods. “But one of the other themes that I emphasize in ‘The New Map,’ and I really felt this over the last few months, is this concept of there being a North-South divide. Where there is one perspective on the energy transition – say, in Western Europe and North America – it’s pretty different in the developing world where per capita incomes might be 1/20th or 1/40^th of the level of people living in Brussels.”

For those developing countries, doesn’t it often come down to subsistence needs trumping climate considerations? “Climate may be a priority, but so is economic growth and poverty, improving health,” he agrees. “It’s just such a different perspective, and this is being played out every day, this kind of North-South divide. And I think we could see, this is emerging as a bigger and bigger issue at the next COP meeting later in the year.”

The Permitting Conundrum

Our discussion next moved to renewables and electric vehicles, and their voracious needs for an array of critical minerals, all of which must be mined at a rapidly increasing pace in the coming years. I asked Yergin for his views on the practicality of that notion in the real world – can it really happen?

“I don’t know,” he says frankly. “I was in discussion with some people, including from the mining industry, and they were just talking about the things that mobilize regulators in terms of making decisions because of all the different pressures they face. But then, even once a decision is made, you go into this litigation marathon that never ends because there are some people who just don’t want it done. And things move from court to court with new filings.

“Right now,” he continues, “a federal court is going to review a decision by a state agency in Virginia that would allow the last 6% of the Mountain Valley Pipeline to be built. That started as a $3 billion natural gas pipeline. Now, it’s probably a $6 billion pipeline. And the tension between the regulation, regulatory, administrative state and the litigation process, and just getting the last 6% done and it just doesn’t seem to end.

“There is a contradiction between the ambitions and aspirations on one side and the fact that you need have this real stuff to get there. You don’t just do it with the sun and the wind: You need real stuff, concrete, steel and lots of minerals in order to implement these aspirations.”

I noted that I had been involved in a conversation earlier in the day in which I told a friend that the reality of all this is that that renewable energy and electric vehicles are every bit as mineral intensive any other form of energy.

“Even more so,” Yergin responds.

Yergin then recounts an interesting conversation he had moderated, between the head of the American Clean Power Association and the head of the American Petroleum Institute. “We think there’d be a lot of things they didn’t agree on, but the one thing they really agreed on is that permitting is a real problem in the United States, whether it’s mining, whether it’s access to federal lands,” he says. “Most people don’t know this, but the federal government owns about 48% of the Western United States. Under the 1920 Mineral Act, it’s supposed to make the land economically productive, and it’s all subject to permitting. And our system just doesn’t seem to allow it to proceed in an orderly way.”

“I chaired a session last year at CERAWeek with a number of senior US government officials and industry, discussing the permitting problem around renewables of all things. And one of the people there was the CEO of one of the biggest European electric power companies, which actually is a big investor in US wind. And he listened to this discussion and said ‘I do not understand why is it not just that you just go to the government, make a decision and get it done?’ And I said to him, ‘with all due respect, sir, you would need to take a course on U.S. constitutional law to understand why it’s so hard to get these things done.’”

Our time running short, I asked Yergin if he had any final words to share on this topic.

“David, if we were trying to do the interstate highway system today, it wouldn’t get it permitted.”

If you’re wondering why the much-ballyhooed energy transition is by all accounts lagging far behind the planned pace, that’s one of many key reasons why.