The Year The Energy Transition Went Off The Rails

All you need to know about how the vaunted ‘energy transition’ is going as 2022 comes to its merciful close is to read the headline of a Reuters story published last week: “Global coal consumption to reach all-time high this year – IEA”.

That isn’t how the narrative surrounding the energy transition assumed this would all be going in the year 2022. Certainly, it isn’t how IEA head Fatih Birol has wanted it to go, given his insistence that “more wind and solar” is the answer to seemingly every energy-related question.

When global coal consumption hit its previous peak in 2013, the IEA and most other proponents of a shift from fossil fuels to renewables subsidized heavily by trillions of printed dollars and euros assumed it was a peak that would never again be reached. Not only was it exceeded during 2022 acc0rding to the IEA, but the global agency expects consumption to remain at similarly elevated levels through 2025.

IEA analysts point to several factors that led to this year’s spike in the use of the most-polluting of fossil fuels used for power generation, including abnormally high natural gas prices that led to a great deal of fuel switching back to coal in Europe. But that added coal use in Europe pales in comparison to the 15% increase in coal burning in China, which the IEA admits “is higher than the total annual coal power generation of any other country, except India and the United States.”

Speaking of India, its domestic coal production reached 800 million tons in 2021 for the first time, and IEA’s forecast is for it to exceed 1 billion tons in 2022. This is not the direction in which coal production and consumption were supposed to be trending by now.

Demand for crude oil also continues to rise around the world. In its November 2022 report, OPEC projects 2023 global crude demand to increase by 2.2 million barrels per day to a record high of 101.3 million bopd. Again, this is not the direction for crude demand predicted by proponents of the energy transition just a few years ago. As with coal’s rise, OPEC attributes much of the ongoing increase in oil demand to rapidly rising needs in China and India, along with continuing strength in the United States despite the best efforts by the Biden administration to shift the dynamic.

Then there’s that “other” fossil fuel, natural gas. As with oil and coal, the IEA projects that global demand for this cleanest-burning fossil fuel will hit record highs in 2022 and 2023. The energy crisis in Europe, exacerbated by Russia’s war in Ukraine, has played a significant role in this year’s higher demand, but the reality is that projections of diminishing appetites for this crucial power generation fuel and industrial feedstock were always overblown and unrealistic.

In the United States, the Energy Information Administration remains bullish on natural gas supply and demand. In its Short-term Energy Outlook for December, the EIA notes that U.S. natural gas supply achieved a record high during 2022, and projects that it will exceed that level during 2023.

None of this is to deny that the wind and solar sectors are growing rapidly – they certainly are. The Global Wind Energy Council projects installed wind power capacity to rise substantially every year through 2030.

However, at the same time GWEC notes that “Wind energy is not growing nearly fast or widely enough to realise a secure and resilient global energy transition. At current rates of installation, GWEC Market Intelligence forecasts that by 2030 we will have less than two-thirds of the wind energy capacity required for the 1.5°C and net zero pathway set out by IRENA in their 2050 roadmap, effectively condemning us to miss our climate goals.”

Solar power installations are also accelerating rapidly. In its December 2022 report on renewable energy, the IEA said “ Global solar PV capacity is set to almost triple over the 2022-2027 period, surpassing coal and becoming the largest source of power capacity in the world. The report also forecasts an acceleration of installations of solar panels on residential and commercial rooftops, which help consumers reduce energy bills.” Indeed, the pace of solar capacity installation is even dominating in Texas, where ERCOT recently reported that solar has accounted for about 90% of new capacity on the Texas grid installed since last year’s Big Freeze event.

Of course, the problem with both solar and wind is that installed capacity does not equate to the amount of electricity that is actually generated, especially during severe weather events during which both forms of renewable energy tend to perform their poorest. What this has meant during a century in which electricity demand has risen at an increasingly rapid pace is that, even with all the trillions of dollars in government incentives and subsidies targeting renewable energy, demand for fossil fuels has continued to inexorably expand.

Add to that dynamic the unpredictable nature of major global events that create large disruptions in energy plans – like Russia’s invasion of Ukraine this past February – and the best-laid plans of mice and men tend to go awry. Concede the truth that the plans for this ongoing, heavily-subsidized energy transition weren’t laid all that well to begin with, and you end up with an outcome like we’ve seen during 2022, the year the energy transition went completely off the rails.