The reality of energy today and the aspirations of energy tomorrow faced off in a boxing ring – and the status quo won, in a knockout.
It wasn’t a fair fight. And that’s the problem.
As the world comes out of the coronavirus recession, energy demand has climbed, propelling prices of fossil fuels higher. Over the past year, the price of oil has doubled, to more than US$80 a barrel. Natural gas prices have jumped even more sharply. Economic recovery in China has led to a shortage of coal.
It’s been dubbed the first energy shock of the green era – but that’s not quite on the mark. The green era, for all the talk and promises, hasn’t yet begun. The world’s energy sources in 2021 are little changed from the late 20th century. We are still deeply dependent on fossil fuels.
You can see that by looking at the price of gasoline. In Canada, the national average retail price of gasoline has topped $1.40 a litre only a few times in the past. Over Thanksgiving, it hit $1.47. In a decade, things could be different, with more people behind the wheel of electric vehicles. But this fall’s economic rebound equalled a rebound in oil demand – as would have happened a decade ago, or a century ago. Higher oil demand crashed right into strained supply, because investment in new oil production fell during the pandemic, when prices were much lower. In the United States, the world’s largest producer, output fell 25 per cent after a peak in March of 2020, and has recovered just half the decline.
Such squeezes will continue as the world juggles investments in clean energy with ongoing use of fossil fuels. The transition will be rocky. But it doesn’t change the imperative: The world has to get off fossil fuels, however politically and economically challenging that will be.
The upcoming United Nations climate conference in Glasgow, which starts on Oct. 31, is a case in point. It’s harder to be bold about 2050 when 2021 feels like a vise. President Xi Jinping of China reportedly will not attend. U.S. President Joe Biden will be there, but his climate agenda is stuck in the swamp of Congress.
The International Energy Agency, which earlier this year put out a landmark net zero report, issued its annual outlook last week. It said progress toward net zero is “far too slow,” and current energy and climate policies around the world are not enough to alter course. Without more change, the IEA says demand for oil and natural gas will continue rising until at least 2030.
The size of the task, overhauling the world’s energy system, is hard to put into words. A look at the birthplace of coal power and the Industrial Revolution provides some perspective. Five years ago, the United Kingdom still got 25 per cent of its electricity from coal. That’s now down to 2 per cent. But the U.K. now relies on natural gas for about 40 per cent of its power, and global demand has shot U.K. power prices to record levels.
What about alternatives? Wind produced 18 per cent of the U.K.’s power over the past year. But wind, like solar, is hamstrung by the vagaries of nature and the limits of electricity storage technology. The winds were strong and steady enough to generate a remarkable 60 per cent of the U.K.’s power on one day in August of 2020. But early last month the winds didn’t blow, and wind was just 3 per cent of power production.
Another clean alternative, nuclear energy, which can replace natural gas as baseline power, delivered just 17 per cent of the U.K.’s electricity over the past year.
Britain’s progress shows how far the energy transition still has to go. In the IEA’s net zero report, it pushed solar as the biggest source of future energy supply. But getting there would mean building the equivalent of the largest solar array currently in existence, every day, day after day, for the rest of the decade.
And that’s not what’s happening. Clean energy investment is at too low a level. So the world remains hooked on fossil fuels. Ontario’s electricity system operator said as much this month when it reported that phasing out natural gas power in the province by 2030 wasn’t realistic, and risked high costs and power shortages.
Right now, in the fight between present and future, the clean energy alternatives are still comparative pipsqueaks, while fossil fuels are Muhammad Ali in his prime. It will take a massive, collective effort to change the outcome.
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