The shibboleths of the old energy order fall away. The International Energy Agency has systematically struck down every economic and social objection to net zero.
“The message is clear: a new global energy economy is coming, which is cheaper, cleaner, safer, more resilient, and much fairer across countries,” said Fatih Birol, the director of the agency (IEA).
For two decades the IEA was aligned with the fossil industry, apt to treat renewables and electric cars in its World Energy Outlook as a romantic niche interest. This year the data tables begin with supply figures for solar, wind, bioenergy, and so forth. The lines for oil, gas, and coal are relegated to the bottom.
Those of us who follow the annual report as the catechism of the energy markets can only gasp with astonishment. Even more surprising is to hear Mr Birol issue a pontifical anathema against fossildom on the eve of Cop26 in Glasgow.
“I would like to see world leaders come together and give this message to investors: we are united in building a clean energy future and we are giving you an unmistakable signal that if you continue to invest in dirty energy you are going to lose money, big time,” he said.
The nexus of solar, wind, batteries, hydrogen, electrolysers, and critical minerals will displace the oil industry as the big global beast, accounting for 80pc of international energy-linked trade by 2050. This of course creates a new vulnerability.
The new term “mineral security” jumps out of the pages. One might deduce that aircraft carriers and foreign military bases will leave the Persian Gulf to protect the supply lines for copper, lithium, nickel, and cobalt coming from such places as Africa. Aukus submarines may patrol hydrogen pipelines from Australia to South East Asia.
This is where the superpowers will skirmish under net zero, and where it could all go wrong. How easily can the world find the raw materials for the IEA’s projected increase in utility scale batteries from 20 gigawatts to 3,000 by mid-century?
Yet overall the report is marvellously uplifting, an answer to the climate doomism of Extinction Rebellion. It counters the pervasive assumption that curbing CO2 implies economic “degrowth” and vegan austerity evermore.
A decarbonisation dash will instead accelerate economic growth, lifting global GDP by an extra 0.4pc annually over the next decade. The 5m jobs lost in oil, gas, and coal will be trumped by up to 24m green jobs, and three-quarters of these will be local.
It will lower the average household cost of electricity, heating, cooling, and transport fuel from $2,800 to $2,300 a year by 2030 in wealthier countries, with gradual gains to follow as the energy share of disposable income falls from 4pc to 2pc by mid-century. Energy bills in the developing world will creep up, but that is because of rising affluence.
Net zero does not cause energy poverty: it is the answer, although there will be gilets jaunes tensions along the way if it is not managed with skill. The poorest and most remote regions of Africa and Asia will leap-frog to cheap renewables, dispensing with the dinosaur infrastructure of pylons and centralised grids, let alone diesel trucked in at ruinous expense. Solar is the cheapest way to reach 800m people with no electricity.
Mr Birol has no patience for those trying to blame today’s energy crunch on renewables. It is due to a turbo-charged reopening after Covid, erratic weather events, hydro disruption in China and Brazil, and outages in global gas production.
“Some people portray the situation as the first crisis of the clean energy transition. It is a gross mischaracterisation. If anything we have too little clean energy,” he said.
It is too early for the 50pc collapse in upstream oil and gas investment since 2015 to curtail current supply, but the mess this autumn is a trial run for what will happen before mid-decade as the green effect bites in earnest.
Big Money has turned its back on the fossil industry and tightened access to capital before alternative energy is available at scale. The disinvestment campaign has been premature.
Declining fields and seams will cause a mechanical surge in oil, gas, and coal prices, a spectacular swansong for an old energy complex that is still most assuredly needed to sustain the existing economic system. The IEA says we must triple clean energy investment very fast to plug the gap, otherwise we face mayhem.
Laura Cozzi, the IEA’s chief energy modeller, says we were heading for a ‘3.6 degree’ world before the Paris Agreement. The Obama-Xi deal in 2015 put us on track for 2.6 degrees. The task at Glasgow is to come down to 2.1 degrees, and from there we can start to see our way out of this.
Some 40pc of the remaining post-Glasgow gap can be covered with existing technology in power production (and by curbing methane leakage) at zero marginal cost - or a “gain” - given that new renewables already undercut new coal and gas plants across most of the world. “We’re seeing wind and solar become so cheap that we could install 800 gigawatts with no extra cost to consumers,” she said.
The latest solar park tender at Saudi Arabia’s Al Shuaiba PV Project came in at $10.40 per megawatt hour, tantamount to free power. Bear in mind that the IEA stated just two years ago that the levelised cost of solar was $95 per MWh. Desert solar is so cheap that it is likely to lead to vast arrays in North Africa and Australia, or Rajasthan and southern Gobi sands, able to sustain much of the global industrial economy.
The Xlinks Morocco-UK project deserves more attention than it has received. It aims to generate 10.5 gigawatts (akin to eight nuclear reactors) from wind and solar across 1,500 square kilometers south of Agadir by the end of this decade, with batteries on-site offering quasi-baseload power transported through subsea cables.
Marco Alvera from the Italian infrastructure group SNAM thinks green hydrogen from Sahara solar will reach the critical level of $2 per kilo (Washington is aiming for $1 by 2030), at which point he plans mass production on the spot for shipment through existing pipelines to Europe at costs that undercut natural gas.
None of this needs technology yet to be invented. What it does require is minerals. The report warns that if the incipient crunch in key metals already underway gets worse it could raise the cost of the green transition by $700bn a year within a decade.
The IEA says that even pre-Cop26 policies already written into law imply peak oil demand by 2025 and structural decline thereafter, with the share of electric vehicles (EVs) rising sixfold to 30pc of global sales by the end of the decade. This is baked into the pie before we even get to Glasgow.
Under the net zero scenario, EV sales reach 60pc by 2030. No new oil fields will ever be needed again anywhere in the world. Output falls from 100m barrels a day to 24m by mid-century - mostly for plastics - with prices sliding to $25. The industry goes into run-off. This is what Saudi Sheikh Yamani meant in 1973 when he said “the Stone Age did not end for lack of stone”.
The life of natural gas as the transition "bridge fuel" will not last long. The IEA expects peak demand around the end of the decade whatever happens. Under net zero it goes into steep decline, surviving only in an “abated” form with carbon capture.
Big snag: while gas use falls overall, its new role in peaker plants as a back-up for intermittent renewables means that we will need 10-15pc more gas capacity by 2030 to cover sudden spikes in demand. This puts a premium on storage, which is exactly what Britain lacks after shutting down the Rough facilities.
Coal disappears altogether. Dr Cozzi said China’s domestic coal pledge implies 20 gigatonnes of averted emissions, equal to the entire effect of Europe going to net zero by 2050. If Xi Jinping is serious, we are well on the way to solving the problem.
Suspending all further coal expansion would eliminate 200 gigawatts, much easier now that Beijing and Tokyo will no longer provide export financing.
The average age of coal plants in rich states is 35 years and most are obsolete. The headache is in developing Asia where they are just 12 years old. The world will have to find a way to shut the plants gradually and “socialise” the legacy debts in poor countries. This is low-hanging fruit and the spread cost is trivial for an $86 trillion global economy.
Kingsmill Bond, a long-time critic of the IEA at Carbon Tracker, said this year’s outlook is a radical departure from old habits of fossil fatalism. “The glory of the report is that it shows how we can tackle every problem one by one,” he said.
The conclusions are still relatively conservative. The IEA assumes that just half the world’s energy system will be electrified by 2050. Others, such as Lord Adair Turner’s Energy Transitions Commission, say it will be 70pc - in which case wind and solar sweep the field, and natural gas does not get a reprieve with carbon capture. But that is to quibble.
You could say that the IEA had to fall into line after the election of Joe Biden on a green deal platform. The agency is the servant of the rich consuming nations and they are signed up to net zero. But that only goes to underscore the larger point: the whole Western power structure has mobilised to force breakneck decarbonisation, and via the IEA it has at last come up with precise ways to achieve it. Resistance is becoming futile.