The Global Energy Transition - Part 1

[00:00:00] Sarah:

Welcome to Wired for Good Conversations for a Better Energy Future. The podcast exploring how we can achieve a faster, fairer, and more affordable energy transition. Brought to you by Ausgrid, this podcast aims to make the complex energy industry more accessible and address how the energy transition can unlock greater benefits for all Australians. Join us as we bring together leaders and experts to tackle the big questions on what's needed to achieve an energy future we're proud to leave as a legacy for the next generation.

We had such a great discussion with Lord Adair Turner that we didn't want you to miss a single insight. So, we are sharing it as a special two-part series. Here's Part One where we unpack how Australia's progressing in the global energy transition. Enjoy the conversation.

Hello and welcome to Wired for Good, the podcast where we explore the people ideas and innovations shaping Australia's energy future. I'm your host, Sarah Aubrey. In this episode, we explore the global energy transition and Australia's role in it.

The need to decarbonise is common across the globe, but the solutions, progress and politics vary vastly across regions and countries. So today we're going global and taking a broad look at the transition, but we will dive deeper into how the transition in Australia plays a critical role in achieving the targets we have signed up to globally.

And talking about targets, let's find out if we're on track. Have we left the Paris Agreement behind us? And what's next? What targets should we be setting for ourselves given current progress? To guide us as we journey across the globe, we are joined today by the Right Honorable Lord Adair Turner, Chair of the Energy Transitions Commission.

Welcome, Adair. It's a great honor to have you here in Australia.

[00:01:55] Lord Adair:

Well, great pleasure to be here.

[00:01:57] Sarah:

Can I call you Adair?

[00:01:58] Lord Adair:

Certainly, yeah, absolutely Adair.

[00:01:59] Sarah:

Brilliant.

[00:02:00] Lord Adair:

Of course.

[00:02:01] Sarah:

Adair, what is, we'll call it the ETC from now on. What is the ETC and what does it do?

[00:02:07] Lord Adair:

Well, the ETC, because it's called ‘commission’, sounds like somebody appointed it or it's terribly official. It's actually just a freely arising, voluntary coalition of mainly companies, but also some environmental NGOs across the world. It got going in January, 2016.

[00:02:23] Sarah:

Mm-hmm.

[00:02:24] Lord Adair:

Just after the conclusion of the Paris Climate Conference, what's called COP21 in the parlance of these things.

And it was originally about 15 companies. It's now about 50. Across the world here in Australia, we only have one member at the moment, and that is Ausgrid members. But we have Chinese members LONGi Solar, the biggest maker of PV manufacturers in the world, Envision one of the biggest makers of wind turbines.

But we also have many European companies like Vattenfall and Iberdrola and ArcerlorMittal and Tata, which makes steel. And we've got Indian companies such as Renew Power and Tata Steel is obviously based in India as well. So, this coalition, which it crosses lots of different sectors, and includes oil and gas companies.

We have Petronas from Malaysia, Shell in the oil and gas space, but also a lot of companies in renewable electricity. A lot of companies, grid companies, technology companies. All of them have come together and we are all committed to finding out, working out how we can build a zero-carbon economy.

We say in all rich developed economies by 2050 in all the developing world by 2060.  And we work on analysing what are the techno economic solutions? What are the technologies which will get us there? How much will they cost? How many of them will be costless? Where will there be a cost of applying these new technologies?

And then once we've done that, we argue for the policies and actions, both private and public policy, which will get us there. And we do work at global level on all the technologies, but we also do deep dives. We've done deep dives, for instance, into the Chinese economy. We did a very deep dive back in 2019 on how China could become a zero-carbon economy.

We've done deep dives into the Indian power system. How can you decarbonise Indian power? And we've become over the last 10 years, you know, an influential body, hopefully off the quality of our work. And we get invited by governments, by companies to talk to them about what our conclusions are and, and how we drive this transition.

[00:04:41] Sarah:

How do those members work together?

[00:04:43] Lord Adair:

Well, they do work together. I mean, it's, they pay for the secretariat. We have a permanent secretariat of about 15 people doing both analysis and communications and member administration. All the different things you'd expect. But we work when we do analysis in a way which deeply involve members.

So we decide to look at a particular subject like, you know, where are we really on the development of hydrogen big issue as to whether we went through a hydrogen hype and have pulled back from it, or how do we need to manage you know, transmission grids in a more, efficient and effective system.

We pick an issue like that and we decide we're going to dive deep, dive into it and produce a report, but then we have workshops. With all our members attending. I mean, they are workshops, they're remarkable things. They last for, you know, four or five hours with 50, 60 people, you know, online, in a workshop.

And we are going through from the secretariat's point of view, our initial thoughts on what our analysis is telling us we think is the answer, but then we're sharing it with our members and getting their input. And on any one issue, there'll be a particular set of members who are the real deep experts on that issue, and we'll spend time with them.

We then develop draft reports, draft points of view, and then we try to get all of our members to sign up to it. Now, as you can imagine, there's a sort of challenge there of how do you write a report with 50 members, which isn't just a complete mess. You can, you can never write anything and...

[00:06:14] Sarah:

And working in completely different...

[00:06:14] Lord Adair:

You can never write anything by committee. So that is a part of our secret sauce. What we have to say to our members is, look, we've got to write something which has real, strength and is clearly written and reaches clear conclusions. And members at that stage have to compromise, and sometimes you get them and say, well, yeah, I wouldn't personally want to say that, but as long as you put in a footnote, which sort of says, well, there may be some circumstances where that doesn't apply.

You know, we get member agreements. But on the whole, we tend to be able to get all our members to agree to things, which if you read them, they're not lowest common denominator reports. They say, you know, punchy fact-based things. They reach conclusions, they argue for a particular point of view, and that's something somehow, we have managed to develop that despite this amazingly disperse membership, both by sector of the economy and by country.

But also, in addition to our member companies we have NGOs like the World Resources Institute, or the European Climate Foundation, or the Rocky Mountain Institute. Along the way, we have had some where we've had big debates. To give you an example, there was a very big debate in the membership about biofuels.

So, some people believe that there's a major role to develop biofuels for multiple uses, which will help with the energy transition. And other people are very, very wary of biofuels competing with food production or with biodiversity. And I think on that one, we probably had a wide range of points of view as to what was a sensible thing to say about the relative role of biofuels.

But we have to go through those arguments and the very process of going through the arguments, you know, fine tunes our analysis, it forces us to be, you know, really fact-based and analytically based and try and work out what are some of these trade-offs and difficult issues, in the energy transition.

[00:08:11] Sarah:

So, when you have a report that you come up with, what then happens beyond that?

[00:08:15] Lord Adair:

Well, we launch it, we put it out. We typically have a lot of media around it, but once it's out there, that's not the end. And indeed, that's the beginning. We will then often produce regularly over the following years, you know, short updates, recommunication.

I think one of the rules of communication in general is you have to communicate a message so many times that you personally are completely bored rigid with it before you have any chance that it's getting through to the relevant people. Now, we spend a lot of time actually debating who are the relevant people, who are we communicating to?

I mean, at one level, our reports are not read by the broad public. But we need to get them pretty wide, we want to get them to tens of thousands of business executives across the world to influence their opinion about what is technologically possible. We want to get it to civil servants and politicians across the world to help them understand if we're going to have this energy transition.

What categories of policy are required to make it possible for business to make the decisions? And then we keep thinking about how far do we have to go towards the consumer end, because of course, we live in a world now with social media. There's a lot of misinformation out there. And so, there's a danger that the spread of misinformation informs what some politicians believe and gets in the way of rational policy.

And I think it's not easy for us to become, you know, social media giants and compete with the people who have huge function.

[00:09:55] Sarah:

I don't know, Adair, I think you've got influencer written all over you.

[00:09:57] Lord Adair:

But we know we have to play it and we also try to, you know, reach out to general public events, as much as possible to get the message over.

So, there's a whole series of different ways that you have to communicate. And by the way, it varies country by country. I mean, we've produced reports in China. Now, what matters in China? Um, China is in a sense, a more elitist culture. I mean, if you get through to the top thousand of people in China, and if you convince them, you probably do get the policies following it. Because there isn't the same, you know, social media challenge to the leadership.

So, our communication there can be a bit more of an elite communication. But I think in other countries we have to get messages out into, you know, the argumentative arena of democratic politics and help win the debates.

[00:10:54] Sarah:

Well, the problem is, is that it's become a political football.

[00:10:57] Lord Adair:

It has become a football much more than it was even over the last 10 years. It's become a political football and interestingly, not sometimes a political football of actual disagreements about the economics, but wrapped up with the culture wars.

I mean, let me give you a bizarre thing, right wingers like big nuclear plants and big coal plants because they're sort of big and macho and left wingers like solar panels because they're nice and decentralised. I mean, people who, you know, sometimes their points of view are not driven by looking at the facts.

They're driven by these, these cultural, these almost aesthetic, belief systems. One has to recognize that, you know, my own tendency as a professional economist and somebody who likes facts might tend towards the belief that, you know, if you convince somebody of the rational economics, you've won the argument.

But often the arguments are driven by something which have nothing to do with their emotional, their aesthetic, their stylistic, their cultural.

[00:12:04] Sarah:

And being amplified on social media. So, at a global level, are we on track to achieve Paris Agreement targets?

[00:12:11] Lord Adair:

No. So, the Paris Agreement target was twofold.

It was, we definitely commit to limit global warming to well below two degrees centigrade. And we ideally aim to limit it to 1.5 degrees centigrade, this is the temperature increase above pre-industrial levels. The 1.5 degree limit there was actually very strongly argued by countries down in this part of the world, specifically the Pacific Islands.

Some of, for some of whom warming significantly above 1.5 degrees centigrade is literally an existential issue. I mean, some of them will almost cease to exist with the rise in sea levels if we don't limit to that. So where are we? Against those two targets? Well, the sad point is we are not going to limit global warming to 1.5 degrees centigrade because we're pretty much there already.

It's averaged that over the last three years. The only way to limit it now would be to cut emissions to zero almost immediately. And we're not going to manage to do that, you know, there's no country in the world that is committed to that. So, I think sadly, the International Energy Agency with whom we work a lot, but they do, you know, really brilliant scenarios, deep scenarios of what different combinations of policies would produce in terms of temperature, their most extreme scenario.

If the world really, really got serious about pursuing net zero and delivered not only the commitments that have been made, but much stronger commitments, they still see it at 1.65 degrees centigrade by mid-century. But actually, if you take their scenario, which doesn't do that optimistic thing, but says, where are we on the basis of stated policies at the moment?

Policies which governments are committed to introduce, we're heading to 2.5 degrees centigrade of warming and that will be disastrous for humanity. Already at 1.5 degrees centigrade, we can see very big and harmful weather effects. We can see big increases in droughts and extreme rain, rainfall events, wildfires, et cetera. Which in parts of the developing world, you know, cost hundreds of people's lives at these events.

And it's going to get worse for every point. One degree centigrade above 1.5. So, you know, it's bad, but we're not going to limit it to 1.5. That's a sad fact. The crucial thing we believe now important is to take the prime Paris, target well below two degrees centigrade and make sure that we achieve that.

Now, you can get worked up about what exactly does well below mean but it doesn't mean 1.95 and it doesn't mean 1.5, maybe it means 1.7, 1.8. We've got to make sure that we get to that level, that we start from that sort of 2.5 that we're heading to on current policies, and we work out what are the changes in policies, the changes in investments, which can get us still below two degrees centigrade. And that is possible, but it requires a lot of work to achieve it.

[00:15:11] Sarah:

Which regions or countries are leading in that?

[00:15:14] Lord Adair:

Well, the answer is it's a mix in terms of different countries doing different things.

For instance, suppose I was to take China. Right. If you looked at China's emissions, you wouldn't say they're leading. China is now by far the biggest emitter in the world and China's uh, per capita emissions are now higher than European or UK emissions. They're still below Australian per capita emissions, which are some of the highest in the world.

But China is no longer, you know, a poor little developing country, it is a huge emitter. On the other hand, China is developing and deploying the clean technologies faster than anybody else. So, half of all solar panels in the world are going in in China. China now has over 50% of all passenger car vehicles are being bought, are electric.

China is driving down the cost of electrolyzers from which we can make green hydrogen. So, whenever I go to China, I say, look, there are two stories told about you and they're both right. You are the biggest emitter in the world. We will have to have stronger targets out of China to reduce emissions if we'd have any chance of well below two degrees centigrade. But we realise that you are also developing and deploying the technologies.

Europe is making considerable progress. So, the UK has brought down its emissions from about 800 million tons in 1990 to 400 million tons or so today. And we are committed by 2035, to get them down to sort of 150 million tons, that sort of level.

And we are on a pretty good trajectory. To give you an example, we have significantly decarbonised our power system. Back in 2010, we had a power system where on average, a kilowatt hour of electricity had 500 grams of CO2 related to it. We call that the carbon intensity measure grams per kilowatt hour.

That 500 is now 125 in the UK. So, we've decarbonised our electricity system by 75 percent and we've completely cut all coal plants, there are no coal plants. You know, back in 2010 we were still getting 40% of our electricity from coal and we are now getting none from coal. So, we've made considerable progress and then you get different places around the world.

India is making considerable progress in the deployment of renewables. I think it's difficult to say anybody has it perfectly right. And of course countries have different starting points. France has a very clean electricity because it built an enormous nuclear fleet back in the 1970s. So, at the starting point of people debating what to do about climate change, France already looked at a relatively low emission country for a rich developed economy.

[00:18:10] Sarah:

Where do you think more could be done?

[00:18:13] Lord Adair:

Well, everybody has to do more. And...

[00:18:16] Sarah:

Who are the laggards. Are there laggards?

[00:18:19] Lord Adair:

Oh well, yeah. America is a laggard and it was a laggard even before this before Donald Trump. And it's going to be a worse laggard still. I mean, Australia's an interesting point.

You do have very, very high emissions per capita. Partly, one can say yes, but that's because we provide a lot of product for the rest of the world. We export it and there's always a debate about where should you think about the emissions arising from? Should you think about them as arising where they are produced or where they are consumed?

So, your iron ore, all the minerals that you produce, in a sense that's bound to give you a high, emissions level. You still need to plan to get them down, but I wouldn't, as it were, you know, blame Australia for that because they're actually being consumed in the rest of the world.

Where Australia stands out is your power system dominated by coal and in some cases dominated by a very dirty form of coal. I mean the Victoria area, the brown coal there produces a, you know, electricity with a very, very high grams per kilowatt hour. So if you have brown coal, you probably produce, you know, 1200 grams per kilowatt hour of electricity.

If you use what is called super-efficient, hard coal with ultra super critical, coal plants, most efficient, you can get that down at about 600. So, there is coal and there's coal. And sadly, bits of the Australian system are the dirty end of coal. And that is one of the bits, which is, you know, Australia has to deliver that. It is clearly committed to doing that.

The government, the federal government has this target of 82%, renewables by 2030, which is achievable. That will involve obviously closing down the coal plants. But that's one of the crucial transitions that Australia has to do.

[00:20:18] Sarah:

Unfortunately, we do have some politicians who would like us to be building new coal plants with taxpayer money.

[00:20:25] Lord Adair:

Building new coal plants would be a really stupid thing to do economically.

Look, you, you can always debate about...

[00:20:31] Sarah:

That's why they want to use taxpayer money because no one else will do it.[00:20:33] Lord Adair: It's not going to happen without taxpayer money. I mean, in places like Australia, which are blessed with sunshine, a combination of solar plus batteries will be a cheaper way of producing round the clock electricity than building a new coal power plant.

I mean, you can have a debate about your responsibility to the world and the costs and the social costs of how fast you get rid of existing coal. But the idea of building in a country drenched with sunshine, new coal plants is about the stupidest thing I've heard for quite a long time.

[00:21:11] Sarah:

Do you think wind, you mentioned solar there, but do you see wind being a bigger part of Australia?

[00:21:15] Lord Adair:

Oh yeah, wind is important as well. Look, we did a report last year, it's on our website called A Power Systems Transformations, and we looked at how in different parts of the world you could build power systems, which are as much as 80 or 90% dependent on intermittent renewables.

Which means wind and solar, as against hydro, which we call dispatchable because if it's behind a dam, you know, you can decide when to switch it on or not. With wind and solar, obviously the wind and the sun decide when to switch it on. So, we call that intermittent. So, we looked at, can you build systems which are 80, 90% dependent on intermittent renewables?

Can you make them technically work? Answer is definitely yes, but also how are you going to balance supply and demand? What are you going to do when the sun doesn't shine and the wind doesn't blow? And we worked out what would be the cost of that in four different regions of the world.

We, we did it in the UK, which is a wind belt dominated country, India where most of the renewables will be solar. China, where it's five or six different climatic zones. So, there will be a bit of everything. And also Spain as a sort of Mediterranean climate, not dissimilar in a way to some bits of Australia.

And, what we found is that in every one of these locations, we will be able to run renewable dominated electricity systems with a total system cost. So that's the cost of the generation and the storage and the transmission, and all in cost, which will be lower than the cost of fossil fuel based systems. But we also found that it's going to be much cheaper in what we call the global Sunbelt than the hydro latitude wind belt.

And that is for two reasons. It's because one, although both solar and wind are coming down in price, solar is hurtling down in price. Whereas, wind turbines and wind are gently coming down in price. So, there's an extraordinary cost reduction going on both in the cost of solar and the cost of batteries.

So, solar is getting cheaper than wind. And the second point is that in the global Sunbelt, let's take India, there is some seasonal variation in wind and solar supply with the monsoon, but broadly speaking, there's intense sun most days of the year. So, the balancing problem, the problem of balancing supply and demand is primarily diurnal. It's day to night.

It's how do you keep the air conditioners going after the sun has come down and batteries occur a complete solution to that.

[00:23:57] Sarah:

Do you feel like batteries have now...

[00:23:59] Lord Adair:

Oh, they’ve taken off. Yeah.

[00:24:01] Sarah:

Like in, just in the last few years?

[00:24:03] Lord Adair:

Yes. Whereas in the wind belt up in Northwest Europe, we are going to get most of our renewables from wind and...

[00:24:11] Sarah:

And that can go all day

[00:24:13] Lord Adair:

And well, it can go all day, but it can also stop all day.

[00:24:17] Sarah:

Right?

[00:24:17] Lord Adair:

Because every now and then we get in the North Sea between Britain and Norway, we get an anti-cyclone weather system and we lose the wind and we can lose the wind for 10 days

[00:24:27] Sarah:

Really?

[00:24:27] Lord Adair:

And balancing that is a much bigger challenge than a day to night. So, overall, sunshine is going to be cheaper than wind, but the really favored countries are ones which have sunshine and wind, and actually Australia has that, and Australia will need, I think the primary bed of your future power system will be solar. That'll be the single biggest source.

But wind helps reduce the cost of it as well, because it means that part of the nighttime electricity is going to be provided by wind. So, I would expect to see in Australia, a mix of a lot of solar, a lot of batteries, but a fair amount of wind as well.

[00:25:06] Sarah:

And I would assume that solar is quicker to build, same as batteries versus wind.

[00:25:11] Lord Adair:

Solar and batteries are quicker to build. And I mean the cost reduction is extraordinary, over the last 50 years the cost of solar panels per watt of power that they can produce. They haven't come down 90%. They haven't come down 99%, they've come down 99.9%.

They cost a thousandth, a thousandth of what they did in 1975. Now, of course, at that stage, they were just experimental things, but they've come down 95% just in the last 15 years, and they're going to go on going down. The cost per power is going to halve again in the next 10 years. Indeed, when I say that, the only thing that I worry is that I'm going to look stupid because I understated how much they are.

What we have here is a technology, which is for a set of inherent reasons, subject to relentless cost reduction. It's rather like semiconductors; we know how semiconductors always fall in price. And batteries are the same. And in particular, you were saying a minute ago, you know, batteries are really taking off now.

What has happened over the last five years is just a stunning reduction. About 60% in the cost of storage batteries, both the sort of storage batteries that you put in your house, you know, 10 kilowatt hours or you know, 40 kilowatt hours in the tens of kilowatt hour ranges and what's called utility scale storage, where there's been the development of what people call the containerised solution.

In the factory, the batteries get put in a standard shipping container shape along with whatever combination of inverters or battery management system or cooling system they need. And the thing in a standard shipping container fashion then gets taken through the shipping process of the world and it ends up, and it's plug and play.

And this is an innovation which has occurred over the last five years, and it is transforming the speed at which we can deploy battery energy storage on large-scale outside the home. Sometimes at the distribution network level, sometimes at the transmission network level, but outside the individual premise.

[00:27:18] Sarah:

And that brings Part One to a close, but our conversation with Lord Adair Turner didn't stop there. Join us in Part Two as we pick up where we left off and delve further into the future of the energy transition. For more info on today's episode, visit wiredforgood.com au. And don't forget to follow us on YouTube, Spotify, or Apple Podcasts, so you never miss an episode.