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Leonard Hyman & William Tilles

Leonard Hyman & William Tilles

Leonard S. Hyman is an economist and financial analyst specializing in the energy sector. He headed utility equity research at a major brokerage house and…

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The Big Problem With Electrifying Everything

  • As the world pushes to electrify everything, fossil fuel usage in electricity production has remained largely unchanged over the past five decades.
  • Despite efforts to shift towards renewable energy, projections indicate a persistent reliance on fossil fuels in global electricity generation through 2050.
  • The challenge of electrification without substantial decarbonization raises concerns about the effectiveness of COP28 goals in a fossil fuel-dominated energy industry.

The UN-sponsored COP28 climate conference has issued a number of proposals for reducing CO2 emissions, some criticized as too weak, others as too radical. But looking at energy data what struck us is the enormity of that task of reducing carbon emissions and how little has actually changed over the past fifty years with respect to fossil fuel usage (the data we’re looking at begins in 1965), even though the first warnings about fossil fuel emissions date to Lyndon Johnson’s administration in the 1960s. Starting in 1965, fossil fuel usage (oil, coal, and gas) accounted for about 90% of global electricity production. The remaining 10% being mostly hydro and a small amount of first-generation nuclear. By 2023 fossil fuels still produced about 80% of total electricity consumed. But over that extended period, nuclear grew and then stalled followed by more recent growth in wind and solar. The result is an incremental 10% or so displacement of global fossil fuel usage in electricity production over the past 50+ years. 

The composition of global fossil fuel usage over the decades has changed somewhat. Oil usage has declined from its peaks in the late 1980s probably due to tightening fuel efficiency standards. Coal usage has also declined while gas usage has increased almost by an offsetting amount. Thinking like an energy monopolist for fossil fuels, if we had a 90% market share that only declined 10% over 50+ years, we would feel rather optimistic about our future prospects. And it gets even better. Why? Because we are on the verge of a huge growth in demand for electricity. True some of that increased electricity usage implies displacement of gas or oil. Heat pumps will displace gas usage and, obviously, electric cars and trucks don’t need much oil, except for some lubricants. But this is all at the retail level. Electrification can significantly escalate kilowatt-hour sales growth upward on a global, wholesale level.

In the US, for example, we are estimated to add 7.7 gigawatts of new gas-fired generating capacity in 2023-24 according to the US EIA. With no new coal or nuclear units on the horizon, all the remaining capacity additions this year are wind and solar, roughly 40 gigawatts of wind, solar, and batteries but mostly solar. So it’s fair to conclude that the US electric generating mix is decarbonizing even as it expands. However, most of the world does not look anything at all like the US in terms of electric power generation. China alone added significantly more new coal-fired power generation than the US shuttered. They also have about 25 new nuclear power stations under construction. Our point is that in growing economies like China, India, and the Southeast Asian nations energy planners are still choosing to build new coal-fired power generation. This is what we mean when we talk about electrification without decarbonization.

Projections through 2050 from the Energy Information Administration (EIA) tell the story.

Table 1. Global generating capacity (in GW) and electric generation (in billion kwh)  

FUEL

Capacity 2022

Capacity 2050

Generation 2022

Generation 2050

Oil

391

96

733

56

Natural gas

1931

2781

6699

8266

Coal

2271

2275

9696

9612

Nuclear

400

468

2660

3297

Renewable

3297

8244

8444

ADVERTISEMENT

21067

Storage

221

1158

  

    TOTAL

8511

15022

28239

42298

     

 

Source: EIA

The EIA projects world generating capacity to rise 2.0% per year and electricity production by 1.5%, which will, we suspect, turn out to be too low, given the push toward electrification.    What is more generation by fossil fuels rises in absolute terms between 2022 and 2050, although fossil fuel percentage of generation does drop from 61% to 42%. These projections, probably more based on reality than promises coming out of a UN conference, demonstrate the foot-dragging nature of the electric industry’s biggest opportunity in a century. And it asks the question: what is the point of electrifying the economy if fossil fuels will generate so much of the electricity? If electrification is the key to decarbonization, then we need to ask whether the world can meet COP 28 goals when the electric industry is so set in its ways.

By Leonard S. Hyman and William I. Tilles

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Leave a comment
  • Lee James on December 20 2023 said:
    In this analysis of avoided fossil fuel growth, are we factoring in population growth relative to increases in electric power load? World population has doubled three times since 1900.

    Seems to me that we are in fact avoiding a lot of growth in electric power load by bringing renewable systems on-line.

    But, yes, we do need to bring in renewable energy faster than we are.
  • James Stafford on December 28 2023 said:
    Reply to Lee James from the authors:

    The projections, depending on the model used, should take into account economic growth, population and changes in consumer preferences and in the technology of electricity devices. In past decades, the models tended to overstate growth in demand, because the modelers did not take into account the increasing efficiency of the users. I suspect that the current models will understate demand growth because they do not take into account the pace of electrification. Either way, though, the difference in growth rate will be small— in the order of 1 or 2 percentage points per year. But as you can imagine, that difference makes a huge difference in spending needed to meet incremental demand.

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