“Global Energy Transition” – Fact or Fiction?

“Energy transition,” said S&P Global in 2020, “refers to the global energy sector’s shift from fossil-based systems of energy production and consumption – including oil, natural gas and coal – to renewable energy sources like wind and solar, as well as lithium-ion batteries.” Today, politicians, CEOs, journalists, “experts,” advocates and others – almost everybody confidently declares not just that this transition is well underway: in the years to come it’ll accelerate. Indeed, it’s allegedly a “megatrend.”

Tellingly, however, nobody cites (never mind presents) comprehensive and rigorous analysis that substantiates the claim that the global economy is “decarbonising.” That’s because the transition is mostly fiction.

Using the latest available data from Eurostat (the European Union’s statistical agency), the Energy Information Agency (part of the U.S. Government’s Department of Energy) and the World Bank, I analyse the consumption of energy in China, the EU, India and the U.S. Collectively, these countries comprise more than half of the world’s total population, almost two-thirds of its greenhouse gas emissions and three-quarters of its GDP. If the energy transition isn’t occurring (at all or sufficiently rapidly) in these countries, then it simply doesn’t matter what others such as Australia do.

My analysis demonstrates that

• In the world’s richest major countries as well as its most populous ones and globally, fossil fuels remain today what they’ve long been: by far the most important source of energy.
• In these countries and around the world, the trend isn’t solar and wind power’s friend: although electricity’s share of total energy usage is rising, particularly in China, it remains small (17% globally in 2021). And as a source of power on a worldwide basis, solar and wind’s contribution remains minor (10%). Indeed, to the extent that decarbonisation has occurred, it owes much more to base-load (hydro-electric and nuclear) than to intermittent (solar and wind) power.
• Just as electricity comprises a minority portion of the total energy mix, households consume just 23-25% of the world’s energy. Intermittent sources of electricity can to some extent decarbonise the household sector, but not most industry, heavy transport and agriculture. Accordingly, just as renewables’ share of global power generation remains insubstantial, their share of global energy usage is inconsequential (4%); moreover, given their inability to power large swathes of agriculture, industry, aviation and heavy transport, their share is likely to remain insignificant.
• In the U.S. in 2021, fossil fuels’ percentage share of total energy consumption soared by the greatest-ever year-on-year amount – to a level not seen in 40 years.

Whether in the world’s biggest and richest economies, its most populous countries or globally, and interpreting these data very charitably, the “energy transition” is advancing glacially from a low base. Interpreting them dispassionately, decarbonisation simply isn’t happening. To assert otherwise, as almost everybody routinely does, ignores or distorts reality – and, as occurred during the Dot Com Bust and GFC, will impose heavy losses upon credulous investors who blindly follow the enthusiastic but misguided herd.

Three Fundamentals and Two Crucial Weaknesses

An even-handed assessment of the “energy transition” must bear in mind three crucial facts. First, all sectors of an economy consume energy; moreover, as economies grow they consume more energy, and as people become wealthier per capita usage of energy rises. From this point of view, modern economies comprise five sectors:

1. Agriculture, fishing & forestry use energy to grow and harvest food and fibre;
2. Households consume the energy that powers the appliances that heat and cool dwellings, cook, cool and freeze food, fuel cars for personal transport, etc.;
3. Mining & industry consume the energy that fuels the mines and factories that produce intermediate and finished goods;
4. Services (including government) power the offices, shops, etc., that house the people and computers that produce myriad services; and
5. Transport via air, rail, road, water, etc., fuels the vehicles that move raw materials, finished goods and groups of people from one place to another.

In the European Union in 2020, according to Eurostat’s latest data, industry consumed more energy (32% of final consumption) than any other sector, followed by transport (26%), households (25%), services (12%) and agriculture, fishing & forestry (3%). (It’s unclear what’s happened to the other two percentage points.)

Time-series data from the Energy Information Agency, which Figure 1 plots, paint a similar picture in the U.S. Although its share has fallen from 47-48% in the 1950s to 32-33% since 2002, the industrial sector (which includes agriculture, fishing and mining) has always been the biggest consumer of energy. The transport sector has always been the second-biggest user, and its share of consumption has risen from the low-20s in the 1950s-1960s to the high-20s since the turn of the century.

The household (residential) sector has always ranked #3, and its share has remained stable since the late-1950s at 21-23%. Finally, the services (commercial) sector’s share has almost doubled, from 9-10% in the 1950s to 18-19% since the turn of the century. (Importantly, the EIA’s figures exclude usage by government, and the U.S. military is a major consumer of energy. Much as its “climate czar,” John Kerry, might wish it, its aircraft aren’t gliders, its warships aren’t wind-powered and its tanks aren’t EVs).

Figure 1: Total Energy Consumption by End-Use Sector, U.S., 1950-2021

My second point is also obvious but equally fundamental: sectors of the economy consume not just different quantities but also varying types of energy. In the EU in 2020, again according to Eurostat, petroleum products such as diesel fuel, heating oil and petrol provided the lion’s share (35%) of the energy consumed in the EU. Electricity (23%) ranked second, just ahead of natural gas and manufactured gases (22%), followed by the direct use (that is, not transformed into electricity) of renewables, e.g., wood, solar thermal, geothermal or biogas for heating spaces or water (12%), “derived heat” (such as “district heating,” whatever they are, 5%) and solid fossil fuels (mostly coal, 3%).

It’s much the same in the U.S., and Figure 2 adds historical context to today’s reality. The biggest change since 1949 has been the collapse of coal’s share – from 40% in 1950 (when it ranked as the biggest contributor) to 11-12% in 2020-2021 (when it tied in position 3-4). Today its share is comparable to renewables’ (which has been steady at 12-13% since 2010). Indeed, renewables’ share has varied little over the past 70 years.

The EIA’s is the most valid, reliable and longest series of data measuring renewable energy of which I’m aware. If the scores and perhaps hundreds of billions of dollars of government subsidies haven’t moved the needle in the U.S. towards renewables, what on earth will? No sensible person can believe that an “energy transition” is underway in that country.

Figure 2: Total Energy Production by Source, U.S., 1949-2021

Gas’ share has waxed and waned. It doubled from 1949 (17%) to 1971 (36%), sagged to 25% in the mid-1980s), stabilised at ca. 27% during the next 15 years and then – largely as a consequence of the “fracking revolution” – rebounded to 36% in 2021. In 1949, gas ranked #3 as a source of energy; today, it ranks #1. Over 60 years, oil’s share halved – and then, over the course of a decade, the shale revolution doubled it. It now ranks #2.

EIA and Eurostat don’t admit it, or even draw attention to it, but the conclusion is inescapable: after decades of increasingly coercive effort and trillions of $ and € of expenditure, the EU’s and U.S.’s economies remain overwhelmingly fossil-fuelled.

In the EU, the sum of the shares of petroleum products, natural and manufactured gases and solid fossil fuels’ shares of total energy usage is 35% + 22% + 3% = 60%. And that’s a very low estimate: it excludes the sources of electricity generation. Renewables’ share, in sharp contrast, is just 12%. In the U.S., fossil fuels’ share in 2021 was 86% (Figure 3). That’s not just a massive year-on-year increase (6.5 percentage points): it’s the biggest increase on record. Furthermore, it’s the biggest share since 1982.

Figure 3: Fossil Fuels’ Share of Total Energy Production, U.S., 1949-2021

It’d be comical if it weren’t so wasteful, expensive and pointless: from the turn of the century to 2000, despite the hundreds of billions of government subsidies, etc., the U.S. economy decarbonised not one iota – and in 2021, for the first time ever, significantly “recarbonised”! Furthermore, the decarbonisation from the 1970s to the turn of the century is attributable to the increased importance of nuclear energy in the mix.

Some enthusiasts of renewables will react to these results with dismay; others will ignore or reject them. A few will emphasise what Eurostat notes: “other renewable sources are included in electricity (e.g., hydro power, wind power or solar photovoltaic).” That’s true. Yet it’s equally true – and Eurostat conveniently overlooks the fact – that fossil fuels such as coal, gas and oil also generate electricity.

That brings me to my third fundamental point: by whatever means of generation, electricity comprises a steadily rising – but still a minority – share of the world’s and almost all countries’ use of energy.

Using data from ourworldindata.org, which collates data collected by the United Nations and World Bank, Figure 4 plots electricity’s share of total energy consumption since 1985 in two high-income countries or groups of countries (the EU and U.S.), two key – given their large populations and rapid development, etc. – middle-income nations (China and India), and the world as a whole. In each of these major blocs other than China, electricity’s share has grown steadily, from approximately 12-13% in 1985 to 16% in 2021. In China it’s zoomed 2.75-fold from 7% in 1985 to almost 20% in 2021.

Figure 4: Electricity’s Share of Total Energy Consumption, the EU, Key Countries and Worldwide, 1985-2021

From these preliminary points emerge two fundamental – and, I suspect, collectively insuperable – problems for advocates of decarbonisation, the energy transition and the like: they put virtually all of their eggs into the (a) “electricity” and (b) “household” baskets.

In particular, they typically talk as if the generation of power from sun and wind, and the replacement of passenger vehicles by EVs, will decarbonise the entire economy.

Yet even if solar and wind generated 100% of the world’s electricity and completely powered all households – possibilities which, given current and prospective technology, not to mention the astronomical cost, are utterly fanciful – they’d decarbonise no more than one-quarter of today’s energy. What about the other 75%?

It’s possible – to some extent – to decarbonise the electricity, household (including personal transport) and services sectors. But they’re the low-hanging fruit; far tougher are vast swathes of industry, as well as air and sea transport and agriculture, which collectively consume three-quarters or more of the world’s energy.

Fossil Fuels and Intermittent Energy as Sources of Electricity

Electricity comprised 12% of the world’s consumption of energy in 1985; by 2021, its share increased to 17%. From what sources of energy has electricity been generated, and what are its sources today? Figure 5, which plots data from ourworldindata.org, answers these questions. It’s true that renewables’ share of global power generation has grown steadily this century. It’s also true their share now stands just below 30%. In this sense, some “decarbonisation” has occurred.

Crucially, however, in 2000 hydro-electric generation contributed virtually all of the “renewable” share. Today, it continues to provide the bulk. That’s because solar and wind generate just 10% of the total. Most importantly, today fossil fuels continue to generate the most by far (62%) of the world’s electricity – a share which hasn’t changed materially since the mid-1980s. In this crucial sense, globally there’s been no “energy transition.”

Figure 5: Global Consumption of Electricity, by Source, 1985-2021

If the decarbonisation of power generation is occurring anywhere, it should be occurring in the EU. No other part of the world has been more self-righteous about intentions (as opposed to outcomes), and it’s probably true (detailed figures aren’t readily available) that nowhere else has spent more money to pursue these intentions. And through the imposition of “carbon tariffs,” etc., no other part of the world has been as thuggish about imposing its climate edicts upon others.

At first glance, Figure 6 will excite the advocates of the energy transition – and particularly of solar and wind power. First, since 1985 fossil fuels’ share of power generation has mostly fallen, and since the ca. 2005 its decline has accelerated. In 1985, fossil fuels generated 55% of the EU’s electricity; in 2021, they generated 38%. Moreover, since the early-2000s renewables’ share hasn’t just risen: in 2020 it was slightly higher than fossil fuels’ share. But a closer examination should extinguish advocates’ enthusiasm:

Figure 6: Consumption of Electricity, EU (ex-UK), by Source, 1985-2021