I have an awkward question for our governments. What are we going to do if the energy transition fails?
Actually, I have a lot of questions.
What if renewables don’t produce a constant supply of electricity? Or the interconnector cables that move their power aren’t built in time?
What if people don’t want EVs, or the grid can’t handle their load?
What if the copper and lithium we need don’t get mined? Or if the batteries don’t improve?
There are so many points of failure. Murphy’s Law dictates we better be ready for something to go wrong.
So, do we go back to fossil fuels? Or go into climate lockdowns?
Politicians had better come up with some answers soon. Because things are not looking good on the energy transition front…
Right now, energy policy makers are taking some rather large punts on future technology. They’re shutting down fossil fuel based power stations, cars and industries, while presuming the replacements will be up and ready in time to replace them.
It’s the first energy transition in history that imposes change, rather than allowing the best source of energy to win fair and square.
And I’m getting worried it isn’t going to work out well.
The world turns on hydrogen
Recently, even the mainstream media has turned on one source of fuel that is supposed to get us over the net zero line: hydrogen.
Of course, it isn’t a source of fuel at all. It has to be made with energy.
But isn’t that true of all energy? Don’t we use oil to pump oil out of the ground? And refining it into fuel is energy intensive too, right?
Yes, the key equation is how much energy you get out per barrel you put in.
Do oil wells and refineries produce more energy than they use?
They certainly do.
But how much energy does it take to produce clean green hydrogen?
It depends who you ask. But they all agree on one thing. A lot more energy goes in than comes out. “Hydrogen Is a Net-Energy Loser,” is how Bloomberg puts it:
The useful energy contained in hydrogen that is produced via electrolysis is, at best, just over 60% of the energy required to manufacture it. This contrasts with other dispatchable fossil fuels and nuclear power, which all have EROIs greater than one, even after including the energy consumed to manufacture the materials and construct the facilities
Losing 40% of your energy to produce energy seems like an odd way to run your energy system.
Nuclear’s EROI is around 75, but the way. Meaning you get 75 times more energy out than you put in.
But back to hydrogen’s fate.
It seems the “source” of energy is transitioning from saviour to posterchild of failure.
A symbolic warning
We all saw the decline of Fortescue’s hydrogen project recently. But this was just the beginning. Other dominoes are falling fast now.
Even the mainstream media is turning on hydrogen. Bloomberg published a video about how unlikely it is to work given recent news from projects around the world.
And this follow up article added fuel to the bonfire:
Hydrogen’s potential as a carbon-free fuel has provoked no end of excitement. From the deserts of Australia and Namibia to the wind-blasted straits of Patagonia, companies and governments worldwide plan to build almost 1,600 plants to make it.
‘There’s only one problem: The vast majority of those projects don’t have a single customer stepping up to buy the fuel.
Among the handful with some kind of fuel purchase agreement, most have vague, nonbinding arrangements that can be quietly discarded if the potential buyers back out. As a result, many of the projects now touted with great fanfare by countries vying to become “the Saudi Arabia of hydrogen” will likely never get built.
So the hydrogen boom could evaporate without a bang. As if it was never part of our strategy for decarbonisation.
Except it would leave is a great big hole in our energy mix.
How big? Bloomberg NEF estimates Europe will fall 17.2 million metric tonnes short of its 20 million hydrogen goal by 2030. Here’s why:
“No sane project developer is going to start producing hydrogen without having a buyer for it, and no sane banker is going to lend money to a project developer without reasonable confidence that someone’s going to buy the hydrogen,” says BNEF analyst Martin Tengler.
Only a politician could presume we’ll use a form of energy that isn’t wanted and won’t be produced.
But without either, what are we left with?
Has anyone factored the demise of hydrogen into our plans to phase out natural gas and other fossil fuel power? Or is that phase out just surging ahead anyway?
My local MP and opposition energy spokesman Ted O’Brien has the answer, as published in the Australian Financial Review:
Opposition energy spokesman Ted O’Brien said Fortescue’s decision had “blown a gaping hole” in the government’s energy plans and, coupled with gas shortages, put energy security at risk.
“The collapse of this project is symptomatic of Labor’s failing all-eggs-in-one-basket ‘renewables only’ plan which is eating away at Australia’s energy future,” Mr O’Brien said.
So far, so common sense. Clearly, hydrogen is not the answer. At least someone is talking sense.
But then comes what we all knew was coming:
“We remain optimistic about the success of hydrogen in the long-term playing a role in our future energy mix, but we will not follow Labor’s mistake.”
It’s funny until the lights go out.
Coming up short circuited
It’s not just hydrogen falling short. EV sales and manufacturing, airline emissions targets, zero emissions shipping technology and countless other parts of our daily lives are proving resistant to the presumptions that we’ll get to net zero.
In fact, emissions cutting targets are falling by the wayside years before we fail to reach them. It’s getting embarrassing.
And yet, governments have not admitted we aren’t on track. At least, not where it counts. They continue to strangle the fossil fuel economy under the presumption it’ll be replaced.
Nobody is asking, ‘By what?’
Because they don’t have an answer.
And so I ask again, what are we going to do if when the energy transition fails?
Will we change our mind about the climate science and use fossil fuels after all? Or will our power consumption be cut?
The answer, I suspect, is to double down. Build more renewables, more hydrogen white elephant projects, more cables and subsidise more EVs.
Which, by the way, all amounts to a vast boom for resources. That’s the energy transition’s dirty little secret. And it’s why our mining analyst James Cooper is licking his lips
He’s found the ASX’s next potential takeover targets as the major miners try to bulk up their production to meet demand. Find out what they are here.
Until next time,
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Nick Hubble,
Editor, Strategic Intelligence Australia
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