Tilak Doshi contributor
I analyze energy economics and related public policy issues.
Mr. Doshi has a fascinating article at Forbes on the transformation of the IEA from a useful energy advisory body to an ideologically driven body.
In May 2021, the International Energy Agency (IEA) – the West’s energy advisory body formed after the 1973 oil price shock – released an astounding report entitled “Net Zero by 2050: A Roadmap for the Global Energy Sector”. She advocated an end to all new investment in oil and gas (let alone coal) by 2021. The IEA’s “roadmap” has, predictably, met with strong support from “climate emergency” alarmists. For example, Climate Action 100+, an investor group with $68 trillion in assets under management, hailed the report as a “watershed moment” and reiterated the IEA’s call for an immediate end to new fossil fuel investments. However, it drew widespread ridicule from industry practitioners. The Saudi oil minister, for example, called the report a continuation of “La La Land”.
It is no surprise that the report’s assessments polarize between those within the climate industrial complex and those outside the climate complex. We now have a forensic analysis of the Energy Policy Research Foundation’s IEA report released last week. It was funded by the RealClearFoundation. The analysis was edited by Rupert Darwall, author of two insightful books on the climate debate. The analysis now enables the assumptions and conclusions contained in the IEA report to be presented.
The EPRF reveals the magical thinking of the IEA
The best of all possible worlds promised by the IEA in its “net-zero by 2050” vision (a cleaner energy system with the net addition of millions of well-paying jobs) will become a reality if policymakers halt all investment in anything new immediately Fossil fuel development projects, a ban on internal combustion engine vehicles by 2035 and a ban on all carbon emissions in the power generation sector by 2040.
Perhaps the most fundamental assumption of the IEA’s net-zero roadmap is that the falling costs of wind, solar and battery technologies will quickly crowd out demand for fossil fuels, which currently account for 82% of the world’s primary energy supply, according to BP’s latest annual statistics bulletin . (Nuclear power is hardly mentioned.) This assumption underpins the entire edifice of IEA claims regarding the “net zero” future. Take away the supposedly cheap and effective “renewable energy” offered by wind, solar and battery technologies, and all of the IEA’s political advocacy – paralleling Europe’s green fantasies – crumbles to the ash of history.
The IEA report states: “Ever cheaper technologies for renewable energy give electricity a head start in the race to zero.” In its forecasts up to 2050, the further use of solar panels and wind turbines will increase their share of electricity generation by 10% in 2021 rise to 69% in 2050. To achieve large-scale, low-carbon electrification around the world, further cost reductions in solar PV and offshore wind power are needed. Capital costs for solar PV will decrease by 57-63% by 2050 and for offshore wind by 60-68%.
EPRF analysis shows that the IEA’s optimistic expectations of wind and solar replacing fossil fuels are illusory. Cost declines in solar PV modules have been attributed to Chinese manufacturing practices with huge economies of scale, cheap coal-fired power supplies and ‘mercantilist’ support from Chinese central and local governments, which have been predatory in export markets.
The IEA’s net zero report does not take into account the additional high-voltage transmission lines connecting renewable power generators to distant demand centers and the sharp rise in intermittent renewable energy sources. Given the prohibitive cost of grid-scale battery storage, weather-dependent power generation from wind and solar with interruptions continues to be associated with insufficient storage capacity. This leads to grid vulnerability costs as grid operators must continuously balance fluctuations in the on-demand power from coal- and natural-gas-based power generators. The EPRF study confirms the link between intermittency and the cost of power grid integration. Eurostat data shows a trend of increasing household electricity prices in 28 European countries with intermittent share of renewable energy in electricity generation.
The EPRF study also points out that the world needs to mine vast amounts of critical minerals used for solar panels, wind turbines, batteries and grids. The study states that “the additional demand for critical minerals, particularly lithium, graphite, cobalt and nickel, will be at least 1,800% by 2040, even in a less ambitious scenario.” [IEA] Scenario.” Even the IEA, in its World Energy Outlook, conceded that while 80% of copper demand in its less ambitious net-zero scenarios could be met by announced production plans, “meeting the additional demand could be a major challenge.”
The IEA’s “magic thinking” about a “net-zero” future is exemplified by its absurdly optimistic projections of new innovations and technologies that have yet to be proven commercial viability. According to its flagship Energy Technology Perspectives, “Reaching net zero isn’t possible without more innovation.” In the IEA’s net-zero future, about 50% of all emissions reductions in 2050 will be achieved by technologies that are now in the prototype or demonstration stages. From a database of over 500 individual clean energy technologies at various levels of ‘technology maturity’, only 29 technologies (less than 6%) have achieved any degree of commercial competitiveness.
The IEA’s rosy forecasts for wind and solar power were beaten again last week when Siemens Energy’s share prices plummeted after the company announced its profits would take a big hit due to failures at many of its installed wind turbines. Energy economist Professor Gordon Hughes pointed out that this will inevitably mean that wind power will become even more expensive. In another recent development, Sweden’s new Conservative government approved a new energy target last week, citing the “instability” of solar and wind power generation. It gave “the green light to move ahead with plans to build new nuclear power plants in a country that voted to phase out nuclear power 40 years ago.”
In April, Father Gosselin pointed to a “catastrophic report” in Germany in which “a whopping 88% of respondents think the green energy transition is out of reach!” Germany is the poster child of the net-zero energy transition and most citizens were enthusiastic Proponents of wind and solar technologies. Gosselin reminds us, “Those days are gone.” The enormous costs and technical limitations of intermittent, weather-dependent renewable energy have become increasingly evident in recent years. Industry leaders have warned of manufacturing exodus to countries like China and the US over the past two years due to expected power shortages and soaring energy prices.
The IEA is now an advocacy organization
It is not possible to do justice in this column to the breadth of analytical criticism contained in the EPRF report. A brief list of the key assumptions made by the IEA that do not stand up to the EPRF’s forensic analysis would be as follows. The IEA’s scenarios assume that all countries in the world work together towards a net-zero future. And this despite the fact that many countries have no intention of jeopardizing their economic growth on the altar of green ambitions. This is in contrast to Western governments, which all seem willing to commit to net-zero targets, despite the negative impact on the well-being of their citizens. China, India, Russia, Vietnam and Indonesia are just a few of the larger countries on the Eurasian continent that, despite declared renewable energy targets, are expanding their coal consumption along with oil and gas to meet rising energy demands, as pointed out by David Blackmon.
The IEA attaches great importance to expected improvements in energy efficiency. According to the IEA, the historical average rate of annual improvements in energy intensity (ie reduction in energy use per dollar of GDP produced) is expected to nearly triple over the next decade. Another IEA assumption that seems obviously unlikely is that the share of all hydrocarbons (oil, gas, coal) in global primary supply will fall from around four-fifths in 2021 to less than one-fifth in 2050.
Other unrealistic assumptions are falling oil and gas prices in the forecast period despite falling production and high CO2 prices for all regions, including the poorest developing countries. The list could go on, but the reader must have already guessed the IEA’s dubious modeling based on such assumptions. In its summary, the EPRF study states: “The IEA has made many questionable assumptions and milestones for ‘net-zero emissions’ in relation to government policies, energy and carbon pricing, behavior change, economic growth and technology maturity.”
Energy economists might be surprised that the IEA relies on such questionable assumptions and performance milestones. However, once it is recognized that the IEA is no longer an authoritative source for analytical studies but has become an advocacy group in support of the Green movement, everything falls into place.
The IEA’s original mandate was to ensure the necessary energy supply at a reasonable cost. The undermining of that mandate is spelled out succinctly by Mr Darwall in his foreword to the report: “The IEA could have chosen to remain true to its original mandate, but as the Energy Policy Research Foundation report shows, it has attempted to to be a cheerleader.” for net zero,
The full article is interesting reading and can be found here: