Low-Energy Fridays: Where’s the Renewable Energy Revolution?

Last week the Energy Institute released their annual Statistical Review of World Energy, and one interesting takeaway is that fossil fuels accounted for a whopping—but not unexpected—82 percent of total global energy consumption in 2022. For reference, in 2010, fossil fuels accounted for 84 percent of total global energy consumption. And by 2050, ostensibly when a “clean energy transition” would be in full swing, the Energy Information Administration (EIA) expects fossil fuels to account for 70 percent of world energy. So, why are we using so much fossil fuel, and where is this clean energy revolution we have been hearing so much about?

There are a few important issues to break down, but let’s start with the simplest: the projection of future fossil fuel use. The EIA gives us reason to be pessimistic about an energy transition, but their projection is based on the status quo, not what policy or innovation may change the landscape. The EIA in its projections is required to make estimates assuming current law policy, and not to predict what actions governments may take to facilitate changes in energy consumption. This also makes EIA projections of clean energy notoriously pessimistic.

The EIA projection shouldn’t be ignored, but it should be thought of as a “business-as-usual” approach, and we should recognize that business never remains “usual” for 30 years.

But why are fossil fuels still dominant in the global energy mix? One big reason is that global energy demand has been rising substantially. From 2010-2020, global energy use rose by about 14 percent—which, interestingly enough, was less than anticipated—and “other,” mostly renewable, energy consumption rose by 58 percent over the same period. So even though renewable energy is booming, we’re seeing it mostly satisfy an emerging demand rather than supplanting existing resources.

Another big reason fossil fuels dominate globally is that coal is still in high demand outside of developed nations. In particular, China accounts for about half of the world’s entire annual coal consumption. To put that in perspective, about a sixth of global fossil fuel consumption is just Chinese coal use. They’re also adding many more coal plants to their existing fleet.

The last big reason is that the sort of market dynamic that would drive renewable substitution of fossil fuels is likely going to come in the form of energy storage, and those costs are still very high. The latest “levelized cost of storage” estimates come in at around $154-205/megawatt hour, which makes it roughly five times as expensive as natural gas. And for transportation, energy storage in the form of electric vehicle (EV) batteries is still a high enough cost that EVs are more expensive than alternatives.

In short, we still use a lot of fossil fuels because there are few cost-effective substitutes to them. Even renewables and EVs, for example, are often only partial substitutes. We expect to continue using a lot of fossil fuels because technologies that would enable broader substitutability are not yet competitive with fossil fuels.

Of course, one important thing to keep in mind is that emission abatement should be central to addressing problems like climate change. This often invites solutions that are inclusive of fossil fuels, such as carbon capture, fuel-switching, etc. Coal consumption today is below past projections, but natural gas use is up, which overall lowers emissions since natural gas is a less emission-intensive energy source.

Ultimately, fossil fuel utilization may not matter if the negative effects of that consumption are mitigated, and the real takeaway from the data is that a policy focused exclusively on fossil fuel substitution may be unrealistically ambitious. It’s easy for policymakers to get too focused on the fossil fuel versus clean energy debate, but the data indicates that the global demand for the utility that fossil energy provides is and will be very high for the foreseeable future. If policymakers want to address climate change, their efforts may be more fruitful if they focus more broadly on all emission mitigation opportunities, and not just on prescriptive energy substitution.