The Transition Critics

Three critics of the energy transition stand out for their expertise and rigour:

• Czech-Canadian energy historian Vaclav Smil, a formidable and prolific scholar whose extensive catalogue of books has provided a seminal foundation for understanding our past and present energy system. The more he writes, the more dismissive he becomes of the idea of Net Zero. This essay encapsulates his viewpoint. 

• American oil historian turned energy commentator Daniel Yergin, author of arguably the most famous book in energy history, The Prize, which he followed with The Quest and The New Map, both attempts to chart the next phases in humanity’s energy journey. His recent essay The Troubled Energy Transition offers a critique of current progress.  

• French academic Jean-Baptiste Fressoz, author of More and More and More: An All-Consuming History of Energy, reviewed here, which explores energy consumption patterns and questions the whole notion of energy transition. 

These analysts’ collective critique of the grand narrative of energy transition is based on decades of research undertaken in good faith, illuminating – to paraphrase a Smil book title – how they see the world really works. 

To summarise the main arguments:

1. Additivity: Past energy transitions (wood to coal, coal to oil, etc) were in fact energy additions. Different fuels dominated, but demand for all of them kept rising. Humanity has never abandoned an energy source (ok, let’s ignore whale oil). Oil, gas and coal consumption all hit new record levels every year, as do emissions, and last year was no exception. Continuous accumulation and intensification of energy use has far outweighed efficiency improvements. In fact, energy sources do not really compete, they are symbiotic. Instead of replacing wood demand, coal mining actually boosted it. Similarly, drilling an oil or gas well and bringing it to market requires huge amounts of steel pipe.

2. Inertia: Fossil fuels today still account for roughly 80% of primary energy consumption. This proportion has only inched down slowly during rapid absolute system growth over recent decades. Therefore, oil, gas and coal will remain the dominant sources for the foreseeable.

3. Timeframe: Transforming the energy foundations of the $115 trillion global economy and eliminating 38 billion tonnes of annual emissions in just 25 years is utterly unrealistic. That’s why we’re already touching 1.5c degrees, 2c now looks very ambitious and 2.5+c is much more likely. Plus, even scaling up the extra mining required involves very long lead times. 

4. Economics: Clean energy projects typically have relatively high capital costs, longer paybacks and lower returns, making them inherently less attractive to investors.

5. Financing: This makes the transition hard to finance, especially in the global south where the investments are arguably needed most. It is proving unaffordable as heavily indebted governments have little financial headroom while private finance lacks the scale. The idea of ESG investing has made no tangible difference.

6. Gridlock: Deficient grids also prevent green energies from replacing brown ones. It’s all very well building so much solar and wind capacity, but insufficient transmission and distribution infrastructure is increasingly leaving it stranded or unable to reach demand when needed. Electrification is too slow and expensive.

7. Unpopularity: Energy evolution has always had intrinsic economic drivers like better efficiency or lower costs. Solving for externalities is a different challenge. Climate targets can't just mean de-industrialisation. They need to work alongside other basic goals: growth, health, energy security and affordability, poverty reduction. This is triggering “greenlash” among those for whom the perceived costs outweigh the perceived benefits.

8. Demand Demographics: Energy demand is re-accelerating and even at their rapid rate of growth, renewables can’t keep up, meaning increased reliance on gas and coal. This is fuelled not just by AI and data centres, but also by EVs, heat pumps and air conditioning demand, in a negative feedback loop from a warmer climate. Meanwhile, population growth increases the challenge every day. By 2050, there'll also be another 2 billion people on the planet - almost entirely in the global south, where elevating living standards will inevitably trigger rapid energy demand growth. But those regions also can’t attract sufficient transition finance.

9. Competition: China totally dominates clean energy supply chains. It will be too expensive and difficult for other regions to compete, but choosing total reliance on China is not a viable strategy. Countries should rely more on the energy sources in which they have their own competitive advantage (whether through natural resource endowments or industrial base).

Taken together, this might seem like an insurmountable litany of problems. It’s hardly surprising to see rising pessimism, disillusionment, apathy and outright opposition to the concept of energy transition. It is easier to identify challenges than to identify and implement practical solutions.

This is where the transition critics seem to run out of ideas. Late in his Foreign Affairs essay, Yergin throws in a few high-level thoughts, but they come across as somewhat token, impractical or outdated. He argues that “a combination of multilateral grant funding and more private investment is necessary to increase the flow of money to the global South". But the real question is how to attract this finance. And if this classic north-south finance paradigm belongs to a world order that is disappearing before our eyes, what will replace it? 

Meanwhile, Smil and Fressoz are both really deconstructionists, more concerned with dismantling prevalent misconceptions than contributing to solutions. Smil relishes highlighting the physical inertia of the inherited energy system but offers few if any fixes. By contrast, Fressoz seems genuinely concerned that energy transition is not further advanced, but equally unable to visualise solutions. 

The question is, then, are these critics just too embedded in their worldview to see answers hiding in plain sight, or are those answers really too inconsequential?

The Transition Proponents

Other energy experts have a diametrically opposed perspective, seeing the world through an entirely different set of lenses. Kingsmill Bond and his colleagues Daan Walter and Sam Butler-Sloss, formerly of the Rocky Mountain Institute and now of energy think tank Ember, are thought leading proponents of this view. Their report The Cleantech Revolution articulates their vision of the future energy landscape. We crudely summarise it here into a series of binary contrasts: 

1. Commodity vs technology: Where human energy consumption has historically been about consuming natural resources, or commodities, the future of energy will be more about technologies. The transition is really a shift from consuming commodities to harnessing technologies, or “electrotech”: a catch-all term for clean, new energy supply, demand and exchange (solar, wind, batteries, heat pumps, EVs, etc). Technologies have fundamentally different economic dynamics to commodities.

2. Combustion vs circularity: Hydrocarbon commodities are mainly burnt and therefore by definition single use: used once, then gone forever (although not the emissions). Conversely, technologies are designed for permanent reuse over their economic lifetimes, which often get extended. Critics like to point out the mining requirements for the transition but fail to acknowledge that 17 times as much oil is mined every year, mostly for single-use combustion. Over time, more minerals embedded in technologies will also get recycled, with the potential to eliminate battery mineral mining altogether by around 2050. Part of this trend will be the gradual engineering out of dependencies on particular elements, as is already being seen with cobalt for batteries. 

3. Past vs future: With this switch to from commodities to technologies, is energy history still the most reliable guide to the future? The additivity argument assumes history simply repeats, but the switch to multi-use technologies suggests consumer adoption of mobile phones and the internet offer more suitable analogies. Modular, accessible and increasingly affordable, solar and batteries are likewise turning into the next ubiquitous consumer technologies. Moreover, where investment is going now reveals more about the future than where it has been. Clean energy investment at ~$2 trillion is approaching double the level of fossil fuel investment - and that gap will widen.

4. Static vs dynamic: Static datasets provide one dimensional understanding. To understand the future, we need to observe data dynamically: how it is changing, and the pace of that change. As solar costs steadily fell and adoption expanded, solar generation grew 20x in the past 13 years, while increasing its share of generation by 16x. Having risen from 100 TWh to 1000 TWh in 8 years, it then took only 3 years to double to 2000 TWh. Technology-based energy moves in learning, cost and adoption curves. Which brings us to: 

5. Linear vs exponential: Straight-line extrapolations of historical data can miss the rapid and transformational “S-curve” changes that occur when technologies become competitive, giving the temporary appearance of exponential change. The human brain often struggles to conceptualise rapid non-linear change. Talk of 100x or 1000x growth can sound absurdly unrealistic, yet recent history can prove that it’s not. The IEA’s now infamous failures to predict solar’s hockey-stick growth show how hard long-term forecasting and modelling really are. Even the most dedicated and objective analysts often miss what may seem obvious and inevitable in the rear-view mirror. What is still marginal today may be hugely impactful in future. Alongside rapid solar supply growth, we’re still only beginning to consider how batteries and/or AI may help to limit electricity demand. 

6. Expensive vs cheaper: Affordability is paramount. It’s impossible to accurately predict the total cost of reaching a sustainable energy system when costs change dramatically and new technologies are fast emerging. But what really matters is: will it be less expensive than the alternative? The answer is surely yes. Increasingly, cost reductions driven by economies of manufacturing scale are making clean energy technologies the rational choice for new capacity, especially when installation times are typically much shorter than for new gas or nuclear plants. Greater adoption then brings greater scale, creating a virtuous circle of further cost reduction. 

7. Waste vs efficiency: Our current energy system’s fatal flaw is wastefulness. Around two thirds of primary energy is lost via conversions, leaving only a third to become useful final energy. It’s therefore a fundamental mistake to view the energy system in terms of primary inputs (the primary energy fallacy). What really matters is what gets consumed. This is why electrification is a gamechanger: it uses far less primary resource to produce the equivalent outcome (e.g. in transport or heating). Fortunately, it also happens to clean up the system in the process.

8. West/North vs East/South: Systemic change breaks in from outside rather than emerging from within. The oil-dominated last eight decades have led to an American lens on our energy system that is fast becoming obsolete. Smil and Yergin both struggle to think outside this box, choosing data to reinforce their views. It’s true that the US has become the world’s oil and gas superpower over the past 20 years, while China is the biggest oil and gas importer. But that is why China has meanwhile transformed itself into the clean energy superpower, meaning manufacturers like BYD, CATL, XPeng and Zeekr eclipsing legacy incumbents (including Tesla) at breakneck speed. Regardless of US tariffs, this industrial strategy sets China up to roll out clean energy technologies around the world, helping the “global south” to leapfrog into an electrified future. The great power struggle between the US and China reflects competing visions for the future of energy. 

9. Top-down vs bottom-up financing: Ever cheaper and more efficient energy sources lead inevitably to accelerating adoption. Consumers from Pakistan to Senegal are starting to take matters into their own hands, embracing ever-cheaper clean tech, led by solar panels but with batteries and EVs set to follow, as affordable sources of energy security. The growth of local, distributed, behind-the-meter clean energy infrastructure across emergent economies has the potential to reshape energy systems and markets, reducing fossil import dependency and ultimately the need for excessive grid buildouts. With the failure of north-south multilateral and concessionary capital to stimulate energy transition in the global south, this cleantech indigenisation offers an alternative paradigm driven instead by east-south financial flows. 

Synthesis: Commodity Inertia vs Electro-technologism

How can we reconcile two such different worldviews on our energy future? One rooted in historical patterns, the other focused on future trends, both containing their own truths. 

The first observation is that, if energy security remains paramount in this new age of disorder, its relationship with affordability and sustainability is changing. Evolving from single-use combustion towards infrastructure multi-use – with fewer moving parts, lower running costs, longer asset lifetimes and improved efficiency – brings more affordable energy security, with sustainability as the by-product. Electrotech could collapse the famous trilemma. This looks set to be the seismic energy shift of the next quarter century to 2050. 

Of course, reality is more complex than reduction to simplistic dichotomies. Take commodities versus technologies. Commodity extraction and processing are technologies too, while ultimately all technologies are embodied in mineral commodities. But the electrotechnologists rightly identify a key difference: as energy tech commodities become infrastructure used not once but thousands of times over, the energy system inevitably changes. From the treadmill of chemical combustion into heat and movement towards efficient conversion of natural ambient processes (sunshine, wind, water flow) into electrical energy. A future of infinite reuse offers the promise of finally overcoming the energy additivity conundrum.

How might that change unfold? Systemic change tends to happen slowly, marginally, often imperceptibly, then suddenly and rapidly. It also tends to break in from outside rather than emerges from within. Today’s static truths – e.g. fossil fuels still supplying 80% of primary energy – can obscure radical underlying shifts. Like the shift from an analogue world where resources are concentrated in relatively few hands towards a more open field of decentralised, digitalised, dare we say even democratised, energy access.

Ultimately, you can’t hold back progress. The shift is irreversible. The only question is how quickly it will happen – a function of economic attractiveness and political will. Equally, it will not be a complete switch from one extreme to another. It is clearly wrong to say coal, oil and gas have no future. “The end of the oil era” may sound a nice cliché, but energy transition is a relative game. Coal and oil demand are now in their very final stages of growth that began well over a century ago: both will shortly plateau. This is a more accurate description than “peak”, which implies sharp decline, but plateau demand still brings plateau value for suppliers. Anticipating this, integrated energy majors focus on capital discipline and returning cash to investors. In their place, legacy national oil companies are starting to take up the clean energy investment baton, in the name of efficiency and economic diversification. 

To identify the most valuable energies of the future, it is worth remembering what drives energy choices. Over human history, it started out with simple availability – and in many places that remains the case. In advanced societies, energy sources need to meet a wide range of criteria: price, versatility (of end uses), storability, portability, efficiency, safety and – only very recently – environmental impact. 

This clearly points to electricity - produced, transported and stored in the most competitive ways - as the central pillar. But it also underlines the enduring role of natural gas, whose steady scores across these criteria provide reasonable trade-offs (whereas the much hoped-for hydrogen revolution has flopped mainly on economic grounds). Clean energy absolutists may disagree, but gas will continue to steadily play a more meaningful global role for at least the next decade – note the extreme congestion in the gas to power supply chain. This is thanks to its relative abundance, flexibility and versatility, serving distinct functions in different regions. Ideally it will mainly be at the expense of coal, thereby acting as a climate net-positive. LNG production is expected to rise by another two thirds by 2040, providing vital flexibility in Europe, cleaner generation in Asia and greater energy security everywhere (although it’s also notable that China has stopped importing US LNG over the past two months). However, with rapid battery growth, the role of gas becomes much less clear from 2035 onwards. 

How does all this relate to the trade war and change in global order? Over the past two decades, two parallel energy technology revolutions have unfolded on either side of the world. In the US, the shale revolution reversed oil and gas production decline to achieve the long-desired goal of energy independence. This has emboldened the Trump 2.0 administration’s aggressive trade policies. As the world’s biggest exporter, LNG becomes a key tool of geostrategic leverage (just as pipeline gas has been for Russia). But meanwhile, China’s industrial strategy has delivered an even more significant energy revolution: overwhelming dominance of clean energy supply chains. That revolution deftly achieves two strategic goals: both minimising energy insecurity (and therefore US leverage) and dominating the global rollout of the transition. By contrast, Europe has ended up doubly vulnerable, dependent on imports of both US LNG and Chinese electrotech. 

But rather than viewing through European or American eyes, the future of energy is perhaps best framed as how the living standards of the world’s “other 7 billion” (or 9 billion by 2050) will catch up to the lucky top 1 billion. To use Yergin’s term, the transition is multidimensional: that is to say, there are many different transitions across countries and regions. They vary according to natural endowments, available technologies, access to capital and national priorities. Evolving from traditional biomass and human muscle, each country will find their own path up the energy ladder. 

This is true even within regions like Europe, whose southern countries will harness more solar power while their northern neighbours use more wind, and even within countries, with specific US states like Texas and California seeing rapid breakthrough of solar and batteries in the power sector. For developing nations, rapid societal adoption of clean energy technology offers a potential pathway to better living standards with limited reliance on imported fossil energy. This model of growth represents surely our best hope of accelerating the march of human progress on a liveable planet. 

As energy investors, then, this provides us a broad spectrum of interest spanning the various forms of electricity production, transmission and storage, and the infrastructure and supply chains behind them, to the technology, machine learning and efficiency trends supporting an electrified energy system, through to the natural gas value chain that bridges the messy divide between the past and the future. 

This is why we see five “FREER” mega-trends shaping the future of energy:

1. Flexibility: batteries and demand side response, alongside traditional gas and hydro   

2. Renewables: led by solar, followed by wind, with advanced geothermal and possibly SMRs as outside bets

3. Electrification: switching final energy use from hydrocarbon products to electricity

4. Efficiency: the invisible but indispensable “first fuel”

5. Removals: despite being immature and uneconomic today, carbon removal technologies will be a key growth theme to limit ongoing energy emissions  

This newsletter is dedicated to exploring each of these key dynamics in more granular detail, in the hope of unearthing some valuable long-term opportunities. Thanks for reading and stay tuned to share this exciting journey ahead.