Thread by @harrybenham_1

A 25-tweet thread that captures the main points in the latest dollasperbbl post: The Energy Transition has entered its Third Act: dollarsperbbl.com/2019/09/22/the…

In a good, but flawed paper from Bloomberg NEF, we can see the rapidly increasing permanence of the transition from thermal (extracted fossil plus nuclear) fuel energy, to renewable manufactured energy (wind/solar/EVs/storage). bloomberg.com/graphics/2019-…

Here is the global picture of how wind/solar growth will alter the structure of world energy:
Which countries reach 50% of energy via wind/solar quickest? Germany 2022, UK (!) 2025, Australia (!!) 2029 – and last place beyond 2050 ? the US. Proud energy laggard.

BNEF then invokecapitalism: “The market triumph of renewable energy marks the biggest victory yet in the fight against global warming. Solar and wind are proliferating not because of moral do-gooders but because they’re now the most profitable part of the power business.."

We are drawn to this argument because it does signal a shift to the dawning realisation that capital is now flowing quickly to a new, high-growth, efficient energy source. But has it got causation in the right direction? Did capitalism force this change, or is now reacting to it?

This energy transition can be thought of a four act drama: Set-up, Conflict, Crisis and Climax.
The Set-up: in 2010, renewables are dismissed by the coal (and other fossil fuel) industry as irrelevant, so we have our protagonist (wind/solar) and antagonist (coal /fossil fuels)

By 2015 coal was humbled and wind/solar no longer dismissed – so to Act 2, a conflict emerges as wind/solar and EVs start to dominate marginal energy growth, forcing other dominant sectors such as electric power utilities and OPEC to confront peaks (and even declines) in demand.

Closing in on 2020, we are entering Act 3, Crisis: wherein the two now large energy systems collide on a global scale: both well-funded, supported and effective in producing giant swathes of global energy.

Before 2025 we will likely enter Act 4, the Climax, the vast reshaping of the energy order: fossil fuel firms restyling to handle declining markets, wind/solar/EVs and energy services proliferating. Is all this due to capitalism?

Maybe: "Capitalism refers to an economic system in which a society’s means of production are held by private individuals or organizations, not the government, and where products, prices, and the distribution of goods are determined mainly by competition in a free market”. Merriam

That pure form seems to be working only in part today. But we do indeed have major firms just getting on with the job and turning toward new energy growth: VW’s pivot to EVs, GE’s ramp up of wind turbines, and NextEra now a wind/solar utility behemoth (market cap > $110B)

There is no doubt therefore that as we enter Act 3 wind/solar and EVs have added global capitalism to the protagonist camp: a powerful ally, and one which is shifting the pace of change at over $250-300bn pa, on the scale of the incumbent industry.

But the main forces of this transition have been in place much longer, and are constantly re-inventing and reinforcing themselves: policy, technology and transforming events (Black Swans)

First, policy mattered for wind/solar in the set up phase: Germany’s Energiewende it them to avoid issues with nuclear / coal-dependence, China’s NEA annual targets were driven by energy security and health scares, the Paris COP21 declaration formalised a (near) global consensus

This policy DNA will continue into the next phase as activism combines with capitalism.
But perhaps technology has been the most formidable force especially via its militant wing, maths: wind/solar and EVs are scalable manufactured forms of energy.

Wind/solar and EVs relentlessly obey non-linear S curves and so like smart phones or flat-screen TVs they are barely noticeable, then suddenly everywhere (just ask the US coal industry)

They are the first ever form of commercial-scale energy to adhere to fast learning curves, and their speed of change is only getting started – see the maps of US capacity in the BNEF paper; they grow like a good virus.

Finally the incumbent industry is more prone to Black Swan events: it emits by-products that cause major air quality and climactic problems which increasingly impact the world’s growing, urban population; and it requires a highly-concentrated supply chain to be competitive

Hence one-off problems (events, Black Swans) have huge repercussions: smog, Iran, Chernobyl, Iraq, Macondo, Fukishima, Katrina, diesel-gate, Iran again, Dorian, Saudi drone attacks. An industry designed this way is more vulnerable to them than a dispersed alternative.

In addition, being mature, and shackled by the laws of thermodynamics, it is vulnerable to technology and policy break-throughs: Elon Musk, PV panel prices, offshore wind-turbines, battery storage, off-grid systems, demand management, carbon-pricing, plastics taxation, and so on

Whilst incumbents (antagonists) may delay some of these, they cannot delay them all and most definitely not the largest ones. A bet on the incumbent industry today is to short a belief in humanity’s desire for invention and self-preservation.

So a new climate- and energy-aware generation is seeing clearly the future that awaits them if we do not re-boot the energy system rapidly, and in its entirety. Social license Black Swans are flocking.

Capitalism for sure is a powerful addition to the new energy protagonist team, but far from the strongest member: there are deeper long-term forces: survival instincts, mathematical efficiency and the growing frailty of thermal fuel’s inequitable and centralised energy system.

This fourth act climax will lead to a much larger work which starts with the end of the problematic thermal age, as it cedes to a far longer era of a globally dispersed, scalable manufactured energy, far freer of drama and intrigue.

And for the incumbents this final act will in hindsight have the essence of classic tragedy: inevitability.