For years, climate crisis experts and amateurs alike repeatedly told us to ‘Follow the Science’. Most of us couldn’t do that, even when we tried. But virtually everyone publicly came to believe the climate crisis is real.
Then governments in advanced economies, including Australia, responded with relative unity. They ushered in the new normal of net zero mandates, green energy transition policies, multi-billion-and trillion-dollar subsidies and incentives, and… ever rising energy prices.
We are now well into the green energy transition, and energy costs and security have come to centre stage, along with the realisation that the world remains deeply dependent on reliable supplies of fossil fuels.
Now, a new refrain is born as a growing and increasingly vocal cohort of data-driven energy transition realists are accusing policymakers of ignoring the math.
“Conservatively, $A7 trillion has been spent in the last two decades on renewable energy, mostly wind and solar. As a result of that investment, wind & solar combined now supply just barely 3 per cent of global energy demand. Fossil fuel demand has been reduced by precisely zero,” says Erik Townsend, an energy economics expert, retired hedge-fund manager and host of the popular Macro Voices podcast for sophisticated investors.
The Australia Energy Market Operator (AEMO) notes that a “plan for true transformation of the energy market from fossil fuels to renewables requires levels of investment in generation, storage and transmission and system services that exceed all previous efforts combined.”
Mr Townsend adds: “2023 was the highest consumption year on record for coal, oil, and natural gas. Maybe it’s time to admit that investment in solar, wind and batteries (SWB) isn’t paying off.”
That doesn’t seem likely in Australia given Prime Minister Anthony Albanese is betting big in a year before he must call a federal election that we can be a green energy superpower and achieve our 82 per cent renewable energy target by 2030 by leveraging our abundant sun, wind and land.
The Prime Minister says his government, under the thrust of a new Future Made in Australia Act, will ensure that we have sovereign solar capability. (China holds 80 per cent of the worlds solar panel manufacturing).
Still, those who claim to have done the math are a varied and growing lot.
They include energy economists and analysts, nuclear energy proponents, GreenTech investors, entrepreneurs and data centre operators who know a little something about 21st Century energy consumption and demand, technology capability and readiness and, critically, economies of scale.
“The thing that has been baked in to all the transition rhetoric is that wind and solar are cheaper. It is not. There is no jurisdiction anywhere in the world – despite billions in subsidies – in which the increasing penetration of wind and solar has led to a reduction in grid costs. They are all higher,” said Mark Mills, a globally respected energy analyst and senior fellow of the Manhattan Institute, a conservative think tank.
“The lessons of the recent decade make it clear that SWB technologies cannot be surged in times of need, are not inherently ‘clean’ nor even independent of hydrocarbons – and they are not cheap.
Mr Mills is author of the widely read paper, The Energy Transition Delusion: A Reality Reset, which takes a hard look at some of the assumptions that have fueled the rhetoric of the green energy transition.
There is no doubt that politicians and advocates of both a carbon-free world and the green energy-led reindustrialisation that is touted to precede it, have radically underestimated not just how much reliable energy the world already uses, but how much more energy the world will yet demand.
The reality is that energy production and demand continue to rise to all-time highs and the energy guzzling elephant in the green energy transit lounge is … the 21st century, and how we live and work in it.
“Societal Complexity – including what we perceive as not just convenient, but essential – is a function of the amount of cheap and abundant energy available to the economy,” says Mr Townsend.
When you consider the unprecedented energy demand of our AI and data-driven 21st century, the disconnect between the decarbonisation dream and reality is so great that the whole vibe around the current shape and pace of the green energy transition screams more madness of crowds than the wisdom of them.
“The energy demands of our data and cloud companies is the definition of exponential growth – like a Moore’s Law for electricity demand, instead of packing more transistors into smaller and smaller semiconductors, says Jeff Brown of Brownridge Research.
Miles of cabling, millions of semiconductors, massive cooling systems, and incredible amounts of electricity are required to power our new data and cloud services infrastructure.
Electricity is the most important operational input and cost required in operating a data centre. They consume anywhere between 10-50 times more electricity per square foot than an equivalent commercial office building.
The International Energy Agency (IEA) forecasts energy demand from data centres is expected to double in the next three years.
“The simple fact is … AI won’t run without electricity. And it won’t run without scaling up the computational power of data centres around the world,” says Mr Brown.
“Within a few years, the increase in electricity required to power artificial intelligence software will be more than 100-terawatt hours year and growing.”
If that’s hard to get your head around, here’s more according to Brownridge Research:
From EVs to the kind of neural network technology that Tesla uses in its self-driving cars to robotics and cloud services and data centres, to enterprise computing and gaming – all are massive energy consumers.
Digital devices and hardware, data centres, the most complex products ever produced at scale require on average about 1000 times more energy to fabricate, pound for pound, than the products that dominated the 20th century.
It takes nearly as much energy to make one smartphone as it does one refrigerator. The global fabrication of smart phones now uses 15 per cent more energy than the entire automotive industry.
Then of course there’s the other common needs such as heating and cooling homes to producing food and delivering freight.
It is stunning that the exponential energy demand of the AI and data services infrastructure rarely gets a mention by politicians and green energy transition enthusiasts.
“They consume electricity like nothing else, but unless you are in the business, no one thinks about it. Many complain about cryptocurrencies and how they require huge amounts of electricity emit CO2 to run,” writes Jeff Brown in a recent essay, The Unyielding Demand for Power.
“And yet I’ve never heard a complaint about the CO2 emissions required to power the software behind Facebook, Instagram, Google, TikTok, Netflix or your choice of mobile game.”
“The reality is that there is no effort whatsoever to reduce electricity consumption when it comes to software services. The opposite is true. The goal is to increase consumption,” Mr Brown says.
“We’ve now entered a period of hypergrowth in data centres driven by the explosion of artificial intelligence. We can see it in the data. The electricity consumption — and the demand for AI-specific semiconductors — tells the tale.”
The Asia Pacific demand for data centres is red hot, expecting to grow at a compound annual rate of 12 per cent from 2023 to 2027, and reach $US48 billion in value. It is being fueled by AI; China’s investment in its cashless society; the development of 5G and 6G networks; and the increasing demand for digital sovereignty.
China had 449 data centres in 2023, by far the most in the region, followed by Australia, Japan and India according to Cloudscape, a connectivity directory for facilities that rent out space for housing servers.
Realpolitech believes all this data-driven ‘reality’ leads to some reasonably safe predictions regarding the tone and shape of the next wave of the green energy transition in Australia and elsewhere.
Despite federal Labor’s coming subsidy largesse, there will be increasing resistance to accelerating the transition to renewables and a campaign calling for a different understanding of transition – one that recognises that new energy sources should be considered additives, not outright replacements for oil, natural gas, or coal.
That means a new conversation about adding nuclear energy into the renewable energy mix seems inevitable and what a wild ride that promises to be. It’s going to make the recent Referendum look like cultural unity.
Australia is the only G20 country with a ban on nuclear power, introduced by the Howard government.
Now the Coalition is calling for the Prime Minister to lift the moratorium and let the market decide on the best energy mix for Australia’s green energy transition. The Coalition’s alternative energy transition plan is expected to be delivered after the May Budget.
Mr Townsend and a growing cohort of technically savvy and ambitious Australians, until recently silent on nuclear energy development, now propose building a global grassroots community of citizens knowledgeable about the challenges of energy transition. The Energy transition, rather than Climate Change, they say could be the uniting strategy that can bring us all together as a unified movement.
“Society needs to come up to speed on energy transition concepts, including nuclear energy concepts, just as many people have already become familiar with basic climate science concepts.
“We can’t have an intelligent public debate about nuclear until everyone knows what a molten salt reactor is. We need everyone to know just as much about advanced nuclear technology as they already know about climate change.”
That’s a huge ask, but Craig Scroggie, the chief executive and managing director at the ASX listed data centre operator, NextDC – which has 13 data centres across Australia – is one of them who is tipped to lead the charge.
He publicly voiced his support for Australia’s need to pursue nuclear energy development at Mr Townsend’s Sydney address and publicly elsewhere.
Another proponent of a new assessment about Australia’s nuclear energy potential is Ian Dover, a non-executive director, chair and advisor in mining, metals, manufacturing industry research, and former CEO at METS Ignited until 2021.
He wrote on Linkedin:
“Australia is endowed with perhaps the greatest combined reserves of Uranium and Thorium we know about in the world. And after some difficult starts in the past, Australia also knows how to adapt our extensive metallurgical capabilities to responsibly mine, value add and recycle these elements.
“It’s going to be a big challenge to replace the revenue from all our fossil fuel exports as they decline in the coming years, but the economics indicate we can achieve this by value adding our Uranium and Thorium and supplying these to the increasing number of nuclear countries, even if we don’t adopt these advanced nuclear technologies ourselves.
“Think what this would mean to closing the gap, improving our health and aged care systems, funding relevant research and innovation and enhancing our education system… by building a new sovereign wealth fund based on U and Th, just like the Norwegians have done with oil.
“Will our politicians examine this?”
That’s the trillion-dollar question we’ll be hearing much more about.
