152: Putin, Producer Logic and Peak Demand with Kingsmill Bond

Paul: [00:02:18] That's so unfair. I thought you were going to go first. Okay.

Christiana: [00:02:22] Okay, okay, okay.

Tom: [00:02:24] Christiana.

Christiana: [00:02:25] So, Tom, I believe and I'm, in fact, delighted to be wrong, but I believe that the support for South Africa is sort of generally called to help them transition out of fossil fuels. But I believe it actually is focused on coal, exiting coal. And I believe that the support that the EU principally is and the United States are in discussion with Indonesia, India and Vietnam is also about coal. So why are we prioritizing coal over, let's call it liquid fossil fuels? We're prioritizing coal because it is the most carbon intensive and it is of all of the fossil fuels, the first one that needs to exit the energy system ASAP. So that is why there is let's say from a carbon emissions perspective, there's a focus on coal. The reason in addition to that, the political reason why there is a conversation ongoing is because developed countries had promised the famous $100 Billion support to developing countries and never delivered it. And developing countries quite rightly, are saying, well, if you don't support us for the transition, how are we ever going to transition out of fossil fuels, especially out of coal? So that is why these countries that are some of the most heavily dependent and most emitting because of their coal and because of their coal exports, that's why they're being prioritized.

Christiana: [00:04:09] Right. So South Africa, Indonesia, India and Vietnam now. What I think is fascinating is the aspiration that is certainly embedded in the South African commitment, which is still being discussed on how it's actually going to be implemented. But the aspiration is not just to give some money to South Africa, but rather to have it be a support that will embed a just transition. And I think this is really, really important for for two reasons, A, because just from a political reason, unless those industries and communities that have been dependent on coal production for decades are supported, it's very difficult for them to to just let go of one branch, so to speak, without having somewhere else to lend. But it also really goes to the morality of this, because to expect a developing country or a small community or a utility to just move away from what it has been doing because it's good for the planet, in addition to being good for the country itself is just not morally correct. So both from a political perspective as well as from a moral perspective, this financing is really being very aspirational in what it is trying to do. And the big question, of course, is whether this is going to be able to be finalized, certainly the South African one, but also how far will they come in the negotiations with Indonesia, India and Vietnam before COP27? And fascinating that these conversations continue despite the Ukrainian war, despite the money that is being put into everything to do with military ramp up and support of Ukraine. And despite the crazy fossil fuel prices, which as we have been taught and listeners will have a fantastic lesson from Kingsmill Bond but it is these crazy fossil fuel prices, to see them as being beneficial is to see the world only from the producer perspective or logic, and not from the consumer logic. Because the producers South Africa, India, Indonesia and Vietnam, of course, will say, wait, wait, wait, wait. You know, this is the moment to cash in. We're getting such huge prices for this stuff, this contaminating stuff. And consumer mentality is exactly the opposite. There is so much anger at the pump. There is so much anger at having to pay these crazy prices for fossil fuels, that consumers are hopefully getting more and more outraged, to use a word that we know a little bit about.

Paul: [00:07:21] It's a brilliant summary, Christiana. And look, isn't it great that actually the South Africa deal and these other deals show that the sort of rich nations, OECD, whatever you want to call them, they're actually coming forward with real cash now because everything else is kind of rubbish. You know, you actually need real money to do this. But I mean, COVID demonstrated that there's a magic money purse that can be opened up when you need it. Secondarily, I think COVID and then the Ukrainian invasion both demonstrate our sense of vulnerability and people kind of get it like, okay, you know, we're vulnerable and we've got to be we've got to do grown up things like look after our security, which includes making deals to take out coal. But just one other thing. I mean, these conversations, these negotiations, I'm sure they are complex for the reasons you described. But there's a whole issue here right in the world right now, which is about capital expenditure on fossil fuels. And we've discussed this before, you know, and I think it's a pure risk management issue. You know, there are problems with fossil fuels. It could be Putin or it could be the carbon border adjustment mechanisms that are definitely coming in the EU or whatever. But people have always kind of criticised renewables. They say, Oh, they're intermittent or whatever, you know, the wind doesn't blow, a sun doesn't shine or something, but fossil fuels are unreliable. This is what we're learning. And and I think that that this is this is an opportunity for us to kind of sort of say, all right, you know, when we shift out of fossil fuels, when we use this unique moment to to replace them with renewables, then we can get ourselves out of that intermittency and into stable, long term energy provision. And that's what we need to do.

Tom: [00:08:52] Yeah. So I agree with all of that. I think just I mean, the point I suppose would be that in a way, we've been supported over the last few years by the fact that coal has been increasingly uneconomic. It's been the more economic solution, certainly to produce renewables, but also gas has been cheaper than coal in most places around the world. Now, the intersection of this issue with the Ukraine crisis is that it's come down a bit now, but it wasn't long ago that gas prices were at €335 per megawatt hour, which is an enormous increase on where they were before. As a result of that, it increasingly became more cost effective to burn coal, even if you had to pay a levy on top of that because you knew it was polluting. Now that is leading according to the conversations that I've been having with people who are very well versed on what's happening in Indonesia, what's happening to India, to an understandable reluctance to do any kind of deal on the table. Because if you're doing a deal about closing down an industry that you think is sort of dying anyway, then that's one set of political considerations. But if you're thinking about doing a deal around an industry that's looking increasingly lucrative, then as you say, Christiana, if you're running a country with lots of people in poverty, then you start to think, is this really a good idea for my country? So I suppose the concern here is, and it's we're sort of admiring the problem rather than solving it at the moment, is that these deals are hard to do at the best of times. And the South Africa deal, impressive though it was, has got a lot of holes in it. A lot of that 8.5 billion is pledged. It hasn't been delivered yet, etc.. It's going to be orders of magnitude and orders of magnitude more complicated and orders of magnitude more expensive to do it in big economies like Indonesia and India. Do we think we have the political will after everything's been going on in Ukraine to still push that through?

Christiana: [00:10:40] No, exactly. And the conundrum there is that what Kingsmill later on will so brilliantly say the consumer mentality versus the producer mentality. So if you have coal to mine and export, then of course you are in the producer mentality and you think that you've hit a jackpot right now. And this is the moment to extract and export as much coal as possible for prices probably never seen before, or certainly not in a long time. Now those who are buying the stuff are not as happy about that, and it does make renewables even more competitive with all the polluting alternatives. So there you are, right? The choice here is do we go with the current from a producer perspective, do we go with the current very lucrative contaminating stuff? Because it's very tempting to do that right now. Even if I know that that won't last forever. But right now, you know, I have a big dollar sign in front of me looming in front of me. Why don't I go for that? And so it makes these deals, these exit deals, let's call them with those countries much more difficult because the alternative for them, at least short term, is looking very lucrative.

Paul: [00:12:20] Okay. So I've got a challenge here for the oil and gas industry, if I may. BP themselves just announced these incredible profits, best for ten years, and they're saying that they're going to spend another $2.5 billion buying their own shares. Now, I'm sorry, but if this is a police investigation, BP would be called a company of interest. They say we have a person of interest. BP is a company of interest. There it is with a whole bunch of capability and logistics possibly able to get people off coal in the short term whilst building the transitions and they're buying two and one half billion dollars of their own shares. I think this is a moment where we all have to get kind of serious about taking coal out and that needs governments and political will, just as you said, Christiana. But it also needs technology and companies to help with interim as well as long term solutions.

Tom: [00:13:06] But Paul.

Christiana: [00:13:07] What does short term infrastructure look like?

Paul: [00:13:11] Plastic rubber hoses instead of metal pipes? I'm being slightly silly, but I'm saying in a sense you've got basically a whole bunch of power demand and let's say it's being fed with coal and it's going to be fed with renewables. I mean, maybe you just have to put the renewables in faster. Maybe that's it. Forget my short term. But what I'm trying to do is I'm offering up the idea that there's a role here and and and we've just got to stop using coal. And it's very simple.

Tom: [00:13:40] Can I ask why we should go to the interview with Kingsmill in a minute, because he's very thoughtful on this, and I think it would be good to do that and then come back. I just had a question for you, Paul. I saw that $2.5 billion worth of buyback. And it struck me that that is BP obviously not saying this, but basically slowly winding itself down and returning itself to its shareholders.

Paul: [00:14:00] That's not necessarily wrong. That's not necessarily wrong at all. And actually, I would encourage shareholders to sort of pay bonuses to company directors of oil and gas companies who do not spend that money on exploration but instead return it to the shareholders. And that's what everybody wants, quite frankly. And the shareholders will then have this cash that they can then deploy in super rapid renewables, because it's interesting. Yes, you're right in that regard.

Tom: [00:14:29] I heard the Labour leader Keir Starmer on the Today programme in the UK this morning and they were hammering him saying, well, you know, you can't tax windfall profits because this money is needed by pensioners who have invested, a lot of spurious argument right, invested all their money into BP. So therefore they need the stock price to rise. But actually, if you were to liquidate those companies over a ten year period and return the money to shareholders, then that would be a win-win situation in many ways would it not?

Paul: [00:14:52] Yeah, I mean, and people don't have to have their pensions stuck in Kodak. They don’t have to keep using film when digital cameras are better, you know, the world changes.

Tom: [00:15:01] That's true. Right, Kingsmill Bond. Okay, so just a word of caution here. We are introduced to not only Kingsmill Bond here, but also a sort of lightly oily and unpleasant character that Paul Dickinson decided to inhabit for some reason.

Paul: [00:15:13] Yeah.

Tom: [00:15:14] So just bear with us.

Tom: [00:15:16] Say unpleasant, but realistic. I would call it realistic.

Tom: [00:15:19] It'll be over soon, listeners. So just bear with us. But anyway, Kingsmill Bond is a senior principal at the Rocky Mountain Institute, RMI. It's a nonprofit. Here's a thought leader on global clean energy. He's an energy strategist, and he writes on the energy transition narrative. He's had a long career in the financial sector, and he really interested us recently with a piece that he wrote that basically made the case that the invasion of Ukraine heralded the end of fossil fuels. And we wanted to, it'll be in the show notes, we wanted to basically take him to task about that and find out if we agree with him. It's very good. You'll be impressed with this. Here's Kingsmill Bond. We'll be back afterwards for some more analysis.

Christiana: [00:16:05] Kingsmill, thank you so much for joining us here on Outrage + Optimism. And Kingsmill, you know, I have very often reached out to you when I have a difficult conversation or presentation because I so respect the analysis that you do of the global energy system. However, I really wonder, Kingsmill, if at this point you are not, how should I say this? You are not in la la land? Because I would love to believe that everything that we're seeing now is actually going to accelerate us into decarbonizing our economy and into investing even more into renewable energy. But is that wishful thinking or is that actually accurate reading of the crystal ball? Because we have Ukraine, we have inflation, and we have midterm elections coming up in the United States all at the same time. And of course, we have a sort of underlying commitment to decarbonization. But how is Ukraine inflation and midterm elections, how is that very dangerous triangle actually going to help us to accelerate decarbonization?

Kingsmill Bond: [00:17:29] First of all, thank you for having me on the show. It's a pleasure to be here. So the question is, are we, am I in la la land by imagining that we are indeed on track in this energy transition? And you are right to say that if it were politics alone that were driving this energy transition, things would indeed look quite bleak. However, the primary driver of change here as, of course, any way with transitions is economics. And of course, if I take your trifecta of problems the midterm elections, the US inflation and Ukraine, the thing that really stands out is Putin's war and Putin's war, which has driven a spectacular increase in the cost of fossil fuels. And after that, I mean, really, it's just pretty simple. High prices drives a reaction, just the same as we saw in the 1970s with the oil price shocks. People scrambled around initially to try and find any other solution. All kinds of weird devices and rationing were tried in the 1970s, but they eventually landed upon the only solution, which is the solution that we are now embracing, will embrace, which is efficiency and faster deployment of new energy technologies. So this, I guess, is the reason for my in spite of the horror of Ukrainem is the reason for my optimism about the energy transition is that we must and we are doing efficiency and and renewables deployment.

Christiana: [00:19:12] But Kingsmill doesn't that really depend on who gets blamed for the high prices. If if Putin's war and horrors in Ukraine are correctly blamed for the high prices, well, then you have one set of actions. But if others get blamed, if renewable energy gets blamed or if Biden gets blamed and you know, we we saw yesterday and I know both Tom and Paul want to jump on this, these amazing stickers that are being placed on pumps, gas pumps and fuel pumps in the United States with a bumper sticker with Biden's face pointing to the cost of filling up your gas tank in your car and the obnoxious statement, Biden did this. Now, if Biden is blamed for increasing prices, well, then that has a huge political consequence that is going to curtail Biden's possibility to pass a bill to and to do any any investment, certainly from the public sector into renewable energy batteries, grids, etc., etc., everything that is necessary and certainly nothing that would incentivize the private sector from investing. So has the oil and gas sector won this battle?

Kingsmill Bond: [00:20:43] So, Christiana, I think you might be getting a little bit too enthusiastic about this. Look, at the end of the day about this argument. At the end of the day, you can have as many bumper stickers as you like if you want to go out there and fill up your gas tank at four four bucks a gallon, or alternatively, get an EV and fill up for $0.20 per gallon, whatever it is. You know, it's just economics, not politics and blame. So I don't think this catches headlines or anything I think terribly relevant or significant. I mean the other point to me is, of course, with all due respect, the United States is not the world. There are plenty of other countries which are facing, of course, similar dynamics of high prices. And it's high price, of course, which is what drives change. So one of the key points that I would make is that before this shock, 91% of the world's renewable electricity was the cheapest source of new electricity. You know, after the war and the shock and the price increases of fossil fuels, it's basically everywhere. And furthermore, there's a whole series of additional tipping points right across the energy spectrum where the cost of renewable energy solutions are now, we didn't think they were going to be cheaper than fossil fuels until the second half of this decade, and they're already cheaper. Green ammonia right across the board. Those tipping points are materializing much faster.

Paul: [00:22:15] Kingsmill, Kingsmill, how I want to agree with you, but Christiana has, Dame Christiana. Dame Christiana Figueres has given me and Tom the opportunity today to play the kind of person who is constantly I'm trying to argue with, and I can't tell you how much I'm looking forward to it. Kingsmill, you undermine your own argument, don't you? Think about it. Be realistic. Be realistic. Kingsmill, surely the higher prices for oil and gas make the business case to drill more oil and gas? And indeed, was it not President Biden, your Democratic president, if you will, who used to talk about climate change? He himself now is encouraging the oil and gas industry to drill. So surely now you must appreciate that these issues of energy independence are temporary concerns about climate change. Be realistic, Kingsmill Give me an answer to the energy price crunch when there's such a good business case for drilling.

Christiana: [00:23:16] Paul, I have to say it does not become you, but that's all right.

Kingsmill Bond: [00:23:20] So is it kind of you to introduce this. If I may, this is a simple failure of logic. This is producer logic versus rather than consumer logic, just because it costs a producer more money to produce something and therefore they get very excited and go and produce more of it, doesn't mean that you as a consumer are actually going to use the stuff. And that's the absolutely key point that the key error, in fact, that the fossil fuel industry and its backers is making right across the board right now, which is that when you've got a supply shock and you get an artificially high prices free as a result of that shock, sure, it's profitable to to drill on a temporary basis, but they're forgetting the damage that it's doing to consumption and its consumption ultimately in our society, which has the power. And I will remind you, of course, that in the 1970, when we had the two oil shocks in 1973 and 1979. It was fabulous for the oil producers for a while, but then we had a massive increase in efficiency, we had a massive ramp up of the exciting new technology at the time, which was nuclear. And as a result of those, ultimately the fossil fuel industry sowed the seeds of its own demise because in fact, as you know, in the 1980s, demand stagnated as a result of those two factors. And of course, ultimately, that was a factor in the failure in the collapse of the Soviet Union. So, you know, be careful what you wish for. I suppose in the fossil fuel sector, artificially high prices are not good for the industry.

Paul: [00:25:02] Let me ask one more follow up, because in this character, I can't tell you how much I enjoy the. So it has been suggested, not least by people that are not familiar.

Christiana: [00:25:11] No, but wait, Paul, you'll have to put on your character voice.

Paul: [00:25:14] Okay. Thank you. Thank you. Yes. The Kingsmill. Kingsmill. Surely we've played into Putin's trap here. I mean, do you think that he might conceivably have started this terrible invasion? And I don't wish to make light of something so serious. But could he not have started this invasion to create an oil crisis, to create a sudden a new wave of investment in fossil fuels, thereby to sort of lock us in? Because, if I'm not mistaken, if we do reduce at 7% a year between now and 2030 or afterwards, then the Russian economy, you know, very much dependent upon export income from oil and gas is in terrible trouble. So might this not be a geopolitical action? And surely Biden begging big oil to drill, it means that we're falling into Putin's trap.

Kingsmill Bond: [00:26:00] So I'm very impressed that your insights into Putin's mind, Paul.

Paul: [00:26:06] And we think alike on many things, actually.

Kingsmill Bond: [00:26:10] The cunning plan to to get defeated at the gates of Kiev and turn what was meant to be a quick war into an extremely long, extended one with very wide, long term ramifications that may have been this cunning plan, but slightly the logic slightly beyond me. No, I mean, clearly it was an attempt at a lightning war like Crimea, and it's failed and it's created this kind of mess that we have to deal with. But I think the really other important point that needs to be stressed is that it is, of course, at times of stress that you do things that you struggle to do before. So right across the world, the technology problems have been solved. The economics problems have been solved with the deployment of renewable energies and technologies at scale. But everywhere they face incumbents and inertia and laws and systems tailored for the fossil fuel era. So now, in fact, is precisely the moment that we can use to as it were, destroy and make a bonfire of all these old technologies and regulations. And actually, it is through crisis that you can drive change. I would suggest, in fact, that Putin has set in train the very transition that he was seeking perhaps to avoid.

Tom: [00:27:30] Kingsmill, can I ask you a couple of questions? So this is really interesting, and I have to confess, I do agree with you on most things. But there's one thing which you said earlier that I'd like to just pick up on, and you said, this is not true politics to do with economics. And so I'd like to just explore the intersection between those two, because, of course, economics and politics is so fundamentally interlinked. And to go back to the examples you've given of the 1970s, which of course, did lead to this efficiency boom, it also led to the collapse of confidence in the Carter administration and ten years or 12 years of Republican rule that led to deregulation and more drilling and other things. So do you not think as we enter into this period where prices are, prices go up as a result of these geopolitical stress that leads to political squeezes? It's very difficult to know what happens once the politics starts being as volatile as that and you start ending up with a situation where the political manifestation of an economic sort of like lack of stability will create this sort of bumpy top of demand where nobody really knows what's going on. So legislative swing back and forth and people come in and take advantage of the politics of fear to try and take advantage of this. So I'm just interested in your analysis of how the economics of this and the politics of this intersects. It could become very messy in that interaction.

Kingsmill Bond: [00:28:45] Well, on this topic, I do actually agree with you. It is going to be bumpy. I mean, we have a kind of peak plateau decline framing for the fossil fuel system. And as you say, the plateau is going to be bumpy. It's going to be very stressful at the top. This, of course, is one of the reasons why RMI and indeed yourselves, Outrage + Optimism, how important it is for us all to set out what can be achieved in very clear terms and set out the great advantages, of course, for the peoples of the world of having domestically produced cheap local energy in order to avoid demagoguery and leaping upon this and seeking to reverse the changes. And I think it's the other point I really want to make, which is that here we are kind of at the end of the peak of the fossil fuel era, which is struggling to get enough stuff out of the ground and we're destroying the planet. And it's very stressful. It's very expensive and it's very damaging. And yet we, of course, have this extraordinary resource of solar and wind, which you've unlocked over the last five years, which is now 100 times bigger. It's distributed across the world. It's profoundly democratic. I mean, I don't want to sound too optimistic, as it were, but it is nevertheless a very powerful rallying cry, I think, for the forces of change and justice and opportunity and growth.

Tom: [00:30:15] Yeah. And I mean, the piece in one of the pieces in your article that really struck me was just about the fact that the growth in solar and wind is absorbing the vast majority of the growth in energy demand. And actually, I know much of my family works in oil and gas, actually. So I remember a long conversations about over the dinner table, over the difference between a million barrels a day supply being and compared to demand, if the demand drops below the supply by even a million barrels a day, you end up with a massive price drop and actually you can end up in a permanent situation of that type. So I was very interested by that analysis. But let's just go one level deeper in the manifestation of this in the world. I mean, I agree with you that this is the opportunity for us to go big in these solutions. But we're not really seeing political leaders capture that opportunity. Right. With the exception of maybe Sadiq Khan or Gavin Newsom, Biden is falling away from this, not talking about anymore. The backbenches of the Tory Party seem to have the Prime Minister in the UK on the run of saying you need to abandon net zero and embrace deregulation. The politicians are not showing the backbone that's going to be necessary yet to take advantage of the opportunity that you're highlighting is my fear about this moment.

Kingsmill Bond: [00:31:22] Yeah. I think living as I do in the UK with a somewhat uninspiring government. I can't disagree with you that we haven't yet stepped up to the plate with solutions. But don't forget, it's early days and inevitably an extended period of high fossil fuel prices will mean that certain slightly more sensible people will obviously embrace efficiency gains, and we'll remove some of the barriers to the deployment of renewables at scale. And I want to come back, if I may, to this point about size just and if your listeners just to articulate how close we are or were even before the crisis to the peak of the fossil fuel era, I think it is quite, quite significant because of course, once you reach the top and enter the new paradigm of decline down the other side, it's a very, very different world. So I'm going to attempt something, I guess, what shouldn't really do, which is play with numbers on air. But anyway, it's quite simple. Global energy demand growth before the crisis was running at about 1% and the solar and wind were about 5% of the system and they were growing at about 15%. So 15, five, 75 basis points, 75% of the growth in a steady state environment was already coming from this new disruptive technology of solar, wind, adding hydro and nuclear and biomass. And basically there's very little space for fossil fuel demand growth. Now, if you go to the new world where fossil fuel prices are significantly higher, you don't have to tweak your models very much. I mean, slightly higher solar and wind growth take it up to 20%, 20 times five. That's one you've already got all of your growth. And then, of course, the growth itself is going to be lower because GDP is damaged by the energy shock and you're going to have at the margin improved gains on efficiency. So we just played with the numbers and we said, well, look, this was a structural shift that was happening anyway brought forward by the cyclical shock of COVID and now really catalyzed by Putin's war and the very, very simple observation that high prices drives new solutions.

Christiana: [00:33:32] Well, Kingsmill, let me press you on that one, because I get your consumer logic. I totally agree with the consumer logic. And at the same time, the view on the other side to decarbonise and increase, especially accelerate exponentially, which is what we must do everything to do with renewable energy. It's not exactly a smooth ride to the world powered by renewables by tomorrow morning. At this point, we have at least three major, major squeeze points, I would say. The first squeeze point is investors. Investors are not prone to take a long term view, unless that's the way they're invested. There is a huge temptation to harvest current profits from absolutely absurd prices of fossil fuels. Now. Then we have a technology squeeze. We actually do not have the maturity of battery technology or of other storage that would support renewables being put on the grid beyond a certain percentage, which is, I think, sort of we're getting to that point now on the grids. And then we have the infrastructure squeeze point, which is we're relying on completely outdated, inefficient grids that are just a waste of grids because they waste so much on the efficiency of the transport that they're doing. So it's not exactly a very smooth ride from where we are now to net zero emissions energy, is it?

Kingsmill Bond: [00:35:21] So, Christiana, let me address those four points in turn, if I may. If you start with the observation about exponential growth and if the argument is made, we're not enjoying exponential growth. In fact, we are I mean, just take a look at any chart of the deployment of solar and wind and electric vehicles and batteries over the last five years. And you'll see an absolutely classic exponential S-curve type chart of very rapid and continuous growth. And indeed, solar is still growing 20%. Wind is still growing at 10 to 15%. Car sales, we're still fairly early days, but they're still growing at over 50%. Battery cells 100%, so on and so forth. So there's still there is indeed actually continuous exponential growth of these technologies. And just to be clear for a moment, all you have to do is get your new deployment to be renewables based. And inevitably, with depreciation and time, all of the old stuff will vanish. And of course, we're now basically there in the electricity sector. And the arena just pointed out 80% of new electricity deployment is renewables nowadays. So we're basically there in that sector. And that phenomenon is very significant. Electricity is so significant in and of itself. But anyway, sorry, answer your other questions about investors. Look, I wouldn't be quite so skeptical about investors. People recognize the difference between price spikes or even a couple of years of high prices and the necessity to earn high returns over extended periods. So even today, in fact, investors are putting money into, turning to put money into short term opportunities in the fossil fuel sector. But it's actually if you want energy and you want energy quick and you want energy with high end, relatively constant returns, actually much easier to deploy onshore wind today or put up a solar farm than to do some wild, extravagant, long term 20 year deployment of oil in the middle of nowhere. I mean, there's no one actually suggesting they're going to do that. That's the other interesting point. I mean, in spite of everything so far, we haven't seen a massive surge in fossil fuel CapEx. Which then brings me to the third point about the variability. So in fact, and I know you're playing devil's advocate, but just to correct the numbers, we're nowhere near the ceiling of renewable electricity deployment. So the argument goes, variability is a problem, we're running up against limits, as you say, and it can't be done above a certain percentage. Well, let us first of all, examine what that percentage might be. So RMI’s rule of thumb is that you can increase the deployment of solar and wind up to around 70% of your system today without incurring significant additional costs, simply by using a whole series of technologies of wider grids and supply side and demand side variability and better forecasting and so on and so forth. And limited room for some batteries in there. The NREL recently said up to 80% in fact they thought you could achieve without long term battery storage. So but the ceiling in 2022 is call it 70 to 80. Then if you examine where the world is today, it's 12% solar and wind globally. The leaders like Denmark or Ireland or northern Germany or southern Australia are approaching 50%. They're not running up against insoluble problems.

Kingsmill Bond: [00:38:55] So it really is an extremely academic debate to worry about the last 20% when we're years, if not decades away from that happy moment. And I think it's really important. I mean, you know, nobody would say that you shouldn't embark on life because you might face problems one day. You just got to get on with it. And there’s so much opportunity before us right now. I mean, the marginal again, to get technical, the marginal abatement cost curves that people like McKinsey do, just have so much, so many opportunities where you can deploy these renewable energy technologies at zero and negative cost saving money. And then finally, this point about inefficient grids. Well, again, the necessity to upgrade grids is part of what we have to do as societies in every country. And we just have to get on with it. And I recognize there's real problems doing it, particularly in the US. But, you know, take a look at China. China is doing this stuff and putting into place these hvdc technologies which were enabling very high deployment of renewables in the west of the country and then taking that energy to the east of the country. And the danger that the US faces is to be leapfrogged by China deploying all of these technologies much more successfully, much more quickly and leading the energies of the future. So I'm waiting for a Sputnik moment where the Republican Party goes. We don't want to get buried by the Chinese in the same ways we didn't want didn't want to get buried by the Russians back in the 1950s. Wake up, guys.

Paul: [00:40:27] So, Kingsmill, Kingsmill, I have to, in this persona, surrender. You've demolished all of the arguments that I've put forward and others, and you're essentially right. So I'm going to throw away this rather unpleasant character I've been playing. And just ask you if you could give a quick answer to the question I gave you in advance this morning. I asked you about those stickers that were going on the gas saying, you know, Biden caused these gas, high gas prices. And I asked you, how could the very large and fast growing climate change community that listen to this podcast respond? What messages could we use to make the opposite point?

Kingsmill Bond: [00:41:04] So I don't actually think we have to get into a kind of counter bumper sticker and the fossil fuel industry this or Putin did this.

Paul: [00:41:11] Putin did this. Yeah, that's true.

Kingsmill Bond: [00:41:13] I mean, certainly you could look at in Europe right now, as you know, again, if I stick with bumper stickers for a moment, they're using the World War Two framing. And if you ride alone, you ride with Hitler kind of stuff. You ride alone, you ride with Putin. That's the messaging. But actually, I think there is a much more substantive point to be made here, which is that we should be using this moment to do stuff that has been difficult. To rewrite laws and systems to remove subsidies to the fossil fuel sector. And before people throw up their hands in horror, you want to be giving subsidies to the people and then the people can use the money where they wish to, which probably will not be on fossil fuels. And you could, of course, make that extremely just by targeting it to specific groups of people. So I think to answer your question, leaving aside bumper stickers, now is the moment for us to actually go and do the very detailed work that Boris Johnson's government doesn't seem to be particularly good at getting these technologies deployed. Let's across the world improve time of use pricing. Let us remove the legislation in the UK which stops the deployment, for example, of onshore wind. Let us make it easier to put up solar panels on roofs and on land. Let's embrace this moment.

Paul: [00:42:43] Time infused pricing. Thank you Kingsmill.

Christiana: [00:42:44] Well, Kingsmill, can I please thank you for putting up with us today. We've been lobbing balls at you right and left, front and center. And thank you very much for really helping us think through these issues, because it is not easy. And the last thing that we want to do is actually reach simplistic conclusions. So thank you very much for humoring us and helping us to get into much more of the complexity of this. And Kingsmill, as we draw to a close, we know that you sometimes listen to our podcast. So this will not come as a surprise to you that we always ask our guests at the end to tell us one thing that you are outraged about and one thing that you're optimistic, although your whole conversation today is actually about the optimistic view for decarbonised energy. But if you could pick one thing that you're most optimistic about, perhaps you know what, perhaps in the short term, because I think long term we could all agree that we are going to make it. But in the short term and the shortest term possible, what are you most optimistic about and what are you most outraged that we still haven't gotten to?

Kingsmill Bond: [00:44:08] Well, I'm going to start with outrage. I am outraged that half of the US maize crop is being turned into incredibly inefficient ethanol, which is being used for driving in a world where whole nations are facing starvation. That was never a good idea. It was an idea of 20 years ago. It doesn't work. It destroys energy, and it needs to stop. And now is the moment. And if you want something very, very short term and alive, and we will have to do it before the end of this year, I suspect. On my optimism, I'm actually if I may, there was something I didn't talk about in my optimism, which is if you just assume, as it were, business as usual, continuity, continued learning curves and growth rate, we will end up in 2030 with $20 solar, $30 wind, $1 hydrogen and $50 batteries. That's less than half of any fossil fuel equivalent. And that means that inevitably the entire system will be obliged, forced to change and is going to unleash a huge amount of human creativity to deploy all of that stuff. Because if there's one thing that one can take from human history, from peat in Holland to sperm whales in the United States, coal in the UK is we're incredibly good at exploiting cheap energy and figuring out ways to use it. So that's my optimistic observation.

Christiana: [00:45:45] So can you just say that again, $1 hydrogen.

Kingsmill Bond: [00:45:49] So 2 to $20 per megawatt hour. So let's put that in context today to generate electricity from coal or gas. I mean, again, prices are spiking so much, but even just the variable cost of the stuff is going to cost you at least 50 bucks. So forgetting even about the building of the infrastructure. So that's $20 per megawatt hour of solar, $30 per megawatt hour wind, $100 per kilowatt hour was always the kind of holy grail for the industry. We're basically there and you don't have to be very aggressive in your extrapolation to see that we're going to get to 50 by 2030. And that just means that you're going to have EVs significantly cheaper than ICU cars, and you're going to have the technology deployed all over the place. Why wouldn't you when when kind of the fossil fuel equivalent today, I guess, you know, we used to say 100. Well, actually, today's oil price is probably 150. And then finally, hydrogen. Hydrogen, of course, being as I like to say, it's like Heineken. It's the technology which reaches places that other technologies can't reach. At $1 per kilogram, you could deploy green hydrogen in many different areas, which today we find it a little bit difficult. So be that heavy transportation be it can be it for for steel for example. You know that $1 hydrogen is the solvent which makes possible the deployment of renewable energy into those areas. And I should say, sorry, also relevant to this debate, we shouldn't forget that we have a whole load of peaks of fossil fuels already behind us. I mean, I know we talk a lot about peaking between peak demand for industry for fossil fuels was 2014. It's down 5%. Peak demand in the United States for fossil fuels was 2007. In Europe is 2006. Across the OECD with long past the peak and in South America. And you know, the kind of narrative that we're talking about, about a very, very fragile system approaching a peak and then declining is absolutely obvious. Sorry, Christiana, I've got a little bit too far here.

Tom: [00:48:02] That's great.

Christiana: [00:48:02] No, no, no, no, no. That's great. And I really like that you brought the peaking in again here, Kingsmill, because we do have the feeling that it's not a peak, right? That we do have sort of a series of peaks and valleys that I think you define as a plateau. And so I think that makes it difficult to understand that, that there is a maximum reach in, that there is a trajectory and a tendency downward. So thanks for bringing that in again. Kingsman one Once again, thank you so much for humoring us today. I think our listeners will not recognize the personas that we embodied today, but we did it quite deliberately in order to give you the opportunity to dig deeper into this. So thank you very much for that. Congratulations on moving over to our RMI. I am sure the carbon tracker is very sad to have lost you, but the good news is the climate community still counts on you. Thank you very much, Kingsmill.

Paul: [00:49:12] Good job. Honestly, you're better at being that than us. I think that's a different point.

Kingsmill Bond: [00:49:16] Thanks a lot.

Paul: [00:49:17] Thank you. Thank you.

Tom: [00:49:23] So what a pleasure to get to sit and chat with Kingsmill. What did you both take from that conversation?

Paul: [00:49:29] I think he's a super, I mean, you know, I'd really disliked pretending to be the awful person that asked.

Christiana: [00:49:38] But you made such a convincing role. You just stepped into that role so convincingly Paul.

Paul: [00:49:45] You could have called me smug. Do I enjoy being smug, adopting that kind of tone of voice where I'm really sort of talking down my nose to the other person, like they've not thought about this at all or have got any opinions that are valid. Yeah, maybe I enjoyed that a little bit too much, to be honest with you. But look, no, he's completely nailed it. I super agree with him. He actually said after the interview in an email to us that he hadn't emphasized enough that COVID was a way to drive change, which I think is really true. Let's not make the mistake again, he said. But particularly he said, and I and I would echo this 100%, he said that he didn't really talk as much as he would have liked to have done about energy efficiency. And he pointed out that the IEA, the International Energy Agency, say over 40% of future cost reductions might be achieved through energy efficiency globally. And let's just remember, that's the first fuel. That's the first fuel is energy efficiency. So, you know, as we get more clever and intelligent electricity grids, we can use that technology to reduce waste. And the benefits are absolutely enormous. Sometimes they don't make profits like an oil company seems to be making at the moment, but they're good investment returns and they're very, very solid and very, very low risk. So now ultimately, I'm an enormous fan of Kingsmill, and I think that he speaks with such clarity and force about this pivotal issue in our society. My only small desire is to clone him.

Christiana: [00:51:19] Well, yeah, I agree. He did. He did a great job standing up to our premeditated pressure. We did think ahead of time that we would put him under pressure. So you definitely did a great job there, Paul, but I think Kingsmill did an even greater job in coming at us back and putting out the very good arguments that he put out. I just wanted to come back to the sense or the reality actually, that renewable energies are intermittent. Yes, they are. Because as we know, sun, wind, etc., etc., rain, etc., etc.. But I'm surprised that we haven't used the same questioning concept for the price of fossil fuels. The price of fossil fuels is also intermittent. It goes up and down, up and down, up and down constantly. And we've known that for decades. Right. And so, you know, I mean, we talk about that as being unpredictable. But I wonder if calling them and recognizing them as being intermittent wouldn't in some way level the playing field so that we understand what we are really comparing here.

Tom: [00:52:44] Yeah, that's a great point. The intermittency of fossil fuels, which is only overcome by enormous infrastructure investment to try to level the price in massively complicated tax structures, which actually would be perfectly if we, it would be a much more level playing field if we deploy the same tools to support renewable development. But of course we haven't done that yet.

Paul: [00:53:03] The Strategic Petroleum Reserve, you know, like millions of barrels of oil all locked up in mountains. I mean, you know, we do do that with oil as well.

Tom: [00:53:11] No, I agree with you. I think he's enormously and it's just so wonderful talking to somebody who's thought so deeply about this issue and makes anybody who takes a different perspective feel like they just haven't understood the data. And so I agree with you. He's incredibly useful and powerful spokesperson to be out there in the world pushing this message, which I think is really resonating. I think if I was to pick up an area that I would love to see further developed, I do think that, you know, the impact of a transformation of this type is going to have and he agreed with this. But I think it goes even further than he allowed just vast political swings that could lead to really peculiar types of leaders emerging all over the world, as we've already seen. Right. And that could derail this in all sorts of ways. So it's not that just, you know, prices change and the world flips because it's logical. That might be true when viewed through generational time. But when viewed through the lens of this decisive decade and the next decisive decade, then actually all it would take is like two or three, you know, stickers of Biden at the pump in a particular election cycle that flips it back to Trump, you know, pulls out the Paris Agreement, abandons everything, re-subsidizes fossil fuels. And we're in this crazy world where politics is intervened in an energy transition in a manner that makes it highly complicated. So I love the clarity of his vision, but I'm just concerned the politics could really screw this up for us.

Paul: [00:54:32] Yeah. And on that political point, I mean, I think once again, you know, we've talked about this a lot before, but it is time for more of a government information campaign. We actually have a global energy crisis right now, and it's a perfect time to begin a real public debate regarding the future of our energy provision. And I think that would be a great way to bring people together around these issues and sort of think about the solutions. And by the way, if I can just revisit a point that we were discussing last week about these Supreme Court judges who oppose environmental protection, who are against protecting people, and they call them conservative. I decided that they're going to be called militant, anti-science judges. And we're not going to call them conservative judges. We're going to call them militant anti-science judges. And what they're doing in, for example, the US Supreme Court exposing the whole great nation, the great Republic of the United States to apocalyptic risk is beyond my comprehension. I know that I'm not suggesting that we summon the Outrage and Optimism gang, to go to the Supreme Court and storm it like Trump told those other people to do. But we'll have to think of something.

Tom: [00:55:34] In completely other news. I mean, today we're calling this Tuesday, the 3rd of May. I mean, we're in we're through the looking glass with the Supreme Court, with the news that they're on the cusp of rolling back Roe V Wade to make abortion probably immediately illegal in 22 states mean there's an alternative issue. But my God, it's really holding us back.

Paul: [00:55:51] Time to get Your Handmaid's Tale outfit on. And and and notice that Margaret Atwood did actually predict the future of the world.

Tom: [00:55:59] Do you have a Handmaid's Tale outfit, Paul?

Paul: [00:56:02] I do, actually. It's kind of cool. Yeah, it's very hard to get that thing to curve right. But I have a box that I keep in. 

Christiana: [00:56:09] So bring us back quickly to fossil fuels, if I may. We got a very, very thoughtful message from a listener, Hugh Richards, who in a very thoughtful message, wrote to us asking if there is any conversation Initiative project to put together a non fossil fuel treaty from the consumer side, from the demand side. So first of all, Hugh, thank you very much for writing to us. Thank you for your thoughtful message and communication to us. I don't know about Tom and Paul. I don't know of any effort on that side, on the consumer side. But I would be happy to know if either of you know, what strikes me is that we have Tom and Paul. We have talked about bringing the nonproliferation treaty effort that is underway, but from a production side. Right. Bringing those voices to the podcast. And I think we just might be there where we should really accelerate that and bring in onto the pod.

Tom: [00:57:24] Great idea.

Paul: [00:57:25] Yeah. 100%.

Christiana: [00:57:28] D either of you know if we can give Hugh a better answer, is there any effort at doing a treaty from the consumer side?

Paul: [00:57:40] I don't know about a treaty. I'm actually at a wonderful conference in beloved Findhorn where there's a wonderful person looking at the role of advertising in promoting excessive consumption of fossil fuels and seeing how the advertising industry can get together and say, We're not going to promote high carbon products, we're going to promote low carbon products. So that's one angle on it. But I think, yeah, the sovereign in the system is actually the citizen as she or he invest their money and spends their money that actually controls our whole society. So that is exactly where we need to intervene. And there are lots of people doing stuff and let's try and do a series about that.

Christiana: [00:58:18] It strikes me also that the whole divestment movement is part of that where certainly institutions, but individuals, pension owners are divesting increasingly from fossil fuels. So that is part of the, let's say, the consumer side action as well as all of the behavior changes, we see so much more demand for vegetarian options, for vegan options. If you want to go to the food, we we see that the orders for electric vehicles has gone through the roof, a long, long waiting list, because people are just so fed up with the price of gas at the pump. So I think it is not a centralized effort to respond to you. It's I don't think there's a centralized effort, but I think there is quite a bit going on, if you want to call it in a decentralized fashion, where consumers and in fact, even institutions are separating themselves from their traditional, thoughtless consumption of fossil fuels and doing taking action that is more thoughtful and meaningful.

Paul: [00:59:29] Yeah, and just a tiny bit of reframing there is that there's a many people have spoken about this, but John Alexander in particular reframing people not as consumers, but as citizens, because a consumer goes on a sort of whole bit of economic rationale. A citizen is capable of acting with courage, with empathy, and with a sort of the greater good in mind.

Tom: [00:59:50] It's a great point. He's written a very good book, we should have him on the podcast. Let's do that. Excellent. Right. Okay. Any more comments from either of you or shall we move on? Okay. All done for this week. Amazing. Thank you, everybody, for joining us as ever. And thank you very much for writing in. If anyone has answers to that question that we just put out there, then do let us know. And thank you. We always appreciate hearing from you. We will leave you, as ever, with a piece of music. Here is Stelios Vassiloudis with End Transmission.

Paul: [01:00:14] Bye bye.

Stelios Vassiloudis: [01:00:18] Hi. This is Stelios Vassiloudis and the song I'm presenting is called End Transmission. What initially inspired me to write this piece of music was an allegorical story, I imagined. A lone survivor and a missile silo or bomb shelter searching for contact after an extinction level catastrophe. Two years ago, as the events of the pandemic unfolded, the feeling of isolation and despair I was trying to express became more tangible. Our plight was and is self made. It is an inescapable fact that our insatiable and callous behavior as a species is directly responsible for the disruption of the very ecosystems we depend on to survive. The important work of researchers such as Stuart Pimm, Andy Dobson and James Wood, who have presented evidence that loss of biodiversity enables rapid spread of new diseases from animals to humans, inspired me to embed a more broad and urgent message.

End Transmission by Stelios Vassiloudis: [01:01:13] [Song plays]

Clay: [01:07:14] So there you go. Another episode of Outrage + Optimism. My name is Clay. I'm the producer of this podcast. And my message to you is very simple. Thank you for listening. The track that you just heard was End Transmission by Stelios Vassiloudis and  Stelios Vassiloudis is really fun to say. He has an album full of songs just like the one you heard. Cinematic, harmonically dense, formulaic and structure. And I went and listened to a few of them. They're great. I love playing this music when I need to reflect on something, sit in some thoughts, or just kind of rest my mind a little bit, and so feel free to do the same. He just released a new album titled All Else Fails that you can go listen to and watch visuals for on YouTube. So go check it out. Speaking of great music, just a reminder to our audience that the Environmental Music Prize is still open for voting. So you can go listen to music. Vote for your favorites. Promote environmentalism and bringing environmental music into the mainstream. Go to Environmental Music Prize dot org. And if you're wondering, Clay what is an Environmental Music Prize? Two episodes back in our feed is an entire episode where Christiana and I speak with the founder of the prize, Edwina Flock, about this effort to get environmental music elevated to mainstream music status. So that effort is happening right now, and you only have a limited time to take part. So go to the website because voting's going to end soon. Again, that's Environmental Music Prize dot org. Click the link in the show notes of your podcast player and vote away. All right. Thank you so much to our guests this week, Kingsmill Bond. And if you were wondering. Yes, I did say hello, Mr. Bond. I've been expecting you when he arrived at our recording sessions, you know. How could I not? Kingsmill's article, titled How Putin's War Marks the End of the Fossil Fuel Era, is a great short read. I'm not an extraordinarily proficient reader, so I really appreciated a complex topic having such human readability. So Link is below. Take a few minutes to give it a read and also go ahead and follow RMI’s socials and Mr. Bond's socials and Mr. Bond's socials in the show notes. Thank you, Kingsmill, for coming on. Last week, our production team here at Outrage + Optimism put a link to a Twitter thread of crowdsourced resources to deal with climate anxiety that was started by Elena Wood. And this week, don't worry, we're not sending you back to Twitter. This week, another recommendation from our team, the Climate Change and Happiness Podcast. It's a podcast for people around the globe who are thinking deeply about the personal side of climate change and in particular, their emotional responses and their feelings. It's hosted by Dr. Thomas J. Doherty, a Portland psychologist who specializes in climate. And the latest episode is with Brit Rae, who just released a book Getting High Praise from several former guests on this podcast Dr. Katherine Wilkinson, Adam McKay, David Wallace-Wells so take some time for yourself and read up on the book. It's called Generation Dread, and the podcast again is called The Climate Change and Happiness Podcast. But you don't need to memorize that because you can just click a link in the show notes. We got you. Yes. If you like this podcast, please give us a rating on Apple Podcasts and write a review because we read every single one and, you know, selfishly, we kind of enjoy it. And we have social media because who doesn't? @OutrageOptimism is where you can find us. Give us a follow to stay up to date on all things outrageous and optimistic on climate. Take a sip water. Okay, stay hydrated and thank you for listening and be sure to hit, follow or subscribe and we'll see you right back here next week. Right.