The document discusses two potential energy futures - a "green" future characterized by high innovation, increasing integration across sectors, low-carbon smart electricity systems, and biomass and electricity in transport, and a "brown" future continuing dependence on fossil fuels. It notes the "green" future would have high upfront capital costs but lower operating costs, while the "brown" future would have lower upfront costs but higher operating costs and more environmental issues. The document then examines topics like whether transitions are crossing a ridge, the costs of different pathways, necessary policy foundations, and the impacts of COVID-19.

1. Michael Grubb
Professor of Energy and Climate
Change
University College London

2. To begin at the end ….
Infrastructuretotalcost
(Energy,transport,comms)
Greenhouse gas and other environmental impacts

3. Global
energy
costs
Annual
global
emissions
Time
‘Green’ futures
•High-innovation system
•Increasingly integrated across
sectors
•Low-carbon, ‘smart electricity’
•Biomass and electricity in
transport
•High capital costs….
•……but low operating costs
‘Brown’ futures
• Continued dependence on fossil fuels
• Unconventional and synthetic oil in
transport
• Low capital costs…
•…but higher operating costs
• … and a host of environmental issues
beyond carbon
PlanetaryEconomicsChapter10,“Transformingsystems”,
Figure10-6:Twokindsofenergyfuture–thecarbondivide
‘Ignoranti quem portum petat nullus suus ventus est’ - Lucius Annaeus Seneca
No wind favours those who don't know where they are going
Diverging paths ….
Topics for this talk:
• Are we crossing the ridge?
• What are the costs?
• Policy foundations?
• … and Covid?
We are
here

4. https://www.wemeanbusinesscoalition.org/s-curve-power-report/
Q: “[is it] exponential, stupid!?”

5. Notes: Comparison of linear extrapolation of historic trend in growth of renewables’ share of electricity generation (2008-2019 average rate), with exponential
growth (7% annual increase), and with 2030 and 2050 benchmarks derived from Climate Action Tracker (CAT, 2020), Climate Ambition Benchmarks (CAB) (Climate
Works Foundation et al., 2019), and ‘Our Paris-consistent benchmark’, based on the median of relevant scenarios from Huppmann et al (2018)
Renewables in global electricity
Hydro % contribution stable,
New Renewables’ only 7% of global electricity generation

6. Notes: Comparison of linear extrapolation of historic trend in growth of renewables’ share of electricity generation (2008-2019 average rate), with exponential
growth (7% annual increase), and with 2030 and 2050 benchmarks derived from Climate Action Tracker (CAT, 2020), Climate Ambition Benchmarks (CAB) (Climate
Works Foundation et al., 2019), and ‘Our Paris-consistent benchmark’, based on the median of relevant scenarios from Huppmann et al (2018)
Renewables in global electricity Hydro % contribution stable,
New Renewables’ only 7% of global electricity generation
…. Growing how, and how fast?

7. `
Growth rates of wind+PV – plausible tracks to global transitions
… as measured 2010-2019,
compared to S-curve dynamic
2010-2050,
defined to median end-point from
SR1.5 model database
On track with 30%/year emergence growth rate, which
also hits 2030 median benchmark but not those of more
renewables-dominated scenarios
Source: Grubb, Drummond and Hughues (2020), The Shape and Pace of Change in the Electricity Transition: Sectoral dynamics and indicators of progress, We Mean Business, Oct 2020
Note the huge change 2020 – 2030
especially under 30 – 35%/yr
emergence growth rates

8. Notes: IRENA estimates of levelised cost of energy (grey) and cost data revealed by auctions and power purchase agreements (blue), for onshore wind, offshore wind and solar PV.
Boxes show 5th to 95th percentile range. Lines show weighted averages. IRENA estimates of high and low range of new fossil fuel power generation shown in red. Data from IRENA
(2020b).
Major investment – but sustained momentum from dramatic cost
reductions
Onshore wind, offshore wind and solar PV levelised cost of energy (grey) and cont

9. Notes: Historic data for 2000-2009 from IEA (2018), and for 2010-2019 from IEA (2020a).
But the trend of fossil fuel – carbon intensity – in conflict
Historic (2000-2019) and projected (2010-2050) CO2 intensity of global electricity
generation – linear and S-curve projections

10. Power: the cost of low carbon
pathways depends on timing and
demand management
Early investments
in renewables +
demand
management
Investments in fossil fuel generation +
stranded assets
3.0% of GDP per year
2.2% of
GDP per
year
Investments in fossil fuel generation +
stranded assets
3.0% of GDP per year
urce: World Bank (2019), ‘Beyond the Gap’

11. Contrasting indicators point to trend transition risk?
Traffic light summary (Executive Summary version)
System element Indicator Current (2019) status
/decadal trend (2010-2019)
Paris-consistent?
CO2 emissions and technology deployment
Power system Total CO2 emissions +10%
CO2 intensity (per kWh) -12%
Wind Generation growth rate 17%/year average growth
Solar Generation growth rate 41%/year average growth
Wind and solar PV Combined share of total
generation
Increase from 2% to 8%
Unabated fossil fuels Share of total generation 5.2 percentage point decline
Electricity demand Demand growth substantially outpacing non-fossil fuel
growth and mostly not displacing other carbon-intensive
energy
Costs and finance
Onshore wind Global weighted average
cost (auctions/PPAs)
-28%
Offshore wind Levelized cost of energy -29%
Solar PV Global weighted average
cost (auctions/PPAs)
-69%
All renewables Generation investment –
share of renewables
~65%

12. What of Transport – will projections be realised?
Mostly vehicles
10 million passenger EVs on the road today, along with more
than 500,000 e-buses, almost 400,000 electric delivery vans
and trucks and 184 million electric mopeds, scooters and
bikes. Growth rate 40% per year

13. Dramatic movements … `
• Most international vehicle manufacturers now producing or launching
lines of electric vehicles
• Costs sharply declining
• Growing number of countries
moving to set phase-out date for
sale of traditional vehicles
• UK set to announce tomorrow -
(20 Nov) bringing forward its ICE
phase-out date from 2040 to 2030

14. Urban transport: Land use planning lowers
investment needs by 20 percent and reduces
emissions
0.37% of GDP
per year
0.47% of GDP per year
Dense cities
&
public transit
Sprawl & individual mobility

15. Shared Micromobility Trips Grew by 62%
in 2019
The number of micromobility trips grew
62% from 2018 to 2019 due to the large
increase in scooter trips. Shared
micromobility refers to small fleets of
fully or partially human-powered vehicles
including bikes, e-bikes, and e-scooters.
Trips on scooters more than doubled from
2018 to 2019 while bike trips increased by 3%
and e-bike trips increased 54%. Data collection
by the National Association of City
Transportation Officials (NACTO) began in 2010
and included only bike trips until 2018.
Note: Data includes systems with
over 150 bikes or scooters and
includes only data reported by
large cities. Data does not include
private or closed campus systems
like those operating on university
campuses. For more detail, see
the source report.
Source: National Association of
City Transportation Officials
(NACTO), Shared Micromobility in
the U.S.: 2019, Summer 2020.

16. With the right policies, investments of 4.5 percent
of GDP will enable LMICs to achieve the infrastructure-related SDGs
and stay on track to full decarbonization by the second half of
the century
Source: World Bank (2019), ‘Beyond the Gap’

17. Global
energy
costs
Annual
global
emissions
Time
‘Green’ futures
•High-innovation system
•Increasingly integrated across
sectors
•Low-carbon, ‘smart electricity’
•Biomass and electricity in
transport
•High capital costs….
•……but low operating costs
‘Brown’ futures
• Continued dependence on fossil fuels
• Unconventional and synthetic oil in
transport
• Low capital costs…
•…but higher operating costs
• … and a host of environmental issues
beyond carbon
PlanetaryEconomicsChapter10,“Transformingsystems”,
Figure10-6:Twokindsofenergyfuture–thecarbondivide
‘Ignoranti quem portum petat nullus suus ventus est’ - Lucius Annaeus Seneca
No wind favours those who don't know where they are going
Diverging paths ….
Topics for this talk:
• Are we crossing the ridge?
• What are the costs?
• Policy Foundations?
• … and Covid?
We are
here

18. with different characteristics and theoretical foundations, apply at different scales
Three Domains of decision-processes
Improved
efficiency and
service
New technology
waves
1.
Satisficing
Habits, myopia/present-bias, risk
aversion, inattention to incidental
/ intangible costs & opportunities,
individual diversity &
experimentation, malleable
preferences; network effects
Behavioural
and
organisational
economics
DOMAIN
Theoretical
foundations
Characteristics
S
O
C
I
A
L
S
C
A
L
E
T
I
M
E
H
O
R
I
Z
O
N
2.
Optimising
Economic optimisation based on
relative prices,
‘representative agents’
with ‘rational expectations’, stable
preferences and tech trends
Neoclassical
and welfare
economics
3.
Transform
-ing
Structural, technological,
institutional and behavioural
change, typically from
strategising, innovation,
infrastructure investment
Evolutionary
and
institutional
economics
New markets,
vs
Incumbents
Source: Planetary Economics

19. The ‘Dark Matter of macroeconomic growth’
• Macro-economic research points to two key areas of economic growth
in addition to resource & capital accumulation:
– Improving efficiency of many economic actors and structures throughout the
economic system
– Infrastructure, innovation and education
• ie. First and Third Domain processes are recognised as important for
macroeconomic development. Yet these remain
– largely absent in global (or national) modelling
– poorly charted in policy

20. H
M
L
H Highest relevance
M Medium relevance
L Lowest relevance
Satisfice
Transform
Optimise
Domain
Standards &
Engagement
Markets &
Prices
Strategic
Investmen
t
‘Smarter’
individual &
corporate
choices
Cleaner
products &
processes
Innovation &
infrastructure
1 2 3
L/M
H
L/M
L
M
H
Policy pillars
“The EU 3-targets
approach is
madness.. “
“Other policies such
as feed-in tariffs,
industry regulation
and subsidies, are
far less economically
preferable than
carbon pricing to
reduce emissions… “
(OECD, 2013)
I beg to differ …
Ideal policy comprises a package …
Key is to match the best instrument to the
respective domain of decision-making

21. Global
energy
costs
Annual
global
emissions
Time
‘Green’ futures
•High-innovation system
•Increasingly integrated across
sectors
•Low-carbon, ‘smart electricity’
•Biomass and electricity in
transport
•High capital costs….
•……but low operating costs
‘Brown’ futures
• Continued dependence on fossil fuels
• Unconventional and synthetic oil in
transport
• Low capital costs…
•…but higher operating costs
• … and a host of environmental issues
beyond carbon
PlanetaryEconomicsChapter10,“Transformingsystems”,
Figure10-6:Twokindsofenergyfuture–thecarbondivide
‘Ignoranti quem portum petat nullus suus ventus est’ - Lucius Annaeus Seneca
No wind favours those who don't know where they are going
Diverging paths ….
Topics for this talk:
• Are we crossing the ridge?
• What are the costs?
• Policy foundations?
• … and Covid?
We are
here

22. Emerging post-COVID stimulus – mostly in the wrong direction

23. … though in global volume, much
may hinge on future of US and
Chinese stimulus developments ..
Source: Vivid
Economics,
Green Stimulus
Index

24. Covid
• A huge macroeconomic shock
• A dramatic episode of ‘Schumpeterian Destruction’
• – can it be made a creative one?
• Keys will be:
– A clear and compelling narrative of the opportunities (and the risks)
– International financial cooperation (eg. underwriting)
– Synthesis between financial and energy/transport policies – Central Banks
need to care about how the money is used
– Links between the lending, infrastructure contracts, and environmental
revenue opportunities to underwrite 10-20 year payments
(eg. carbon pricing, road pricing)

25. 25
Sector policy still crucial to accelerating decarbonisation
 `To overcome obstacles in international diffusion
‒ Country risk particularly in some developing countries create high cost of capital
‒ Some State-Owned Enterprises particularly in Asia still funding coal and sometimes impeding
renewables
‒ Challenges may be exacerbated by aftermath of Covid (impact on debt and attention to sectoral
reform)
 To reform power market structures appropriate to ‘free to run’, variable output power sources
 To provide the infrastructure of interconnection and electric vehicle charging
 To help incumbent industries adjust
 To promote both efficient use, and electrification of carbon-intensive end-uses

26. Global
energy
costs
Annual
global
emissions
Time
‘Green’ futures
•High-innovation system
•Increasingly integrated across
sectors
•Low-carbon, ‘smart electricity’
•Biomass and electricity in
transport
•High capital costs….
•……but low operating costs
‘Brown’ futures
• Continued dependence on fossil fuels
• Unconventional and synthetic oil in
transport
• Low capital costs…
•…but higher operating costs
• … and a host of environmental issues
beyond carbon
PlanetaryEconomicsChapter10,“Transformingsystems”,
Figure10-6:Twokindsofenergyfuture–thecarbondivide
‘Ignoranti quem portum petat nullus suus ventus est’ - Lucius Annaeus Seneca
No wind favours those who don't know where they are going
Diverging paths ….
We are
here
“.. Then took the other, as just as fair,
And having perhaps the better claim,
Oh, I kept the first for another day!
Yet knowing how way leads on to
way,
I doubted if I should ever come back.
I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and
I—
I took the one less traveled by,
And that has made all the difference.”
Robert Frost

27. Michael Grubb
Professor of Energy and Climate
Change
University College London