Heated Debates in Global Energy: An Interview with Thunder Said Energy
This week our guest is Rob West, founder and CEO of Thunder Said Energy. Founded in 2019, the firm aims to help decision-makers find economic opportunities in the energy transition. Rob lives nine time zones away in Estonia and is an uber-productive energy expert, covering a wide range of topics in his consultancy.
Here are some of the questions Peter and Jackie asked Rob: What are your views on the likely demand for oil and gas in 2050? Assuming that oil and gas demand remains relatively high, is it still possible to achieve the current climate targets? Do you think the cost of direct air capture (DAC) can be further reduced? What are some of the technologies and solutions that are most effective in reducing GHG emissions at the lowest cost? You have been warning about an energy shortage for some time, is this still a concern, especially considering that the energy markets have been relatively well-supplied in the past year? Do you think fusion energy can become commercial?
Other content referenced in this podcast:
- Thunder Said Energy blog on the supply and demand for global energy and the concerns about under-supply: https://thundersaidenergy.com/downloads/global-energy-supply-demand-balance/
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Episode 215 transcript.
Speaker 1:
The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.
Speaker 2:
This is the ARC Energy Ideas Podcast with Peter Tertzakian and Jackie Forrest. Exploring trends that influence the energy business.
Jackie Forrest:
Welcome to the ARC Energy Ideas Podcast. I’m Jackie Forrest.
Peter Tertzakian:
I’m Peter Tertzakian. Welcome back. Well, Jackie, we broadcasted from the WPC, World Petroleum Congress, a few weeks back and now we’re going to be broadcasting from a clean electricity conference coming up. Why don’t you tell us about it?
Jackie Forrest:
Electricity Transformation Canada is actually at the same place, the BMO Center in Calgary. That is Canada’s biggest renewable energy conference. It’s actually been held in Toronto for a number of years. So exciting that it’s here in Calgary. It’s the biggest renewables conference, as I said. There’s going to be a really large trade show. It’s happening right now as you’re listening, October 23rd to 25th, so as we’re releasing this podcast will be on the first big day of the conference. So, I just encourage people to check it out. We’re actually going to be doing some live podcast recordings right from the trade show floor.
Peter Tertzakian:
Yeah. Well, looking forward to it and I hope I can park this time given all the mayhem that was there a few weeks ago. Anyway, onto our special guest who comes to us from nine times zones away, from none other than Estonia. We are delighted to have with us Rob West, analyst and CEO of Thunder Said Energy. I must say, Thunder Said, if you don’t know it, is a must-read website because the depth of analysis and the incredible context it provides for anyone studying energy transition is, as I said, it’s must-read. So, Rob, welcome.
Rob West:
Well, thank you so much for having me and for those incredibly kind words of introduction.
Jackie Forrest:
Well, let’s start out, Rob, you described yourself on your website as the research consultancy for energy technology. So just tell us a bit more about what you do and what kind of information people can find on your website.
Rob West:
Well, I guess it all started with this growing goal that really picked up in 2018 to meet the needs of human civilization. So, 80,000 terawatt-hours a year of useful energy, about 60 billion tons a year of stuff that we produce every year. By 2050, those numbers are going to be bigger. It’s probably going to be 120,000 terawatt-hours a year of energy and 100 billion tons a year of stuff. We need to do all of that and then decarbonize all the stuff. So go from 50 billion tons a year of CO2 to zero. I’ve just become fascinated with this question of how do we do that, which is really an ocean boiling exercise of looking at hundreds of different technologies and opportunities, and for each one just what is it, how does it work, what does it cost.
Peter Tertzakian:
It is a daunting goal in what I used to say 27 short years, now we’re pushing 26 short years here as we close out 2023. Hey Rob, before we get started, I think our audience, certainly those who follow you, are curious about the name Thunder Said. Where does that come from, Thunder Said Energy?
Rob West:
Yeah, it’s from a poem that I like called The Wasteland by T.S. Eliot, and it’s about a pretty bleak world where nothing will grow and no one can prosper, and the sort of antidote is the final chapter is called What the Thunder Said, and it washes away all of the bleakness. So, I guess that’s kind of what we need is antidotes rather than drowning in bleakness.
Peter Tertzakian:
I love the symbolism and the poetry of T.S. Eliot. So, tell us how many topics you cover. I mean, the energy landscape is so vast and the infrastructure that pumps out 80,000 terawatts a year is just incomprehensible in scale. So how many topics do you cover and how large is your team?
Rob West:
Yeah, it’s the ultimate very hungry caterpillar. When I started the company, I thought I might look at wind, solar batteries, EVs, hydrogen. I think across the thousand items of research and data files and models, there are definitely over 200 distinct pieces of the puzzle in my roadmap to net zero, which kind of underpins my just feeling that the more I’ve looked at, the stupider I feel. But I do all the research myself. I’m trying to run it through the same brain so that I can fairly weigh things up one against another. I’ve never really figured out a great way to delegate to somebody, like read a stack of patents and tell me how I feel about them.
Peter Tertzakian:
Yeah, so I guess you feel like there’s 25 hours in the day, like many high performing people I know. So good for you.
Jackie Forrest:
Yeah. Well, it’s funny, Rob, I will tell you that a lot of people do follow your work and it’s often a point of conversation like, “Wow, he puts out so much material.” People are very impressed with your productivity. I hope we all can be uber productive like you. It’s amazing the amount of work you put out. I wanted to follow up with one of your opening statements there. You said you’ve been boiling the ocean for the past five years and I found that quite interesting. The more you know, the less you feel like you really know. We have that issue too in research. But maybe tell us what are some of the conclusions that after five years of doing this, the big trends and conclusions people can take away?
Rob West:
I think energy transition is possible, but it’s going to be the biggest construction project in the history of human civilization costing something like $5 trillion a year to get the world to net zero, maybe $9 trillion a year of investment going in. There’s probably 10 sectors with $15 trillion of market cap that get just completely swept up by this very hungry caterpillar. On the one hand, there’s more technology change happening than any time in history. There’s 7 million patents filed every year now. That was growing about 5% a year a decade ago. It’s now growing at 10% a year. So even the pace of technology change is trying to go ever faster. But on the other hand, I kind of observed as somebody who spends my days looking at technologies that there’s this lifecycle of generating huge hype and then it sort of takes 15 years for something to go from the lab to the real world.
Peter Tertzakian:
To the real world, and then from the real world it has to follow some adoption curve. So actually, by the time you go from 7 million patents to any meaningful dent in the substitution curve, I mean, you’re talking probably 30 years, yet we only have 23.
Rob West:
I think that’s what makes the real-world changes all the more remarkable. My perception has been that I’m sitting here wanting to find cool things that’s going to change the world, but really, I think 2050 is going to look a lot more like today’s world with some tilts and a few big game changers, then this whole scale transformation that some other people think is out there and going to happen.
Jackie Forrest:
Well, that comes to a very popular topic for us. It seems like we just hit on it last week with Pembina Institute, an environmental organization, this debate around the future of energy, specifically with the path of oil and gas and the folks that say, “Well, hey, the IEA scenario that says we’re going to have this drastic drop in oil and gas demand to 2050.” Something like 80% drop from today between now and then. Do you see that as possible? If not, what do you think is likely?
Rob West:
Yeah, what makes a market is that different people are entitled to different views. That’s not the view that seems likely to me. I think if I was emperor of the world, a title that I would not deserve, and I could sort of dictate what would be the most plausible, most economical route to get the world to net zero, that means like zero net CO2 in 2050, I still think that the best way to do it, you’d end up with oil kind of flat lining and declining gently to about 85 million barrels a day by 2050. You’d end up with more gas. How much more gas? That’s the balancing line in the model. I could see it going from 400 Bcf day to 800 Bcf a day. Mainly the reason to do that is to phase out coal, which is twice as much CO2 per unit of energy because it’s almost all coming from carbon going to CO2, whereas natural gas, half the energy is the hydrogen and the methane molecule, CH4.
Peter Tertzakian:
Why do you think it is that people take scenarios and twist them into predictions?
Rob West:
It’s hard. It’s very difficult. I mean, one thing that sort of sticks in my mind is the question about efficiency gains. So, if you go back to 1970, the energy intensity of GDP has been falling by 1% per year.
Okay, so is it going to go to 2% or 3% or 4%? That seems like just splitting hairs, a percentage point here and there, and I can see how if you put slightly different numbers in and compound them forward for 26 years, you get to very different places. So, if you ask me about that particular debate, my sense would be the challenge of Jevons paradox, the idea that as you make stuff more efficient, you unlock this new demand. So, one of my favorite examples of that is lighting. Lighting, the efficiency of lighting has improved by 90% every half century since 1800, and yet commercial lighting demand is still making new highs. We’re building the Sphere in Las Vegas, this incredible building covered in 54,000 square meters of LEDs.
Peter Tertzakian:
LED lights are six times as efficient as incandescent lighting, but then people just put up six times as many lights under their kitchen counters or on their Christmas tree or what have you. But I think you’ve addressed the elephant in the room in many ways in your opening statement, these are all numbers, but just going from 80,000 terawatt hours to 120,000, which is 50% gain in overall energy by 2050, where is that energy coming from?
Rob West:
Well, I think it’s depressing the inequality in the global energy system. The top billion of us in the developed world use about 25 megawatt hours of useful energy per person per year. The remaining 7 billion people use about 75% less, 6 megawatt hours per person per year. The bottom 4 billion people use 90% less, 3 megawatt hours. And these sound-like abstract stats, but to bring it to life a bit, 85% of all the people in the world have never been on an airplane. The bottom 4 billion people in the world, if you quantify the living space in their dwelling per person, it’s less than 10 square meters, which is less than a regulation size prison cell in the Western world.
These are just really scary numbers and make it hard to imagine that there’s 7 billion people outside of the developed world will not grow their energy consumption, I hope to maybe 10 megawatt hours per person per year in my model, which is still 60% less than the levels in the West today. So, kind of still crazy low numbers.
Jackie Forrest:
Well Rob, generally we would agree with you that the outlook for oil demand and gas demand is much higher than these net-zero scenarios because of these reasons, the fact that the developing world is probably going to consume more energy. We are going to have clean energy, but it’s going to be very difficult to get off oil and gas with the growth.
But that brings me to a point, well then, we’re not going to meet these 1.5C degrees scenarios, and what is the solution to that? Do you think we need to really be ramping up carbon capture storage or direct our capture? What are your views on those technologies? Can they fill the gap or is the gap just too large?
Ro b West:
So, I genuinely think done right, they can fill that gap. And there’s nothing incompatible with an energy system that is 30, 40% renewables in 2050 and 85 million barrels a day of the lowest carbon oil, several hundred Bcfs day of the lowest carbon gas. And then I’d have something like 7 billion tons a year of CCS and blue hydrogen, a billion tons a year of DAC, 15 billion tons a year of nature, the biggest unsung possible hero of CO2 removal in the world today.
Peter Tertzakian:
Let’s talk about that nature-based solutions, because they’ve sort of seemingly gone a bit out of favor or less prevalent in the dialogue about solutions. What are you sensing?
Rob West:
Yeah, I feel that too. I feel there’s a kind of ebb and flow of momentum behind almost all the energy transition technologies that I follow. I mean the fact is that we’ve deforested 5 billion acres since pre-industrial times, that’s a third of all of the gross CO2 that’s gone into the atmosphere. And if you can pull out 3 billion acres that get reforested at 5 tons of CO2 per acre per year, which is the global average, that’s a 15 billion ton per year carbon sink. And you don’t have to have ridiculous things like trees living forever, you just have to go from those 3 billion acres being not forested to reforest it.
And the cost of that is something like $50 a ton, which I hope we get to come back to relative costs of stuff. That’s a number that I think flies, that I think can do a lot of useful decarbonization. This has got to be done and I think that’s where the initial nature-based projects have fallen down is that they haven’t all been right. They haven’t been real, incremental, long-lasting, measurable, biodiverse. And I know there are people out there working really hard to fix that.
Jackie Forrest:
Yeah, I hope that the whole credibility issue gets solved, and we can get on track, because we’re obviously going to need a lot of money to go into that space to plant all those trees and to take that land back.
But I just want to come back to the last question in that, I’m really happy to hear that you think there is a way to make it, but we need to be spending a lot more time probably on carbon capture storage, direct air capture, nature-based solutions, to offset the fact that we will be using more oil and gas demand. One frustration for me, just a general comment, not a question, is just that we’re so busy looking at these unrealistic scenarios for where oil and gas demand goes, that we’re not, and this is not we like the world, people that go to COP are not focused on actually those aren’t that possible, so we need to be really investing a lot of effort and time in these solutions.
So, I hope that that message and the information you’re getting is getting out there and hopefully informing some of these conversations.
Rob West:
Yeah, I love that point. I mean, I think it’s one thing that really strikes me as this paradox, that there was a recent survey 40% of Americans said they wouldn’t give $1 per month in order to do decarbonization. Candidly, my own roadmap involves lining up every single person in the world and taking away 3% of their disposable income forever to do energy transition at an average cost of about $40 per ton of CO2 that gets avoided or removed from that emissions mix.
It’s a distribution. So, I think you could very realistically have 10% of all the decarbonization in the range of a $100 to $150 a ton, but if there are solutions out there that cost several hundred dollars a ton, that’s not a solution for the 1%, for the 0.1%, but for the 0.0001%. And I just think that’s something that’s kind of important to figure in terms of what can scale.
Peter Tertzakian:
Yeah, I love what you’re saying, because this is the sense, I get what you’re getting at is, okay, let’s just back up for a minute. You said we have to spend like 5 trillion or 9 trillion a year, I don’t know, the number’s so big it’s hard to comprehend.
Rob West:
Yeah, that’s right.
Peter Tertzakian:
But we’re not even close to that, whatever the number is. It strikes me as what reading between the lines, you’re saying is that there’s a misallocation of capital and really expensive solutions that cost $300 a ton, and we shouldn’t be wasting our money on that stuff because there is proverbially the lower hanging fruit at $40 a ton. And if we all put our heads together and found the optimal set of where to spend all this ridiculous amount of money, then we would be a lot further ahead.
Rob West:
I mean, I guess I would just use an oil industry analogy. If the whole world thought that the marginal barrel for the world was going to be oil sands mining and that was where all global supply growth was going to have to come from, and then you went out and you invented Permian shale and you already get big in that space before anybody else had figured out that that was a lot lower on the cost curve, you’re going to make a lot of money doing that. And I think you’re going to provide something that the world needs. And so, as investors, I can see the cost curve, I want to go to the bottom of the cost curve and there are a lot of interesting things there.
Peter Tertzakian:
Yeah, I mean, what are some of the things that you think are leading to this misallocation of capital? In other words, where are we spending money that we shouldn’t be based on your analysis of high-cost solutions that are too distant?
Rob West:
I’m most excited by the stuff that’s hidden away. So, the thing that excites me most is really gritty, really nerdy process technology. Did you know, the average industrial process today is like 20% thermodynamically efficient? So, in other words, if you want to make ammonia with an energy content of 1 megawatt hour, you put in 5 megawatt hours of energy to actually make it. For 20% of all the stuff in the world, the process is less than 5% thermodynamically efficient. And that’s where a better catalyst, a better reactor, a better process technology is going to be able to take some of the… a great example is DAC.
Peter Tertzakian:
Direct air capture.
Rob West:
Thank you. Sorry, I speak in acronyms.
The minimum energy you need to separate 400 ppm CO2 out of air, it’s like 130 kilowatt-hours a ton. And the best process technology we have today is 2,500 kilowatt-hours per ton, less than 5% efficient. And somebody’s going to come along with the right sorbent and put it in a passive system where you don’t have to blow any air, and they’re just going to zap it with electricity and it’ll absorb the CO2, and then they zap it with electricity again and it will release the CO2. And there are labs looking at that, there are some really cool patent libraries that I’ve been through, but when that happens, I wouldn’t want to be building liquid DAC calciners, you know?
Peter Tertzakian:
Yeah. I think that’s very cool. But again, by the time you commercialize it, by the time you get the thing scaled up, by the time it starts removing CO2 in any meaningful quantity, we can allocate some of our capital to much lower hanging fruit today. Say even in the nature set of solutions or other solutions. Or the converse, which is not spending so much money on stuff that will never be thermodynamically efficient, especially when it’s chained together in a complex system.
Rob West:
Yeah, I agree with that. There are some concepts out there that are the thermodynamic equivalent of printing out your emails.
Jackie Forrest:
I want to come back to that direct air capture though, Peter, because yes, there’s lots of low hanging fruit, but if there was a way to figure out how to do that in a more efficient way that could be economic, we should all be spending a lot of money and time accelerating that because I think we’re going to need that to reduce emissions in that future where we’re going to be using more oil and gas. So, I think it is one of those game changers that would really change the outlook for the climate situation in my view.
Rob West:
So, I think picking up on that, there is this temptation to look at investments as either/or and hold off on doing anything until the perfect DAC sorbent has been found. And that’s not a great answer either. That’s why I think we’ve under-invested in energy by about a trillion dollars since 2016. So, I’m very much an all-of-the-above kind of guy.
Peter Tertzakian:
Could you just elaborate under invested by a trillion dollars, in other words, we should be spending more, is what I’m hearing you say. And then it begs the question, who should be spending more? Is it incumbent on the public purse or private capital or what are you thinking?
Rob West:
A better way to frame it would be how much does global energy demand want to grow every year? Probably wants to grow about 2% per year and you can add up all of the coal that’s going to come online, oil that’s going to come online, gas, hydro, nuclear, wind, solar and add it up. And so put it all together. I think we’re going to be about 2% short of energy in 2025, growing to about 6% short of energy in 2030 relative to that level of what we would want if we were going to grow at 2% a year. For context, we’ve grown at 3% a year since 1970.
Peter Tertzakian:
Are you meaning all energy from all sources, we’re going to be short?
Rob West:
That’s right. That’s right. And so, I think what’s going to be the mechanism that bludgeons down demand to the level we can actually supply, it’s going to have to be quite high prices. And I almost wonder if you’re going to need to have prices high enough, long enough to move the hydrocarbon industry out of this limbo. I think there’s been a message like don’t invest and I’m not sure that’s the right answer. I think that might be a reason that we’re going to be short of energy.
Jackie Forrest:
Now Rob, you wrote about this back in November of 2022, and I do want our audience to know that you can subscribe for no cost, to Rob’s newsletters, I do, and then you can also subscribe to get more detailed information on each of the blogs. But back in November ’22, you warned that energy shortages are going to happen because of this underinvestment. That was certainly real for people at that period, but the last year, it’s gone the other way. Now suddenly we seem to have a lot of oil. OPEC has spare capacity. Gas situation isn’t quite as dire as back then. The world seems to be a lot less concerned about energy shortages at this moment than back then. Have you changed your view at all because of the last year where we seem to be back to abundance?
Rob West:
So, I think that’s made things worse. So, I’ve had my energy under supply jaws chart since 2021. It was really 2021 that I started getting quite worried about that. And I guess my view for this year, I wrote this in January, was we’re going to have this effective industrial slowdown caused by raising interest rates at almost the highest ever level, fastest ever level. And I think we’ve seen that slowdown in demand from this rate rising cycle like a mini-banking crisis, China only slowly coming out of Covid restrictions. And the weak pricing and the high interest rates have not been great for progressing that needed energy supply. So, I’ve found my wind numbers being cut by about 0.7% of all global energy in the second half of the decade because offshore wind projects have been so moribund in this high interest rate environment, maybe also hitting the limits of how much we can upscale the turbines.
I found my shale numbers revised down by 3 million barrels a day second half of the decade because again, we’ve got an industry that is saying, “Hey, oil prices might be $80 a barrel. I might be able to get 60% well level IRRS, but I don’t need to spend that CapEx.” And I wonder if the weak environment of 2023 maybe sets the stage for things to be actually worse in the second half the decade than I would’ve had at the start of the year.
Jackie Forrest:
Right, because it’s resulting in less spending. Well Rob, you’ve got so many topics on your website, we can’t cover them all, but I was really interested in a write-up you did around Germany and how as they’ve grown in terms of the amount of renewables, wind and solar that they’ve had in their electrical grid, how that has actually increased power costs.
And you had done some analysis of that, and I want to highlight that because that is a huge debate here in Alberta where we’ve been bringing on more and more renewables and there’s a debate, is that actually reducing the price of power? In theory, it is because if you look at those levelized cost analysis, it shows that wind and solar are much cheaper generation than a lot of other sources like fossil fuels. But at the same time, they do increase the cost of transmission. You do have lower utilization rates on some of those fossil fuel generators, which all things the same should mean that they charge more for running. So, do you think that renewables is actually causing electrical grids and electrical power to be cheaper and just what has your research shown on that?
Rob West:
I want to start by being positive. I do think solar efficiency is going to double again from here. I do think solar is going to surprise to the upside even though everybody expects it to surprise to the upside. I think it’s one of the true game changers of energy transition, but it is hard to look at the data and not conclude that countries who’ve ramped renewables fastest in the past have higher electricity prices at the overall grid level today. I guess I worry about levelized cost analysis but it’s a little bit dangerous. It gets used as though the task is to find some lowest cost energy source to rule them all and then go all in on that, and coming back to our previous discussion, cancel investment in absolutely everything else. And I don’t think that’s how energy works. I think getting to net zero involves more of a balance.
On the grid point, the way I would think about it is if I have an apartment that I’m renting for a $100 a month and then I have to go and rent a second apartment, it doesn’t matter what the cost and how low that second apartment is, even if it’s $10 a month, if I have to go and rent it as well, my overall rental costs are clearly going to go up, not down. And we do have that in grids. In the developed world, the average utilization of the grid was about 55% in the year 2000. It’s about 38% today. And the reason is, well, we’re ramping up a large asset base with solar, maybe 20% utilization factor, wind, maybe 30% to 40% utilization factor. And when that ramps up, something else has to ramp down. And so, I think we do want to ramp wind and solar responsibly in our grids. It might mean the grids are more expensive, but it also means that they can be more resilient. So, if you have all of your eggs in one basket and that basket has a problem, then you have a problem. So, I would say having a diversified grid that includes wind, solar, hydro, nuclear, low-carbon gas in balance, it will be slightly higher cost on any one day where the wind is really, really blowing or when gas is really, really cheap. But overall, I think a lower cost system is one that is more diversified.
Peter Tertzakian:
I completely agree that solar and batteries and electrification, power, electronics, all that kind of stuff are game changers, and I think we’re going to become progressively more efficient through those pathways, I’ll call them. But you’re the numbers guy, Rob, so I’m going to give you a trillion dollars. Given that you see supply shortages, there’s a climate urgency, geopolitics leading to energy insecurity, how would you spend that trillion dollars today if you were to ration it across the energy landscape?
Rob West:
Well, there’s a ten second answer and there’s a 10-minute answer and there’s a 10-hour answer, so.
Peter Tertzakian:
10-hour answer.
Rob West:
I guess which do one you want right now?
Peter Tertzakian:
The 10 second answer, one minute answer.
Rob West:
I’ll say something controversial. I would build renewables obviously, but I’d also build out a lot of gas. Numbers that kind of really stick in my mind is what’s the worst thing out there, right? I don’t want to sort of build a bunch of wind turbines in order to scale back my nuclear plants. There are countries that have done that. No decarbonization is achieved by doing that. But if you start to do the numbers, the worst stuff out there is low efficiency coal.
Peter Tertzakian:
Yeah.
Rob West:
Yeah. You can find power generation out there that is over one kilogram per kilowatt hour of useful electricity. You know what, there’s 8 billion tons a year of coal still being burned. That’s 40% of all the world’s emissions. So, if you kind of quantify it, and I have this chart, like per billion dollars spent, where do you deliver the most decarbonization? I’ll tell you, per billion dollars spent, the most decarbonization is getting large quantities of high efficiency, low methane leak natural gas to areas that would otherwise be burning low efficiency coal like China and India. Dollar for dollar, actually, you find that that is the biggest decarbonization you can do.
Peter Tertzakian:
Yeah, dollar for dollar, and I’ve written about this many times in the past, talked about it as improving efficiency. I mean, I ran the numbers. If you have 100 pounds of coal, by the time you burn it, transmit it and put it through an incandescent old school light bulb, the amount of light energy you’re producing is one pound of coal. So, you start with 100 pounds and 99 pounds are lost along the way to heat dominantly, and it’s kind of a ridiculous process. Getting back to what you argued earlier on, our industrial processes, our civil processes are so energy inefficient that by spending the significant amount of this trillion dollars on efficiency gains, so that by 2050 we’re not necessarily hugely different as you said earlier on than today, but we are potentially far more efficient is one way to think about it.
Rob West:
Another way to kind of make that point is, so I actually brought those numbers into the discussion about what does it cost to remove one ton of CO2, $40 a ton for nature, about $100 a ton for carbon capture and storage, a lot of those efficiency investments end up with negative costs per ton. What you put in; you actually get 20% plus IRRS repaying those CapEx costs in the form of energy savings down the line.
Peter Tertzakian:
Would you spend a dollar on a bag of insulation for your home or would you spend a dollar on a hydrogen furnace? It’s pretty clear to me which is the better investment to reduce emissions and to improve the cost of energy.
Rob West:
Yeah, I totally agree with that.
Jackie Forrest:
Well, what is the answer? What would you agree with? Is it the insulation or the hydrogen furnace?
Rob West:
Oh, I think it’s the insulation.
Jackie Forrest:
Yeah. It’s not very exciting though. We like the hydrogen.
Rob West:
That’s just not true. It’s just not true. If you don’t think it’s exciting, you don’t know the magic of the polyurethane’s value chain to create high grade insulation materials. I mean, it’s a 20-step process. There are interesting companies at every step of the way. I remain amazed that same material, basically it’s Lycra, right? You can go and buy a pair of running shoes with 750 grams of this unbelievably complex chemistry and you can buy it for €80 and it’s way better than running 10Ks in Glompus made out of leather. But we didn’t sort of get into this in the discussion. I mean, I think it sort of leads really nicely to it.
I mean, my sort of biggest idea at the moment is actually we’re going into the age of materials, the age of new energies being driven by materials, energy transition being driven by materials. There’s a great stat. If you go back 10 years ago, materials were about 15% of the cost of new energies, everything like wind, solar, batteries. Today it’s over half. For batteries, in fact, it’s two-thirds is materials. The reason for that is that we’ve ramped battery production capacity up by 40X in the last decade. So, manufacturing has gone from guys wearing gloves manually putting these cells together to just totally automated mass manufacturing. The manufacturing costs come down by 90%, and so what’s left is the materials.
So that’s already telling you that the materials matter a lot more for what the cost of these technologies do going forwards. But the kicker is, like I said earlier, I think you can double the efficiency of solar from here. I think you can quadruple the energy density of batteries from here. They’ll still be 90% below hydrocarbons, but you can quadruple them. The way you do that is paying more for materials, for better materials that enable higher voltages or higher currents or less efficiency loss.
Peter Tertzakian:
The losses in all electricity systems is far less than combustion-based processes.
Rob West:
So much less, yeah. I mean, 7% from generation to consumption.
Jackie Forrest:
Well, Rob, so much we’ve covered, so much we’d still like to ask you. We’ll have to have you on a future show, but I want your 10 second answer, because we really like the exciting stuff versus insulation. Fusion, is that going to be a big thing in 2050 or not?
Rob West:
So, I actually wrote a research note on this. I think it will happen, but I think it’ll be more expensive than fission. So if you don’t think that the world should be investing in small modular nuclear reactors at $3,000 a kilowatt, well, I’ve got bad news for you on where fusion is going to come out. But I think we should be doing both of those things, so. That was more than 10 seconds.
Jackie Forrest:
Okay. No, that’s good. So, it’s one of those ones where either feedstock might be cheap, but the process itself is going to be very expensive. So great. Well, Rob, we really appreciated the conversation. Thank you so much. I do encourage our listeners to check out your website. We’ll put a link to it in the show notes.
Peter Tertzakian:
Yes, Thunder Said Energy, Rob West, analyst and CEO. Thanks so much for joining us from Estonia.
Rob West:
Thanks. I really enjoyed being on the show.
Jackie Forrest:
Thank you to our listeners. If you enjoyed this podcast, please rate us on the app that you listen to and tell someone else about us.
Speaker 3:
For more ideas and insights, visit arcenergyinstitute.com.
