WORKWEEK

So far in 2022 we’ve witnessed: 

1. Violent political protests in Kazakhstan 
2. Russia amassing 100,000 troops on the Ukrainian border
3. China and Russia cozying up to push back on NATO expanding to include new members

None of these geopolitical events are exclusively about energy. Still, energy plays an important role in all of them: 

1. The protests in Kazakhstan were sparked by the government removing price caps on fuel 
2. I’d venture to say that if oil & gas prices weren’t high, Russia wouldn’t be posturing as aggressively on the Ukrainian border (they have leverage)
3. China and Russia announced alignment in opposing the expansion of NATO at the same time as a 30 year deal for Russia to supply China with gas. 

Today we’ll explore how geopolitics makes a great case for transitioning from fossil fuels to renewable electricity sources that has nothing to do with climate change 💡.

Not that climate change isn’t important. But it hasn’t exactly galvanized the level of global response, coordination, and investment that one might expect (or that’s needed). Could geopolitics be a more effective trigger for electrification?

DECENTRALIZING ENERGY

North of 80% of the world’s primary energy generation is still dependent on fossil fuels. Based on where fossil fuels are concentrated, e.g. gas in Russia or oil in the Middle East, this breeds geopolitical dependencies.

One example? New German Chancellor Olaf Scholz is coming under considerable fire for not decrying Putin’s threats in the Ukraine more vocally (among other things). Case in point? In a meeting with Biden yesterday, the President said he’d make sure Nord Stream 2, a planned Russian gas pipeline to Europe – would fall through if Russia invaded Ukraine. Scholz didn’t commit to the same.

I don’t envy his position. Germany imports nearly a third of its gas from Russia and gas provides nearly a fifth of German electricity. 

Reading between the (pipe)lines

What does a better system look like? I.e. one with fewer geopolitical interdependencies to complicate matters?

For one, there are countries like Sweden, where more than 50% of all energy is produced via renewables (and an even higher % of electricity is produced via renewables). This reduces their dependence on fossil fuel imports. Sweden did fire up an oil-fired power plant back in December… but it was mainly to help their Polish neighbors endure an energy crunch. Poland is more than 80% reliant on coal and fossil fuels.

While some of the energy sources countries like Sweden use to achieve greater energy independence (and lower CO2 emissions) are still ‘centralized’, e.g. nuclear power plants, on the whole, renewables offer a path to a much more distributed and decentralized energy future.  

This isn’t just true at the level of national energy independence either. Electrification will open up opportunities for more independence at a local and ‘micro’ levels, too. Rooftop solar and distributed power generation can help decentralize the electric grid. At the most granular level, a combination of rooftop solar, an electric vehicle (which doubles as a big battery), and a heat pump can support most homeowners’ energy, heating and cooling needs, most of the time. 

More innovation is needed, specifically in energy storage, before this can work consistently and at different site types and sizes. But it’s achievable. And the bevy of fundraising we see any given week for battery companies makes me optimistic 🔋.

THE NET NET

To be sure, renewables aren’t at a stage yet where they could replace fossil fuels, even in places like Europe that have a head start in terms of their focus on them them. And critics of renewables point to the energy crunch in Europe as a case against them, suggesting countries will always need fossil fuels as a backstop for their energy security.

I think what’s happening in Europe geopolitically illustrates the opposite. Outsized reliance on fossil fuels is an outsized weakness for the countries that import them. 

Electrification in turn can help improve energy resilience while also reducing emissions. Often we focus more on the latter when we talk about climate tech.

The current geopolitical environment thus represents an opportunity to push for electrification and to invest in and build the infrastructure needed to make it happen. Investment in many ways is the most important piece; as we saw with McKinsey’s report from a few weeks ago, there’s a wide gap between the money being spent on decarbonization currently and what would be needed to get to net-zero goals (to the tune of ~$3.5T globally annually). 

Could the electrification narrative achieve more success if presented in the lens of energy resilience in addition to climate impact? 2022 should be a good case study. 

Polar bear on an ice float not tugging at your heart strings? Maybe sticking it to Putin will resonate more. Let’s watch.

MORE COOL STUFF ✌️ 

👨‍💻 How I’m staying sane: Total boomer admission – I typically transcribe recordings of interviews by hand. To be fair, the process helps me structure the written deep dives that come out of interviews. Still, I’m finally making the switch to Otter to do the transcription for me. Will report back on whether saving those ~2 hours per interview is worth it…  I imagine it will be.

🎶 What I’m listening to: Lots of Michael Kiwanuka this week. Important to diversify during Black History Month 💪.

♟️ How I waste time on the internet: Playing speed chess. 3 minute specifically. And lots of it. Holla at me on chess.com if you do the same 😂. Seriously considering a run at playing live on Twitch too. If that’s a terrible idea, let me know.