This is a lightly edited transcript of Michael Liebreich’s speech at the Press Club on Tuesday on predicting that the Middle East crisis could provoke years of turbulence, sparking a second coming of “the great clean energy acceleration”.
Many thanks for that introduction. I would like to add my own acknowledgement of the Ngunnawal people, and pay my respect to their elders, customs and continuous culture.
I feel enormously honoured to be addressing you here today – and not a little intimidated. I realise that coming over to Australia as a Brit and talking about energy, particularly clean energy, I am risking a re-run of the Bodyline Scandal of the 1930s.
Nevertheless, this is a critical time to be having a conversation about energy.
We are in a completely new world
This March, Fatih Birol, executive director of the International Energy Agency, addressed this audience about the consequences of the conflict in the Gulf and the closure of the Strait of Hormuz. A few days before, I had spoken to him in Paris, and he called the current situation “the mother of all energy crises”.
Since then, there has been an uneasy ceasefire, and energy prices have fallen back somewhat, but they remain 40 per cent to 70 per cent higher than they were before the start of the conflict. Two commodities of particular importance to Australians – diesel and jet fuel – have been disproportionately hard hit.
We are told that any day now, we might see a deal between the US and Iran to end the conflict. But neither side is particularly predictable. If we do, it might just amount to a prolongation of the current ceasefire. We could be in for months or even years of turbulence.
In any case, this is only the latest in what feels like an accelerating list of crises and instabilities. COVID. Fractured supply chains. A huge spike in inflation. The Russian invasion of Ukraine. The US’s Liberation Day and the ongoing tariff wars. President Trump’s assault on NATO. And we can add to that list the looming spectre of large scale job losses from AI.
It should not be surprising that people are anxious, and they are angry. They are turning to populists on the left and right in unprecedented numbers in all democracies.
If you add hydro to the mix, renewables have overtaken coal. That’s right: renewables now generate more power than king coal.
But let’s not overtrade the trend. Energy prices are still nowhere near where they were in the aftermath of the Russian invasion of Ukraine. And climate change is by no means off the agenda.
Most of the public understands that it poses a very grave threat, which will only worsen if it is not addressed. They would like to reduce emissions, even to stay on track for Net Zero. But it is the top priority for only a dwindling minority.
The days in which society mandated its leaders to eliminate carbon emissions at any cost are well and truly over. There is a new urgency in the search for resilience, and a new focus on costs.
Luckily, whatever the question, clean energy can offer, if not the whole answer, at least a very substantial part of it.
Let’s start by looking at what is going on in the world
As I speak, 20 per cent of all electricity being generated around the world is from wind and solar. This year, wind and solar will each generate as much as all the nuclear plants in the world. Together, they will generate more electricity than natural gas.
If you add hydro to the mix, renewables have overtaken coal. That’s right: renewables now generate more power than king coal. For a nation whose economy is as bound up with coal as Australia’s, that statement alone should get your attention.
In 2005, 80 per cent of China’s power was from coal. Now that figure is just over 50 per cent. Last year, China may have commissioned enough new coal plants to power Australia’s National Electricity Market twice over. But, despite those new plants, last year coal fired power in China actually fell.
This explosive growth of renewables is happening everywhere. Last year, over 80 per cent of new electricity generation built in Africa, the Middle East, South Asia, and Southeast Asia was wind and solar. Not because those countries are woke, or trying to please their World Bank or BRIC Bank overlords, but because renewables represent the cheapest way to secure additional power for their growing economies.
As long as you have access to finance, you want to build the asset, not burn the fuel. Ask your mining companies, who have been building solar power for years.
Australia plays a leading role in this story. Not just because the father of modern photovoltaic technology is an Australian, Professor Martin Green of UNSW. But also, because, at 75 per cent renewable penetration, South Australia is one of the leading grids in the world – behind only Denmark, and ahead of California.
In 2005, 80 per cent of China’s power was from coal. Now that figure is just over 50 per cent. Last year, China may have commissioned enough new coal plants to power Australia’s National Electricity Market twice over. But, despite those new plants, last year coal fired power in China actually fell.
You are also world leaders in the penetration of residential solar roofs, now serving comfortably over 30 per cent of homes. Crucially, you are also leaders in being able to install them at less than half the cost of an equivalent installation in the US.
And now it looks like you are going to execute the same play with home batteries. Scale, standardisation and competition work.
Australia also has a place in the history of big, grid-connected batteries. It started with the big battery mocked by Scott Morrison as being as useful as a roadside Big Banana or the Big Prawn. The Hornsdale Power Reserve delivered $150 million worth of savings to the grid in its first two years.
Fast forward to this year, and grid connected batteries are now pushing out gas peakers and reducing the hours in which expensive gas sets power prices. The Australian Energy Regulator’s so called “default market offer” will be up to 11 per cent cheaper from July, delivering tangible price relief to consumers and businesses.
Batteries may still be more expensive than hydro for long duration storage – though Snowy 2.0 appears to be trying to prove me wrong – but that gap is closing fast.
Transportation
A similar sort of transition is happening in transportation – not just in Norway and California.
Last year, around the world one in four car sold was electric. One in five in Europe, one in two in China. In China 25 per cent of heavy vehicles sold last year were electric.
When I hear complaints about charging infrastructure, I am reminded of the investors who backed Blockbuster because Netflix was bound to fail for lack of bandwidth.
Established car companies have clung to the old technology, claiming that their customers don’t want electric cars. They have sowed the wind, and now they are harvesting the whirlwind. China was the number 5 auto exporter in 2021. By 2024, it was number 1. Meanwhile, peak sales of internal combustion cars and light trucks globally were in 2017.
Recently, an eminent oil and gas economist, speaking just before me at an event, told the audience that people in the developing world would never buy an electric car. With some help from my friend Claude, I was able to correct him: in 2024, 60 per cent of new car sales in Ethiopia were electric, in Nepal, it was 76 per cent. Africa is ahead of Europe in sales of electric trucks.
How have countries responded
Even in the US, despite the best efforts of the second Trump Administration, the clean energy sector is continuing to grow.
The One Big Beautiful Bill retained the Biden-era tax breaks for geothermal, batteries and carbon capture and storage – as well as solar and onshore wind, as long as projects meet tough deadlines for starting construction. Last year, wind and solar generation in the US grew 13 per cent, for the first time overtaking nuclear.
The administration slammed the brakes on the EV sector, but manufacturers repurposed their planned gigafactories to churn out grid-connected batteries. By the end of 2027, the US will have enough capacity to double its total amount of power storage, including pumped hydro, every two years.
BloombergNEF, the information provider I founded, expects to see record levels of wind, solar and battery capacity added to the US grid every year until the 2028 Presidential election.
Nevertheless, the US is far behind when it comes to the supply chains and exports of clean energy, focusing instead, as it does, on fossil fuels.
China, by contrast, grasped the strategic importance of clean technology fifteen years ago, very intentionally building a leadership position across all its major supply chains – dominating the manufacture not just of solar panels and batteries, but also wind, metals processing, critical minerals and rare earths.
It is probably worth noting that many of these materials also play a key role in the military industry, as well as in telecommunications, computing and AI.
The confrontation between the US petrostate and the Chinese electrostate looks set to be a defining feature of this century’s geopolitical landscape.
The troubled transition
Given the scale of disruption threatened by these developments, it should not be a surprise that there are efforts to suggest that they amount to nothing.
Early last year, veteran fossil industry advisor Dan Yergin published a piece in Foreign Affairs called “the troubled transition”, claiming that pragmatism means accepting that we live in an economy that will forever be fossil-based. The piece was anchored on the fact that fossil fuels contributed 85 per cent to so called primary energy in 1990 and still contribute 80 per cent today.
Chris Wright, the US secretary of energy, frequently makes the same point. Of solar power, he said on a podcast, “There’s no there, there! 50 years out, I’ll make a bet, solar never gets to 10 per cent of global energy.” It will take not much longer than the term of the Trump Administration for him to be proven Chris wrong.
The fact is, however, that even countries trying their utmost to build new nuclear plants are finding it slow going.
Let’s look at the use of primary energy as a proxy for energy demand by those defending the status quo. Primary energy is not demand, it is supply. Around two thirds of primary energy is wasted, mainly from oil, gas and coal. It never does anything useful for anyone.
I want you to imagine two Australian families, the Browns and the Greens, living in identically sized houses, with similar lifestyles. Family Brown uses coal-fired power, heats with gas, and drives a diesel. Family Green, on the other hand, has invested in solar power and a battery. They use electric heating and drive an EV.
Running the Brown household takes four times the primary energy required to run the green household. If you use primary energy as the metric, you would believe the Browns are deserving of 80 per cent of your time and attention.
And if your state or country is made up of half Browns and half Greens, you might conclude that reaching net zero is impossible, because replacing 80 per cent of primary energy seems such a hard nut to crack. But you don’t need to replace it; you only need to replace a quarter of it.
This is called the primary energy fallacy. Whenever you hear anyone using the words primary energy, one of two things is happening. Either they don’t understand what they are talking about, or they do, but they are hoping that you don’t.
The narrative of the failure of the transition is also based on the false premise that any transition worthy of the name must begin with a rapid reduction in fossil fuel use. To be fair, this is the model of transition that has been espoused by everyone shooting for net zero.
The problem with this model is that the leading indicator of all previous technology transitions has not been the destruction of the old; it has been the growth of the new.
The transition to mobile telephony wasn’t declared a failure because the global number of landlines continued to grow until 2006, 33 years after the invention of the mobile phone.
So, the transition imagined in the hallways of the United Nations, with fossil fuel use and emissions crushed before the scaling of clean solutions, may well be dead.
But a transition based on clean energy meeting an ever higher proportion of real global energy demand (not primary energy), year after year, decade after decade – just as we are seeing – is very much alive.
Nuclear
I want to talk about nuclear, because I know that it looms large over the public debate here. I speak as a fan and former student of nuclear power, but one who is also realistic.
Nuclear power sounds like such an elegant way to provide large amounts of clean, reliable electricity. Surely Australia’s failure to avail itself of its uranium resources, instead banning their use to generate power, is a monumental act of self-harm.
The fact is, however, that even countries trying their utmost to build new nuclear plants are finding it slow going.
Despite costs that we in the West can only dream of, and the full backing of the State, China has not been able to push nuclear’s share of electricity above 5 per cent. Wind and solar overtook nuclear in 2010 and now deliver 25 per cent of China’s electricity – a proportion growing with every passing year.
India, too, is pushing to build nuclear power as fast as possible. Yet its share of electricity has stalled at an even lower 2.5 per cent. Wind and solar now deliver over six times as much, and their growth curve is approaching vertical.
France is held out as an example of the successful use of nuclear power to decarbonise electricity. But it’s surely worth remembering that the French state created the country’s nuclear industry, bailed it out no fewer than three times, and will now have to finance the bulk of the decommissioning and replacement of its aging reactors.
China has not been able to push nuclear’s share of electricity above 5 per cent.
The Trump Administration has put its very substantial shoulder to the nuclear wheel. Small modular reactors (SMRs), developed by nimble new players as well as established ones, hold out great promise. Maybe they will help the US crack the code. After all, they have the backing of some fabulously wealthy new customers, the hyperscalers, looking to power their gigawatt-scale AI data centres.
And they will be able to get some plants built. But will that be enough to trigger the oft promised yet so far never delivered nuclear renaissance? To do so, they would have to drive the cost down by almost an order of magnitude.
Bloomberg NEF, the team of analysts I built and trained, estimates the real cost of power from the first new SMRs at around 400 US dollars per MWh, once you strip out the research grants, concessionary finance, tax credits, socialised risk, and other subsidies. That’s around seven times the current wholesale power price in Australia.
We know from, for instance, the aviation industry, that if the key to lowering costs is volume, you need hundreds of orders before economies of scale and learning kick in.
But hundreds of SMRs would not be enough to make them a climate solution. The clue is in the name: Small. Just to match the electricity generated globally last year by wind and solar would require thousands of SMRs. Just to meet Australia’s current power demand, you would need to build hundreds of them.
India, too, is pushing to build nuclear power as fast as possible. Yet its share of electricity has stalled at an even lower 2.5 per cent.
So, what happens next?
Let’s get back to the real world and look at the potential impact of the current crisis.
Of course, in the short term we are seeing efforts to route oil and gas from the Gulf around the Strait of Hormuz, we are seeing non Gulf producers trying to produce as much as possible, and we are seeing countries burning more coal, particularly in Asia. We are also seeing countries reopening discussions about exploration and extraction.
But let’s be clear: this is a fossil fuel crisis. It will not have a fossil fuel solution.
If you think of this as the second fossil fuel crisis in four years, that’s the wrong framing. It is, in fact, the fourteenth crisis in the sixty years since the 1973 OPEC oil embargo stunned the world. Eight times the oil price has soared by over 30 per cent in the space of a year. And six times it has crashed the same amount, harming producer nations.
Defenders of the status quo are always keen to point out that renewables are not as cheap as their supporters claim, because of the externality costs they impose on the power system. They are less keen to accept the far bigger externality costs imposed on our economies by the perennial volatility in fossil fuel prices.
The UK’s Climate Change Committee has calculated that the cost to the UK of just one more fossil fuel shock would be more than the entire cost of achieving net zero by 2050.
We can learn a lot about what to expect, particularly if the Strait of Hormuz remains fully or partially closed, from Russia’s invasion of Ukraine. I wrote a piece at the time, predicting that “The great energy price spike is going to give way to the great clean energy acceleration.”
That turned out to be one of my better predictions. The four years that followed the invasion saw around a doubling of installations of wind and solar, sales of EVs and investment in clean energy globally.
I am confident that this will prove to be a foretaste of what we are about to see.
Most of Asia was insulated from the impact of the Russia-Ukraine war. Indeed, China and India were able to buy sanctioned oil, gas and related commodities at discounted prices.
This time, Asia is directly affected – being the destination for over 80 per cent of the oil and gas that normally passes through the Strait of Hormuz. Can you imagine any world in which India, China, Japan, South Korea, and other Asian nations do not dramatically accelerate their efforts to reduce their exposure to this and other pinch points?
Over time, therefore, the short-term scramble to replace oil, gas and other commodities stuck on the wrong side of the Strait of Hormuz will give way to a strategic and profound re-evaluation of what a resilient economy looks like in a volatile world.
The process has already started. China’s state-owned oil and gas company Sinopec has cancelled a planned expansion of an LNG import terminal. Vietnam’s Vingroup has cancelled 4.8GW of LNG fuelled power generation. The EU is bringing forward a legislative package, designed to “address EU’s rising energy costs on volatile fossil fuel markets.” Pakistan has decided to go to 95 per cent domestic clean electricity by 2040.
Consumers are acting too unilaterally. Sales of EVs in Europe have jumped from 25 per cent of new cars to nearly 40 per cent. Populations may be sick of being lectured on climate change, but they are acutely aware of soaring prices at the pump.
Where the first great clean energy acceleration took renewables to the point where they were absorbing all growth in electricity demand globally, the great clean energy acceleration 2.0 could well take renewable energy to the point where it absorbs all growth in energy demand.
What that would mean is that we could well see peak fossil fuels and peak emissions this side of 2030.
How is Australia doing
Let me finish with a few thoughts on Australia. I have mentioned some of the areas in which Australia leads. I feel it’s only fair I should mention another, and that is the use of diesel.
Australia is the world champion when it comes to the use of diesel per capita. When you subsidise diesel, most folks don’t buy electric mining trucks. Who knew? I would expect Australia to accelerate rapidly in all types of EVs in the next few years.
Given how well Australia does residential solar roofs and batteries, you could do better on commercial and industrial solar – box retailers, sports grounds, warehouses, and so on. France has mandated that all car parks with over 80 spaces must have solar panels within 5 years.
“The great energy price spike is going to give way to the great clean energy acceleration.”
You also need to master the inflation in your supply chain. Wind in Australia used to be cheap. But its price has more than doubled since 2019. Some of that is inflation, some is interest rates, but a big chunk is not. And you will need wind, because if you only use solar and batteries, your supply is too correlated.
You will also need to speed up how you build new grid infrastructure – make it smarter and more competitive. Around the world, countries are grappling with this issue, and the winners will be the ones who figure it out.
It is existential here in Australia. You can forget any chance of using your superb renewable resources to drive export industries, the so called superpower thesis, if your clean electricity is twice the price of China’s.
Finally, around the world, electrification is the word on everyone’s lips. Australia fell hard for the hydrogen hype, and it’s good to see it now recovering. But where hydrogen failed the test of physics, electrification passes.
Electrification is the key to the future competitiveness of industry, and there is a wealth of innovation in Australia that could be globally competitive. It’s good to see electrification being pushed by the team preparing your contribution to the COP summit in Türkiye later this year.
In summary, I hope I have managed to persuade you that the transition to clean energy is not a threat to Australia’s prosperity. That it can provide answers simultaneously to the three biggest challenges we all face: climate change, affordability, and resilience.
And that, when it’s done, Australia will still be an agricultural powerhouse, an extractive industry powerhouse, a services powerhouse, a tourism powerhouse, an education powerhouse, an electrification powerhouse, a financial powerhouse, a defence powerhouse and, above all, a fabulous country to visit.
Thank you.