Think bigger, Canada. Industrial revolutions don’t come along that often
Every year, I interview 400 to 500 energy experts, half of them from the United States, Europe, and Asia. An observation gleaned from those conversations: most Canadians have no idea how rapidly the global energy transition has accelerated since 2020. The “slow transition” camp, which includes Alberta Premier Danielle Smith and many energy executives, also seems to have missed the rise of China as the international clean energy hegemon. This matters because oil and gas, Canada’s largest export by far, is about to be steamrolled by the electrification of everything.
Not next week or next year, but a decade from now, give or take (see the International Energy Agency’s forecast of peak fossil fuel demand by 2030 or sooner). That’s not much time to build new industries to use Canada’s hydrocarbons. Or to take advantage of the many opportunities created by the massive investment now taking place in clean energy industries like battery plants.
The slow transition folks are linear growth thinkers in an exponential growth world, as I explained in this column. And the leader of that growth will be China. “China is now the undisputable global leader of renewable energy expansion worldwide,” Christian Zinglersen, the International Energy Agency’s former head of its clean energy ministerial secretariat, wrote almost five years ago, in 2019. China has only increased its lead in the years since.
A short list of clean energy manufacturing sectors dominated by China:
- Solar panels – 80%
- Wind turbines – 60%
- Batteries – 75%
- Battery supply chain – 77%
- Electric vehicles – 57%
- Heat pumps – 40%
Let’s not forget that China already has massive supply chains for electronics manufacturing, which are key to most clean energy technologies. (listen to my Energi Talks podcast interview below with Morgan Solar CEO Mike Andrade for more on this point)
Perhaps we can forgive Canadians for missing these momentous developments since the Americans did as well. In a remarkable 2022 speech that explains the changed US thinking about China, Secretary of Commerce Gina Raimondo said that “COVID opened our eyes to the long-term risk for both the private sector and the American people of this over-dependence on China and the need to rebuild domestic manufacturing and innovation.”
In some ways, US clean energy industrial policy will follow China’s example, with huge subsidies for both manufacturing the equipment and buying it, around $1 trillion between a variety of bills (Inflation Reduction Act, Infrastructure Investment and Jobs Act, CHIPs ACT).
“Today, history is again moving fast. We as a nation need to keep pace,” says Raimondo. “With this modern American industrial strategy, we’re embarking on a mission America has not seriously attempted in decades.”
The US response to China then had a knock on effect in Europe, already shaken by Russia’s invasion of Ukraine and the resulting energy crisis. The EU is a leader in clean energy, but leaders now worry that industries might relocate to the US. They responded with the Green Industrial Plan.
“Major economies are rightly stepping up investment in net zero industries,” said European Commission chief Ursula von der Leyen. “We want to be an important part of this net-zero industry that we need globally.”
Who will lead the clean energy industrial revolution?
China, the US, and Europe have effectively kicked off a clean energy arms race. Whole sectors of the economy – think power and transportation – are being re-engineered in what we used to call “internet time.” Buildings, thanks to heat pumps, are catching up and a great deal of effort is going into decarbonizing hard to abate industries like steel and agriculture.
If money really does talk, the fact that 2023 global clean energy investment will outstrip fossil fuels by about 75 per cent speaks volumes.
Canadians need to listen up.
The time to ditch the navel-gazing parochialism that defines the national energy conversation is already long gone. Too often, the voices Canadians listen to represent the oil and gas incumbents, the players who are desperately trying to protect their (for now highly profitable) status quo because they can’t see an obvious pivot to a low-carbon future. Too often, those voices lead Canadians into bitter debates about issues, like the carbon tax and heating oil, that hardly qualify as a molehill, let alone a mountain.
This column is a plea for Canadians to broaden their thinking, to understand that momentous changes are coming to the global energy system sooner rather than later, and to stop listening to the “slow transition” boosters like Premier Smith.
As the fourth largest oil producer in the world and the fifth largest gas producer, change is going to hurt, but it can’t be avoided. And if Canada can adapt quickly enough, there are more than enough opportunities to offset the downside of the energy transition.
Think bigger, Canada. Industrial revolutions don’t come along that often.