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The History of Energy Transitions

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The History of Energy Transitions

Over the last 200 years, how we’ve gotten our energy has changed drastically⁠.

These changes were driven by innovations like the steam engine, oil lamps, internal combustion engines, and the wide-scale use of electricity. The shift from a primarily agrarian global economy to an industrial one called for new sources to provide more efficient energy inputs.

The current energy transition is powered by the realization that avoiding the catastrophic effects of climate change requires a reduction in greenhouse gas emissions. This infographic provides historical context for the ongoing shift away from fossil fuels using data from Our World in Data and scientist Vaclav Smil.

Coal and the First Energy Transition

Before the Industrial Revolution, people burned wood and dried manure to heat homes and cook food, while relying on muscle power, wind, and water mills to grind grains. Transportation was aided by using carts driven by horses or other animals.

In the 16th and 17th centuries, the prices of firewood and charcoal skyrocketed due to shortages. These were driven by increased consumption from both households and industries as economies grew and became more sophisticated.

Consequently, industrializing economies like the UK needed a new, cheaper source of energy. They turned to coal, marking the beginning of the first major energy transition.

YearTraditional Biomass % of Energy MixCoal % of Energy Mix
180098.3%1.7%
182097.6%2.4%
184095.1%4.9%
186086.8%13.3%
188073.0%26.7%
190050.4%47.2%
192038.4%54.4%
194031.6%50.7%

As coal use and production increased, the cost of producing it fell due to economies of scale. Simultaneously, technological advances and adaptations brought about new ways to use coal.

The steam engine—one of the major technologies behind the Industrial Revolution—was heavily reliant on coal, and homeowners used coal to heat their homes and cook food. This is evident in the growth of coal’s share of the global energy mix, up from 1.7% in 1800 to 47.2% in 1900.

The Rise of Oil and Gas

In 1859, Edwin L. Drake built the first commercial oil well in Pennsylvania, but it was nearly a century later that oil became a major energy source.

Before the mass production of automobiles, oil was mainly used for lamps. Oil demand from internal combustion engine vehicles started climbing after the introduction of assembly lines, and it took off after World War II as vehicle purchases soared.

Similarly, the invention of the Bunsen burner opened up new opportunities to use natural gas in households. As pipelines came into place, gas became a major source of energy for home heating, cooking, water heaters, and other appliances.

YearCoal % of Energy MixOil % of Energy MixNatural Gas % of Energy Mix
195044.2%19.1%7.3%
196037.0%26.6%10.7%
197025.7%40.2%14.5%
198023.8%40.6%16.3%
199024.4%35.5%18.4%
200022.5%35.1%19.7%

Coal lost the home heating market to gas and electricity, and the transportation market to oil.

Despite this, it became the world’s most important source of electricity generation and still accounts for over one-third of global electricity production today.

The Transition to Renewable Energy

Renewable energy sources are at the center of the ongoing energy transition. As countries ramp up their efforts to curb emissions, solar and wind energy capacities are expanding globally.

Here’s how the share of renewables in the global energy mix changed over the last two decades:

YearTraditional BiomassRenewablesFossil FuelsNuclear Power
200010.2%6.6%77.3%5.9%
20058.7%6.5%79.4%5.4%
20107.7%7.7%79.9%4.7%
20156.9%9.2%79.9%4.0%
20206.7%11.2%78.0%4.0%

In the decade between 2000 and 2010, the share of renewables increased by just 1.1%. But the growth is speeding up—between 2010 and 2020, this figure stood at 3.5%.

Furthermore, the current energy transition is unprecedented in both scale and speed, with climate goals requiring net-zero emissions by 2050. That essentially means a complete fade-out of fossil fuels in less than 30 years and an inevitable rapid increase in renewable energy generation.

Renewable energy capacity additions were on track to set an annual record in 2021, following a record year in 2020. Additionally, global energy transition investment hit a record of $755 billion in 2021.

However, history shows that simply adding generation capacity is not enough to facilitate an energy transition. Coal required mines, canals, and railroads; oil required wells, pipelines, and refineries; electricity required generators and an intricate grid.

Similarly, a complete shift to low-carbon sources requires massive investments in natural resources, infrastructure, and grid storage, along with changes in our energy consumption habits.

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Energy Shift

The ESG Challenges for Transition Metals

Can energy transition metals markets ramp up production to satisfy demand while meeting ever-more stringent ESG requirements?

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The ESG Challenges for Transition Metals

An accelerated energy transition is needed to respond to climate change.

According to the Paris Agreement, 196 countries have already committed to limiting global warming to below 2°C, preferably 1.5°C. However, changing the energy system after over a century of burning fossil fuels comes with challenges.

In the above graphic from our sponsor Wood Mackenzie, we discuss the challenges that come with the increasing demand for transition metals.

Building Blocks of a Decarbonized World

Mined commodities like lithium, cobalt, graphite and rare earths are critical to producing electric vehicles (EVs), wind turbines, and other technologies necessary to burn fewer fossil fuels and reduce overall carbon emissions.

EVs, for example, can have up to six times more minerals than a combustion vehicle.

As a result, the extraction and refining of these metals will need to be expedited to limit the rise of global temperatures.

Here’s the outlook for different metals under Wood Mackenzie’s Accelerated Energy Transition (AET) scenario, in which the world is on course to limit the rise in global temperatures since pre-industrial times to 1.5°C by the end of this century.

MetalDemand Outlook (%) 2025203020352040
Lithium +260%+520%+780%+940%
Cobalt +170%+210%+240%+270%
Graphite+320%+660%+940%+1100%
Neodymium+170%+210%+240%+260%
Dysprosium+120%+160%+180%+200%

Graphite demand is expected to soar 1,100% by 2040, as demand for lithium is expected to jump 940% over this time.

A Challenge to Satisfy the Demand for Lithium

Lithium-ion batteries are indispensable for transport electrification and are also commonly used in cell phones, laptop computers, cordless power tools, and other devices.

Lithium demand in an AET scenario is estimated to reach 6.7 million tons by 2050, nine times more than 2022 levels.

In the same scenario, EV sales will double by 2030, making the demand for Li-ion batteries quadruple by 2050.

The ESG Challenge with Cobalt

Another metal in high demand is cobalt, used in rechargeable batteries in smartphones and laptops and also in lithium-ion batteries for vehicles.

Increasing production comes with significant environmental and social risks, as cobalt reserves and mine production are concentrated in regions and countries with substantial ESG problems.

Currently, 70% of mined cobalt comes from the Democratic Republic of Congo, where nearly three-quarters of the population lives in extreme poverty.

Country2021 Production (Tonnes)
🇨🇩 Democratic Republic of the Congo120,000
🇦🇺 Australia5,600
🇵🇭 Philippines4,500
🇨🇦 Canada4,300
🇵🇬 Papua New Guinea3,000
🇲🇬 Madagascar2,500
🇲🇦 Morocco2,300
🇨🇳 China2,200
🇨🇺 Cuba2,200
🇷🇺 Russia2,200
🇮🇩 Indonesia 2,100
🇺🇸 U.S.700

Around one-fifth of cobalt mined in the DRC comes from small-scale artisanal mines, many of which rely on child labor.

Considering other obstacles like rising costs due to reserve depletion and surging resource nationalism, a shortfall in the cobalt market can emerge as early as 2024, according to Wood Mackenzie. Battery recycling, if fully utilised, can ease the upcoming supply shortage, but it cannot fill the entire gap.


Rare Earths: Winners and Losers

Rare earths are used in EVs and wind turbines but also in petroleum refining and gas vehicles. Therefore, an accelerated energy transition presents a mixed bag.

Using permanent magnets in applications like electric motors, sensors, and magnetic recording and storage media is expected to boost demand for materials like neodymium (Nd) and praseodymium (Pr) oxide.

On the contrary, as the world shifts from gas vehicles to EVs, declining demand from catalytic converters in fossil fuel-powered vehicles will impact lanthanum (La) and cerium (Ce).

Taking all into consideration, the demand for rare earths in an accelerated energy transition is forecasted to increase by 233% between 2020 and 2050. In this scenario, existing producers would be impacted by a short- to medium-term supply deficit.


The ESG dilemma

There is a clear dilemma for energy transition metals in an era of unprecedented demand. Can vital energy transition metals markets ramp up production fast enough to satisfy demand, while also revolutionising supply chains to meet ever-more stringent ESG requirements?

Understanding the challenges and how to capitalise on this investment opportunity has become more important than ever.

Sign up to Wood Mackenzie’s Inside Track to learn more about the impact of an accelerated energy transition on mining and metals.

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Mapped: Asia’s Biggest Sources of Electricity by Country

Asia is on its way to account for half of the world’s electricity generation by 2025. How is this growing demand currently being met?

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Mapped: Asia’s Biggest Sources of Electricity by Country

The International Energy Agency (IEA) predicts that Asia will account for half of the world’s electricity consumption by 2025, with one-third of global electricity being consumed in China.

To explore how this growing electricity demand is currently being met, the above graphic maps out Asia’s main sources of electricity by country, using data from the BP Statistical Review of World Energy and the IEA.

A Coal-Heavy Electricity Mix

Although clean energy has been picking up pace in Asia, coal currently makes up more than half of the continent’s electricity generation.

No Asian countries rely on wind, solar, or nuclear energy as their primary source of electricity, despite the combined share of these sources doubling over the last decade.

 % of total electricity mix, 2011% of total electricity mix, 2021 
Coal55%52% 
Natural Gas19%17%
Hydro12%14%
Nuclear5%5%
Wind1%4%
Solar0%4%
Oil6%2%
Biomass1%2%
Total Electricity Generated9,780 terawatt-hours15,370 terawatt-hours

The above comparison shows that the slight drops in the continent’s reliance on coal, natural gas, and oil in the last decade have been absorbed by wind, solar, and hydropower. The vast growth in total electricity generated, however, means that a lot more fossil fuels are being burned now (in absolute terms) than at the start of the last decade, despite their shares dropping.

Following coal, natural gas comes in second place as Asia’s most used electricity source, with most of this demand coming from the Middle East and Russia.

Zooming in: China’s Big Electricity Demand

While China accounted for just 5% of global electricity demand in 1990, it is en route to account for 33% by 2025. The country is already the largest electricity producer in the world by far, annually generating nearly double the electricity produced by the second largest electricity producer in the world, the United States.

With such a large demand, the current source of China’s electricity is worthy of consideration, as are its plans for its future electricity mix.

Currently, China is one of the 14 Asian countries that rely on coal as its primary source of electricity. In 2021, the country drew 62% of its electricity from coal, a total of 5,339 TWh of energy. To put that into perspective, this is approximately three times all of the electricity generated in India in the same year.

Following coal, the remainder of China’s electricity mix is as follows.

Source% of total electricity mix (China, 2021) 
Coal62%
Hydropower15%
Wind8%
Nuclear5%
Solar4%
Natural Gas3%
Biomass2%

Despite already growing by 1.5x in the last decade, China’s demand for electricity is still growing. Recent developments in the country’s clean energy infrastructure point to most of this growth being met by renewables.

China does also have ambitious plans in place for its clean energy transition beyond the next few years. These include increasing its solar capacity by 667% between 2025 and 2060, as well as having wind as its primary source of electricity by 2060.

Asia’s Road to Clean Energy

According to the IEA, the world reached a new all-time high in power generation-related emissions in 2022, primarily as a result of the growth in fossil-fuel-generated electricity in the Asia Pacific.

With that said, these emissions are set to plateau by 2025, with a lot of the global growth in renewables and nuclear power being seen in Asia.

Currently, nuclear power is of particular interest in the continent, especially with 2022’s energy crisis highlighting the need for energy independence and security. India, for instance, is set to have an 80% growth in its nuclear electricity generation in the next two years, with Japan, South Korea, and China following suit in increasing their nuclear capacity.

The road ahead also hints at other interesting insights, specifically when it comes to hydropower in Asia. With heatwaves and droughts becoming more and more commonplace as a result of climate change, the continent may be poised to learn some lessons from Europe’s record-low hydropower generation in 2022, diverting its time and resources to other forms of clean energy, like wind and solar.

Whatever the future holds, one thing is clear: with ambitious plans already underway, Asia’s electricity mix may look significantly different within the next few decades.

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