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00:04Happy Friday, everyone. I hope you enjoyed that. I enjoyed it a lot, but I was also filled
00:11with trepidation because at least one of my slides was described as completely crazy in
00:15that conversation. So I have 10 minutes and I have five thoughts for you. And I know that
00:22based on the previous conversation that at least some people in the room will find some
00:25of my thoughts completely crazy. So I ask you this. You don't have to agree with me on all
00:31of these things, but at least consider the question, what if I'm right? Because I think
00:35this is important to make sure that we navigate the delicate situation we have in energy right
00:40now. I'm here to talk about the sort of the long-term view. We're talking right now a lot
00:45about what's happening at the moment, particularly with the situation in the Middle East. So
00:50my first thought out of five, the meaning of energy security is evolving. I'm going to
00:54take this right back to 1800. This is global fossil fuel consumption. And it's interesting
01:01because you can always see the story by looking at what's going exponential. And so here we
01:07see coal consumption going exponential. This is the industrial revolution. Human ingenuity
01:11finding different ways to use coal, whether it was steam power, whether it was smelting,
01:18whether it was steel. That was the defining story of that era. It was the industrial era.
01:23It was the coal era. Then from the 1920s onwards, the story changes. I just changed the scale
01:30so we can fit what's going to happen next. It's the century of oil. Again, human ingenuity
01:36finding all sorts of different ways to make use of oil. That is a defining feature of the
01:4120th century, I would argue. And this is why whenever we've had an energy crisis, it's always
01:47been about oil. Oil has been the main character. Sometimes natural gas plays a role, coal very
01:52rarely.
01:53Now I'm going to show you the slide that apparently is crazy. We model the future of energy, not
02:00based on policy, not based on ideology, based on economics. We look at the future evolution
02:04of technologies. We look at costs, including renewable technologies, including the supply
02:09chains for lithium-ion batteries and how that impacts the uptake of electric vehicles. And
02:13so when we wind the clock forward to 2050, this is what we see happening. So we do see
02:18peak oil happening. We see it happening soon.
02:22So that means that if it's an oil crisis we're looking at in the future, in the near future,
02:27it might not quite have the same sting that it has today. What's interesting here, though,
02:32is you look at natural gas, and that is climbing. So maybe when it comes to fossil fuels, we're
02:37getting a new main character, natural gas. And maybe the next energy crisis, natural gas will
02:42be the conversation. That's good news for the US because the US is not short of natural
02:46gas, also not short of oil. But there's nothing to worry about in terms of energy security if
02:50you're America.
02:53The other thing that's changing about the nature of energy security is the dependence
02:57of different nations on energy imports. This is the same modeling exercise. We looked
03:01at what percentage of GDP do energy imports account for today. We round it forward to 2035.
03:08We round it forward to 2050. And as you see, there's a pattern. Not everyone is in the
03:13clear by 2050. Not everyone's in the clear by 2035. But again, perhaps the acuteness and
03:18the sting of energy crises will not in the 21st century be quite as they were in the 20th
03:25century. I'm kind of using now as being the end of the 20th century here. I know I'm kind
03:29of 25 years out, but just bear with me. So that's my first thought. Second thought, the current
03:34situation that we see is only accelerating these trends.
03:38We saw in Europe, after the invasion of Ukraine, a concerted effort to reduce dependence on
03:44natural gas. And we can see it play out today. It was additional installations of solar, additional
03:50impacts of wind, also significant effort for demand reduction. And then with the current
03:56crisis, we look at imports of solar modules from China around the world, a significant
04:02uptick in March 2026. Same for lithium-ion batteries. So this current crisis is accelerating
04:09that trend. The world is looking at alternatives.
04:13Third thought, I'm saying I'm kind of doing down energy security like it doesn't matter.
04:18It does matter. It still counts. It's just what you do with it that really matters. It's
04:22not necessarily energy for energy's sake anymore. So I showed you that previous chart, and I
04:27said, what's changing exponentially? What's reaching that scale? And my argument was that
04:35is what defines the era. So let's have a look at what we see changing now. And you won't
04:40be surprised at all by what I'm going to see. But I thought I'd compare it to global crude
04:44oil revenues, just so we have a benchmark of what counts as important in terms of the global
04:49economy. And I'll draw this line here, something that is changing exponentially, something that
04:54is growing very quickly. What is that line? That is the combined revenue of six American
05:00companies. So based on this already, I mean, we know it because we're living through it.
05:06Information technology is defining this new century that we're in. And based on this exponential
05:12growth, that is set to continue. Maybe we're going through the second IT revolution with
05:16AI, which requires a lot of power demand. We model this. This is the average load we anticipate
05:24for the US, an extra 60 gigawatts. It's an awful lot. We're actually relatively conservative
05:29in our estimates. So it's either this or more is what is expected. It's a huge turnaround,
05:36particularly when you look at the US grid. The past decades, electricity demand has been
05:41flat in the US, more or less. This is the breakdown of where generation is coming from.
05:48So adding a 60 gigawatts into a system, not just in technological terms, but in regulatory
05:53terms, that has been optimised around reducing costs on an otherwise static system and saying,
05:59actually, now things are changing. We need to get 60 gigawatts. That's challenging. I mean,
06:03we talked about permitting reform in the previous panel. I mean, it's a real issue. It's a question
06:08of technology. It's also a question of policy and regulation. And to put it into context,
06:13who else is looking to establish AI sovereignty? Well, let's have a look at China.
06:20This is what their past 25 years of the power sector looks like. When you're growing like this,
06:26if someone says, oh, we're going to throw in an extra 60 gigawatts so that you can be AI dominant,
06:31it's not really much of a problem there, because that's what you've been doing for the past 25 years
06:35anyway, is growing the grid. So this puts into the perspective the challenge. Now, this is not to
06:40say that China's going to win the AI race. Firstly, currently, the US is winning the AI race as a
06:47pole position. Secondly, China has a different issue, which is lack of access to chips. So everyone
06:52has their strengths and weaknesses in this race. But this is a real vulnerability for the US.
06:57So maybe energy security is not about energy for its own sake, but enabling US dominance,
07:05sovereignty, whatever you want to call it, over what is going to define the 21st century,
07:09and that is technology. Fourth thought, what matters more, molecules or hardware? If we've
07:14defined the challenge as I have about growing the power sector, well, a lot of the power technologies
07:21we're seeing acquired around the world are renewable, and they are, for the most part,
07:26built in China. That's where the supply chains are, and that's the red on this chart. So China
07:31is dominant in this next wave of technologies and producing the hardware. I don't think that
07:35comes as a surprise to anyone. The interesting thing is they have a severe overcapacity problem.
07:41The dotted line on this chart represents global demand. The bars represent, for different points
07:48in the supply chain, China's capacity. They're dealing with a huge overcapacity problem. And the
07:54rest of the world is taking advantage of that, getting cheap technology at China's expense,
08:00capitalizing on China's overinvestment. You could almost call it China's mistakes.
08:05One country isn't doing that, and that's the one we're in right now. So this just shows tariffs,
08:11for example, on Chinese solar. This is not, by the way, a Trump administration thing. This
08:16goes all the way back to the Obama administration, tariffs on Chinese solar, shutting out what would
08:21otherwise be cheap technology. And I'm just framing it, you know, maybe a little bit provocatively
08:26as the U.S. is not taking advantage of what is a very unprofitable industry for China.
08:34But maybe it doesn't matter because America has gas. The whole strategy isn't built around solar.
08:39It's not built around batteries. But let's talk about that. There's no shortage of molecules.
08:43I already said that. But look at this from the perspective of the organizations that build gas
08:49turbines. This was demand between 2016 and 2020, and then the subsequent five years, 2015 to 2020,
08:57the additions for new gas turbines in the U.S. It pretty much halved. Absolute disaster if you're a
09:03company that has been making gas turbines. It was the sort of the end of the era of maybe gas
09:08generation,
09:09gas capacity displacing coal. And instead, we had it kind of flattened out. That opportunity went away.
09:18For the next five years, we see a similar outlook. And then with all of this new demand,
09:23we see that ticking up greatly. Now, why is it not ticking up sooner? It's because of supply chain
09:28constraints. You always know something is constrained if you see a market going absolutely bananas. So
09:35these are the three companies that make two-thirds of the gas turbines in the world. To put this in
09:40perspective, if you'd invested in their stocks in 2016, until very recently, you would have lost
09:45money. But if you'd held on, suddenly you're looking very, very rich. You're sitting pretty.
09:51But these companies, they know what it's like to lose it. I was saying this to some of our clients
09:56yesterday. This is analogous to what the shale industry went through between the transition from
10:01the late 2010s to the early 2020s, no longer willing to invest in just expanding capacity
10:07willy-nilly. So the US faces a hardware shortage. This is the real energy security issue, is do you
10:14have the hardware to meet the country's needs? So my final thought, putting it all together,
10:21if we're thinking about energy dominance, we have to think of why. And I would argue that is because
10:27it feeds into tech dominance, which is going to be the real trend that defines the 21st century.
10:33But in that, you have to think about hardware as well. And hardware, it's not just about supply
10:38chains. It's also about regulation, getting stuff installed. This is the trifecta that you need
10:43to consider. Thank you very much.
10:45Thank you very much.
10:46Thank you very much.
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