Written for Wiley in March
As the energy transition gets underway and the urgency of combating global warming intensifies, there are widely divergent opinions on how the transition is going. The loudest critics and biggest pessimists, rather unsurprisingly, have a lot to lose from a switch to green energy, and include oil giants such as Saudi Aramco and ExxonMobil. The optimists are more widespread and environmentally driven, although many of them also have something to gain. But they have the admirable goal of a sustainable future on their side, and the advantage of evolving technology. Recent battery and solar advances, in particular, seem to be making the claims of the old fossil giants increasingly tenuous.
In March, S&P’s CERA held its week-long annual conference in Houston, attended by the biggest names in the oil business, and this year there appears to have been a major backlash against moves to transition away from fossil fuels – despite the unmentioned consequences for global temperatures. Leading the charge was Saudi Aramco’s CEO, Amin Hassan Nasser, who said that the energy transition is “visibly failing”, and that he saw higher oil demand above 104mn b/d in 2025, describing the phaseout of fossil fuels as a “fantasy”.1
“A transition strategy reset is urgently needed, and my proposal is this: We should abandon the fantasy of phasing out oil and gas and instead invest in them adequately reflecting realistic demand assumptions,” he said, as reported in Platts and elsewhere. Nasser said the energy transition narrative would increasingly be written by the developing nations of the global south.
Among the biggest failings of the transition, according to Mr Nasser and fellow sceptic, ExxonMobil CEO, Darren Woods, is green hydrogen, which they say is too expensive to replace fossil fuels. Mr Woods even suggested that the US would fail to meet its 2050 net-zero emissions target, partly due to this high cost of renewable hydrogen. Mr Nasser claimed that, in energy terms, the cost of green hydrogen amounted to the equivalent of $400/bl – about five times the current oil price.
Weak link
Criticism of hydrogen, however, is also coming from renewables purists who say electrification will eventually be a better option for almost all energy applications. Falling costs of batteries, EVs and solar panels are likely, the group believes, to make hydrogen use uneconomical compared to electrification in most fields, especially given the large amounts of energy lost in the conversion of renewable power to green hydrogen – arguments partly echoed by the big oil company CEOs at CERA-Week. The Hydrogen Science Coalition has been formed to represent these views, backed by leading academics around the world.2
So, to condemn the energy transition on the basis of the high cost of green hydrogen – which many green advocates feel has only a minor part to play in the transition – is perhaps a bit defeatist. There may be hope for global temperatures yet. Indeed, the Hydrogen Science Coalition’s main premise seems to be coming true more quickly than many expected with rapid recent falls in the costs of batteries and solar panels – mostly driven by accelerating technological and manufacturing process developments, as well as lower raw materials costs.
In March, the chairman of BYD (the world’s biggest EV manufacturer) said he expected sales of EV’s to top 50% of all new car sales in China within three months as EV prices fall below those of ICE cars – far in advance of even the most optimistic forecasts of a year or so ago. ICE vehicle manufacturing, on the other hand, saw output in 2023 37% below its peak in 2017, with ICE factories becoming stranded assets. These developments in China signal an acceleration away from gasoline and diesel cars – and reduced demand for fuel.
The EV price falls are largely down to rapid technological developments in battery production and raw material extraction. Since last summer, lithium battery cell pricing has plummeted by about 50%, according to Contemporary Amperex Technology Co. Limited (CATL), the world’s largest battery manufacturer, to around $50/kWh, as reported by CnEVPost, with other manufacturers expecting further reductions.3 This cuts the price of grid storage too, increasing the grid’s ability to absorb cheap intermittent renewables and feed the additional demand from EVs.
Some of the new battery designs don’t use cobalt or nickel, while lithium prices in particular have fallen sharply in the last year due to new finds and extraction processes, after surging from late 2021 through 2022. “The China green space is running profitably in this rapid transition. It is rapid price drop to facilitate massive adoption, not discount,” said one HK-based observer. The new batteries also have faster charge rates, higher cycle life, improved temperature management, and higher energy density packaging.
Solar panels (already the cheapest form of energy generation) are also falling in cost, with additional potential major technological advances (such as perovskite) in the trial stages, while China is already approaching its 2030 solar installation targets. Together with EVs and batteries this represents a major challenge to the claims of fossil fuel industry leaders, with or without hydrogen.
References
1. https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/oil/031824-ceraweek-saudi-aramco-ceo-says-oil-phase-out-a-fantasy-in-transition-rebuttal
2. https://h2sciencecoalition.com/
3. https://cnevpost.com/2024/01/17/battery-price-war-catl-byd-costs-down/