Daniel Yergin said that getting the approval in the U.S. to open a new mine takes 29 years. He said there is lithium, for instance, in Arkansas, but getting the approvals to mine that lithium could take quite a while. The E.V. supply chains “have a very high degree of dependence on China at a time when both the geopolitical tension and the trade tensions with China are increasing,” Dan said.
The bottom line, Dan said, is that “the energy transition is not unfolding as speedily and smoothly as people thought” it would. The evolution of the electric car market is a good litmus test. In China, he said, 45 percent of all new cars sold are electric vehicles, thanks to the Chinese government’s decision to make such sales a priority rather than merely environmental advocacy. The Chinese government has made E.V.s a mandate because the country imports 75 percent of its oil, much of which comes through the South China Sea, and is worried about any potential “disruption” of the shipping lanes in that area.
China also has realized that it would never be able to compete with other countries’ production of conventional gasoline powered cars because China came to the party too late. So the government decided to leapfrog combustion engine cars with E.V.s. “This was a mercantilist strategy,” he said, before underscoring that it’s a different story in the U.S. First, the purchase of EVs, like so many other things, has become politicized. Sure, there are lots of E.V.s in Dan’s hometown of Los Angeles but it’s now “very unlikely” we will meet the Biden administration’s goal that half the cars sold in the U.S. by 2030 are E.V.s. European carmakers, such as Renault and Mercedes, are also backing away from previous promises to produce more E.V.s.
Part of the problem with E.V.s is that they are still rather expensive, while gasoline remains relatively cheap, given the fact that the U.S. no longer imports much oil. There is also a supply-chain problem with E.V.s, which gets back to China and our ongoing, but seemingly foolish, trade wars with the country. China, of course, is the leader in the production of lithium batteries, which are a key component of E.V.s, and it controls much of the world’s supply of lithium. “This is something that Western governments have only woken up to two or three years ago,” Dan said.
China is also a big producer of copper, another key component of E.V.s. The U.S., he said, has two copper smelting factories; China has 52. He said Chile and Peru produce 40 percent of the world’s copper, and China is the biggest customer for that copper and the biggest processor of that copper. He said that getting the approval in the U.S. to open a new mine takes 29 years. (He said there is lithium, for instance, in Arkansas, but getting the approvals to mine that lithium could take quite a while.) The E.V. supply chains “have a very high degree of dependence on China at a time when both the geopolitical tension and the trade tensions with China are increasing,” Dan said.
At the same time, in another strange twist, we have more hydrocarbon energy than ever. The United States, Yergin noted, is the world’s largest producer of oil and the world’s largest producer of natural gas. Before the “shale revolution,” the U.S. was spending about $400 billion a year importing oil. Now it is spending pretty much nothing. This has obviously been an enormous shock to the power centers in the Middle East. “They didn’t understand it,” he told me. “Everybody said the U.S. was finished as an oil producer. The only question was ‘How fast was production going to go down?’ Now 70 percent of our oil is shale. 80 percent of our gas is shale. They just struggle to understand how it could be geologically possible. The textbooks said it wasn’t possible.”
Consumers still like oil, or the gasoline that is refined from oil, in their cars, despite a proliferation of electric vehicles. And until consumers decide to abandon their combustion engine vehicles—or until California bans their sale in 2035—there probably won’t be a meaningful shift away from fossil fuels. But there’s another challenge that Yergin envisions. There is now a recognition that we may not have enough electricity supply to meet the growing demand, which is being driven, yes, by electric vehicles, but more so by the “reshoring” of the manufacturing of computer chips, the rise of A.I., and the proliferation of data centers. “The difference between last year and this year is quite remarkable in terms of the recognition that we may have a big electricity problem in this country,” he told me.
Dan said the owners of the big data centers, such as Microsoft, which is building a new data center every three days, are trying to tie up electricity production with long-term contracts to make sure they get the supply that they need. Amazon recently paid $650 million to Talen Energy, a Pennsylvania provider of nuclear energy, for a data center adjacent to its nuclear power plants and to power an AWS data center. And that’s just the beginning. Yergin predicted that while U.S. demand for electricity has been essentially flat for the last decade, it is looking like it will grow some 2 percent this year, and in five years, 10 percent of electricity demand in the U.S. will come from data centers.
/Daniel Yergin, William Cohan, Bill’s Dry Power/