Geopolitics, the equitable transition, and AI: things to look out for in energy in 2024

Roberto Bocca, Head, Centre for Energy and Materials, World Economic Forum: How we move forward with the business case and the economic case for the energy transition. The environmental case is very clear. But now we need to make things happen. We need to accelerate on the business and economic case.

Robin Pomeroy, host, Radio Davos: Welcome to Radio Davos, the podcast from the World Economic Forum that looks at the biggest challenges and how we might solve them. This week: energy - and the ‘energy transition’. How do we make that vital, rapid move to green energy while meeting growing energy demand?

John Defterios, Professor of Business at New York University Abu Dhabi: It's still extraordinary. You have 775 million people that don't have access to energy, and 2.3 billion people that don't have access to clean cooking facilities in the 21st century.

Robin Pomeroy: Roberto Bocca, Head of the Centre for Energy and Materials at the World Economic Forum, and John Defterios, Professor of Business at New York University Abu Dhabi and a former CNN business news anchor, talk us through the big issues facing the energy industry, and all of us consumers.

Roberto Bocca: Geopolitics has been, is and will be always at the forefront of energy.

John Defterios: That kind of gives us that uncertainty, how fast we can move on the energy transition when you have the number one and number two powers competing fiercely with each other.

Robin Pomeroy: Our two experts give us their readout from the Forum’s Annual Meeting in Davos, where geopolitics, the equitable energy transition and new forms of nuclear were all hot topics, along with something else…

John Defterios: ‘The AI revolution’. We don't know what the revolution looks like in energy yet, but it should have quite a big impact on demand and hopefully allow us to be a lot more efficient in the process.

Robin Pomeroy: Subscribe to Radio Davos wherever you get your podcasts, or visit wef.ch/podcasts where you will also find our sister programmes, Meet the Leader and Agenda Dialogues.

I’m Robin Pomeroy at the World Economic Forum, and with this look at where we go next on energy…

John Defterios: That’s profound.

Roberto Bocca: That is amazing, right?

Robin Pomeroy: This is Radio Davos.

A year ago in Davos, energy - particularly the dispruption to supply and prices caused by the war in Ukraine - was pretty much the top issue at the Forum's Annual Meeting. And on Radio Davos we invited Roberto Bocca, who head up energy at the World Economic Forum, and John Defterios, a business professor and CNN journalist, we invited them in to set out the top lines of the energy discussion.

And we have done it again this year. The war in Ukraine is still raging, we have a new one in the Middle East, and geopolitics remains a central issue to energy.

Roberto and John talk about that, and about the energy transition, especially how that might look in the global South, and they address what was the top issue at this year's Davos: artificial intelligence - which many people believe could play a central role in the energy transition, but which is also itself creating a surge in demand for energy to power all the compute needed to create AI.

Before we start, a little jargon busting.

What is the energy transition? The World Economic Forum defines it as the "transition to a 'fit for 2050' energy system: equitable, secure, and sustainable, which enables positive economic and social development" - so that means increasing the supply of clean energy - energy that is not emitting the greenhouse gases that cause climate change - while at the same time curving energy demand, and ensuring everyone can have access to affordable and clean energy they need.

In the interview, we hear mention of the SDGs - those are the United Nations' 17 Sustainable Development Goals (SDGs) - those are targets the world is trying to meet by 2030. For example, SDG 7 is to "Ensure access to affordable, reliable, sustainable and modern energy for all."

And finally, Roberto talks about 'green electrons' and 'green molecules' - that's shorthand for the difference between renewable electricity - the green electrons generated by things such as wind or solar - and more physical types of green energy, such as hydrogen that's been created using clean energy.

You can find lots more information on the Forum's website - links in the show notes to this episode.

So, on with the interview, which starts with our two guests introducing themselves.

Roberto Bocca: Roberto Bocca, head of the Centre for Energy and Materials at the World Economic Forum.

John Defterios: John Defterios, visiting professor of business at NYU Abu Dhabi and a senior fellow at the World Economic Forum.

Robin Pomeroy: Welcome to Radio Davos to both of you. Energy. We had you at the end of Davos last year where energy was the big, big issue. Where can we expect the field of energy to go. I feel that's so important for everyone in the world. I want you to lead me through this discussion. Roberto, do you want to start and say what were the big themes at this Davos 2024?

Roberto Bocca: We have three big, big themes. The first one was how we move forward with the business case and the economic case for the energy transition. The environmental case is very clear. But now we need to make things happen. We need to accelerate, and the business and economics is a critical one. That is the first topic.

The second one is the element of addressing energy demand, how we can be more efficient in the way we use energy.

And the third element is the element of energy equity. There is no transition if there's not an equitable transition. And so we really had a lot of conversation between the so-called global South and global North to make sure there is not such a division, but we are really focussed on a transition that is for everyone.

Robin Pomeroy: Great. We'll pick up on each of those three elements as we talk through. John, maybe you can say, the global energy scenario, how different is it this January from what it was last January?

John Defterios: Well, I think this January is extraordinary because, Roberto had it as one of the four key pillars at the annual meeting in 2024. And in fact, you can think visually, there's the big graphic description as you walk into the main entrance, and right at the centre of the board this year, Robin, was energy, because the plan was to look at a long term strategy for climate, nature and energy. And it did command a great deal of the overall voice at Davos this year in a very big way.

But what stood out for me, as Roberto was saying that, we had a pivot moment last year in the recognition of why we need to speed up the energy transition. I think in 2024, we had a case where it is the complexity of the energy transition, we're building a new system. Everybody wants to move that at rapid speed here. But we're recognising there's going to be some complexity along the way - make sure there's energy equity, as Roberto was suggesting.

In fact, we did a panel finishing out the energy transition programme on 'No one left behind'. It's still extraordinary. You have 775 million people that don't have access to energy, and 2.3 billion people, Robin, that don't have access to clean cooking facilities in the 21st century.

So, yes, we want to make the transition. Yes, we're concerned about climate warming around the world with a consensus building on 2.5-2.8, not the 1.5 that we talk about. So we need to accelerate. There's a lot of investment going into renewables right now. But you have to make sure no one's left behind. In fact, I was looking it up. Roberto, I almost forget sometimes that SDG 7 is for everybody to have access to reasonable cost energy around the world, and we can't forget that in this process.

Robin Pomeroy: Last year, geopolitics was a big thing. The Ukraine war was playing havoc with energy supplies. There was all this worry about inflation, which to some extent seems to be more under control now, globally, broadly speaking.

But geopolitics is still and has been a massive issue this week. Is that still a big feature in the minds of people in the energy sector?

Roberto Bocca: Absolutely. Geopolitics has been, is and will be always at the forefront of energy.

There are new dynamics. There is not only the one that we knew in the past of oil and gas. There is also all the dimension of the materials, the materials that are needed, especially for the new energy system being solar, wind and and batteries and so on. So there are new geopolitics in place, but definitely geopolitics is a very, very important element always to keep in mind.

I think the energy system and the energy players are used to that. So that the good news. There is more diversity as well, because there are more sources of energy. And so it is as important, but is also there is a way to tackle it. And so that's why it probably was not discussed so much in this specific case.

John Defterios: I think that's because we have a lot of resilience built into the system. Right? Because people are worried about shocks all the time. But Robin, they're prepared to deal with it.

So while people worry about shocks in the energy sector and the geopolitics around energy, they've learned to be much more adaptable.

So think about it. We still have Russia-Ukraine grinding on. While we're speaking, we have attacks from the Houthis in the Red Sea and bottlenecking some of the big shipments of merchandise trade and even oil trade.

And we still have oil prices hovering around $75-80 a barrel. Kind of not too hot, not too cold, so they can deal with the complexities.

Another big issue on geopolitics. We don't know how U.S. and China unfold. We have major players from both countries, and they're both vital to the energy transition. So they're going to compete with each other quite fiercely when it comes to business. The US made it very clear with Jake Sullivan, the national security advisor to President Biden, that they're not going to retreat from the Asia Pacific. And that kind of gives us that uncertainty, how fast we can move on the energy transition when we have the number one and number two powers, competing fiercely with each other.

But I don't think it's distracting anyone on the energy transition. And I think on the positive side, we have $2.8 trillion still going into energy every year. Now about 1.8 trillion of that is in the energy transition, even on efficiency. I think very successfully, Roberto and the team highlighted what's the demand scenario going forward as well. So it's not just about deploying money on the energy transition, but what can we do about demand and efficiency, for example, in buildings and everything else we touch in our lives?

Robin Pomeroy: Yes, that's interesting to move on to that because I think traditionally people have seen energy as a thing, the production and the consumption, the delivery of oil and gas and renewables. But what happens on the consumption side, energy efficiency, it's a thing, but it's sometimes seen slightly separate, isn't it, from from the energy sector and what the energy sector does.

Is that changing now? Is it becoming things that energy companies are really thinking about?

Roberto Bocca: Yes. Absolutely right. Normally we look at energy from a supply or a leading mindset is the supply because we talk about oil gas as solar, wind etc. but the consumption is really critical. Eventually there is supply because there is demand.

We have done a study where it came out that we have almost 2 trillion that could be saved - 30% of the energy consumption that we have today around the world - that is huge - could be saved if we were smarter in the way we use energy at company level, but also across value chain level, optimising across the value chain. When it comes to buildings, with transport, or industry, there are a huge opportunity. And by the way, these opportunities are good business opportunity, good competitive opportunity. If you are a company and you reduce your consumption by 45%, as we have heard a manufacturer telling us in one of the panels, you are more competitive, you have less cost. If you are a country and you consume less energy, especially if you are an importing country, you will need to import less so your trade balance will be better off.

So really addressing this element of consumption, and I want to be very clear, reducing demand in the scope doesn't mean reduce the benefit of energy. We are just addressing the inefficiency. And there is a huge opportunity there. And indeed, there was a lot of discussion and action taken on this side.

John Defterios: The other thing I think it's needed, but in this whole debate, it's not within the Forum. I think there's actually a consensus building. It's just how do you move efficiently on that consensus and deploying assets to the global South.

And that's another conversation we should have here. But I think there's a huge gap in society and what it takes to have an energy transition. And what I mean by that, Roberto brought up this idea of the mining resources you need to have an energy transition for solar or wind blades and the whole architecture around battery storage, you need seven times the mining assets that we have today. And there's not a shortage of supply. You just have to go to places that are not that easy to work in: central Africa, there's an abundance of supply. So Iran, Iraq, Afghanistan, Saudi Arabia discovered a great deal of resources. They want to have a super region going from Central Asia into Africa.

But do we really want to have seven times more mining capacity around the world than we have today? I don't think people understand it. The same thing about what's the role. I think on one of our sessions. So we gathered people. They talked about the head knows what to do, our heart wants to do something on climate, and then you have to have your hands in terms of operation to deploy. Everybody, the consumer, needs understand what's going on. And business needs to act much more quickly in this process.

Robin Pomeroy: All of what you've just been saying, that speaks to that first thing that Roberto said about the environmental case for the energy transition. But making that economic case, and it's always been my, I've covered energy and climate for decades, and it's always been my feeling that it's only when it's gonna be more profitable than less profitable to make this transition actually happen. And do you think that is the case now? Is that what you're hearing from from companies and other people you're speaking to here?

Roberto Bocca: So two things: I was actually quite surprised. I spoke with a couple of oil and gas companies, or companies that until five years ago, I would have said they are an oil and gas company, and they show me their numbers. They are investing today in terms of CapEx, 60% of their CapEx in the trajectory to 80% of their CapEx, in the new energy system.

John Defterios: That's profound.

Roberto Bocca: That is amazing, right? So there is a movement there. There is that direction.

Now interesting that these are privately owned companies. When you come to the complexity it's the whole ecosystem that has to move. So when you are listed in the stock exchange, when you are a company in that space, or when you have to really look throughout your supply chain to have all these transitions happening, not just in your shop, if you like, that's where you get more complex. And that's what we are working on with our partners, both the business side, but also the whole ecosystem, to try to advance at speed, for scale. But all the ecosystem has to advance - it is not just enough one company. We really need the ecosystem to move and this is the challenge. But I've seen fantastic improvement in this period.

John Defterios: You also look for nuggets of information, Robin, one that stood out for me was, I had a session on the Regeneration of Oceans with Ray Dalio of Bridgewater. He's the founder of that major investment firm. And he said, we have too much focus on the development banks around the world, which have assets of $2 trillion or access to that funding, but it's not easy to get that approved. They should be the guarantors. But there's $200 trillion of institutional money to be deployed. Now, what's happening here is that there's not a recognition that a lot of investment needs to go into the global South. So if you have guarantees for the global South, because the private sector doesn't want to deploy money where they are not certain it'll get paid back, or there's a profit margin that's there for them to survive. So if you're thinking about it, it's 100 times what the developing banks have. So how do we unlock that money faster for the private sector to jump in across the board on renewables? But you hear countries like Colombia or Brazil or Nigeria or Tanzania or Senegal, they're all saying, we'd love to move faster. We need the funding to do so.

So it's almost getting the matchmaking correctly, where you get the private sector to come in and the larger scale get the development banks to underwrite it. And then how do we define what should be invested in? There was a debate four years ago. Should we be underwriting hydrocarbons, natural gas assets we probably need for another 40 years, right? But we're still debating to too much on that front, I think.

Roberto Bocca: I wanted to add one thing, Robin, is relevant in terms of framing. So when we talk about new energy or the new energy system that we have in mind is solar and wind, that's what is top of mind. In one of the conversation came up today, 50% of what we call renewable is actually green molecule. When you think about the biofuel, biomass, etc. etc.. So there is an element there where investments are going and that's where also the expertise of, if you like, the old system, the oil and gas sector are, is on green molecules or is on molecules. And so making them green is really something that that they are able to do. So it's very interesting to see that we are definitely going for green electrons when we get through electricity. But also we need the green molecules because eventually we have still a lot of our functioning energy systems that require molecule and not just electrons.

John Defterios: The only thing I would add also, because you talked about demand, we often think of G7 demand today because they're the industrialised countries of the world. I mean, there's a landscape here to 2040 where the E7, or the emerging seven. This came up in some of the roundtables I was involved in: Brazil, China, India, Indonesia, Mexico, Russia and Turkey. And there are other countries, as you know, that are coming on, and they need access to to energy. We don't know what their demand is going to be.

So it's very hard to sit here in 2024 and say, what is the demand by 2040? So it's difficult to roadmap the energy transition.

Should people be using energy more efficiently, to your point? Does the demand need to be over 100 million barrels a day? And for how long is that the case? Because it makes it difficult for energy companies to continue on a dual track process, investing in oil and gas and also looking at what's going to be profitable in the renewable space.

Robin Pomeroy: Flavour of the month or flavour of the week this time has been, artificial intelligence. I can't believe you weren't touched by that during this week as well. Tell us what's happened this week where AI has been part of the energy conversation?

Roberto Bocca: Indeed it has been. And there are two dimensions from what I've understood and I heard them.

And I think there is this dimension of how much artificial intelligence can accelerate and help us when it comes to efficiency, because the fast elaboration of data can really optimise when you think of the building or the lighting or the heating system, etc., there is amazing opportunity there. We are talking about 25% of improvement when it comes to efficiency in that case. So that's one.

The other one is how much energy those, the elaboration of data, we require when it comes to artificial intelligence. And that will be a big issue. It is a big issue in terms of additional energy demand.

So when you think about the big source of additional energy demand going forward, one is indeed emerging markets, as John was saying just earlier. But the other is also really this data centre and the demand that is coming through the computing.

John Defterios: And I think we have to separate the excellent points because the data consumption of the world today is requiring more energy. And I know a lot of the technology companies are trying to have much more renewable in that mix, but it's going to continue to rise, and AI is going to actually make a major push on demand for energy, Robin, which I think is a very important point.

The other thing we should look at is the efficiencies AI could provide in the field. And also, you know, resource management of oil and gas, that you're still using: efficiency of your pipeline system, in observing leaks in the system itself. Methane tracking I think is a very important point here. And again, can we squeeze efficiency out of the system by using AI deployment? I think it's early days here.

You know, Davos was extraordinary in that way, internally within the Congress Hall about the discussions or in the Kurpark Village where we are today. If you go down the Promenade, everybody wants to be an expert on AI. The AI revolution. We don't know what the revolution looks like in energy yet, but it should have quite a big impact on demand, as Roberto was saying, and hopefully allowing us to be a lot more efficient of the process.

Robin Pomeroy: AI developers I interviewed, said they have a data centre producing all this heat, which is actually then used in a local heating system. I think it provides that heat to a university.

Roberto Bocca: What you are underlining is this real ecosystem working. And we are doing some work in the industrial cluster, we have done here in Davos, but we have also done throughout the year.

Effectively you have industries and activities, commercial activities, that are more and more co-located, what we call cluster hubs, industrial zones. And what we are working on is really trying to help them in synergising. The example you gave is a great one is where the excess heat from one type of industry goes to another type of industry that needs or an activity that needs it.

So there are opportunity to optimise again the energy consumption. When we really work at ecosystem, we come from a world where we are used to work in silos and these collaboration across value chain or also across zones is really key.

John Defterios: We had discussions about the global South, which I think is really important because we have the other half of the world right now that's trying to get access to energy. And I think we need to discuss a transfer of the best practices from the North into the South. Number one.

Roberto Bocca: And vice versa.

John Defterios: And vice versa. Right. And then it's not one size fits all, which we've heard this discussion. You can't order a country to take a different path on the energy transition than perhaps is logical for them themselves.

But, can you have a unified voice in the global South? Because right now they're kind of calling out that they need funding. They want to make the transition. They'd like to use the natural gas assets they have. They have mining resources or strategic minerals for the energy transition. But they come with very different and disparate voices.

So if you can get a unified message through the the World Economic Forum and the work that Roberto and the team are conducting right now, I think it'd be very effective.

And that started to emerge in Davos 2024. It's often overlooked, and you don't want to have a case where it's the major energy companies of the world or the West saying to people instructing these countries how to take on the energy transition.

Robin Pomeroy: Is there things we should be looking out for in 2024? Davos sets up the agenda in so many ways for the year. Are there things you'll be looking out for, either work, Roberto, of your Centre at the World Economic Forum, or just in general in the kind of global, I know it's a very broad question.

Roberto Bocca: Well, there are many, but one that we haven't discussed and I would like to point out we had a few conversation here is actually nuclear.

Because nuclear is evolving, not only in terms of fusion, but also in terms of SMR, Small Modular Reactors. And when we look at the growing demand of energy to power the world, the growth of the word nuclear is seen by many as a solution. We know that there would be in March, a meeting of all the countries that are active in nuclear. We know that there is new technology that are safer and faster to build.

So this is definitely one topic on which we are seeing not just the supply side, but also the demand, because there is much more demand for energy and deployment of renewable won't be sufficient to accelerate this transition.

So I can expect nuclear in the coming year and coming years to be one of the topics that will be strongly on the agenda.

John Defterios: In fact at COP28 we had 22 countries sign on to tripling nuclear capacity by 2050. It wasn't part of the final agreement, but the fact that you had the US and other major players at the table saying we want to triple nuclear capacity, to Roberto's point.

We can't get complacent on Russia-Ukraine, I'd say. It's grinding on. Can't get complacent about the Middle East. So disruption of supplies is a wild card. I don't see it happening right now, but you never know what's going to happen in this period of disruption. So keep an eye on that.

And also, US, China and the Far East is a geopolitical risk. That's the only thing I would add to Roberto's comments here. Geopolitical risk remains very high, we're in an era of disruption. And in fact, everybody said, we know we're in the era of disruption. We don't know where we're going.

So we have to make sure that the energy transition doesn't get distracted by that era of disruption, because Russia-Ukraine kind of put the pause button on the transition while people had to worry about, you know, heating homes and getting the fuel at a reasonable cost through their system to their citizens.

Robin Pomeroy: There's a thing called a Davos moment where things that happen can only happen in Davos, or things that happen in Davos that just make you go, wow, I wasn't expecting that. Do you have one, Roberto?

Roberto Bocca: Well, it's a data point that that stunned me when the minister from from India on energy and urban development told a number.

So every year in India, a city like Chicago is built. And so if you think that this is just one country, if you think how much building there is around the world and how much energy need there is, it's giving us a dimension and an idea of how big it is, the energy system, not just the existing one, but the one that we have to serve going forward.

Robin Pomeroy: A wow point. John, what was your Davos moment?

John Defterios: Well, you often say you learn a lot if you take the Davos shuttle. And we had the Minister of Energy and Mines of Columbia on our panel, and I didn't recognise him when he got into the shuttle bus because he had a ski cap on and he said hello. And I said, who's this young guy? He's a young minister. He's very forward thinking. It's a progressive government, as you know, of President Gustavo Petro.

And so I did a mini interview with his interpreter there, and he gave out a quote which I thought was good. He said, we see the pathways to success on the energy transition, now I have the easy job - he was being very much ironic - to get it done.

But he said something interesting, Roberto, 50% in the industry see it as an add-on to do the energy transition, but it's not an option. We have to do it. And he said, can we afford not to act because their cost of production for oil is like $35-38 a barrel versus the Middle East, which is like $2-4 a barrel. So he said we're trying to get the timing right. We need the revenue from the oil and gas and the coal in their exports. But they don't want to be stuck in the middle of that transition where they can't make money for oil because they're a high cost producer, because it's very heavy oil. So they're trying to find other sectors to go into, with tourism and renewable energy. And being a location for that in the future, obviously the coffee sector as well.

But I thought it was a really interesting point from a young minister saying, we're trying to do it, there's no option. But half of the world doesn't see the urgency that we see today.

Robin Pomeroy: John Defterios, Professor of Business at New York University Abu Dhabi. You also heard Roberto Bocca, head of the Centre for Energy and Materials at the World Economic Forum.

You can find so much more on energy and the energy transition on the website of Roberto's Centre, and at the Forum's Global Future Council on the Future of Energy Transition - links to those are in the show notes.

If you enjoyed this episode, please leave us a rating or a review on whichever app you are listening, and be sure to subscribe or follow Radio Davos to get it every week. Do also check out my colleague Linda Lacina's weekly Meet the Leader podcast. They are both at wef.ch/podcasts, where you can also find transcripts of all our episodes.

This episode of Radio Davos was written and presented by me, Robin Pomeroy. Studio engineering in Davos was by Juan Toron, editing by Jere Johansson and studio production by Gareth Nolan.

We will be back next week, but for now thanks to you for listening and goodbye.