The New Energy Revolution
The best thing that can happen to a university student is to have a brilliant professor who can change one’s view of the world. While studying economics at the University of Colorado in the early 1970’s, I was lucky enough to have the late Dr. Reuben Zubrow do that for me. Zubrow worked for the War Production Board of the United States during World War Two. He was part of the effort that saw the U.S. production of aircraft go from 6,000 per year to 85,000 per year between 1941 and 1945, and that built 2,710 Liberty ships in four years, an amazing rate of three large ships every two days. He was a believer in the ability of human ingenuity to solve problems, both large and small.
In 1968, Paul Ehrlich’s book The Population Bomb was all the rage. It contained (among many others) the following dire prediction:
“The battle to feed all of humanity is over. In the 1970s hundreds of millions of people will starve to death in spite of any crash programs embarked upon now. At this late date nothing can prevent a substantial increase in the world death rate”.
In this, Ehrlich was re-articulating the theory of Thomas Malthus, who argued in his 1798 “Essay on the Principle of Population” that since population increases geometrically and food production increases linearly, there would inevitably be catastrophic famine, disease, and starvation. Malthus is in large part responsible for economics being dubbed “the dismal science”.
Zubrow thought this was nonsense, and he was right. Both Malthus in the 18th century and Ehrlich in the 20th were underestimating human intelligence and the role of innovation and technology in solving problems. Malthus did not foresee the role of mechanization in food production, even though steam engines were already in wide use when he wrote his essay. He did not reckon with better farming methods which increased yields. Two hundred years later Ehrlich did not account for the Green Revolution in India which used higher yielding grain varieties, increased irrigation, and chemical fertilizers and pesticides to increase grain production by more than 600% over about 50 years. Far from having catastrophic famine, India became largely food self-sufficient.
We are in the middle of a worldwide change in energy production and use that is every bit as important and life changing as the Green Revolution. I refer, of course, to the increased use of solar, nuclear and wind power, together with modern lithium batteries. Much as Malthus did not understand what steam power would do to transform agriculture and industry at the end of the 18th century, many today do not recognize that we are just at the start of the cheap energy revolution. The largest user of fossil fuels in the world is China. In the first quarter of 2025 China reduced its greenhouse gas emissions for the first time, even as electricity demand and production surged. The aggressive roll out of solar, wind, nuclear and battery technologies upped output enough to meet the new demand and reduce the reliance on dirty coal powered electricity generation. In Texas, a huge producer of oil and gas, renewable energy now accounts for 50% of electricity production, twice the amount of only ten years ago.
The rapid change in energy technology comes at a crucial time, as the demand for electricity is rising worldwide, but particularly in the most industrialized countries.
The rise of artificial intelligence (AI) is expected to increase the demand for electricity by a tremendous amount. The International Energy Agency predicts the following:
“Driven by AI use, the US economy is set to consume more electricity in 2030 for processing data than for manufacturing all energy-intensive goods combined, including aluminium, steel, cement, and chemicals. According to Executive Director Fatih Birol, “Global electricity demand from data centres is set to more than double over the next five years, consuming as much electricity by 2030 as the whole of Japan does today. The effects will be particularly strong in some countries. For example, in the United States, data centres are on course to account for almost half of the growth in electricity demand; in Japan, more than half; and in Malaysia, as much as one-fifth.””
The most plausible way to meet this new demand is through a massive roll-out of renewable energy, consisting of solar, wind and nuclear production. This is well underway.
The use of renewable energy is driven by a virtuous circle. For example, as the cost of solar energy cells goes down, their use increases. As demand for cells increase, producers are driven to be more efficient and bring the costs down further, in turn inducing further demand. The impact of this has been to reduce the cost of 1,000 watts of solar energy from 45 cents in 2010 to less than 5 cents today. The cost of wind powered energy has shown a less dramatic but similar pattern.
The major problem with wind and solar energy has been the obvious one: the sun does not shine at night, and the wind does not always blow. Various solutions for energy storage that would allow accumulation during sunny and windy periods and release power back to the grid at night and in calm periods have been used, but by far the most effective is large-scale battery storage. This has become possible due to the huge increases in battery efficiency (measured in energy density) and the corresponding dramatic fall in price for energy storage. Industrial scale battery systems now cost about 25% of what they cost only eight years ago, and as technology improves, the costs will fall even further. The same technology that powers bicycle couriers up the hills on their ebikes and allows Tesla cars to accelerate like Ferraris will power the data centres now being built.
Simply put, modern batteries are a game changer. They can store more energy in smaller packages at lower cost than was imagined as recently as ten years ago. In the last eight years, the cost of an industrial size battery storage system has fallen from $614 per kilowatt-hour to $165, a drop of 73%.
The amount of energy a battery can store has increased by about 3 times in the last five years, while the cost has fallen by about two-thirds. Not surprisingly, demand for industrial scale batteries is rising fast.
The confluence of climate change and the electricity needs of AI have created perfect conditions for a massive change in how electricity is and will be produced. Once again, technology, ingenuity and the incentives of capitalism have created solutions to seemingly impossible problems. Dr. Zubrow would simply have smiled knowingly.
David Baskin
Chairman
Media Appearances
Barry Schwartz on BNN’s The Close – August 11, 2025
Barry Schwartz on Stock Up! podcast – August 13, 2025