Long waves: The global trends driving energy transition and electrification

Tom Heintzman: Welcome to The Sustainability Agenda, a podcast series focusing on the evolving complexities of the sustainability landscape. I’m your host, Tom Heintzman. Please join me as we explore today’s most pressing issues with special guests that will give you some new perspectives and help you make sense of what really matters.

Nat Bullard: We’re now expecting year on year load growth in North America in the two, maybe almost 3% range back to the kind of rates of growth that people were planning for in the 1990s. To put it another way, rates of growth that have not been known by most of the practitioners in the sector right now. And not only that, it’s growth of a particular kind.

Tom Heintzman: Welcome to our multi-part series on the role of electrification in the transition to clean energy. Like last year, we’re producing a number of episodes in the lead up to CIBC’s Second Annual Electrification Summit taking place on April 23rd, 2025. Throughout each episode, we’ll explore key issues enabling our electrified future, as well as the opportunities and challenges for participants along the electrification value chain. As we’ve been discussing in prior episodes, the electricity grid is undergoing significant changes to meet the growing demand for electricity. On today’s episode, we’re going to take the conversation up a level and provide a global scan of the latest trends driving the energy transition and the progression and trajectory of electrification. To help us better understand these trends and forces at work, I’m delighted to welcome my guest, Nat Bullard. Nat has been a leading commentator and chronicler of the energy transition and electrification for more than two decades. Nat’s spent 15 years at Bloomberg New Energy Finance, where he ultimately became BNEF’s Chief Content Officer. Nat subsequently went on to establish two businesses, Business Climate, a Singapore-based, decarbonization consulting company, and Halcyon, an AI-assisted research and information platform focused on energy transition and decarbonization. Listeners may recognize Nat for his annual presentation on Energy Trends, which is a widely anticipated event. We’re also delighted to have him as our keynote speaker at this year’s Second Annual Electrification Summit. So with all that, good morning, Nat, and welcome to the show.

Nat Bullard: Good morning, Tom. Thank you very much to you and CIBC for having me.

Tom Heintzman: So Nat, I’d like to start with some high level context for the listeners. Can you provide an overview of the world’s energy mix and where it stands today? Often commentators distinguish between electrons, meaning electricity and molecules, meaning the fuels that we burn for energy. How has that split been evolving over time? I realize this is a big, big topic, but if you could just give us a couple of minutes to kind of set the context.

Nat Bullard: Certainly. Our modern world and the conditions that we build for ourselves in it are inextricably linked to a greater consumption of energy. And that’s both primary energy, so very roughly the things that we dig up and convert from fossil hydrocarbon into some kind of useful work, as well as final energy. And you can think of electricity as final energy, the thing that we actually end up consuming in many cases to make our modern and electrified world work. They’re both growing quite a bit. I will say though, and this is one of the reasons that I think it’s so useful for us to be having a discussion about electrification, is that there’s a bifurcation a little bit in the trend between all of energy, which is at peaks for pretty much everything that we burn, and electricity, which is not only at its peak, but growing much more rapidly. And I like to set this up with a little comparison to look at this century in energy consumption. Let’s look at oil, coal, gas, and then let’s look at electricity as another way of thinking of energy. Since the beginning of the century, our oil demand has grown, but it’s only grown by about 27% from the start of the 21st century. The increase in coal and gas consumption is about two thirds over that same period of time. Electricity consumption has pretty much doubled in that same time. And what’s so interesting is that while these things actually were very similar, in fact, electricity and coal had kind of a similar trend for a long time in this century. For the last decade, electricity has really sort of taken off and gone on its own path that is growing more rapidly than the fuels underneath it that run not only electricity, but other parts of the economy. So we’re becoming more electrified, not just people and economic activities using more electricity, but we’re also using electricity in new ways. We’re devoting more of our economic activity to electrified functions. And a lot of the things that are really the prime movers of today’s economy are increasingly, or almost in the case of let’s say artificial intelligence, almost entirely driven by electricity.

Tom Heintzman: So we’re seeing more and more electrified industry and transportation, etc. Let me just follow on that a little bit. Recently, in one of our newsletters here at CIBC, there was an article based upon a study from the IEA that talked about oil consumption leveling off in China, and largely, as a result of electrified transportation where 50% of new vehicles are EVs. What do you make of that trend? What’s driving this change in China and what’s its significance?

Nat Bullard: So I love this question because I can put a little bit of theory into practice having just returned a few days ago from Beijing on my first visit in nine years and my first visit to China in seven years. And honestly, look, the change in Beijing itself is extraordinary, largely thanks to the change in road transportation. Yeah, as you said, 50% of new car sales are now electric. In Beijing, you can see the green license plates that are probably between 30 and 50% of the cars that are on the road, depending on which part of town you’re in, you see a change in air quality, you see a change in sound. The soundscape of the city is different. In fact, you have to be very much more cautious walking around quiet streets at night because the cars are so silent. The impact that it’s going to have on flows of commodities, I think is actually pretty profound. China is the world’s largest importer of oil and now imports more oil than Europe. It is also the world’s second largest market for oil after the United States and its total demand seems to have peaked. It’s potentially peaked pending activity that happens outside of transportation sectors. So basically outside of road transport. So aviation and petrochemicals are the big drivers now of growth, if there’s going to be any growth. But you’re starting to see the demand for not just passenger cars, but two and three wheel vehicles, but also medium and heavy duty trucking increasingly becoming electrified. And if China is no longer the world’s biggest importer of oil or the biggest source of demand, and we’re in a world that is based upon growing oil demand as an expectation for a lot of the big companies that provide it, I think that that’s going to be pretty profound. But it also has pretty profound impacts if you’re going to move to a highly electrified big economy for transportation in terms of what gets built, where, by whom. How do you move from energizing this fleet of hundreds of millions of vehicles with liquids to doing so with electrons? I think China’s doing a good job, but as in many cases, it’s probably an exception in terms of the scale and the scope and the speed at which it can work.

Tom Heintzman: So Nat let’s stay on the EV theme here for a minute. What is the latest data about the global shift to EVs and its impact in the grid and charging infrastructure? We were speaking about China, but how does that look globally? Are you seeing any regional differences in the electrification of transportation?

Nat Bullard: Certainly, so it varies greatly by economy. There are some places like Norway, other parts of Europe where you have between 50 to 90% of new vehicle sales are electric. But these are in small places with small vehicle markets and with already a pretty high per capita electricity consumption that they can sort of fold the EVs into. You see a lot more uptake of two and three wheel vehicles to be candid, not something that we think about very often in North America, but sold by the tens of millions every year in markets like India and Southeast Asia that create a sort of meta infrastructure kind of need for charging. You start to see the uptake of EVs happening in other markets in Latin America, in Southeast Asia. Again, you do not see them particularly prevalent in the vehicle markets in Africa, certainly yet. But as I mentioned, when I was talking about China, not every place has got the ability to just immediately build massive charging car parks everywhere. And not every place has this sort of ability to build these in a sort of coordinated and concentrated fashion. So what I think you see, certainly in the United States is a lot of challenge around who’s going to build and own a network. Where does that network get sited? I would also add that there are some interesting questions about who is the beneficiary of that. Is it meant to be an automaker? Is it going to be a network operator? Is it going to be essentially a filling station type of model for building all of these things? I think it’s not yet entirely clear. I will say, and again to return to China, BYD, which is the world’s biggest EV maker now, had a demo at a demo day where they were rolling up this suite of technologies that they’re now promising to the market, including megawatt charging, which would basically pull a small vehicle refueling or recharging into about the same interval of time as going to a filling station in North America for a car, in the range of like five minutes, which I would say would collapse a lot of the kind of anxieties that we have about spending time in a windy gas station in the middle of nowhere in the middle of the night. There’s some ways to go for that to happen. But I think we see a great deal of innovation pushing out into that element of building. It’s, as I say, not going to happen everywhere and not going to happen certainly all at once. But promising, I think, to see people continue to push the frontier on the speed with which vehicles can be charged. And therefore, how accessible that market becomes to people who either may have a bit of range anxiety or simply have time need. They’re in a fleet scenario and they don’t have the ability to sit around for 40 minutes and wait for a car to drive.

Tom Heintzman: Fascinating. I read about the chargers in China that are projected only take a few minutes and it blows me away. I also read about two new BYD manufacturing facilities that are both supposed to be double the size of the largest manufacturing facility that exists in the world today. Nat, I do want to move to some of the other drivers like AI, but before I do, just one last high level question. This theme of electrification, how salient has it become in energy dialogue here in 2025?

Nat Bullard: I think that it’s becoming more salient now because actually, in particular in North America, we’ve had a bit of a holiday essentially from thinking about electricity. We’ve had, generally speaking, quite well-built grids. I would say in Canada, you have a very well-built grid, and you have a lot of large central station generation that can meet most of the demand profile that you have. In the United States, where I’m a bit more familiar, we had, basically for my entire career, no growth in electricity demand. You can go back and look at the sort of porcupine charts we used to call them where you had projected demand from any given grid and then the actual demand that is sort of a flat. So imagine a porcupine where its quills sticking up rather than a back that’s flat underneath it. But that’s actually gone in reverse. We’re now expecting year on year load growth in North America in the two, maybe almost 3% range, which is obviously infinitely higher than nothing, but also back to the kind of rates of growth that people were planning for in the 1990s. To put it another way, rates of growth that have not been known by most of the practitioners in the sector right now. And not only that, it’s growth of a particular kind. It’s driven by not just the kind of old sorts of demand drivers that we had, such as cooling demand for residential installation. So air conditioning in the sun belt, but for things such as manufacturing, semiconductor fabrication, a return to making more vehicles and making more electric vehicles. And also, of course, artificial intelligence and this particular kind of concentrated demand. But really, I think electrification is a really important theme because it’s useful to disentangle this from thinking about energy in general, because it allows us to focus as we’re talking right now, more clearly and more saliently upon specific and distinct ways that electricity is growing as opposed to just waving hands and saying energy growing in general.

Tom Heintzman: Now your point about electricity not only growing, but changing its shape and structure is also very interesting here in Ontario. We’ve been summer peaking for as long as I can recall, but the IESO, the market operator is projecting that come the 2030s will become winter peaking as more and more homes switch over to heat pumps. So that’s a completely different structure of demand than we’ve been used to in the past. Nat, turning to AI and data centers, which is a hot topic these days and a key vertical that you cover in your annual summary, as many hyperscalers are investing big money to build and power their facilities, many electricity system planners are revising their demand projections significantly upwards. Matching this demand growth with new generation transmission and distribution is a huge challenge. Can you help quantify for our listeners the volume of projected demand that data centers are expected to generate? And how are utilities and market operators currently thinking about meeting that demand, which is obviously a huge challenge. One more question just to squeeze it in there. What does the data suggest in terms of how we’re going to generate the additional power? What types of generation are going to be particularly important?

Nat Bullard: That’s a lot to work with. Let me start with just some round numbers from the hyperscaler. So for your listeners, they don’t know, and I’m sure they do, but if for those who might not, it’s basically the four biggest operators of clouds of AI within them. So that’s Microsoft, Meta, Alphabet, Amazon. They intend to spend about, or invest rather, about $325 billion this year in building mostly data center capex. We could round that down if we were feeling generous to only $300 billion. Of that, most of it is going towards not just the sort of data centers that they typically even build and that you might think of at a city edge that might’ve had a demand up to maybe 100 megawatts. So like a large industrial kind of demand, but more towards the sort of things that are in the four to 500 megawatts, potentially even gigawatt scale. We saw an announcement in the lower 48 just last week of an intention to convert an old coal plant to a 4.5 gigawatt gas plant installation. That’s entirely meant to be powering data centers. We’ve also seen the recommissioning essentially of Three Mile Island being planned, the nuclear plant in Pennsylvania in order to power data centers. And those are, I think, specific point interests that we can say, this is partly how people are thinking. Although I would also add that those are lagging indicators. They’ve been planned for some time. You know, a more leading indicator, and I spent a lot of time doing this reading for my sense is in the public utility and public service commissions where people are having hearings and petitions and having discussions about what is being intended to be built with a lot of hand waving and saying, we have no idea how we’re going to power this, because you could find a grid, for instance, in Virginia, south of where the traditional data center alley is that’s west of Washington, DC. You have utilities and co-ops who say, I am receiving applications right now to connect single assets that have more demand by several factors, maybe twice or three times as much demand as my entire grid has at a summer peak. And I have no idea how I’m supposed to do this. So there’s a lot that needs to be happening here. First, we need to speed up our process of interconnection. Certainly in the United States, we have way more than two terawatts worth of stuff waiting to be connected to generate power. But we also have basically no construction of long distance high voltage transmission. We have very long cycles of approval for these assets. They can be bogged down in all kinds of on all kinds of environmental reviews for years and potentially to the point where people just don’t do anything. So as much as we need to, we need to speed up this process is largely to connect renewables. We also have to be cognizant that the sort of next best option, I would say for many operators build a gas plant is not in the favorable economic position that it was even five years ago. The benchmark costs for a combined cycle gas plant in the US have doubled since 2019. I will say that that’s for one particular cohort, the hyperscalers who we’re talking about. It’s probably less significant to them operationally than almost any other kind of large electricity consumer in terms of how that impacts the economics of their business. But at the same time, we still have to be very clear that doubling the cost of the hardware and adding in the variable costs of gas to provide power does have costs that A, impact those particular operators and B, would impact the rest of the system where some of those costs are going to be socialized.

Tom Heintzman: Nat, you mentioned the four main hyperscalers, but in addition, there’s all the private equity that are stepping in to build the infrastructure that the hyperscalers require. Participants at the Electrification Summit will hear from the likes of Blackstone, but also KKR and GIP and others are investing into space, as you know, very well. Fortunately, we do have you back at the Electrification Summit, so I’m looking forward to continuing the discussion. Last question. On the last page of your annual summary, you reference long waves and I’m quoting here, “every energy source grows its share and then loses it. The system is not static”. How does this quote influence how you see the energy transition evolving in the coming years? What should companies be aware of today as they move further into this era of electrification?

Nat Bullard: I want us to look back a little bit into the history from many of us, the sort of proto history of the global power generation sector. In the early 1970s, when we were not coincidentally entering what would be two massive oil crises. Oil-fired power generation was almost 25% of global power. We always in our heads think about long lines for gasoline being the upshot of two oil crises and two shocks. But the reality is one of the reasons that there was such long lines is because the real must run that we had was power generation running from oil. We sort of kicked our addiction to that in both relative and absolute terms pretty handily over time. One of the ways we did that was to provide a huge wave of nuclear power generation, which reached a peak of about 16, 17% of global power generation in the late 1990s. But its share has since been eroded not just by renewable energy, but also by things like natural gas. And one of the things to be aware of is that, obviously in absolute terms, almost everything is growing with that little exception, I would say, of oil-fired power. But the shares that they take up and the share of capital that’s devoted to them, is inevitably going to change over time. And the questions I ask myself and the questions I would urge upon your listeners is what would it take to reverse a couple of the trends that would impact positively the energy transition? What would we need to do to make nuclear power go up again in terms of its total share of power generation? What would need to be true and what would we need to do? Likewise, for renewables to keep going, are they going to reach some sort of natural limit? Are they going to tap out where oil fired power was in terms of share of global generation, or are they going to keep on going? Like, are we going to reach a state of 60 to 70% wind and solar generation in the collective global grid? And if so, what needed to happen to make that happen?

Tom Heintzman: Fascinating. Well, Nat, I’m looking forward to continuing this on April 23rd at the Electrification Summit. Thanks for taking time this morning to talk to us and thanks to the listeners for tuning in.

Nat Bullard: Thank you, Tom.

Tom Heintzman: If you would like to learn how electrification trends will impact your business, join us for CIBC’s second annual electrification summit on April 23rd, 2025 in Toronto. The summit will bring together leaders from across the electrification value chain, including developers, generators, utilities, heavy consumers, some of the largest investors and lenders in the space, as well as government and regulators. To register, please contact your CIBC relationship manager. Please join us next time as we tackle some of sustainability’s biggest questions, providing you different perspectives to help you move forward. I’m your host, Tom Heintzman, and this is The Sustainability Agenda.

Disclaimer: The materials disclosed on this podcast are for informational purposes only and subject to our Code of Conduct as well as CIRO rules. The information and data contained herein has been obtained or derived from sources believed to be reliable, without independent verification by CIBC Capital Markets and, to the extent that such information and data is based on sources outside CIBC Capital Markets, we do not represent or warrant that any such information or data is accurate, adequate or complete. Notwithstanding anything to the contrary herein, CIBC World Markets Inc. (and/or any affiliate thereof) shall not assume any responsibility or liability of any nature in connection with any of the contents of this communication. This communication is tailored for a particular audience and accordingly, this message is intended for such specific audience only. Any dissemination, re-distribution or other use of this message or the market commentary contained herein by any recipient is unauthorized. This communication should not be construed as a research report. The services, securities and investments discussed in this report may not be available to, nor suitable for, all investors. Nothing in this communication constitutes a recommendation, offer or solicitation to buy or sell any specific investments discussed herein. Speakers on this podcast do not have any actual, implied or apparent authority to act on behalf of any issuer mentioned in this podcast. The commentary and opinions expressed herein are solely those of the individual speaker(s), except where the author expressly states them to be the opinions of CIBC World Markets Inc. The speaker(s) may provide short-term trading views or ideas on issuers, securities, commodities, currencies or other financial instruments but investors should not expect continuing analysis, views or discussion relating to those instruments discussed herein. Any information provided herein is not intended to represent an adequate basis for investors to make an informed investment decision and is subject to change without notice. CIBC Capital Markets is a trademark brand name under which Canadian Imperial Bank of Commerce (“CIBC”), its subsidiaries and affiliates provide products and services to our customers around the world. For more information about these legal entities, as well as the products and services offered by CIBC Capital Markets, please visit www.cibccm.com.