[Scott] Next on "Energy Switch," we'll hear two very different opinions on liquefied natural gas.

- To take a gas and turn it into a liquid comes at an energy cost.

There's also, you know, a huge amount of methane leakage that occurs across the United States.

Methane is about 20 times more potent than carbon dioxide in terms of driving the climate impact.

- In the company that I'm the CEO of, we produce gas.

We have zero tolerance for methane leaks.

We can all agree that we want to make the energy sector cleaner with less emissions.

We want to make it affordable.

Otherwise, people will use whatever they can get their hands on that's cheaper.

My point is, LNG has a place regionally to solve the problem.

[Scott] Coming up on "Energy Switch," how could LNG shape our energy future?

[Announcer] Funding for "Energy Switch" was provided in part by The University of Texas at Austin, leading research in energy and the environment for a better tomorrow.

What starts here changes the world.

And by EarthX, an international nonprofit working towards a more sustainable future.

See more at earthx.org.

- I'm Scott Tinker and I'm an energy scientist.

I work in the field, lead research, speak around the world, write articles and make films about energy.

This show brings together leading experts on vital topics in energy and climate.

They may have different perspectives, but my goal is to learn and illuminate and bring diverging views together towards solutions.

Welcome to the "Energy Switch."

Liquefied natural gas or LNG has made more gas available in more places.

Some think this is a good thing, giving countries access to a lower carbon versatile fuel that can be used in power generation, industry, fertilizer and as a chemical feedstock.

Others disagree, saying LNG infrastructure is so expensive it would tie countries to gas for decades and increase methane emissions.

Instead, countries should be moving towards solar and wind.

My guests are Jake Schmidt.

He's a senior strategic director at the National Resources Defense Council, focusing on international climate policy, and is firmly anti-LNG.

His discussion partner is Octávio Simões.

He's the president and CEO of Tellurian, one of America's largest producers and exporters of LNG, and obviously is in favor of its expanded use.

Stay tuned for a lively discussion on this episode of "Energy Switch."

Could LNG shape our energy future?

Just real briefly, what is it?

What's LNG?

- Well, the acronym stands for liquefied natural gas.

You take natural gas from pipelines, from wells, and you put it through a process that liquefies it.

So it goes from ambient temperature to minus 260 degrees.

[Scott] Degrees?

- Fahrenheit.

But then you put it in ships and distribute it around the world where it gets regasified into a natural gas that can flow in pipes.

The advantage of it is that in liquid form, LNG takes one six hundredths of the volume space of natural gas.

- Yeah.

- LNG made it possible to take gas that was in one place and get it to some other place that didn't have a pipe or wasn't in close proximity.

So, the ability to put it on a ship means that it can go into lots of other parts of the world that aren't geographically close to where the gas is produced.

[Scott] Real high level, what are some of the difficulties?

- Well, the big challenge obviously, it takes quite a bit of infrastructure investment.

It's a liquefaction facility is in the billions of dollars.

So it's not something that you do casually with little investment.

- Because it's gonna-- once you start that process, you're committed.

- That's correct.

And then you also have the investment infrastructure on the other end, which is the regasification.

That's obviously much lower cost than the liquefaction facility but still some.

- To take gas and turn it into a liquid comes at an energy cost.

There's also, you know, a huge amount of methane leakage that occurs across the United States.

Methane is about 20 times more potent than carbon dioxide in terms of driving the climate impact.

So every bit of methane that leaks in the atmosphere has a real consequence.

- I can speak because in the company that I'm the CEO of, we produce gas, fracking in Haynesville.

We have zero tolerance for methane leaks.

And on top of it, we are deploying pipelines with compressors that are used in deep water exploration, which are sealed with absolutely zero leakage.

So when you vilify or demonize, you're taking tools out of the toolbox that are really, make the problem worse.

We can all agree that we want to make the energy sector cleaner with less emissions.

We want to make it affordable.

Otherwise, people will use whatever they can get their hands on that's cheaper.

We want to make it available because we can't deprive generations in part of the world from the access to quality of life.

So my point is, LNG has a place, natural gas has a place regionally to solve the problem.

- Lot to respond to Jake.

- Lot to digest.

I would agree.

We have to deal with the energy challenges that we actually face today.

I think the reality is LNG doesn't fit within that future, or it can't fit within that theme.

- Anywhere?

- In rare exceptions, I think maybe, but the reality is the International Energy Agency looked at what the pathway is to get to the climate targets that we set.

You know, 2.7 degrees Fahrenheit, 1.5 degrees Celsius.

That's the goal benchmark.

That's where the world's trying to drive.

Under that scenario, gas, global gas demand has to decline by about 55%, which means that LNG... - By when, Jake?

- By 2050.

[Scott] By 2050, okay.

- And so, the LNG picture within that has to be a declining future.

Second, the reality, I think, has changed quite fundamentally in the last five years.

Outside of China, the world is not building new coal.

And so, the gas that we're putting on the system right now is actually competing with wind and solar.

The life cycle impact of solar is about 93% less than LNG.

For wind it's about 98% less.

[Scott] For emissions?

- For emissions.

- Set LNG aside for a minute, you do see in the US and Europe, coal has come down dramatically.

And it's being offset by a combination of natural gas and solar and wind.

- So within the US, I would agree.

We haven't seen a huge increase in natural gas power plants in Europe over the past couple of years.

Mostly what's been happening in Europe is that renewables have been coming online.

[Scott] Solar and wind.

- Solar and wind, and that's made it more cost-competitive to close some of those coal plants that were pretty old that are, you know, in Europe.

- If I may touch on that because I disagree with the numbers you provided.

First of all, China alone is building or financing 500 gigawatts of new coal.

Indonesia is building new coal.

Japan is building new coal.

Korea is building new coal.

Those are the facts.

[Scott] Vietnam.

- Yeah, no, no, no.

So China is building new coal plants, fact.

- About 150 gigawatts.

- A whole bunch of other countries have plans to do that, but they have no ability to actually finance that.

- You're talking Western financial system.

- Western financial system, public, private, but, you know, most of these countries have depended on subsidies from China, from South Korea, and from Japan to subsidize their coal plant.

- The numbers still there, Jake.

- Those three countries have committed to get out of coal financing.

And they are sticking to that.

[Octavio] But China's not doing it.

- Domestically.

- No, internationally, they got 250 gigawatts financially overseas, 100 being built, 150 being financed.

Indonesia signed the Paris Accord, right?

Saying we're going to shut these coal plants.

And then on the same day, they started building more coal capacity than they shut down.

- China is not financing overseas coal plants anymore.

Xi Jinping has committed to get out of that.

We track the data.

- Oh, and you believe that?

- I see the data.

We know it.

We watch it.

We can see it because you can see the plants.

- But let's address another point you said, you said Europe about gas replacing coal.

Europe was riding the gravy train of having pipeline connections to Russia.

And they always could shut it off when they actually were in a position that they could.

When that ended, they're reopening lignite plants in Germany.

Now, the only alternative that actually has worked is in France where they have 75% coming from nuclear.

But Germany says no more nuclear.

The fact of the matter is this.

It's physics, wind and solar have seasonality and intermittency, we all agree.

So you need backup, okay?

So, how do you do that backup?

It's either batteries or some other form of fuel at this point.

- Or grid management or energy efficiency.

- You still have intermittency and seasonality, right?

So, there's-- grid management doesn't get you there.

So you have either batteries or another form of fuel.

So I'll give you the example of California, where I happen to reside.

We have brownouts and blackouts, and we have issues with voltage because we don't have batteries.

So when you don't plan what the reality of a grid is, when you don't take into account how to make it reliable and affordable, yes, wind and solar at the bus bar have come down cheaper in prices.

- Bus bar meaning at the gate?

- At the gate.

The price to consumer has gone up because it never includes all of the grid stuff that needs to be there in order to deliver that energy.

- So let's talk cost, right?

So Bloomberg New Energy Finance does an estimate every year of what's the least cost source of energy around the world.

And it's like wind, solar... - But energy where?

At the gate or at the customer?

- It's at the gate.

- It's at the gate because most of these are in state-owned enterprises, and that cost has dropped dramatically over time to the point that now they conclude that everywhere around the world, wind and solar and energy efficiency are clearly the cheapest alternative compared to gas and even compared to coal.

And so, the actual solution is not to build out an infrastructure like LNG or gas that is going to come online at a time where the renewables costs are going to be even lower, and then they can't compete even more.

And so what you see in a place like Europe, the response is yes-torn, but the response in Europe is we're going to try to diversify our energy mix because we were too heavily dependent on Russian gas, but they've also doubled down on their clean energy.

And so what you're seeing is, under their current plans, we're looking at probably a 50% to 60% decline in gas consumption by 2030 in Europe if it meets both its climate's targets and now it's increased efforts to speed those up because it has a Russian, sort of, gas problem.

- This is not about an opinion, Scott.

Germany, which has 30,000 megawatts of wind and solar, is paying higher prices of electricity than when they didn't have it.

California is the same way.

And by the way, the people that vote are the people at the meter, not the Bloomberg's doing the study at the bus bar.

- Let me try to weigh in here a little bit too.

For listeners, you know, they're going to hear data on both sides, and I actually think both statements are correct.

- Exactly.

- So, the levelized cost of electricity, which is at the plant gate, solar and wind have come way down, remarkable.

You said, correctly, to get it from there to a consumer requires something.

That something either has to be there to back it up, like a battery, or a load- following plant of some kind.

That piece, because it has to be there redundantly, adds cost to the consumer.

The consumer hears, it keeps getting cheaper, but I'm paying more.

Why is that?

And I think we need to be very clear that the consumer has to also pay for the cost to make it reliable.

Real quick, who are the big exporters and importers of LNG today?

- Russia, Qatar, Australia, United States.

- Are the four what?

- Exporters, largest exporters.

They export about 70% of the world's LNG.

The largest three importers are China, Japan and Korea.

- Yeah, and so America is the number one exporter of LNG today.

They weren't five years ago, but they are today.

And the list has changed quite a bit in that Europe gets a lot more gas in this short period of time than they used to just six months ago.

- Yeah, right.

How much LNG is traded globally now?

Where do you see it going?

What would it need to be for it to become more like oil?

- Well, we're about 400, 500 million tons of LNG around the world today.

[Scott] On an annual basis.

- On a global basis.

[Scott] On an annual basis.

- An annual basis over the three.

The demand is there.

And I've never sat across from anyone that said, "Please sell me LNG, otherwise I'm going to build a wind and solar plant."

The answer is usually, "Please sell me LNG at a price I can afford or I'm going to have to go and do oil and coal."

- Mmm, interesting.

- That's a reality that it pains me because [laughs] obviously, I am a strong believer that we need to make the energy sector cleaner.

And not only that, we also need to really focus on conservation.

We forget that part.

We waste a lot of energy in the Western world.

- Do you see natural gas and coal the same?

Isn't gas better than coal?

- Gas is better than coal, but only if it's methane emissions are captured.

There's significant amount of leakage of methane.

His company may be better in that, but the reality is the US, when it reports to the UN, the methane leakage in the US is 1.5 times what the US reports.

That's according to people that have looked at this, including the International Energy Agency.

But the reality is not, I don't think, a choice between coal and gas anymore.

The choice is between gas and renewables now because that's what's actually coming on the system now.

And at the same time, we're seeing some countries interested in gas build-outs, but they're also looking at the possibility of cost of renewables is going to come down over that 10 to 15 years.

- It's come way down now.

It's getting kinda, not much headroom in renewables at the gate anymore.

- Not at the gate, but I think renewables still has huge barriers.

So Europe, for example, we think of Europe as a major supporter of renewables, but the cost and the permitting process to do a wind plant is like stacks of paper this tall.

And so, can you streamline that?

That brings down the cost.

Can you do that, boast those pieces faster?

- I want to make sure I'm hearing this correctly from you.

Are you saying that a major economy like the US or the EU could run on solar and wind with batteries?

Doesn't it need something else, molecules for heat?

- I think we're seeing changes fundamentally in all across those industries.

So in the power sector, the analysis shows that from Bloomberg New Energy Finance that you could probably meet the variability of wind and solar with storage, better grids, energy efficiency, grid management, you know.

- For power generation?

- For power generation.

- Which is about let's call it a third.

- It's about a third globally.

For the industrial sector, it's a little harder.

We're beginning to see a significant innovation happening.

So we're seeing net-zero steel plants being introduced in Europe, net-zero cement facilities starting to pop online.

It's years away.

And there's a challenge that we have, which is why some in the industry are talking about how do you get things like hydrogen into the mix?

But I think we're going to see huge innovations.

- Well, I have significant disagreements with some of the things that were said.

I don't think neither one of us, certainly Jake is not, saying that gas is better than wind and solar on terms of emissions, it's not.

[Scott] Right.

- But the question has to be integrated in the energy issue.

And the energy issue is wind and solar are not gonna meet the demand or replace the large amount of coal, gas, and oil we have today.

So the question becomes what should we do to minimize that, to improve on that?

Yeah, we can build nuclear plants around the world to make it, you know, baseload.

And if we can somehow find a way to produce hydrogen reliably, cheaply, and transport it and use it safely and everything else, great.

And we need to look at all those things, but they don't exist today.

So what we're facing today is because we're not opening the door to do something that is more pragmatic, we're making the problem worse.

- Right.

Right, right.

Yeah, so there's a time frame issue.

- There's definitely.

I mean, that's a piece I think we should look into.

There's a time dimension to this, right?

- Yes.

- But it plays the other way too, which is a new LNG facility probably is two to five, maybe six years.

And so, the time for where we bring the LNG facility on comes at a time where we need to be transitioning really fast off of fossil fuels.

It also comes at that same time frame where the cost of renewables is come down and is gonna become even more cost competitive over time.

And so, you're seeing countries looking at a choice of, I'm building an infrastructure for maybe 30 years at a time where I might actually have an uncompetitive kind of future.

Oxford University looked at this in Southeast Asia and they basically estimate that probably about two-thirds of the gas plants that are planned to be built in Southeast Asia will be uncompetitive with renewables.

And so that's a terrible economic choice for a country.

- When I see studies like that, I don't see the component of redundancy built into the cost, including the Oxford study, in a realistic way.

So I worry a little bit about that by saying solar and wind will be cheaper when we see the results of large solar and wind in some economies and they're more expensive.

And I think your point is we have people right now in the world that don't have anything, and some that are living with energy that just isn't stable.

- So, yes, we have an energy poverty challenge around the world.

That is true.

That is mostly in sub-Saharan Africa and a little bit in parts of Asia.

Africa's energy challenge is a choice between biomass for a lot of poor people and nothing.

And so they're burning biomass right now.

But LNG's not going to Africa to provide clean cooking solutions for those people.

They're going to heavy industry in Japan, South Korea, Europe.

But the solution is not more gas for them, the solution for them is we need to get some renewables and we need to build the grid kind of out there.

- If I may add, it's a simplification to say energy poverty sub-Sahara.

India is in energy poverty.

China is in energy poverty.

Okay, so it's three billion people around the world.

You can have a simple cycle turbine that you can put up in a few months to actually produce electricity for a small site.

I mean, if you just look at, the numbers are staggering, India, they got a goal to go from six percent gas in their energy sector to 15% by 2030.

That's 95 million tons of LNG equivalent.

- From six to 15.

- From six to 15, six to one-five.

Plenty of room left for wind and solar and everything else you want to think about.

But they need that for their fertilizer.

They need that for their industry.

They need that for their commercial, for electricity.

They need that for gas bottles, okay?

Because folks are burning dung.

Let's not minimize it because this is where we lose the argument.

- How do foreign partners, investments, private equity, how does this help in the conversation?

- In the last five years, six years, there's been a very strong narrative that private funds, equity, banks, investing, anything that had fossil fuel relationship was just kind of not a good idea.

So as a result, we saw production of oil and gas and availability go down, prices went up.

What has happened recently is that countries and funds and banks completely reversed their policy.

We saw financing of liquefaction facilities in the United States with a multitude of European banks involved and American banks.

Does that take away from the necessary investment in other things we're trying to develop, like wind, solar, batteries, whatnot?

No, it's actually not competing.

But people are realizing that eliminating one side actually creates a problem.

- How do you see money playing in this?

- I think when, you know, investors are looking at this, they're looking at it from two different angles.

What is the long term, right?

Is it gonna pay back over that period of time?

Is something gonna come online that's gonna make that, you know, uncompetitive or make it hard for that loan to get paid back?

- Investibility.

- Investibility.

Two, they're gonna look at what's the cost versus the alternative, you know, today.

And I think what we are seeing is now all the major asset owners, all the major private equity funds have committed to shift dramatically towards a climate-safe future.

So they're, in the near term, not always investing along those lines, but that's the kind of long-term trajectory that they've signaled.

- Look, I agree with Jake.

You mentioned two items.

I think you missed a third one.

Whether it's private equity, they want a return on their investment.

And right now, historically, the wind and solar projects have provided a lousy return, and that's going to be the biggest challenge.

What projects can come up and deliver those returns are the ones they're going to get the money and get the allocation of capital.

- Any wrap-up thoughts?

Anything you'd like to share, say, anything?

- Sure.

Let's agree on what we can agree.

Let's bring folks together, academia industry, NGOs, that basically said, look, we're willing to solve the problem and we're willing to be convinced and change our minds.

And I think we can then make significant progress.

We can come up with a pragmatic solution that really looks at the facts, really looks at the reality, takes into account the energy issues, the economical issues, the environmental issues, not just CO2, but the other pollutant, and really work through it.

So my challenge to everyone is come to the table, and really come with that attitude that really are willing to do this.

- Wrap-up thoughts?

- I mean, the LNG industry, I'll be frank, I think sells a story that's not actually, you know, true in reality.

So if the industry is actually interested in providing, you know, cheap electricity to the world, then it needs to sell LNG at a much lower cost because most of the world can't actually afford the prices that Europe can pay.

And if the industry actually wants to be a part of the climate solution, then it needs to clean up its methane leaks dramatically.

And if we want to actually solve the climate crisis, we can't build a whole bunch of gas plants that then 10 years from now we need to shut down because the math just doesn't work in terms of a climate crisis.

So we need to put the same amount of dollars that we're putting into the fossil fuel industry into the clean energy future.

And I think there's solutions there.

Yes, wind and solar don't always run, but there are solutions to that that we can figure out if we come to the table.

So I think it's important for the industry to actually have a more realistic kind of picture of what the solution set sort of looks like going forward.

And so, I hope that we can kind of get there, but, you know, we got a short window to get there.

- Can I add one thing?

My thought is my wrap up comments were about creating a dialogue.

It's not a right way to start the dialogue by saying what the LNG industry says, it's wrong.

So, just a comment.

If you want to establish credibility and trust, because the industry can turn around and say, the environmentalists really are not saying the truth.

Let's come to the table and let's put the stuff that really is a way to get a dialogue going.

- Yeah, it's a good observation and conversation, I think, that the thoughtful people in government, global, in NGOs, NRDC, EDF, others in industry, and academics, we gotta find those groups and bring them together and we'll be able to then start to address some of this.

So I really appreciate both your civility, your candor, your thoughts, how you see the world, and for taking the time to be here today.

- Thanks for having me.

- Thanks for having us.

[Scott] This has been great.

- Yeah, told you off the air that we would not agree on everything.

- But you do agree on some things.

[Jake] Some things.

- Yeah, and that's a good thing.

Scott Tinker, this is the "Energy Switch."

Perhaps not surprisingly, this became a discussion about solar and wind versus LNG.

It's true that solar plants and wind farms have become cheaper over the past decade, but their electricity has not become cheaper to the consumer because they produce energy intermittently and require some backup source to fill in the gaps.

That may one day be batteries, but today it's most often natural gas.

To me at least, that seems less like a competition and more like an opportunity for supporters of solar and wind and LNG to work together to create electricity systems in more countries that are both lower carbon and reliable.

[dramatic music] ♪ ♪ ♪ ♪ [Announcer] Funding for "Energy Switch" was provided in part by The University of Texas at Austin, leading research in energy and the environment for a better tomorrow.

What starts here changes the world.

And by EarthX, an international nonprofit working towards a more sustainable future.

See more at earthx.org.