Podcast Transcript: Peter Tertzakian on Energy Transitions, Electric Vehicles and Big Oil

This is an edited transcript of our podcast episode with Peter Tertzakian, who discusses the path of renewables and clean tech, continuing reliance on oil and gas, how the oil industry will evolve, and much more. While we have tried to make the transcript as accurate as possible, if you do notice any errors, let me know by email.

Peter’s Background and Career Path

Bilal Hafeez (01:30):

Onto this episode’s guest, I have Peter Tertzakian. He’s deputy director of the ARC Energy Research Institute, a managing director of ARC Financial Corporation, an energy focused private equity firm, and the creator of Energyphile, a multimedia project exploring the past, present and future of our energy circumstance. He’s the author of three books: the best-selling A Thousand Barrels a Second, The End of Energy Obesity, and his latest, The Investor Visit and Other Stories, which explores disruption, denial, and transition in the energy business. He’s also an adjunct professor at the University of Calgary. Now, onto my conversation with Peter. So welcome Peter to our podcast show, it’s great to have you on.

Peter Tertzakian (02:12):

Well, thank you, delighted to be with you, Bilal.

Bilal Hafeez (02:14):

Great. What I like to start my podcast with guests is to find about their background first before we talk about the subject at hand. And obviously you’re very accomplished in your field, you’re obviously one of the leading experts in the energy sector, you’ve written books and so on, but how did you all start off in this area? What did you study at university? Why were you interested in energy in the first place? What’s your origin story?

Peter Tertzakian (02:38):

Yeah. Well, thank you very much. I have a bit of an eclectic background, which I think contributed to my later year accomplishments. I started out as a physicist as my first degree was in physics with a minor in geophysics (so back in the 1980s), that allowed me to get a job in the oil and gas industry. I started out with Chevron Corporation, and for eight years, I was working in both the field and in the office – in the field acquiring data, and in the office, processing and writing algorithms for imaging the sub-surface of the earth in pursuit of finding oil and gas.

That was a very formative period of my career because it allowed me to understand the scale of the world’s energy supply chains. I didn’t really realize it at the time, but reflecting back on the experience later in life led me to think about the extent to which we go, as I called it in my first book which came 20 years later, “the ends of the earth” to get our energy supply. So it was a very formative …

But I realized after a while that I wanted to diversify my career. I came to the UK and I did a post-graduate degree in econometrics. And then subsequent to that, a few year later, I did a degree in finance and finance of technology companies at The Sloan School at MIT. That launched me into my finance career, which I’ve been in ever since.

Bilal Hafeez (04:02):

Oh great, okay. Lots of studying there as well along the way, lots of degrees you’ve picked up.

Peter Tertzakian (04:07):

Yeah. No, that’s right. I figured three degrees is enough, but it all contributed to a holistic understanding, as I said, from real life experience in the energy space, to the economics of how supply, demand, the world works, and then ultimately the mechanics of finance, which is really now my specialty is understanding things like sustainable finance, capital markets, and how energy transitions are made or are executed and the essential need for a financial strategy to be able to do that.

The Continuing Reliance of the World on Oil and Gas

Bilal Hafeez (04:42):

Yeah. Okay, no, that makes a lot of sense. I guess, perhaps a good starting point would be the recent moves we’ve seen in commodity markets. So we had COVID, oil prices collapsed to zero or negative, and since then, commodity prices kept rocketed since then, whether it’s oil prices, metal, base metals. Is that in your view just a case of that just reflecting general reflation, or is there something deeper behind this rally?

Peter Tertzakian (05:08):

There’s a reflation happening, there’s no question about that. As the world gets going again, we certainly don’t have anywhere near enough electric cars to make a dent in the world’s pre-COVID 100 million barrel per day addiction. You can’t even imagine that, it’s just so huge. And so there’s a reflation happening as the demand picks up again. But it’s also a consequence of five years of weak investment and the past one to two years of under-investment in the oil business. There’s a lag effect, and as you know, markets are based on expectations.

Today, there’s more than enough oil in the world in storage and spare capacity, but the market always anticipates – whether it’s equities, whether it’s commodities – and we’re starting to actually see that we are still addicted to this 100mbd commodity. And guess what? We have not been investing. Actually, in the Western world, from the independent oil companies to the multinationals etc., there’s been a broad divestment movement, a trend that away from growing production and to grow your profitability and pay dividends to investors.

So all these factors coming together is now bolstering the oil complex. And of course, there is a broader rotation for commodities that’s occurring as well. I mean, it’s certainly not just oil. We’ve seen all the base metals and others are rocketing up as well.

Path of Renewables

Bilal Hafeez (06:41):

Yeah. And at the start of what you just said, you mentioned energy transition and obviously that’s been a really big topic over the last few years. And when I speak to investors, this is becoming a bigger sort of topic, ESG, it’s really entered the mainstream of the finance community. So just at the basic level, where are we on this energy transition and is it possible to move away from this 100mbd addiction as you call it? Can you restructure an economy away from that? And how does a transition look? And what are the things people are missing when you undergo such transitions?

Peter Tertzakian (07:17):

Well, you can. I think the question is the timeframe in which we can accomplish it and the amount of money it’s going to take. And then there’s a social dimension all the way from what sacrifices are we willing to make. We got a sense of that over the last year with the pandemic where we were forced to make sacrifices in our personal mobility, and actually that’s a really good thing to think about because we were forced to lockdown. Ad in April of last year, momentarily, when the price of oil went to zero, we saw that oil consumption dropped from 100mbd down to 80mbd, only 20%.

So one can get a sense of the scale and magnitude and the complexity of getting off oil. We had to lockdown the world and mobility, air travel was reduced by 95%, vehicle travel by some 20%, 30% depending on estimates. Congestion, traffic congestion, which is very parasitic and inefficient to fuel economy disappeared in every major city around the world, and even so, we were only able to mitigate 20% of oil consumption.

And so that in itself is a lesson, it’s basically almost like an economic lab experiment, what would happen if everybody stopped moving around. Well, we now know, and it speaks to the difficulty of getting off this commodity. Now we can through technology, it’s just a matter of how fast. I’ve driven an electric vehicle, it’s been four and a half years now. I love it and I want to say that I think we’re probably going to see adoption faster than most people think.

But don’t confuse that with getting off oil, because there’s 1.2bn (depending on how you count, 1.2bn or 1.2bn) vehicles in the world and you can do the math. Even if you get to a rate of a million or two million EVs being sold every year, it’ll barely make a dent. It’s a monumental task to swap out the existing fleet. We tend to forget the scale of the world’s population, the scale of the world’s economy, the scale of the world dependent on resources, and then there’s a business difficulty of trying to displace an incumbent.

Are Latest Clean Energy Expectations Likely to be Realised?

Bilal Hafeez (09:27):

Yeah. You said it’s a question of timing and one challenge people often have towards the transition to green energy is when would something like renewables have enough capacity to offset carbon-based energy sources? What are the alternatives to oil and gas?

Peter Tertzakian (09:44):

Well, I think that renewables are upfront in the energy systems, more primary energy sources, and they’re growing exponentially and handsomely, and their costs have come down and it’s really exciting. But if you actually look at the fraction of the world’s energy systems that are being powered by renewables today, it’s still very small and there is a large wedge that has to be displaced if we’re going to achieve things like net zero by 2050, if we’re going to achieve even the Paris agreement, which isn’t as restrictive as the net zero by 2050.

And so it’s going to take a lot more than just upfront renewables. The whole energy complex, the whole system has to be re-piped and reworked. Can that be done in 30 years? It’s a monumental challenge. To get back to my original point, it’s how much money is it going to take and dealing with all the resulting social and economic issues. Not every country has the money to do that.

Bilal Hafeez (10:43):

Yeah. And in terms of the types of policies, places like Europe who I guess are on the forefront of this, what types of policies would you expect to see for countries to be able to reach these targets, except for the progressive countries say?

Peter Tertzakian (10:59):

You could have very restrictive policies like shut down coal plants. I view those as relatively easy policies in a sense that the result is what I would call a plug and play, let’s unplug the coal plant and plug in the renewables. That’s almost like the proverbial low hanging fruit. Then you get into let’s ban combustion engine vehicles by 2035 or 2040. Okay, that’s good, but do we really need to ban all of them? You’re going to get resistance socially from some people and combustion vehicles serve a certain purpose. Then there’s the stuff in the middle, that’s the complex stuff. How do you rework the existing systems that feed our industrial complex, which is the steel and the fertilizers and aluminium and all of that kind of stuff?

I think we’re at the point right now where we’re pursuing what I would call blunt policy instruments where it’s just, okay, let’s just have a carbon tax broadly speaking. There’s a whole range of policy instruments, but they’re fairly blunt. We’re going to have to get much more targeted to be able to address different situations, remembering that energy is pervasive and entrenched in everything we do in the economy. There’s nothing we do that does not require energy in our economy. You can’t just apply blunt instruments.

Why Clean Tech is Being Highly Valued

Bilal Hafeez (12:19):

Yeah, understood. And when you look at market prices at least, the prices of stocks that are related to clean energy and so on have done really, really well recently, so it seems to suggest that what the market is saying is that there will be this big transition and the prices of companies involved in that sector are getting bid up. Meanwhile, more traditional infrastructure or traditional energy companies, not withstanding the last few weeks, have done less well. Do you think the market is correctly pricing the next five, 10 years, or do you think that the market or investors are missing something in this narrative?

Peter Tertzakian (12:59):

Well, let me say first of all, we’ve seen this movie before 20 years ago where there was grand expectations of hydrogen vehicles and all sorts of renewable technologies and things and there was another episode of that back in the ’70s. So this is not a new phenomenon, where there’s excitement generated around this space. I happen to believe that this time it’s real. Not necessarily uniformly real across all types of energy systems and pathways, but there’s a lot more substance behind it. And I think we should explore why it is that these clean tech stocks are attracting such high valuations and capital.

I think it’s quite remarkable how the cost curves of wind and solar have come down and the exponential growth that’s occurring. Equally, the same is happening to the cost curve for lithium-ion batteries, the ability to manufacture them in high volumes, the learning curve effects, and the Teslas of the world demonstrating that yes, we can have exponential growth and this is very promising, and the utility of these vehicles is as good or better than the incumbent. So we have these high profile examples, especially the Tesla type examples.

Then in parallel to that, the pandemic demonstrated to us that technology can achieve amazing things in a very short period of time. We saw, in things like Zoom (video) and Amazon (retail shopping) etc., the power of technology to be able to transform the world. If you look at how the tech stocks and the clean tech stocks have run, it’s really been over the course of the pandemic. I think investors are basically saying well, if we can transform the way people live, work, and play, we can transform our energy systems just as fast.

Peter Tertzakian (14:40):

I believe that’ll be true in some instances but not in every instance. Getting to your question – I see broad landscape of energy as different segments, from primary energy resources (renewables, nuclear, traditional oil and gas, bio fuels etc.), to all the stuff in the middle [midstream], to [downstream in] things like electric vehicles, batteries, appliances etc. There’s over-capitalization occurring in some segments. But in other segments, the expectations probably match some of the valuations, and we’re going to see how this story plays out over the next five years.

Bilal Hafeez (15:21):

Yeah. In terms of sectors where you think the expectations are realistic, are there a few that stand out for you?

Peter Tertzakian (15:27):

Well, I think that still the renewable space is very exciting. All else being equal (because the ability for the renewables to grow is dependent upon things interest rates and other of factors), I think that battery energy storage space has a lot of promise. I would say the hydrogen space is probably overdone, personally, but we shall see. It’s a broad area like I said. The full system pathway from end to end is not clear to me and the inflection point for really aggressive adoption really isn’t in my opinion until the 2030s. So to pay up for it 10 years in advance is probably a bit exuberant, but there are definitely places on the, as I call it, the energy landscape which are very exciting.

Certainly in Canada, where I’m from, biofuels is potentially a very interesting spot. Policies like the clean fuel standard which call for the reduction of carbon intensity in the combustible fuels. To achieve that, you blend in the bio fuels. I think that we’re going to see more of a pull on bio fuels that has its pros and cons. In terms of sector valuation, it’s certainly a lot cheaper than the other spaces.

So, as I said, there’s a lot of different “neighbourhoods,” I would call them, on the map, and to continue the metaphor, it’s location, location, location! Some of them are valued as a premium properties and that’s good, and other ones are probably overvalued.

The Impact of Electric Cars and Batteries on Metals

Bilal Hafeez (17:02):

Yeah. And you mentioned earlier about electric car adoption, that there’s over a billion traditional cars, ICE cars, and the electric cars are just a drop in the ocean at the moment, but assuming the adoption picks up, that will require more batteries in those cars and those batteries require real materials, it’s not all digital. It requires cobalt, lithium, graphite and so on, and those prices obviously have gone up. How would you see things like that? We talk about clean energy, but still it’s in the material realm that we’re talking about then, so how do you think about that? Is there enough supply? Are there issues of how you dispose of some of these types of resources and things?

Peter Tertzakian (17:42):

Well, there’s a multitude of issues you’ve touched on that are important. I think the most important one is where are these base metals and in some instances, rare metals going to come from to feed these very aggressive adoption curves. Solar relies largely on silicon which is the most abundant element on Earth I think, so it’s not an issue.

Bilal Hafeez (18:07):

It comes from sand.

Peter Tertzakian (18:07):

Yeah, it comes from sand. So now you start getting into broader electrification, let’s take something as simple as copper wire. If we’re going to aggressively move to electrification, which would as a subset include plugging in electric vehicles etc., we would need more copper. The ability to ramp up a copper mine is far longer than on the oil side. In the oil business actually, the industry has got it down where you can go and drill wells relatively quickly and bring hydrocarbons to market fairly quickly. For a lot of these mines, this is not the same case. So there’s this lag effect.

I think that this point, which actually I’ve been talking about for a few years, and it’s coming to pass as we see the price of these commodities go up very aggressively in expectation of this electrification, is that it questions the expectation that cost curves are always going to go down in clean energy. Well, welcome to the commodity world. Ultimately everything in the world of primary energy traces itself back to the Earth’s resources, and that includes, by the way, agriculture and bio fuels, and the price of agriculture is going up as well, so this is a major issue.

In terms of the other issues you raised, recycling, I think that there’s a lot of work being done on the circular economy idea and how to dispose of batteries and recycle them. I’m pretty confident that innovation and companies will emerge to take care of that. And in part, that will take some of the edge off of the constant need for new metals.

Moreover, if look at the exponential ramp-up that are being expected for electrification, things like electric motors rely on magnets, which in turn rely on rare earth metals, I think we have to question not only at what price they’re going to be able to access it, but also from where because there’s a lot of geopolitics as most of the world’s rare earths production comes from China.

I don’t think that the mining industry currently has the capacity to supply the expectations that are being set by the clean tech world. That extends even into things like fuels cells, which rely on platinum etc. By the way, I’m not an expert, I don’t follow the cost, but it’s just you don’t need a spreadsheet to see what’s going on.

Bilal Hafeez (20:50):

Do you think there could be technological advances in mining and things like that, that could really open up the supply in the same way as we have fracking and shale and that was something kind of new-

Peter Tertzakian (20:59):

Well, I’m not a mining expert. I know enough to know that the lag time is long, and that, and certainly I’ll call it the Western developed world, there’s also the legal and the environmental considerations and so on. And so you can’t spin up a mine and bring these metals to market as fast as you can drill a well and bring oil to market.

Bilal Hafeez (21:26):

Yeah. So this sounds like one of the potential challenges for markets and investors there when they think about how much to push some of these sectors. When we hit up against supply constraints there’s going to be a constant thing we’ll be hearing about I imagine in the next few years.

Peter Tertzakian (21:41):

I don’t think next few years, I think it’s happening right now. The prices are telling you that. Look at the price of copper, I think it’s beyond a five-year high if not higher. It’s moving up very aggressively and if it’s moving up very aggressively right now, well, what’s going to happen when the real pull comes for electrification and, as I said, all the way from appliances to high voltage transmission lines to whatever they need.

Bilal Hafeez (22:08):

Yeah. Listening to you, it makes me really think that prices could continue to go up quite a lot. I’ve been looking at copper and some of these metals and you look at a chart and it’s just looks like wow, it looks very, very high. But in the structural sense, it could just go much further from here.

Peter Tertzakian (22:22):

It could, and I think this is the case where I’ve seen it in my career at least twice now, it’s kind of a generational thing. It sort of happens once every generation where it seems that the technology sector, I’ll call it, starts roaring and then you start to see the headlines and people starting to talk about this is the, quote, “new economy, resources are dead, tech is the best, tech is the future.” Okay, well, I can’t eat an algorithm, I can’t run something without the physical resources of the Earth and the materials that goes. So, the tech economy can’t run without the resource economy. In the market, they can get out of sync, which is where we’re at now I think, though it’s not a surprise that we’re starting to see the early phases of a rotation of capital from one sector to the other.

Bilal Hafeez (23:15):

Yeah. To me, today’s environment reminds me a lot of the late ’90s, early 2000s where we had all of this focus on the new economy tech and an almost “who cares” attitude towards the material realm, resources and so on. But then 2000, like 2000, 2002 onwards you saw a massive rally in commodities as China came online and obviously tech didn’t do so well. So it feels somewhat similar to that sort of period in some ways.

Peter Tertzakian (23:39):

It does. We don’t have a China coming online as aggressively, but globally, 20 years on, we have at least a billion more people and a broader pool. And then we have now this impetus to transition to electrification and the clean energy economy and the excitement around that which I subscribe to. However, the excitement has somewhat forgotten that you need the resources to make this thing happen in the time period that we are hoping to make it happen.

How the Oil Industry Will Evolve with ESG and Clean Tech Trends

Bilal Hafeez (24:12):

Now, we talked a lot about renewables and electric cars, we haven’t talked so much about oil. So what does the oil industry do in this context where on the one hand there still is a need for oil obviously? As you pointed out earlier, even with the full lockdown last year, oil demand only fell by 20% or so, so there still is demand. So what does the oil industry do in this environment, and investors are turning a bit away from oil companies? What’s your take on this?

Peter Tertzakian (24:40):

Well, the oil industry, I always push back a little bit when we try and characterize the oil industry homogeneously, either in the global sense or even a regional sense because the oil industry globally is split roughly into two segments. The state-owned oil companies account for probably 80% of the industry and the free market-oriented companies account for about 20% – depending on how you measure it, whether it’s in resources or production etc. Roughly, let’s just call it 80-20.

So, what will the oil industry do? The free market segment (I’m talking dominantly about North America, North Sea, and those producing jurisdictions) have been under siege environmentally with the divestment movement and ESG and so on. The impetus now is for these companies to grow profitability rather than grow production and offer a better product. In this context, the better product means a lower carbon intensity product. The good news is that the carbon intensity in the free-market economies are coming down handsomely I think.

The interesting thing is that the pressures on these companies, not only on the environmental front, but also by the very low oil prices that we’ve had over the last five years, has forced the free market subset of the industry to consolidate, to lower their costs, to become far more efficient, and therefore, far more resilient. They’ve had their access to capital curtailed through things like the divestment movement. Therefore, they’ve had to rely predominantly on cash flow and make money for their investors. And so, the interesting dynamic that’s emerging is that the survivors are coming out leaner and meaner and arguably cleaner than they were before, so that’s interesting.

But there’s also geopolitical overlay because, without naming names, the other side of the world is only happy to take market share away. So, we say okay, we’re on an individual country basis is reducing our reliance on oil, but that actually means Western free market oil. Countries like the Russians and others are only happy to take market share. So, do Russian companies have as transparent ESG policies as our own? I would argue not.

And so, we’re creating an odd situation where our free-market companies are improving on every dimension – cost, carbon and so on – but production is either flattened, or in the case of companies like BP, reduced. Into that vacuum, the Russians and others are only happy to take that market share away, because ultimately if we don’t reduce our consumption then somebody’s going to have to supply the oil, right?

Outlook for US Shale and Oil Prices – Will it Really go to $120/barrel?

Bilal Hafeez (27:48):

And where does the shale gas industry fit into this all? Obviously, there’s been a big focus on the supply from shale gas. It sort of collapsed. Will they start to fire up production or not? They’ve been through some big credit issues a number of years ago, so they appear to be a bit more resilient. Do you have any views on shale?

Peter Tertzakian (28:06):

Well, my view is that it’s been remarkable as to how effectively and cheaply, certainly in North America, we can bring gas out of the ground in tremendous volume and speed – it’s become almost like a just-in-time delivery system here, because we’re so effective at the drilling. And so, shale gas is very price responsive and we’ve seen that even here over the course of the pandemic.

Peter Tertzakian (28:30):

Now we’re seeing the cold weather and the fact that the drilling had really come to a halt because of the pandemic 12 months ago. The pull comes from the cold freeze weather that we’ve had here. And all of a sudden the price of gas goes up again and so the drilling rigs will go back out again. From a global context, if you look at the growth of oil versus gas, natural gas is growing and continues to grow far faster than oil. Oil has levelled out in many countries, but gas has yet to do that.

Bilal Hafeez (29:03):

And do you have a view on oil prices themselves, WTI or Brent and so on? They’ve obviously picked up a lot over the past 12 months, now some people are talking about we could get to $100, $120 as economies reopen and so on. Are we in that type of cycle right now?

Peter Tertzakian (29:22):

All I can say is that there’s a lot of momentum. If you take the theoretical general equilibrium of oil based on fundamental availability – as I said, there’s no shortage of oil – it probably should still be $40, so I don’t know. But because there’s the expectation that it’s not necessarily going to be there, and also there’s this rotation from, as I said, the tech world into the commodity world, it’s being uplifted with all the commodities.

I’ve studied dual markets now for 20, 30 years and there’s no such thing as equilibrium. It either completely undershoots or it completely overshoots, and much as should the price have been near zero a year ago. No, it shouldn’t have. I think a better way to frame it is my belief that the long term price of oil resides between $50 and $60, that’s where it resides.

Bilal Hafeez (30:12):

And then we have overshoots, undershoots around that?

Peter Tertzakian (30:14):

Yeah. So we have this oscillating, unstable system that overshoots and undershoots.

The Challenge of Financing Carbon Capture in O&G

Bilal Hafeez (30:19):

Now, one thing I wanted to ask you was that you obviously look at the finance side of the industry quite a lot. Is there anything different about financing energy projects or sustainability projects compared to just other forms of finance? What’s the challenges you find in terms of financing side?

Peter Tertzakian (30:38):

Well, the challenge is that energy is a capital-intensive business – whether it’s the infrastructure or whatever. So who’s going to pay for it? That’s the big issue, these are big dollars. As a side note, it’s quite interesting what we’ve seen in the last year. Further to your comments about the equity markets, we have seen a lot of investors come into this space on the clean energy side. We’ve talked about that and that’s very positive in a sense that government alone through stimulus programs and whatever can’t effect the structural change – I view that stuff as seed capital in the big scheme of things. You need big pools of investor capital, sovereign wealth funds, pension funds, all these kinds of funds to finance all this infrastructure for the next generation and beyond.

Back to what I was saying – the big difference is that energy projects are very capital-intensive. We are in a low interest-rate environment right now where the cost of debt is very low. And so, the thing about renewable energy and those sorts of projects is that they have a high level of debt – you can leverage them up. Right now, like I said I don’t know, just going to throw some numbers out, it’s 80% debt, 20% equity for the sake of argument, but heavily biased. When you’re in a low-interest environment, you’re going to see a lot of investment and it’ll help to catalyse even more investment in this space.

However, in the oil business, the traditional oil business, the ratios are typically reversed, 80% equity, 20% debt or less. And then when, as I said, if you have a situation where whether it’s for divestment or other reasons investors aren’t there, then you won’t see the oil side, or at least the free-market oil side grow very much. That’s another dynamic that’s at play.

In the pursuit of decarbonization, the International Energy Agency and many others are moving towards things like carbon capture and storage are requirements and I believe that. There’s really no way we are going to be able to achieve these sorts of targets without carbon capture. And the question who’s going to pay for that and who’s able to do that? Well, the companies that are best able to do that are actually the hydrocarbon oil and gas companies themselves. They know how to build the big projects, they have what we call the geological pore space to bury the carbon and so on. But they are the ones that are hampered most in raising capital right now.

So, we’ve got this situation that we need to resolve, because in the world of sustainable finance (that’s a phrase that’s thrown around a lot – I’m always questioning well, what does sustainable mean, because in my opinion, an oil and gas company should be able to issue a green bond to finance a carbon capture project), many financiers will not lend to or give money to oil and gas companies because they have been labelled as carbon-intensive.

So, it’s sort of this blockade that has formed in terms of how are we going to deal with this. And I’m hopeful that we’re on a path where we realize that the goal is to reduce emissions as fast as possible. That’s the goal. Multiple energy systems will have to contribute to that – substitution by renewables, small modular nuclear reactors, we haven’t even talked about that, and necessarily, the oil industry’s going to have to be part of it to help decarbonize. And so, the goal again is to reduce emissions, the goal isn’t to put an entire industry out of business because the latter is far harder to do.

Bilal Hafeez (34:19):

Yeah. Just as an aside, carbon capture, I’m an outsider here, but how effective is carbon capture?

Peter Tertzakian (34:26):

Well, there’s a handful of projects around the world that have started to emerge, even some here in my back yard in Canada. It’s effective for sure, but it costs a lot of money and the other issue is that in many jurisdictions, there isn’t a mature enough carbon market for buyers and sellers to transact carbon to convince somebody to spend the hundreds of millions or billions of dollars to build large scale carbon capture facilities.

So, we’ve got sort of this chicken and egg thing. When we think about carbon capture, it’s not just about physical infrastructure to capture, transport and sequester the carbon, it’s also about the infrastructure that’s regulatory – e.g., what are the legal rights of those who have buried the carbon – and the financial infrastructure.

As we speak here, I can get on Google and find fairly quickly the price of oil, the price of gas, the price of electricity, and forwards in almost real time. I can’t do that for carbon, I can’t do that for hydrogen, can’t do that for a lot of the things. And so if I can’t do that, how can I model out what I think this business model looks like? And there’s a lot of hurdles that have to be overcome. I think they’re surmountable, but we have to think holistically and we have to stick to the goal, which is how do we reduce emissions as fast possible.

Peter’s Book Picks & Productivity Hacks

Bilal Hafeez (35:56):

Yeah, I see your point there. Well, I think we’ve covered a lot of ground here on the energy sector in all its different dimensions. I do like to round out my conversations with some personal questions. One is, I do know that you’re a researcher of course and you’ve written many books and so on, and as a researcher myself, I always like to ask people how do you manage your information flow in your research flow because there’s so much produced out there? How do you filter out things? What’s your philosophy or your approach?

Peter Tertzakian (36:29):

Yeah, that’s a good question. I’m of the generation … I’m a reader, I’m a speed reader. So I do watch YouTube videos and listen to podcasts, but not as much as others. I tend to have a whole variety of reading from a whole variety of channels, be it from Twitter to traditional media. And first thing early in the morning, I’ll scour through of what’s going on and get a sense of the narratives and what the issues are. And then when something piques my interest, whether it’s mainstream or more subtle, then I’ll dig a little bit deeper. I have help where I work, my colleagues will go and dig up some stuff that’s interesting, hopefully. Sometimes it’s a dead end, sometimes it’s interesting.

And then I’m also very much someone who loves to learn from the past, the history. So, I’ve got my personal museum which you can find on energyphile.org, ENERGY-P-H-I-L-E.org, and you can see my personal collection. And the act of writing – whether it’s about the past, present, or future – that creative process keeps me active and questioning. I think that’s the most important thing, because if I just read or watch videos or whatever, that’s insufficient because it won’t catalyse in my brain. If I actually then take it, think about it and write. That’s when it crystallizes in my mind what I think is going on in the world.

Bilal Hafeez (38:02):

Yeah. No, I see what you’re saying. And you said you read, are there any particular books that really influenced you in the way you look at the world or your line of work?

Peter Tertzakian (38:12):

Yeah, it’s a great question. There’s a lot of great writers and authors and my sense of recall isn’t that great in terms of the vault because of the volume, but I can tell you one of the books that has been influential in terms of me thinking about energy transitions is actually the biography of Thomas Edison, Thomas Edison, His Life and Inventions, and it’s a two volume book by Frank Dyer.

And if you read the book, especially the chapters on electrification and the light bulb and how Edison thought about displacing the incumbents, this is a 140 years ago, the parallels to what needs to be done today and what he accomplished are so similar – maybe I’ll leave it at that. It’s a biography and it’s fascinating and it’s very easy to read, but at the same time, if you read it from a business lens, it’s also a fantastic book about business strategy and how someone who’s not only such a shrewd inventor, but how he thought about what needed to be done to commercialize quickly.

There’s only been a handful of people through history I think that have accomplished similar things and I would throw Elon Musk in that category. The execution of what an Edison accomplished or what a Musk accomplished is just staggering and their thought processes. There’s of course a Musk autobiography and the Steve Jobs autobiography. These are just fascinating reads.

Bilal Hafeez (39:36):

Okay, no, that’s great. Yes, it’s good. That’s a book I’ll add to my reading list now as well. I’ve been looking for a new book to read recently, so maybe that’s the next one I’ll read. So with that I like to thank you, but before we end this, how can people follow your work? What’s the best place for them to go?

Peter Tertzakian (39:52):

Yeah, the best place, there’s Energyphile, ENERGY-P-H-I-L-E.org and I have a blog there. That’s my personal museum and what I’m thinking. And then, there’s my day job at the ARC Energy Research Institute at arcenergyinstitute.com. You can find some of the work there.

Bilal Hafeez (40:12):

Great. I’ll add those links on the show notes as well, so people can click on it very easily. Yeah, so with that, thank you very much. That was excellent, I really enjoyed the conversation. Good luck with all your various endeavours.

Peter Tertzakian (40:21):

My pleasure and likewise to you.