Prof Ray Wills: 0:00

So the, the challenge for the oil and gas and the fossil fuel industry right now is they've got plenty of buyers. But what they don't have sight of is when do those buyers go away?

Tom Raftery: 0:19

For anyone making long-term investment decisions. That's the real question. Are you backing the energy system we have today or the one that will actually have customers tomorrow? Good morning, good afternoon, or good evening, where everywhere in the world, this is Climate Confident Stories and Strategies that cut Emissions episode 293, and I'm your host, Tom Raftery. My guest today is Professor Ray Wills, Managing Director of Future Smart Strategies and adjunct professor at the University of Western Australia. We explore why clean energy technologies are moving faster than many decision makers expect, how batteries already changing electricity economics, and what China's industrial strategy tells us about where the competitive advantage is moving. I followed Ray's work on adoption curves for years. His argument is that solar, batteries, and electric vehicles are now moving so quickly that delay carries the greater risk. I began by asking what boardrooms still underestimate about that speed.

Prof Ray Wills: 1:30

Oh, there's the classic stereotypical answer, which is human brains can't understand that nonlinear growth and most particularly accountants can't. And those that are Chief Financial Officers for boards because their day to day and their year to year is not anything but linear or any, and sometimes the wrong linear going negative. So I think that's a critical part. But I'd like to think that it's, really a human challenge about things that we are comfortable with and familiar with is what we like and what we stick close to. And what we've seen now in this quick, the fastest energy transition in human history. And we're having difficulty in coping with the thought that it could actually be that fast. And I've mostly lived in hope because I've mostly believed the data and the data have shown me very sharp curves, and the curves are all pointing at the roof.

Tom Raftery: 2:25

Okay. Okay. So what would you say has changed recently that makes getting the transition wrong, expensive rather than just slow?

Prof Ray Wills: 2:34

Because we're at the, the pointy part. If you got it wrong five years ago, then that mistake didn't carry you terribly far forward into the future. But I promise you that from here on in, it will be scary if you get it wrong. And those that do will be left behind and not in a good way. So that's the warning is that the rate of change now is so fast that it's expensive not to make the right decision because you still don't get your business in order. But if you don't make it quickly now, it's really going to be debilitating.

Tom Raftery-4: 3:08

Ray, your recent analysis with Peter Newman shows batteries supplying a small share of electricity overall, yet approaching up to 30% in some Western Australian evening intervals. How can that already change the economics of the system?

Prof Ray Wills: 3:26

In, in, if you measured it by the day that batteries would be 4%. But if you measure it during their excursions during peak swallowing the gas price then you get to the 30% mark. How has that happened? It's happened extraordinary quickly and, and batteries really are the thing we've been waiting for. And haven't really triggered solar to go faster. Solar has been going faster, but batteries have come along at a time where solar's growing so fast we need something. We had to have to deploy something. And so batteries are there. And that 30% excursion that we're getting in Western Australia in 2026 was zero in 2024. That's how quickly that, that's grown. Why? Because batteries are cheap. Everybody's rolling them out. The build of batteries is always faster in a sense because a solar panel is a, solid device that only has so much capacity we can, we can put into it at this point, although it's improving every year, whereas batteries, can occupy every space. They're already in my laptop. They're already in my phone. They're now outside on my wall, exactly behind my back here where I've got 42 kilowatts hours of batteries on my house to match my 14 kilowatts of solar on my roof. And that's pretty sweet because for the most part, apart from the darkness of winter when it actually gets a bit of a bit tight but apart from then, I've got so much electricity that it powers my own, own house all the time. And there's no no problem with, with changing it. That's happened really rapidly. And this extension towards rate of growth is critical. And 2026 is the year in my modelling for the last 15 years. If I go back and actually if I count the dates, yes, 15 years is about right. Everything has been growing according to the rates of, of, of assumptions of Roger's S-curve and, and particularly Wrights law. Wrights law has been critical in this whole adventure. Every time you double manufacturing, reduced costs. And we've obviously increased solar manufacturing tenfold since the beginning of the decade. And hundreds of times in that intervening period prior, we've been constantly reducing the price. There has been no slowdown in the manufacturing of these goods. Solar panels, batteries now move that onto inverters and to motor cars and to wind turbines. All of these things are, are going at their own pace. Solar's going fast, but batteries are going faster. Why? Because batteries fit into more things than solar panels. Before that happened, solar had to be subsidised and has been. We've still got very small subsidies in it in Australia, even though solar's got very cheap. Some people say, oh, we can knock those subsidies off now. We really don't need them. And if we didn't have climate change, I'd agree. But the reason the foot has to be on the accelerator is to deal with climate change. And the great joy for Climate Confident is that that's exactly what's happening. Governments are maintaining their pace on this rollout. The relevance here is that all the data shows the growth is not slowing. Every year there's a headline, oh, China slowed up a bit. Oh, electric cars aren't selling as fast as we thought. Ah, this is all going slower. Not in one year has there been a where, except I guess with COVID, there was a dip there. But that was a legitimate dip that had nothing to do with their technology and everything to do with global economics. When we look at any international model, and I'll name a few people without necessarily outing everybody but if it's, the International Energy Agency, if it's the World Bank who do a little less modelling there, if it's Bloomberg, New Energy Finance, all of those, when they're putting their models out, they're always quite conservative and quite flat. They're not growing really fast. I simply say this, if you see a model that doesn't have an uptick in it, then don't believe the model because this is faster than we think.

Tom Raftery: 7:20

But are we now reaching the point we're building new gas plants for energy security could actually increase strategic risk?

Prof Ray Wills: 7:30

The only data that we have that's convincing in one direction, we've got a lot of data. So I don't, I don't really want to restrict it like that, but to say that the Australian data is extraordinarily convincing. The more renewables we've built, the the cheaper our wholesale energy price has become. But at a critical point, we had to reach a tipping point. It wasn't until renewable energy supply in Australia has hit 40 and 50% of supply that we've got a tipping point. Now, we're not consistently doing that yet. It's only still 46% on average for the year. But if you measure it every day, there are some days when we are over over 60% and there are some days, occasional days where we're over 80% of energy generation is actually renewable. If take every one of those days and we measure 'em, we stick a price next to it against the amount that was generated, and we plot those things what we see is if we do that for renewables, that line simply goes continuously downwards. And when we get over 50%, there are no prices above hundred dollars austral megawatt hour. If we do the same with gas, the reverse is true. The less gas we have, it's only when we get to a point where gas is only about 4% of our generation source use, that that falls below a certain amount. The conclusion is quite obvious with lots of renewables and little gas, that's when we have our cheapest pricing. If we add gas back in and because renewables diminish then the price goes up inevitably. One of the other things that happens is if we don't have a lot of renewables and we've got a lot of gas, there's a lot of s spikiness. And the little nuance that the batteries have added at this point because they're still not big yet. And we, we've got a lot of battery penetration in a, in Australia overall and one of the highest take up of batteries anywhere in the world, both from utilities and also from domestic customers. But the, battery saturation hasn't got big enough yet to actually start taking the high pricing out of the market, which, which is what we anticipate it will do. But what it has done is very effectively capped the spikes. We're seeing less and less large spikes in price.

Tom Raftery: 9:39

And what would have to happen for your argument against new gas generation to be wrong?

Prof Ray Wills: 9:46

Look, surging demand would be the main one. And, and certainly of course, gas has been tied to the need to power all of these data centres and artificial intelligence machines that we we know that we want. And I'm not necessarily a sceptic. I know that we want them as well because actually AI is a very important part of a smart energy system. And we need AI to actually improve in the first instance, management of our, energy systems. And in the second instance, to use AI to find better solutions, more efficient solutions to do things. And there is no doubt that that will happen. If we make energy really cheap, then the desire to find savings on energy is less attractive. Just, just human nature. The cheaper something gets the more we tend to use. But it's not the only thing that drives us. The other part is that it has to be managed, and that's really critical. Most of the energy savings through the nineties and the naughties was through energy efficiency gains driven by the International Energy Agency who understood that pretty well. And Europe actually did extraordinarily well in improving energy efficiency over the last few decades. Although that seems to have slowed down a bit. There's a few balls being dropped there. I, I think. I'm fond of Michael Liebreich's talks and sometimes he, he, he's, he's talked about terms that he not, hasn't, hasn't necessarily invented. But he talks about the US being a petro state, and he's talked about China being an electro state and as China electrifies, China has obviously embraced it as a policy. And China has embraced it in the policy in no surprising way. No one in the world should be surprised, and if they haven't, they, don't believe what they read because China has this process of five year plans. We're now up to the 15th, five year plan. Five times 15 is 75 years that they've been putting these out. And the 12th plan and then the 11th plan and the 10th plan all said, oh, we, we've really gotta do something about climate change. It's important, it impacts China. We've really gotta do something about how do we fix that? And we need to do that. We need Cleantech like solar and wind. Oh, and these battery things will be pretty useful too, so let's, let's build some of those. And they, they put them into the plans and said, we're gonna build battery factories. And in the next plan they said, oh, we built battery factories, now we're building batteries. And in the next plan they said, oh, when we build batteries, we're gonna build electric cars. And everybody's surprised that there's a lot of electric cars in the world. China's been telling us for the last 15 years, we're gonna build electric cars guys just, just wait a minute. It's, it's, they're coming and they are. That's why China's called the electrostate. Michael referred to Europe and particularly in relation to Europe's commitment to act on climate change, which is absolutely there and, and for the most part, broadly accepted. And there's absolutely industry influence in Europe, just as there is around the world. And when the car industry gets a bit panicky and says, oh, we're going a bit fast on this ICE ban thing, can we slow that up a bit? The answer is seemingly mostly yes. Oh yeah. We can slow that up a bit. That's, that's not so important. Well, it's very important, number one, but number two is the, the detail that Michael got to, US is petro state. China is an electro state, and Europe is in a state of confusion. And, and he's right because, because there is adamant effort for climate change action there's also adamant effort to try and defend those things that create emissions. And we haven't seen a lot of as much movement as Europe promised nor as Europe was capable of. That's gotta be pretty frustrating for those that are closer to the flame than I am in terms of the location.

Tom Raftery: 13:31

Yep. Ray China is absolutely fascinating. What are they doing in clean technology that Western business leaders still fundamentally misunderstand?

Prof Ray Wills: 13:41

Rigorously adopt it. So one of the things that we've written about in, in our series of papers has been what has driven car market adoption. And it's really clear that if you're building electric cars at home, then your export market also contains electric cars to export. China, if you're doing things as in a, in a state of confusion and you're not building your electric cars as aggressively as you, should be, then you are not really adopting electric cars as fast as China. That's Europe. Your question was about why has China gone so fast on this path and the answer is they've done it adamantly because first and foremost, China is impacted by climate change. China there's, there's a whole pile of metrics you can measure about drying and warming and flooding and and so on that affects agriculture and populations and, and so on. China is absolutely conscious of that. China is a scientifically based evidence-based management system. They believe the data that they have, even though that the west from time to time questions the data that China claim. But nevertheless, China is adamantly pursuing a scientifically informed evidence-based management system and that has certainly driven their decision making to go into clean tech. But your point about uptake of technology, why is China doing it? I think that their, their move therefore to Cleantech was only logical because they had to fix it for themselves as well. The rule that I I said about motorcar is if you build it for yourself, you can then sell it to the world or that, that applied earlier to solar panels that applied earlier to wind, turbines. But China's building, again. Building all the related tech, they're connecting the dots, they're looking at ecosystems. When you look at a city in China, you've gotta look at an ecosystem. What part of the economy are they building for? If it's car markets, then it's out, out of Guangzhou. If it's humanoid robots, it's, it's, it's other places. They're all doing their own specialty thing. And they're all getting 25 million people in that live in their city to do that particular thing in a particularly fast way. And that's producing product that is affordable now, but more importantly and, and increasingly so, also of great quality. And they're doing it with science. They're doing it with great management. And, and there is a lesson there and the, the end part of your question was, and now they're taking that learning and taking it to other countries, especially for the car industry, but not just for the car industry. And if we go back to the dawn of time, as far as solar was concerned, yes, all of those original factories in China had learned and had German machines in to start their process. But Europe's got a population of 350 million. China's got a population of 1.4 billion. China is the best pace in the world for Cleantech and what that means in terms of its delivery of a future, of a decarbonised planet. And that's the critical thing here. There's lots of things we could potentially take time to criticise China for. That's not the point of what we're talking about. We are talking about decarbonisation and hope. And I think that China, its manufacturing base and the quality of its manufacturing base and the absolutely the scale of its manufacturing base, which brings down the price are the critical things for this question of decarbonisation.

Tom Raftery: 17:43

I think there's another thing as well, Ray, and I think it's that the dangerous energy transition decision may no longer be moving too fast. It may be investing as though the old system going to last. And so what China's doing is they're investing in the energy transition because they know it's the future. Whereas to your earlier point about Trump's America, they're investing in fossil fuels and they're investing in, oil and gas and coal as though that's going to last. Whereas the world is moving on and no one's going to want to buy any of the products that the US is investing in, and everyone is gonna want to buy the products that China is investing in. The thing is, to your point here in Europe, we gotta do it faster.

Prof Ray Wills: 18:36

As long as you've got a buyer and a seller, you've got a marketplace. So the, the challenge for the oil and gas and the fossil fuel industry right now is they've got plenty of buyers. But what they don't have sight of is when do those buyers go away? I did a graph back in about 2012 on comparing countries that were, buying clean tech and installing renewables and countries that were not doing that, but were making oil. And it was pretty stark. Nowadays that graph is much more confused because a lot of countries like Indonesia who do have oil supplies, but are now also going down the electric path. And so, Ember Energy have, have put out some similar graphs like that more recently. And to be frank, they're much better than mine were in terms of explanation. But I guess it was a clue back then that this is, this is how it should look. And it wasn't necessarily surprising to discover that there was ab there's absolute clarity. If you're exposed to an oil price and you're not moving toward a solution, which is a few countries then you're a mug. If you're exposed to oil price and you are moving towards a solution, then you're a bit cleverer. But if you're not doing it rapidly and taking, advantage of I'll say the headline again, the fastest clean tech shift in, or the, no, sorry, I've gotta shorten that sentence. The fastest shift in energy, in human history of any form, that's solar and it's batteries. The, the take up of those two things is just extraordinary. And there is no indication in, in the data to say that that's going to slow. And if that's true, then if you're a politician and you make a decision to say, oh, let's back renewables, that'll be good, you're not a mug because you're not gonna fail because it's just gonna happen anyway. So politically you should get right behind it.'cause it's not a Yes Minister question. It's not a question to say, oh, that's very brave minister. Actually, yeah, shouldn't you do that a bit faster? Oh, yeah. Can we do a bit faster? The, the most politicians though, are not doing it faster. They're doing it adequately. Some are embracing the data and I've gotta commend our energy minister in Australia, Chris Bowen, for, for doing that. He's regularly out there saying we can see the result.'cause we can see the data and the data says we're right. That's the smartest thing you could possibly do. I'm seeing other ministers that are in our own country as well and who are constrained because Australia does have a, fossil fuel capture problem. We've got lots of gas. We've got lots of coal. We'd like to sell it forever. And anybody that's a minister tied to resource extraction their chant is drill baby drill. and so we've gotta be able to counter that. And it's particularly important in my state, in Western Australia, where most of the gas comes from. And so, the consequence of that is that our economic wellbeing is unnecessarily tied to that because there's a view that there's no way we can escape it. And that's problematic for decision makers. And it certainly challenges policy makers who have to report to a minister. How do we tell the minister we really should move on from this? It's easy if, if your advisor has been hired from out of the oil and gas industry, they'll say, oh, no, we don't need to move on from it. But the ones that are able to think about these things, because that's been, their rational training. Famously in Australia, our former Prime Minister Morrison, he famously put up a headline about electric cars will ruin your weekend, 'cause you can't go away in a Ute in 2019. Now, of course, there are a large array of Utes coming to Australia, but there was a choice back then. And he made the choice of backing combustion engine cars and belittling the technology to avoid it. Through our estimates, there would've been another 10 to 15% of cars in Australia would be electric in the fleet, would be electric by now, if he hadn't have done that which would've been a good 3 or 4% share of Australia's fuel bill.

Tom Raftery: 22:39

Sure. Well, if we talk about EVs for example, as, as you just brought up there, why should a company CEO see EV adoption as an industrial competitiveness issue rather than simply a climate issue?

Prof Ray Wills: 22:54

Yeah. the answer is always simply is look at the data. We are, we are seeing wonderful data come out from companies that are doing it and have translated their freight fleets from fueled to electricity. And we know that they're making big cost savings. The major challenge for those companies in the start, especially the ones that started earlier has been the capital cost upfront, capital cost for that swap over. And so, while Australia is most states now finished with incentives for, the private person buying a, an EV they haven't yet done any fleet incentives for commercial fleets. And what we really need is for our Climate Energy Finance corporation CFC to help fund those things in forms of loans. So it's not, it's not a grant necessarily. It's form of a cheap loan that allows a company to finance a more expensive upfront capital cost to allow them to swap their fleet. And if we can do that then that would be a, a rational step. We've actually seen some move in that space just recently, again, from Minister Chris Bowen. He's expanded the the rooftop solar scheme to move from private homes to move to businesses. And in a substantial way. The, the cap on homes was 6.6 kilowatts is where, where you'd go and you, you could put more on the that, but then you'd start to lose access to feed in tariffs. But he said, look, we've got in lots of industrial parks out there, and if you fly into Perth and you fly over the industrial parks next to the airport, you look out and you can see bugger all solar panels on rooftops of these industrial parks, and you go, why the hell aren't they doing this? And the answer is is straightforward. They, they haven't stepped up to do it. Often those industrial parks, the rooftops are owned by the landlord and the companies inside a tenants, so they can't do it. But again, the, the, the key scheme that that Bowen has extended is to a one megawatt system, up to a one megawatt system which would mean that most very large warehouse places would be able to cover their roofs and generate electricity and mostly power their own operation. It's getting even sweeter now because batteries are reaching the point where they're so cheap, that if you can generate your own electricity then you can use some of that overnight by moving the power that's generated by batteries into some overnight load as well. If you've got a refrigeration business, then that's gonna be massive because cooling stuff down to freeze it is, is a really big step. But actually, if you've got people in your factory, you gotta keep the temperature below 24 degrees. And Perth summer days can be up to 40 degrees. So those little air conditioning units gotta work pretty hard. They work a lot easier if you've got your own power to put, to push it through and keep those factory areas at least much more workable.

Tom Raftery: 25:55

Where have you changed your mind about the energy transition in the last five years, and what are most senior leaders still getting wrong about the next five years?

Prof Ray Wills: 26:06

Look what I've, what I've been able to confirm, so I've really been running, running my models on this since about 2010. They started to get sophisticated enough for me to start releasing some details in about 2012, 2013, but wasn't till about 2015, 2016 that I worked out that my assumptions in my models, my models aren't sophisticated. They're just, they're, they're just assuming growth. They're assuming growth because informed by Roger's S-Curve and how, how we see penetration in market, it's assuming things like Wright's law, which saying that, and as we expand these markers and they grow faster, everything gets cheaper. Natural assumption. And it assumes that as long as those things are true, then the market will simply grow. Now is is it half a dozen more steps in it than that? But it it's really,

Tom Raftery: 26:55

Jevons Paradox kicks in.

Prof Ray Wills: 26:57

yeah. Yes. And, and where we start to make, make use of more energy as we, as we try that. And actually this is growing so fast, that's okay. We can get away with it. It's okay that, that UK may now have to use air conditioners because climate change bought the heat. But it means that we can manage that in a, in a positive way. And it's particularly important to think about people's welfare because at the end of the day, we've gotta manage the only point of an economy is people. If, you take people outta the equation, you don't need an economy. We started here. I think talking around the question of, humanity, I guess the challenge is in AI systems who do the AI systems benefit? If they're gonna benefit the whole of humanity, and that is an edict as, as far as their regulation is concerned, then that's great. I think there's a great opportunity in AI to improve things like energy efficiency and so on. We'll get better design as a consequence. It's gonna be great in pharmaceuticals, which is gonna be better for populations in terms of overall health. The data shows that, we've gotta actually be more mindful, in all that we do, as China already does. As we talked about earlier, follow the science, believe the evidence, deploy the evidence into management systems, and so you'll have better outcomes as a consequence of that.

Tom Raftery: 28:22

Okay. Left field. Question for you, Ray. If, you could have any person or character, alive or dead, real or fictional, as a champion for the clean energy transition, who would it be and why?

Prof Ray Wills: 28:37

The, the real one that's living today is Al Gore. Al Gore continues to do a magnificent job, but the one I'd really like to meet is Carl Sagan. Carl has been a constant inspiration to me in terms of his writings and the many recorded interviews that he's done. And, his speeches to Congress early on when we were talking about climate change when we're actually going to do something. And that was in the eighties and we never did. And he bemoaned that relentlessly in, in further interviews, talking about science, the importance of science and evidence the importance of growth of an educated society and ensuring that they're fully informed with our ability to act. So, Carl Sagan.

Tom Raftery: 29:19

We're, We're coming towards the end of the podcast now, Ray, is there any question that I did not ask that you wish I had or any aspect of this we haven't covered that you think it's important for people to be aware of?

Prof Ray Wills: 29:32

Look, I, I think o overall, this, this is an exciting time. If you are interested in this topic and your politician isn't, write to the buggers. Send them a message. Tell 'em, tell 'em how they should improve their game. Equally, if there's a politician out there that is on their game and, and delivering what you think they should be doing, even if they're not quite doing it well enough, make sure that they understand that they're moving in the right direction and cheering them will only make them go there faster. Whereas criticising the edges of what they're doing, isn't necessarily productive for you or for them. And, and I guess that it's Al Gore that, often would talk about that, that democracy is a renewable resource. That the people that we vote for can make change. I'm less confident in that now in 2026 than I was in 2006. I, but maybe I'm more cynical and wiser. But I, I think there's still an opportunity for the political system to do more. And the only way that they will do more is if the polls tell them, that more can be done. And if their advisors say, well, sir, doing that, ma'am, doing that is not gonna be expensive. Actually, it's the cheapest route, let's do that.

Tom Raftery: 30:54

Ray, if people would like to know more about yourself or any of the things we discussed on the podcast today, where would you have me direct them?

Prof Ray Wills: 31:02

Look, the simplest thing is just to put Prof Ray Wills into a Google engine, and I will inevitably fall out the other side, and I'm sorry for that, but I will.

Tom Raftery: 31:10

So the point I'm taking away is that the curves have already changed the risk. Capital decisions now have to catch up. Ray, that's been fantastic. Thanks a million for joining me on the podcast today.

Prof Ray Wills: 31:22

Thanks for having me. See you, Tom.