Michael Cembalest Does the Math on the Energy Transition

**Michael Cembalest** (0:04)
I'm just telling you, the facts on the ground are that we are in a linear transition and not what is often portrayed as a geometric one.

**Jason Bordoff** (0:13)
The energy conversation today is full of confidence and also confusion. We debate whether data centers are driving up power prices, whether solar plus storage can replace natural gas as baseload power, whether small modular reactors can become commercially viable, whether emerging technologies like geothermal or hydrogen and our carbon capture are real solutions or still mostly hype, and whether today's energy crisis in the Strait of Hormuz will accelerate a transition away from oil and gas. But underneath all those debates is a more basic question. Do we have the data, the evidence, the analytic clarity that is needed to understand where the energy world is actually headed? That's the focus of Michael Cembalest's latest annual energy paper from JP. Morgan. The report takes on some of the most contested claims in the energy world today. From the so-called primary energy fallacy, which can obscure how much useful energy renewables actually provide, to China's dominance of clean energy supply chains and the economics of electric vehicles or the role of demand response. Michael's work is a reminder that the energy transition is not just one story. It's a messy collision of climate ambition, energy security, industrial policy, technology, capital costs, and consumer behavior. And to make sense of it, we need to separate what's real from what's wishful thinking, what's material from what is marginal, and what the data show from what the headlines seem to suggest.
So where's the global energy system really headed today? Which technologies are gaining meaningful traction and which are not? What are the most common fallacies distorting the energy debate? And as electricity demand grows and costs rise and geopolitical competition intensifies, what should we be paying closer attention to?
This is Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University. I'm Jason Bordoff.
Today on the show, Michael Cembalest. Michael is Chairman of Market and Investment Strategy for JP. Morgan Asset Management. Prior to his current role, he was the Chief Investment Officer for JP. Morgan's Global Private Bank. Michael has spent his entire career at JP. Morgan joining the Securities Division in 1987 Michael joined me to discuss his 2026 Eye on the Market energy report, which takes a hard look at the state of the energy transition and the many battles shaping the energy world today. It was a wide-ranging conversation about what the data actually tell us and what they don't. I hope you enjoy it.
Michael Cembalest, great to have you for the first time on the podcast. Really good to see you again.

**Michael Cembalest** (2:59)
Thank you.

**Jason Bordoff** (2:59)
So I always want to talk to you about what is happening in the world, and we will no doubt do that. One of the immediate impetus for asking you to come on was, I think, many people in the energy world, but I don't know, maybe not as many as should be. Like myself, find your annual energy paper, must read, event of the year that we look forward to and spend enormous amounts of time consuming. So we're going to talk about what you put in that paper this year when it came out. I think that was back in March at this point.
But maybe you could just, for those who may not be aware of it, talk about what that paper is, how long you have been doing it. I know Vaclav Smil has been involved for a while. What are you trying to achieve with that paper?

**Michael Cembalest** (3:41)
Yeah, my day job is I'm the Chief Investment Officer in the Asset Management business here. And we deal with a lot of clients, institutional clients, individual clients. A lot of them are extremely knowledgeable in the industries they work in, whether it's real estate, pharmaceuticals, technology, healthcare, you name it. And I noticed about 20 years ago that one common feature of all these people is many of them knew a lot about their own sector and a couple of other ones, but didn't understand anything about energy. And I didn't understand much about energy.
And I would go out to Silicon Valley and people would play things like, well, we should just shut down all the fall plants tomorrow because that would provide a market signal to come up with a replacement. And I remember thinking, well, that's an interesting theory. And certainly it's played out that way during certain technological revolutions, energy may be different. So I started doing a deep dive on energy fundamentals. And 16 years ago, we wrote the first one. So this year was our 16th one. And each year we do cover more topics, more modeling. And for me, it's less about 2035 and 2050 projections. 20 people do that. And if you want them, you can get them. The EIA will give it to you, the IEA will give it to you, IRENA will give it to you, and BEHR will give it to you. There's an alphabet soup of people making projections of the future. What I'm trying to deliver is a forensic analysis of where we are and what will happen.