The Future of Energy – The Global Challenge – Jeremy Bentham, Shell

The energy system is at the beginning of an inevitable transition, which has a focus on renewable energy, energy efficiency and sustainable development. Transitions will occur more rapidly and look differently in some parts of the world than others. Driving the transition is a range of factors including growing prosperity, changes in resource availability, technology & cost developments, political imperatives, shifting social norms and ever increasing environmental concerns.

The two fundamental and strongest influences behind the energy system transition is a growing population and climate change.  There is broad acknowledgment and consensus that the world’s population is expected to grow to 9 billion people by 2050. In addition to this increase, more people will be coming out of poverty and having access to energy for the first time. This will be more so in emerging economies such as China and India, where people will want access to basic ‘luxuries’ that many high income countries enjoy such as electricity, a TV set, a fridge. According to The International Energy Agency (IEA), energy demand could double by 2050, from its baseline just a few years ago.

Following publication of a series of reports from the Intergovernmental Panel on Climate Change (IPCC) there is now significant consensus and not much debate over the scale of the problem and the impacts of climate change. If left alone, and not considered the impacts will be severe, irreversible and will include rising global warming, rising sea levels and acidity and extreme weather events such as floods and storms. The publications from the IPCC bring a necessary wake-up call. The IPCC warns that ’warming of the climate system is unequivocal and unprecedented, with emissions rising faster than ever before’.

Key questions that need to be asked are how are we going to tackle the rising growing energy demand and global warming? How do we build a sustainable energy future? How do we ensure we act now and swiftly before time runs out? The hard truth is that time is passing and CO2 emissions are accelerating.

There is little doubt that the impact of climate change on the environment, and on economies is of great concern to governments, civil society and to the private sector. However the debate is polarized on many fronts. For example one issue is that developing nations say high income countries, which have historically produced the most C02 since the Industrial Revolution, must do far more to cut emissions since they are responsible for climate change. Meanwhile high income countries are saying emerging economies, such as China have to accept both a cap on emissions and a reduction for real progress to actually occur.

The Future of Energy – Proposed Way Forward

Energy has unjustly become a dirty word and is thought of in very narrow terms, with images of bleak industrial landscapes and pollution filled cities. Yet in many under developed and third world countries, access to energy is the difference between prosperity and poverty, sickness and health, life and death. The benefits of energy cannot be forgotten or become obsolete, energy is the backbone of our prosperity and wellbeing, and you cannot have a functioning, efficient, modern economy without it.

The World Bank estimates, for example, that the growth of around ten million small and medium-sized businesses in Africa is hampered by the lack of available energy.

Ben van Beurden, Shell’s Chief Executive Officer, recently shared his strong views that the climate change debate needs to pragmatic, common sense thinking and broader, focused not only on reducing CO2 emissions, but on developing a low carbon, high energy future to ensure prosperity for all.

Discussion frequently focusses only on the need to reduce CO2 emissions and centers on policy levers and mechanisms to accelerate the shift from fossil fuels to other energy sources such as renewables. We are not addressing the urgent need for higher energy to drive prosperity. Far less discussion is devoted to the related, parallel and central imperative of securing sufficient additional energy to not only maintain current energy affluence for those who have it but also provide it for the 3 billion who live in energy poverty today and the additional billions yet to be born.

Many countries, such as China are entering into the phase of growth in which their energy consumption will surge, following the historical trend witnessed by richer countries in the past. We need to ensure the dialogue about the energy system is well informed and balanced, with greater understanding of the drivers and possibilities.

We are missing the necessary long-term global, regional and national policy frameworks – which may look different in different parts of the world- to guide and support building a cleaner, global energy system which is capable of meeting growing energy demand.  We need long term solutions, and we need to avoid knee-jerk late responses that create avoidable disruption and destroy value for society. It is unsurprising that thus far international climate policy negotiations have so far failed to deliver significant change.

To bring about a shift and to broaden the frame of discussion, pragmatic collaboration is needed, between government, society and industry at an unprecedented scale. Building a sustainable, low carbon energy system will involve a lot of effort by a lot of people, with realistic and achievable outcomes. Cross sector groups need to convene, and develop mutual understanding and move beyond the polarized debate. It will be a difficult task, but it is necessary and urgent. A positive step is that in late 2015 governments will converge at the 21st Conference of the Parties on Climate Change in Paris, to sign what is hoped will be a binding agreement to address climate change and reduce C02 emissions.

The Future of Energy – Impacts and Implications

The fact is that the world will need oil and gas to help meet rising energy demand well into the second half of this century, and beyond. In terms of practical solutions and for an informed debate we need to understand that not all fossil fuels are the same, and we should not use fossil fuels as an umbrella term. An extended period of co-evolution and co-existence with renewables and fossil fuels is likely as new energy infrastructures supplement or supplant old.

Natural gas emits half the CO2 emissions compared to coal, another fossil fuel, when used to generate power. As gas plants can be switched on and off in response to demand, these can help provide the essential back up, and be the back bone needed to accelerate deployment of intermittent energy sources, such as renewables. As the window on reducing emissions closes, switching out coal and replacing it with natural gas-fired plants is the single fastest way to slow emissions.

The reality is that there are also significant technological and economic obstacles, which need to be accounted for as part of an informed global warming discussion.  Historically new energy sources have taken around 30 years to establish even a 1% share of the market. The scale and cost of energy infrastructure is simply too large to have quick turnaround times. Renewables such as wind, solar and hydro, will play increasingly important roles, however currently the US Energy Information Administration estimates that 11% of today’s global energy comes from renewable energy sources. But it also estimates that, even by 2040, that number will have increased to only 15%. Shell’s Scenarios team, for its part, believes that figure could be as high as 25% by 2050. But that still leaves 75% of energy demand needing to be met by traditional sources like oil, gas and nuclear. We need to moderate our expectations of a zero-carbon future with the understanding that there are significant technological and economic obstacles. Therefore it is neither logical nor possible to underpin a low carbon, high energy future solution to renewables alone, especially in the short term.

A recently released report by the New Climate Economy finds that the economic costs of inaction are substantial, whereas the costs of taking action are relatively modest and delaying action significantly raises costs.  The report identifies the energy sector as significant from the perspective of both the economy and climate change. Being pragmatic also means recognising the fact that economic growth and action to tackle climate change are not mutually exclusive.

It sets ambitious goals for emissions reductions from renewable energy and energy efficiency measures.  For example, it recommends that, by 2030, all new generation capacity in high-income countries come from renewables or other zero-carbon sources and at least 25% of new power in fast-growing middle-income countries come from non-hydro renewables. However, the report recognises that fossil fuels will still continue to account for a significant share of the energy system between now and 2030, and beyond. The report identifies reducing coal use and increasing gas use as important ‘seeds of change’ for decarbonizing the energy system.  However, the report finds that natural gas is likely to provide net climate benefits only if it is backed by robust climate policy and environmental regulations.

The trend of urbanisation will also play a key role in the future of energy, and the energy transition. More than three quarters of the world’s population in 2050 are expected to be living in cities, and we will be building the equivalent of a new city of over 1.4 million people every week. Urbanisation can bring benefits, such as the opportunity for change at a local decentralized level, but if managed poorly can cause greater environmental degradation and accelerate global warming. There are many differences between cities. For example Houston will never be the same as Hong Kong, however compact, densely populated, well planned cities with effective integrated infrastructure and services are more resource- efficient. This is in part due to less energy per person in transport because people live closer to where they work, live and shop. Cities such as Houston, and other existing cities, will need to focus on retro-fitting and lowering the carbon intensity of their transport systems or buildings for example. New cities though, can be designed to be more resource efficient.

The Future of Energy – Conclusion

Change will need to happen on many fronts, from the energy supply mix to energy demand management. Optimism and swift collaborative action is needed to ensure a sustainable, clean global energy system that is capable of meeting growing energy demand and ensuring prosperity for all.