The last 250 years have been characterised by multiple transformations of the global energy system. Each of these transformations - from biofuels to coal, and then coal to oil and gas and now from fossil fuels to renewables - were caused by a combination of the discovery of new resources, technological innovation, economic factors. Given the enormity of the changes in the past, they led to economic, social, and geopolitical shifts in the world. The shift to the current range of alternative energy sources is introducing far-reaching changes too, but it is uncertain if the current suite of energy solutions is of the magnitude that oil and gas were for coal and steam-based industries and the great political powers of their day.
Certain transitions have the potential to (i) drive greater power for those that master them and for early movers provide important economic, military, and political leverage, (ii) drive value creation and growth through trade and new industries that result in surplus wealth and job creation and (iii) drive long-lasting changes in the world order by altering the relative power and relationships between countries.
The on-going energy transition away from fossil fuels has several characteristics that suggest that it is the beginning of an inexorable and transformational shift for several reasons. Firstly, the primary impetus to the transition comes from the existential threat of global warming. Secondly, the transition is already having a high impact on behaviours, altering patterns of both consumption and production, reshaping domestic and international policy, standards, and regulations, and is starting to change the criteria for investment decisions in the biggest and most advanced economies and therefore is set to change the flow of capital between projects, companies, sectors and industries and countries. Thirdly, and importantly, these changes are spurring the search for new technologies and energy breakthroughs that could either accelerate the transition or completely change the nature of the energy basis of the world system.
The global energy transition is playing out within the broader transition from the Industrial to the Information Age which has been accelerated by the changes to the use of technology and remote working brought about by the pandemic during isolation. This period of isolation has forced a new model of consumerism on the world. It is one that is still information but it is already clear that it is changing the old industrial model based on mass urbanisation, physical retail, and global supply chains and multinational industries that made and supplied products and services for a high touch world. The pandemic therefore has the potential to be an inflection point for both the energy and information transitions and mark a time between a carbon energy-based past and a potentially very different future.
This month’s Sign of the Times is a simple one. It draws on ten pieces of analysis to tell a story, there are many to tell, of the dramatic global energy transition underway that are a sign of our times and augur in a brave new world.
The Global Energy Transition Story
The existential threat of climate change is in turn driving a rapid shift in the nature of the global energy system, and the underlying pattern of supply, demand, and efficiency, which together have the potential to balance the world’s growth and development imperatives with its energy needs.
Looking ahead, while the transformation of the energy system has resulted in renewables emerging as a commercially attractive source of energy at scale (at the cost of oil), the path to a net zero emissions future is still a long one with significant investment and effort required over the next thirty years, estimated at US$120 trillion4.
Implications for the World
The Key Shifts Emerging from the Global Energy Transition
The past decade has seen alignment around the need for a new global energy system and over the next few decades, this transition to renewables is expected to accelerate, with a profound impact on the world, driving changes in policy, industry, financial systems, human behaviour, and geopolitics. There are five key shifts underlying the current Global Energy Transition and this will only be completed once a transformational energy source is established as its base which will have far-reaching impacts beyond previous energy transitions given a world population of c10 billion by 2050, four powers in the US, China, EU and India expected to be vying for power and economics in this world, while others aspire to travel and populate outer space and other planets in Space X, Blue Origin and Virgin Galactic.
Conclusions
The current transition away from fossil fuels and towards renewables has helped slow, for now, the pace of global carbon emissions.
While renewables have emerged as a commercially viable source of energy, the current technologies do not add a key ingredient, the enhanced functionality to enable a more advanced civilisation to emerge from the industrial age. As such, they cannot be the basis of a planet which will soon need to provide energy to 10 billion people and do so in a form that is clean, abundant and near free. And so if we rely on the current energy renewables, it will be a long and painful journey to transition the world away from carbon.
More importantly, the current energy alternatives do not enable people to realise their aspirations in terms of a “ decent life” they cannot be the basis of meeting the SDG goals to 2030 raising people out of poverty and into prosperity, and they cannot be the basis of the next stage of mankind’s goals beyond the planet.
Despite the aspirations of private sector space programmes to source from other planets, at this stage, we cannot go beyond the planet to access such resources and bring them back at an economic price. This adventure also requires a dramatically more functional energy source at a near free cost to enable this. So, in the meantime, the current competitive model of economics is likely set to plunder, and asset strip the planet while the world economy transitions with low/same functional alternative energies.
Developing countries are set to have approximately 50% of the world’s 10 billion people by 2050[ Source: UN Population Database] and therefore the priorities of developed and developing nations are unlikely to be aligned without sharing energy and that is not yet on the cards. This implies that the world is unlikely to realise its target of net zero emissions by 2050.
As such, despite the many policy changes and multi-trillion-dollar commitments made by governments, and the private sector to date, the next thirty years will require a different pact across the world. This will be one where, in recognition of the inherent interdependency of poor and rich nations, countries and transnational institutions and the private sector work together to invest in technology, capital, and resources to develop breakthrough technologies that help generate the quantum of clean energy in abundance and at a cost then share it to facilitate equitable growth across the world.
However, in history, every breakthrough in resources and energies has led to the emergence of competitive power politics between nations, and this time may well be no different. The countries that can fund and own breakthrough clean energy technologies will emerge as the next industrial and financial superpowers and drive the economic and geopolitical agenda of the new world order.
The new world order is yet to be forged; we have merely begun the transition to it. Energy is one of the most important keys to it. And a competitive approach to its development and distribution has been the way in history. This approach is unlikely to lead to a cleaner and more peaceful world. Importantly, not doing it well may well threaten the ecosystem of the world and make being the most powerful of peoples irrelevant. So, this time could be different. World leaders need to urgently start to discuss this huge gap in the plan – the funding of survival, the transition and the future - rather than become too excited by the enormous but insufficient efforts in play today. This transition is clearly our common challenge.
