Megatrends: Transforming Energy
Megatrends and How to Survive Them is the title of our book published by Cambridge Scholars Publishing and available on Amazon.
This is one of a series of blogs based on the work we have done for the book. This blog is about Transforming Energy, which focuses on both the way it is used (and how much) and where the energy comes from. None of the trends that we discuss operate on their own – they are all part of a larger system. This trend, in particular, impacts (and is impacted by) several megatrends: Mobility and Economic Activity (as well as Population)impact the demand for electricity, Global Limits and Multi-polar Worldview are impacted by the shifts in where energy comes from.
There are major transformations underway in the global energy sector. Where we get our energy from is changing, becoming diversified, with renewable energy becoming a much larger part of the mix. This pushes decentralisation which in turn will force the business models in the sector to transform.
The use of renewable energy will increase as the costs for its production come down. This leads to the cost of electricity, rather than the price of oil, becoming the key measure of energy costs.
As increasing numbers of people become middle class (using Hans Rosling’s four levels, levels 3 and 4, numbering roughly 3 billion people), the demand for energy rises. Not just in order to produce and transport the goods that people aspire to buy, but also to allow them to exercise their choice to travel. This means that the demand for transport (of goods and people) rises from where we are today.
Changes in the pattern of where energy is sourced (and what energy is sourced) will undoubtedly affect global politics and Multi-polar Worldview.
Diversification of energy mix
The mix of fuels used to supply electricity is becoming decarbonised as it diversifies. Coal powered electricity plants are being taken off-line in the OECD and China is slowing growth of coal powered plants. In the global North, nuclear power is in decline in most countries due to costs of production and safety issues, as well as aging plants nearing the end of their life. But in other parts of the world, investment is large and ongoing (see figure below).
Electricity production from natural gas is projected (in the figure below) to reduce very slightly out to 2040. Coal powered plants are being replaced by wind and solar energy: these sources are not always available and currently the ability to store electricity is limited.
Demand for energy
Demand keeps rising as we find more ways to use energy. While the requirement of liquid fuel for use in each internal combustion engine is decreasing (as engines become more efficient and there is a shift to other types of engine), the number of devices is increasing. The number of vehicles will increase as more and more people wish to travel and as more goods are required by increasing numbers of middle class. This will keep the demand for liquid fuel at about the same level as it is now.
There will also be increased demand from the Internet of Things (Connected World) and The Next Technology Revolution. Overall this means that the demand for energy will increase, perhaps substantially.
If we continue to diversify our energy sources, a new model will emerge to utilise these diverse sources and it is likely to contribute to a re-distribution of the current economic/political power among countries. As we said in the blog on Multi-polar Worldview, power follows the money. It may cause an economic downturn in areas that export oil. It may cause variations in pricing due to the intermittent nature of renewables. It paves the way for disruptive technology and new business models
Some questions that might be useful for you to explore:
- How will your business model need to change if the energy distribution model or pricing changes?
- Will you produce your own energy and/or buy it in?
- How will your products need to change to take advantage of the transformation of energy?
- What opportunities might the distributed energy production model offer you in community engagement?
Some interesting articles in this area:
- Energy mix in Europe to 2040 (source of figure above)
- New way to store energy
- Outlook for self-generation of electricity
- Nuclear energy statistics around the world
We live in interesting times!
Written by Patricia Lustig, SAMI Associate and MD, LASA Insight, and Gill Ringland, SAMI Emeritus Fellow and Director, Ethical Reading.
The views expressed are those of the authors and not necessarily of SAMI Consulting.
SAMI Consulting was founded in 1989 by Shell and St Andrews University. They have undertaken scenario planning projects for a wide range of UK and international organisations. Their core skill is providing the link between futures research and strategy.
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