Cheeky stuff when utilities attack new suppliers’ free market access, although it shouldn’t be surprising. I have been interested for some time in how big energy companies (from utilities to the fossil fuel industry suppliers) will attempt to liquidate assets that don’t really have another use. If what we now face really is a rapidly decarbonizing economy — obviously I hope for it, but I don’t think we’ll know until the pandemic disruption is past — big energy companies will need to adapt to it. Just how they do depends on a few things.
First, it will depend on how expectations for energy change in the developed world, and what expectations arise in the developing world. It is very hard for me to imagine that our future society will accept (on average) a significant reduction in energy production. There are many reasons for this, but for the moment let’s just accept that per capita energy consumption is likely to rise in the future for the vast majority of people on Earth. (This is technically because the majority of population growth will happen in the developing world where present per capita energy consumption is low. There have been slow declines in some developed countries over the last decade or so, thanks to more efficient technologies there, which make hardly a dent in the final number.) For a low-growth, sustainability focused track for socioeconomic development (i.e., SSP1*), we won’t see an enormous growth in demand in developed countries with highly diversified energy sectors, but we can expect high growth in the developing world, particularly in West Africa, South Asia and Latin America. (Any growth in the developed world will probably lean away from carbon-emitting sources.)
Because of their access to capital, expertise, and relationships with regulators and so on, big energy companies should be better positioned than most to lead our transformation to low carbon alternative energy sources. Obviously it’s hard to do this while simultaneously selling fossil fuels to the same customers. Instead, they could decide to sell “transformed” versions of themselves in climate-woke parts of the United States, like advanced geothermal in California, for instance, and re-imagined fossil fuels elsewhere, such as compressed natural gas in Florida. (In fact, this appears to be the Chinese model: apply strict emissions standards at home, but build coal power plants supplied by Chinese coal producers in low-income countries abroad.) On the strategic level, it seems that energy producers will ultimately divest from fossil fuels, but unload their increasingly toxic assets in the developing world. Hence, it is the dual pressures of rapidly increasing demand for energy in the developing world, and big energy’s urgency to dump outmoded technologies, assets, and carbon-emitting fuels, that concerns me.
Second, it will depend on whether wealthy countries are willing to donate zero-emissions energy technologies to overwhelmingly poor countries. While the very idea drives some people nuts, it deserves consideration for purely economic reasons. This is because (provided the most up to date carbon accounting is correct), permitting fossil fuel-based development in Sub-Saharan Africa and Asia will necessitate the deployment of negative emissions technologies (NETs) on a massive scale. This could be more expensive (particularly because mature technologies don’t yet exist) and, worse, enormously disruptive — politically and economically — to food production and land-use systems (because of increased demands on forest land from NETs like BECCS, i.e., bio-energy carbon-capture and storage).
An additional detail to the second point is what kinds of zero-emissions tech we will permit to be distributed. I am really interested in the rapid development of so-called advanced small modular nuclear reactors (SMRs). I am a bit surprised that so little is said about them in popular culture. In principle, they are easy to build with off-the-shelf components, and radioactive fuel of course; and, in principle, they can be built without any of the features that failed in previous nuclear disasters — I’ll define this as “safe”. There are obvious security considerations for mishandling their fuel and waste, but seem manageable. Most important, with SMRs under mature development in the Russian Federation, China, and the United States, it seems like the cat is very nearly out of the bag. In short, soon the difference between willingness and permission with respect to SMRs could little matter.
Third, it remains to be proven whether it is even possible for alternatives like solar, wind, and biofuels (ethanol and biodiesel) to be scaled up fast enough to meet near-future demand. Many developed countries are putting forth plans to decarbonize their energy systems by 2050. Commonly this means net-zero carbon emissions from fossil fuels by 2050, with the balance being made up by negative emissions. (For my own IEP research, I am digging into the rate at which new solar can be practically brought on line. It’s not straightforward.) In the US, coal production (shown below) has cratered over the past 10 years, but it has been replaced in large part by gas.
I remain interested in how the energy system, from producers to utilities that operate grids, will respond to decarbonization and democratization. Obviously they will not want to be caught with worthless stranded assets that cost trillions to accumulate; and so they can be expected to try and unload these quickly. What suckers will buy them?
*For information on the SSPs (shared socioeconomic pathways) and how they are used in climate scenario planning, see the nice write-up here, and for more detail the open-access summary by Riahi et al. (2017) and original concept paper by O’Neill et al. (2012).
Image: the least relevant one I could find, just for fun — my dog polishing the inside of a peanut butter jar.