The Collaborative Storm: Energy Transition, Poverty & Market Share
John Tranfield
B.Eng-Phys-Math | MBA | GAICD | PMP | CPEng | WSET I II | H? Researcher
The psychology surrounding taking pleasure in others misfortune is a well-studied area, it has even been given the name “Schadenfreude”. This emotion is very common, and partly based on an evolved process within human nature, being social status. For millions of years humans have worked to increase their social status, however this works in a relative way. I.e., another was of increasing your relative status is when other individuals lower theirs. [1] ?At first, we wish people the best and we watch them grind for years trying to make it. It’s not until their hard work develops into success, we get jealous, and to quote Mark Burnett, what is worse, this sabotage comes from within “your own social class”.
Recently I have been reading more social commentary regarding energy sources, exploitation, distribution and consumption, and as you read more you develop an understanding the complex relationships in play. You hear about the many ‘new’ ?technologies for each value chain component across each of the differing energy sources, an encouraging sign for continued energy growth. However, as I continued to read a distinct pattern began to emerge. Amongst different stakeholders in the energy industry there were countless articles of internal sabotage between one sector and another. Interestingly and potentially surprisingly, this is not limited to fossil fuels verses renewables, in fact most of the social media sabotage was internally within the renewables sector, between the different technological groups / energy source groups. Interesting!
Taking a step back, and looking at the macro energy goal, I feel safe in saying that this is (or at least should be) the secure, accessible, affordable, reliable availability of energy to support continued local development.
Energy poverty (a level of energy consumption unable to meet certain basic needs [2]) is officially defined as the absence of sufficient choice in accessing adequate, affordable, reliable, high-quality, safe and environmentally benign energy services to support economic and human development [3].?
Figure 1: Regional Distribution of Energy Poverty. Source: IEA, International Energy Agency,?Paris?(2012), 2013 [4]
Energy poverty although a very large, significant and separate issue within itself, is connected with the development of energy technology, and most certainly its successful commercial deployment. But globally, we don’t choose a single technology to improve energy poverty. Many technologies, across different sectors have the ability change the current situation.
Individuals deploying their superfund savings, do not invest in a single company. That would be way to risky, and go against every economist, accountant and financial advisor I have ever spoken to. In fact, it is mathematically proven, in order to reduce the unsystematic risk (company specific risk) to acceptable levels, one must invest in 21 or more companies. This spreads the risk, to the point where negative company specific news, will be offset by the companies in your portfolio (on average).
So, we don’t do it with our own investments, so why should we do it with energy investments, sector development and associated research and development. So why do we continue to sabotage technological advances within other industries. Global energy requirements are not reducing, in fact they are tipped to increase by over 4% in 2022. As a group we should be championing new technology, and supportive of energy development, if nothing else to support the supply of energy globally. Keeping in mind, the longer-term energy transition target.
Internal standardisation has long been a way of improving internal efficiency, this has been proven many times in practice, and having completed this exercise myself the savings can me significant (~$20M over the year). But what if we standardise cross company within the same sector, we can improve this efficiency another order of magnitude. Now what if we integrate cross industry, with the goal of truly integrating energy technology as it is today but taking the next step and embracing change.
“Maintaining fluidity within a strategy, is a strategy within itself”
whether this be at company, industry, sector, regional or national level.
Integrating knowledge to the advantage of the masses is not a new concept and is discussed here in the introduction of the collaborative emergent and SAIL strategy. [5] please see the full concept here https://doi.org/10.1093/ce/zkab032
Figure 2: Collaborative Emergent Strategy. Source: https://doi.org/10.1093/ce/zkab032
Where SAIL stands for.
This strategy draws on the collective to innovate, iterate, experiment, review and learn [6], producing value co-creation for the benefit of the participants within the collaborative environment allowing systems to learn faster than the competition, sustaining any competitive advantages [7].
Change, however, is sometimes not the easiest concept to embrace. ?We all know individuals who have anxiety or struggle with change. Often this is the result of their individual perception to change, it is never always a pleasant experience. Perhaps, comfort can be taken by noting change is often not a result of a single event, but rather gradual, over time [8].
Bringing this full circle, we cannot hope to solve issues of global importance, like energy poverty, without change, and clearly by figure 1, change is needed. As the Nobel prize winner of 1925 (Literature) George Bernard Shaw wrote.
“Progress is impossible without change; and those who cannot change their minds cannot change anything”
So how has change helped in the past, and how has technological advances assisted in ?energy security, supply and accessibility. Below is an image of the energy consumption by source since 1800. Up until 1860 biomass provided the majority of global energy, when coal made its way onto the energy stage, gradually increasing in usage all the way into the 2000’s. Oil, gas made a splash on the stage in the 1950’s and continues to increase supply.?
The oil and gas industry has single handed, provided the biggest increase in the global access to energy. The human development index, life expectancy and GDP of a nation are all proportionate to energy consumption [9].
Combining all other energy sectors would still not supply the same amount of energy as the contribution the oil and gas energy sector supplies today. No other industry has directly affected the standard of living, provided employment, or allowed for the significant economic growth through globalisation. Every product you can buy today, is available to you because of the oil and gas industry. Your fruit and veggies, tv’s, shoes, food, surfboards, hats, even your battery powered cars are available because of the oil and gas industry. In addition, there is no other industry as important in the successful transition to low carbon energy. No other industry will spend more investment capital on the transition and associated technological development. It is negligent to believe that the reliance on oil and gas will disappear over the next few decades and for those that say otherwise are inviting an increase in energy poverty, over the short term.
However, this does not mean that one cannot, source different pathways to obtain energy, and this should be encouraged, not encountered with negative commentary from energy industry stakeholders. Skipping the years where traditional biomass supplied almost 100% of global energy needs, brings us to 1859, where Edwin Drake drilled the first commercial crude oil well in the US. At the time this new technology drilled 21.2m to successfully intercept oil and this became the first commercial crude production. Today, after ‘trillions’ of capital investments, technological advances and industry change we can drill in over 3,000m water depth, for over 6km, and intercept a target within centimetres (That is accuracy of centimetres, from 9km). That is some change in capability!?
Figure 4: Edwin Drake, at the site of the first commercially drilled crude oil well. Image: https://www.britannica.com/biography/Edwin-Laurentine-Drake
Technological advances don’t stop with the oil and gas industry. Since the late 1970’s the cost of solar PV has reduced from greater than $100/W to just $0.20/W in 2020. That is a 99.8% reduction in price in just 50 years. In addition to the cost reduction, efficiency has increased dramatically from ~15% in 1970, 18.8% in 2000, to ~35% currently today [10]
Figure 5: Solar PV module prices since 1976 Image: https://ourworldindata.org/grapher/solar-pv-prices
More recently, similar technological advances have been occurring with hydrogen, the world’s most abundant element, blessed with the highest energy content per unit mass, and produces nothing but water during combustion. To date over 99% of todays hydrogen is produced from technologies that are carbon intensive, making hydrogen anything but green however technologies exist to produce green, or even ‘carbon negative’ hydrogen.
Hydrogen has the potential to help decarbonise some of the most carbon intensive industries. Economically, hydrogen is price competitive in today’s environment in industries like the steel industry and some others (in certain situations). Remembering ‘green’ hydrogen technologies are in their early stages of development as a fuel and energy source this is some feat. This is ~50 years development behind solar and ~150 years behind oil and gas.
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Hydrogen is one of the very few industries that offers the ability to produce carbon negative fuel and energy (along with nuclear and biomass). Not solar, batteries or combinations of such can make that claim. Early-stage technologies have the potential to remove 5 kg CO2 or more for every kg of H2 produced.
NOTE: Personal belief is that nuclear as a clean energy is highly under rated, potentially the best solution to a lot of energy related problems, however the fact that it is probably political suicide it has not received the attention it deserves.?
In conclusion
So, what was the big energy picture? The ability to collaborate as an ‘energy industry’ to ensure everyone has sufficient choice in accessing adequate, affordable, reliable, high-quality, safe and environmentally benign energy services to support economic and human development [3]. With a key word in this definition being environmentally benign.
The energy transition is here, the change in the distribution of energy source consumption and the positive environmental effect carbon neutral energy would have, or even its need not only now but in the future is na?ve, or strategically negligent over a long period. Each energy bearing industry has a position and duty within the current global environment, to assist in the transition whilst as a race we continuously work to improve global energy poverty.
Regions, nations, producers and users all have a role to play. This article is not about climate change, but for those that deny its existence or resist the need for change, technology will see to it, that you do it kicking and screaming anyway. Oil and gas isn’t going away any time soon, if ever, but the continued development of the solar, battery and hydrogen sectors has only just begun. This ‘change’ is not a reason for anxiety, but an opportunity for collaboration in an emergent energy economy. Embrace change, champion the energy industries wins, as the one thing that will continue to change is technology.
“The measure of intelligence is the ability to change”
Albert Einstein
About the Author
John Tranfield has 15+ years experience in the Petroleum Industry currently researching emerging energy sectors including hydrogen, the hydrogen economy, production technologies and business strategies to exploit emerging industries.
REFERENCES
[2] Mikel González-Eguino, Energy poverty: An overview, Renewable and Sustainable Energy Reviews, Volume 47, 2015, Pages 377-385
[3] Reddy, A. Energy and social issues. In: World Energy Council and UNEP, editors. Energy and the challenge of sustainability. New York, NY; 2000.
[4] IEA International Energy Agency, Paris (2012) 2013
[5] John Tranfield, The micro–meso–macro architecture of a proposed collaborative emergent strategy for the hydrogen market, Clean Energy, Volume 5, Issue 4, December 2021, Pages 634–643, https://doi.org/10.1093/ce/zkab032
[6] Nyaga GN, Lynch DF, Marshall D, et al.?Power asymmetry, adaptation and collaboration in dyadic relationships involving a powerful partner. Journal of Supply Chain Management, 2013, 49:42–65.
[7] Senge PM, Kleiner A, Roberts C, et al.?The Fifth Discipline Fieldbook—Strategies and Tools for Building a Learning Organization. London: Currency, Doubleday, 1994.
[9] Mikel González-Eguino, Energy poverty: An overview, Renewable and Sustainable Energy Reviews, Volume 47, 2015