Energy Innovation – part 2

I think a large part of what energy innovation involves is changing our habits as much as coming up with the tech that can meet our demands. And we probably need to be incentivised and shown why we should change. This is why fresh visionaries are needed and why the major oil and gas companies are unlikely to be the ones that lead the charge. They may have a part to play in scaling and reaching markets due to their size and internationalism, but even this may not be necessary with the availability of financing today. It may even be prudent to see this as a totally new industry.

The issue is also much larger than simply talking about renewables. We need to look into aforementioned habits, battery technology and distribution networks. It is a long list but does show there is much opportunity in the energy sector.

Kicking the habit

I’ll start with our habits. There is currently a big push via the likes of Tesla to go towards electric cars as well as experimentations in self driving vehicles. Transportation is a good place to start – more than half the world’s oil goes in transportation (using numbers from here and another source which I must confess I can’t refind). Our current usage of cars is very much driven by price at the pump and whether we’re in jobs (especially in the US). The early adopters for electric vehicles may understand the issues and crucially can afford the costs of climate change, but how do we get the general population to switch?

Unfortunately there is no easy answer and we need to get battery tech much more affordable to be competitive with gasoline vehicles. There’s a whole analysis in the Economist showing how prices between energy (electric) and oil need to play out for the overall battery costs to be competitive. And the scenarios show this will be very tough to achieve. In the end people will switch because it is easy and affordable to do so. This will likely only happen if governments incentivise buying electric vehicles or levy carbon taxes. And we have to question if subsidies are the answer – it is open to so much abuse, but can we leave it to market forces to get the job done? Whatever way you see it , we need creative solutions if we want to meet that 2°C climate target.

Can Governments get the job done?

Cars are only one habit we need to change. The way we consume energy in general will have to be reexamined. A big question is how you encourage ‘developing’ countries (i.e. China and India) to change? The best argument is to show how quality of life is suffering due to increase in smog and pollution. The adverse effects could be long lasting on the population. I think China at least recognises this and have indicated to try and push the 2°C target. Given the more top down law making the country runs on, it will be very interesting to see how the Chinese Government pushes this agenda through. It may even be the case that they lead the way for other countries to follow.

However relying on governments to get the job done outside of policy setting is risky business. In an era where entrepreneurial instincts are at a high, there will be creative individuals who take a novel approach to tackling the problems at hand. From a pure economic perspective there is probably a huge amount of money to be made. I said earlier, innovation will arrive in the form of changing our habits; ecosystems that enable smarter use of technology (think smart cities) and more efficient on-demand solutions.

I want it later, not now

Storage and satisfying demand  is still the biggest drawbacks with renewables – we may have solved with say solar on how to build large scale economically, but how do you deliver the electricity to the people who want it when they want. Distribution and storage have now become a dilemma which is something the tech industry can sink its teeth into. Lowering costs will enable growth, adoption and final acceptance.

This essay shows the path for energy transformation is far from straightforward. I’ve picked out a few themes that innovation efforts will likely be concentrated on – renewables, habits, battery technology and distribution. What should be clear is if we truly believe in limiting the global increase in temperature to ‘well below 2°C’ there is a lot to be done and not a lot of time to achieve it all. Collaboration from all stakeholders is a requirement with some parties needing to sacrifice self interest in order to be successful. If anything has been shown from our greed of oil over the past century is that countries will do a lot to secure their energy needs, including going to war. Can anyone play that leading role?

This is no doubt a subject I will be returning back to over the course of the year. In the meantime I know there are readers out there who are more involved in the industry, so please leave me your thoughts in the comments section and if there are any specific subjects I should be exploring!

J

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