Global Natural Resources Conclave (GNRC)

GNRC Perspective: 3 key questions on the future of our energy system

When we plug an appliance into a wall socket or fill our cars with petrol, we probably don’t stop to reflect on the remarkable changes in energy technology over the past century that have made this possible. Energy in the coming decades will look very different. But how?

The concept of the “energy triangle” is now well known. One side of the triangle: the energy system must deliver access to safe, secure and reliable energy. Another side: the price must be affordable. The final side: the environmental impact should be sustainable. A modern energy system must deliver on all the three dimensions.

The energy system that evolved during the last century has largely achieved its primary goal of enabling substantial economic growth. However, the triangle is out of balance for different reasons in different places. For about two billion people, access to progressive energy solutions is still not available. In several geographies across the globe, affordability is still an unresolved issue. And in most countries the environmental impact is beyond what we can sustain, especially as world population heads towards a projected nine billion people.

The effort we are now putting into developing energy technologies is typically directed at least as much at reducing environmental impact as improving affordability and access. Renewables and electric vehicles, in particular, offer an opportunity to strengthen the third side of the triangle.

However, in thinking holistically about how we want our future energy system to look, we need to look beyond the energy triangle at another set of three critical considerations.

First, what will be the social impact of future changes in the energy sector?

Part of this question is related to affordability. New technologies for distributed energy generation – along with new financial models to reduce the risks of investing in them – could finally bring cheaper, cleaner energy within the reach of everyone on the planet.

The changing nature of jobs in the energy sector will also bring about social transformations. As with many sectors, we can expect automation to put some people out of work.

But higher-skilled jobs should also be created – for example, in programming and operating more intelligent energy systems. These new jobs should also offer better health and safety: remotely supervising robots as they perform dangerous tasks that were previously done by humans.

The location of jobs in the energy sector is changing. This reflects changes within specific sectors – for example, as the balance of oil production becomes more spread out around the world, jobs are being created beyond traditional regions. Meanwhile, deployment of renewable forms of energy is enabling local job creation in the many geographies where the new installations are being built and maintained.

It will also reflect the battle for competitive advantage in emerging sectors. China has already established a lead on solar production, and the race is on to become the global leader in battery technology that will enable grids to make more use of renewables.

Alongside global shifts in job creation will come the second critical consideration – differing financial impacts around the globe.

Initiatives like Saudi Vision 2030 reflect how oil-producing countries have recently appreciated the urgency of reducing their budget dependency on energy revenues. The trend towards there being more sources of energy in more places around the world looks likely to continue.

It is not only governments of energy-producing countries that will have to rethink their budgets, though. Some OECD countries bring in more tax revenue by taxing sales of petrol at the pump than OPEC countries make from producing the petrol. As electric vehicles take over from petrol-powered cars, these governments will need to adapt.

Finally, future changes in the energy sector will be inextricably bound up with broader advances in the Fourth Industrial Revolution – the convergence of rapidly-advancing technologies that are blurring the lines between the physical, digital and biological spheres, from automation to artificial intelligence, from big data to biotech.

Bringing reliable, affordable energy to poorer and more remote regions is a necessary step towards closing the digital divide – which, in turn, will offer opportunities for those regions to leapfrog to the newest, digital-enabled technologies.

The opposite is also true – the rolling out of new technologies to poorer areas will be needed to achieve 100% coverage of reliable, affordable energy.

The future energy system should, therefore, become a key enabler of a society conducive to inclusive and equitable economic and social growth.

Much depends on what policies are pursued by China and India.

Currently, about two-thirds of power in China still comes from coal. If the big emerging markets prioritize coal power for future development, they will address two sides of the energy triangle – affordability and access – but at the expense of environmental sustainability.

In India, key questions the country is addressing include what role will private-public collaboration play at the national and international level, the desired destination of this energy transition - starting from the key elements of universal energy access and reliability of supply – and how to manage the costs and opportunities of the transition as outlined above.

Cleaner technologies will become more competitive the more they are embraced by the biggest, fastest-growing energy markets, as recent falls in solar costs have demonstrated.

As the Fourth Industrial Revolution creates faster change and more risks and opportunities, the future of the energy system is more open than ever before to being shaped. That will require farseeing collaborations between the public and private sectors.

The Global Energy Architecture Performance Index 2017 is available here.

This article was originally published on World Economic Forum.

Entry by invitation only