People usually call upon an expert for advice about the future—whether that is about investing their money, deciding on a vacation spot, which school or discipline to pursue, or what industry career they should prepare for. That advice is usually pretty sound when things are stable, when the past is a pretty good predictor of the future. But, in a time of dislocation and rapid change, the knowledge and experience of that expert may not be that valuable or relevant.
There is a lot of talk these days about transitions. Sometimes, I wish history would slow down to let most of us catch up. The headwinds and the tailwinds are both blowing pretty strong, and it is hard to stay on the road at times. There are technology transitions (digitization and digital transformation) going on. There is talk about Industry 4.0, when many parts of the world are still trying to get to Industry 3.0. There are demographic (The Big Crew Change) and cultural transitions in the workforce and in society at large with a new generation with new ideas taking over from my generation. I have lost track. Are we in Generation Z or Millennials or what are we calling the next generation these days? All I know is that my generation is getting assigned a seat at the back of the room.
Public health pandemics and climate change can’t be ignored. Economic recessions of very large magnitude can’t be ignored either. But, the one I want to focus on in this column is the so-called “energy transition.” Although, to be fair, all of these transitions get mixed up into one pot and each affects the others.
Environmentalist are talking about an energy transition to a new green-energy world, a net-neutral carbon-zero world to mitigate the effects of climate change, and predict that we don’t have much time to get there. The oil and gas industry has started to talk about sustainability and the use of natural gas as a bridge fuel between coal for power generation (electricity is the new target) and renewables. All but the crustiest oilman can probably get that direction. Even SPE has its Gaia initiative under its Health, Safety, Environment, and Sustainability technical committee. And, while several European oil and gas majors are rebranding themselves as international energy companies (IECs) instead of international oil companies (IOCs), my question is: How long should a transition take, especially with something as central as the role of fossil fuels in the energy mix of our society.
The facts say that, despite the rapidly growing role of renewables, fossil fuels are responsible for 75–80% or the world’s energy production right now. In some places, countries are still building coal-fired power plants. But here is where the challenge lies. Many existing energy experts suggest that, by 2050, the world will still depend on fossil fuels for a significant majority of energy production, while many politicians and activists cry out for carbon-free long before then. Here, the experts are looking to the past to predict the future.
I am not debating the role of fossil fuels in climate change. It has both provided affordable energy to lift billions out of poverty and created unimaginable wealth as well as significantly contributed to rising greenhouse gas in the atmosphere. I believe the data from environmental studies. The impact is real, and we have to do something about it.
Let’s stop arguing about the science and start talking about what we need do during this transition. This is a question for the oil companies as well as the politicians. This is a question of engineering and economics as well as policy and environmental studies. Can there be a common ground, an agreed path to a new energy economy, or will we stay shouting at each other and calling each other names while not only the temperature rises but many people are trapped in poverty?
In my experience, answers to complex questions are often found in the middle between two extremes. But compromise has gone out of style. You don’t get elected anymore by appealing to the middle. You don’t get on TV talk shows by appealing to the middle and common sense. You don’t win market share by working with your competitors on common standards. All this verbal sparring may get your heart rate up, but it rarely finds creative and practical solutions.
Both sides need to give some ground, and both sides need to agree on some common objectives. The oil side needs to get out of denial. It needs to clean up its act in many places. It needs to invest in something it already has the skills to do such as carbon sequestration and reducing methane emissions from natural gas production. The green side needs to answer the economic question of how we, as a society, are going to pay for this transition and the employment question of how to transition hundreds of thousands of workers to these promised new green jobs, many of which pay a lot less than a petroleum or drilling engineer. And both sides need to remember to address those on the other side of the energy divide who still don’t have reliable, affordable electricity and can’t afford to pay their bills as it is.
Every journalist will easily quote you the dramatic decline in fossil fuel demand because of the COVID-19 virus, but few will go further and discuss that 2020 will see that global growth in new renewable energy capacity will experience its first annual decline in 20 years this year amid the coronavirus pandemic according to the International Energy Agency. The world is set to build fewer wind turbines, solar plants, and other installations that produce renewable electricity this year as energy demand has been reduced across commercial and industrial sectors and logistics issues delay projects.
Growth for 2020 and 2021 combined is expected to be 10% lower than the IEA had previously forecast before the coronavirus outbreak. Almost all mature markets are affected by downward revisions, except the United States, where investors are rushing to finish projects before tax credits expire.
To sort this, out we need to look at the big picture. The really big picture. While Denmark (population of 5.82 million, about the size of the state of Colorado) is fossil fuel free, and they are counting the days in Britain since they last needed to turn on their coal-fired power plants; there are about 1.1 billion people in the world living without reliable electricity. We could focus new energy sources on this vulnerable population, but they can’t pay for it. So who is going to cover the bill?
My dream would be that we all get together and bring each of our skills and resources (energy companies; NGOs; economists; engineers; scientists; environmental activists; renewable energy firms; and, yes, even a few politicians/lawyers, but not too many) and develop an all-of-the above energy transition strategy with the aim of carbon-neutral, sustainable, affordable energy as soon as practical. With practical being a modifier on urgent. We have to do more than stand behind a podium and state energy is a human right. Of course it is, but how you get there is the challenge. But I am a realist and don’t think that will probably happen.
We are good at name-calling. The energy transition has become yet another divisive issue. Line up on your side and start slinging mud at the other side. Get ready, set, sling. Meanwhile, the planet gets hotter and the poor still don’t have the energy they need to get out of poverty. All the bad consequences are starting to happen (wild fires, pandemics, weak health systems, stronger hurricanes, melting ice caps, growing wealth divide, etc., etc.). This would be a big challenge even if we were all pulling in the same direction, but we are not.
So now down to my specific challenge. What do I tell the young engineering student about the future of oil and gas? Should he or she (I wish there were more women in the industry) pursue a degree in petroleum engineering or Earth science? Or should they follow the longer line at the enrollment table (virtual these days) for computer science and law? We need those young engineers to help solve the problems of more sustainable fossil fuel production, more efficient oil and natural gas production techniques, a smaller environmental footprint, carbon capture and sequestration, halting methane emissions, enhanced oil recovery, etc., etc.). But, who are they going to listen to in deciding their futures?
