By Matt Finch and Richard Black
The Paris Agreement on climate change that all governments struck in December has been hailed in some quarters as an unequivocal signal that a low-carbon transition is underway – a signal to investors that fossil fuels will soon be just that.
On the other hand, the slump in the oil price – and it looks like being a long one, with even OPEC arguing it could be 2040 before we see $100 a barrel again – has been taken by some as a hindrance to the low-carbon transition, on the grounds that if oil and gas are cheap, people will stop investing in the alternatives.
So who’s right?
|No one knows how long the oil price slump will last. Image credit: Loco Steve, Creative Commons Licence.
Both arguments are eminently challengeable: the Paris Agreement isn’t legally binding, and the oil price could go up much sooner than OPEC predicts (although frankly, no-one has a clue where it might go next or how quickly it might take to get there).
But there’s another force at work to which businesses of all kinds will pay attention if they’re wise; and that is disruption.
It’s a buzzword much discussed in some corners of the business world, and really a hyperextension of the much more familiar ‘innovation’.
In Davos – the annual business shindig-in-the-snow – the talk was of the ‘Fourth Industrial Revolution’, and with good reason. Last year the World Economic Forum conducted a survey on the advent of various game-changing technologies amongst 800 executives from the information and communications sectors. Some of the responses will blow your mind:
by 2025 – less than a decade away – over 90% of them expect 10% of the population to be wearing clothes connected to the internet
84% of them expect that the first 3D-printed car will be in production
over 80% expect the first implantable mobile phone to be available commercially
over three-quarters expect 10% of all cars on US roads to be driverless
67% expect there to be more trips globally via car sharing than in private cars
|Driverless cars are expected to be big in the future. Image credit: Gman Viz, Creative Commons License.
All this may seem unbelievable. But for some perspective, recall that the original iPhone was only launched in 2007, less than a decade ago. Before that, almost all phones were as dumb as a big coal investment looks nowadays.
So what will happen? The possibilities are endless.
Drones will replace couriers and postmen (RIP Royal mail). Your fridge will order food for you (RIP trips to the supermarket). Your tax return will be worked out and paid using blockchain technologies (RIP tax accountants – no great loss IMHO!).
Tiny nanorobots on your pillow might start cleaning your hair at night (Au revoir L’Oreal), or, for those of us who lack a little in that department, replacing it. Larger robots will put out fires, with humans watching from a safe distance (no more firefighters – sorry girls).
I could go on, but my imagination isn’t good enough.
In case you’re wondering what all of this has to do with climate change and energy, just look back 10 years.
And the best thing is that these figures are the latest available, but are already out of date.
|Electric cars have come a long way since the G-Wiz. Image credit: (left) The G-Qiz by nataliej, (right) Tesla by The NRMA, Creative Commons License.
Clearly in the energy sector, more efficient solar panels and wind turbines are welcome examples of innovation, but they’re not particularly disruptive.
However, ‘decent’ electricity storage could and would change everything. Put simply, it would mean that we could use the electrons generated by turbines and panels at a different time to when they are generated – and that is massive. The intermittency of renewables stops being a problem and it suddenly becomes sensible to only invest heavily in renewables and energy efficiency.
Going back to the oil price issue, this has the side advantage of fostering economic stability; because how can any country or company that is heavily invested in oil and gas plan sensibly anyway these days? A clean renewable energy sector would equal a stable energy sector.
Energy storage is now a very ‘live’ issue for scientists, entrepreneurs, investors and utilities – and should be for governments and regulators also. Real, grid-linked storage plants are springing up in many parts of the US and in Germany; and just this week the first stage of a commercial 100MW facility opened in Northern Ireland.
As with any new field, companies are pursuing different models, innovative ideas abound, and important questions remain unanswered.
Does the future lie in millions of small storage units within homes and offices – ‘behind-the-meter’ – that foster independence from the grid (and in so doing, reduce demands on it)? Or are larger, grid-linked systems operated by utilities the way forwards?
|The electricity storage landscape is changing rapidly. Image credit: bitslammer, Creative Commons License.
|The one sure-fire conclusion is that if energy utilities ignore the roiling creativity at work they will suffer – just as shareholders of Germany’s giant RWE are suffering this week from the absence of their expected annual dividend, owing to the company’s failure to take seriously the disruption being caused by wind and solar power and the German government’s seriousness over its climate policy.
This disruptive phase in energy storage is happening, as with solar power, for a number of reasons: technological advances, public dissatisfaction with ‘energy-as-usual’ utilities, concern about climate change and the desire for stable energy costs.
It would be happening even without the Paris Agreement, and is happening despite the oil price slump – although the former will undoubtedly speed progress and the second is unlikely to hinder it.
Leaders and Laggards
In the UK, it’s unclear whether all elements of Government have yet spotted the challenges or the opportunities. But they should, especially as businesses (including Statoil and Italian utility Enel) are, to some degree, ‘being the change’.
The incentive is huge. A well-run storage business, timed right, can become stellar. Any laggard business that genuinely believes that a high carbon business-as-usual scenario (BP?) is here to stay is already on the path to extinction since it has missed the point: what is usual changes.