What does our energy future look like?
Right now, I feel like I’m already in the future, in some sci-fi movie. You know the genre, where people are trapped in a cyber-stoked parallel reality.
The pandemic highlights the extent to which we are captive to our computers, living much of our lives in a surreal, virtual medium. Recently, I participated in a video call where the host embedded another live video session into his frame, like some kind of Zoom Inception—weird if you think about it. I’m no Aristotle, but I think the whole meaning of our existence is changing amidst this pandemic-induced digital revolution. But that’s my philosophical side coming out.
In the physical world (pinch self here), my musings tend toward the way COVID-19 has suddenly altered the way we live, work and play. Post-pandemic, some of these life-altering changes will have long-lasting consequences to how we get our energy, where we get it from and how we put it to work.
Take for example the success of video meetings. After the pandemic, why should we fly to another city for a couple of one-hour meetings and a martini? If half of the world’s business air travel never comes back, half a million barrels-a-day of jet fuel could evaporate into the digital ether.
But some things may never change. Business Insider recently reported that cruise ship bookings for 2021 are tracking higher than 2019. Go figure.
In more progressive news, the International Energy Agency recently reported that, with the marked increase in screen time, demand for intermittent electricity like solar and wind power is up, a positive trend for renewable energy.
Human behaviour post-COVID will dictate any permanent changes to energy consumption. But the economy—which encapsulates everything in our live-work-and-play reality—is the primary regulator of energy use. For oil, global consumption usually varies by +/- 300,000 B/d for every 1% in GDP. But during a pandemic, that rule of thumb is about as useful as a cheap mask.
Right now, all the global economic indicators are through the floor. An estimated half of the world’s eight billion citizens are under some sort of COVID house arrest. Consequently, we’re witnessing an unprecedented loss of up to 30MMB/d, or 30% of oil consumption. The good news is that people in congested cities are seeing blue skies for the first time in years, which is a progressive force for a clean energy transition.
In the pursuit of job creation, forthcoming government stimulus dollars are likely to support a push for more green energy infrastructure. That’s what happened around the world after the 2008 financial crisis. More than a decade on, wind and solar power have become growing and viable competitors in the world’s energy mix.
But post-pandemic clean aspirations could encounter friction on the consumer side. The oil collapse has turned gasoline into a giveaway product. Pump prices in some jurisdictions have been halved, effectively giving people a negative carbon tax that drives regressive consumption habits. Low gas prices also act as a barrier to switching to an electric vehicle. Why would you make that leap when gas is so cheap? Old habits die hard, and people love their entrenched energy systems, especially when it comes at rock-bottom prices at a time when wallets are thin.
Then there’s the geopolitics at play. Pre-COVID, the US was touting “energy dominance” given the meteoric rise of its shale oil production. Now we’re seeing how meteors come crashing down to Earth. How will western countries value energy security after state-owned oil companies in Saudi Arabia and Russia pulverize the market share of their foes? Memories are short: We’ve had more international incidents over oil in the past 100 years than pandemics. Normally, I wouldn’t hold my breath waiting for energy security to become a top issue, but it might, depending on how much of North America’s oil industry is decimated.
For some guidance to the future, we can look back at major disruptive events in world history and assess the before-and-after state of energy. Wars, financial crises, natural disasters and sudden environmental degradation have historically acted as pivot points in how we source our energy and put it to work. Studying the consequences of these events suggests three factors shape future outcomes:
- Changes to societal values – Disruptive events usually shift our norms. After the pandemic, will we value personal time over things like business travel and commuting? How about at a macro level? Will the pandemic shuffle the order of priority for how we want our energy: clean, cheap or secure?
- The ability to switch to viable alternatives – If our values change, how easy is it for the way we live, work and play to follow suit? Adapting to large video conferences from home was inexpensive and painless. Yet migrating to clean energy systems in a capital-constrained world full of cheap oil may be difficult.
- A willingness to spend money on change – How willing and able are individuals, corporations and governments to spend money on alternatives to satisfy changes in societal values?
What will our post-pandemic energy future look like? When clarity emerges on the three factors above, we’ll get a better sense if countries will regress, stay the course or transition forward in the way they get and use their energy. It won’t be science fiction, but it could very well be a brave new world.