ENERGY

‘Francis O’Sullivan of MIT Energy Initiative, part of the Massachusetts Institute of Technology says: “We are moving from a world where the value of the energy is embedded in the resource [oil, gas etc.] to where technology [renewable energy] is the resource.”1The Economist Special Report on The geopolitics of Energy, March 17th 2018.

 

ELECTRICITY TO REPLACE OIL

‘The 21st century will see oil’s influence wane, argues The Economist2‘Electric dreams,’ The Economist 17th March 2018p.13-4 (abridged). ‘Cheap natural gas, renewable energy, electric vehicles and co-ordinated efforts to tackle global warming together mean that the power source of choice will be electricity. The electricity era will diminish the clout of the oil trade, put energy production into local hands and make power more accessible to the poor. It will also make the world cleaner and safer. Oil and electricity are a study in contrasts. Oil is a wonder fuel, packed with more energy by weight than coal and by volume than natural gas (both still the main sources of electricity). It is easy to ship, store and turn into myriad refined products, from petrol to plastics to pharmaceuticals. But it is found only in specific places favoured by geology. Its production is concentrated in a few hands, and its oligopolistic suppliers—from the Seven Sisters to OPEC and Russia—have consistently attempted to drip-feed it on to the market to keep prices high. Concentration and cartelisation make oil prone to crises and the governments of oil-rich states prone to corruption and abuse. Electricity is less user-friendly than oil. It is hard to store, it loses its oomph when shipped over long distances, and its transmission and distribution require hands-on regulation. But in every other way, it promises a more peaceful world. Electricity is hard to monopolise because it can be produced from numerous sources of fuel, from natural gas and nuclear to wind, solar, hydro and biomass. Electricity also rewards co-operation. Because renewables are intermittent, regional grids are needed to ship electricity from where it is plentiful to where it is not. This could replicate the pipeline politics that Russia engages in with its natural-gas shipments to Europe. More likely, as grids are interconnected so as to diversify supply, more interdependent countries will conclude that manipulating the market is self-defeating. After all, unlike gas, you cannot keep electricity in the ground. An electric world is therefore desirable. But getting there will be hard, for two reasons. First, as rents dry up, authoritarian oil-dependent governments could collapse. That will lead to the second danger: the fallout for investors in oil assets. The tension is inescapable. On the one hand government policy should press forward with the transition as fast as it can. On the other, a rapid transition will cause upheaval. Expect the big consumers, especially India and China, to force the pace.’

‘America’s shale revolution has turned the country into the world’s biggest combined producer of oil and gas,’ says The Economist.3The Economist Special Report on The geopolitics of Energy, March 17th 2018.

 

‘Francis O’Sullivan of MIT Energy Initiative, part of the Massachusetts Institute of Technology says: “We are moving from a world where the value of the energy is embedded in the resource [oil, gas etc.] to where technology [renewable energy] is the resource.”4The Economist Special Report on The geopolitics of Energy, March 17th 2018.

‘Unlike hydrocarbons, renewable energy is potentially available almost anywhere,’ says The Economist.5The Economist Special Report on The geopolitics of Energy, March 17th 2018.

‘David Criekemans of the University of Antwerp points out that from the Industrial Revolution onwards, energy transitions such as that to coal and then to oil have changed the world. This latest one could have equally far-reaching effects. “The [nation] state and central power supply go hand in hand. They need one another,” he writes. He expects decentralisation of the energy supply to boost the power of regions in relation to central authorities. The beauty of the energy transition, enthusiasts believe, will be to give communities “super powers” over their energy, rather than turn countries into energy superpowers,’ says The Economist.6The Economist Special Report on The geopolitics of Energy, March 17th 2018.

 

‘Renewable-energy advocates talk of a “tipping-point” at which renewables become cheap enough to drive fossil fuels out of the electricity mix. To hear them talk about falling costs, you would think the world was almost there (see chart). Yet excluding hydropower, renewables still produce only 8% of the world’s electricity, and far less of the energy needed for heating, cooling and transport, which are harder to decarbonise,’ says The Economist.7The Economist Special Report on The geopolitics of Energy, March 17th 2018.

‘A new book, “The Geopolitics of Renewables”, edited by Daniel Scholten of Delft University of Technology in the Netherlands, argues that the clearest losers will be those blessed with ample fossil-fuel reserves and those who bet on oil for too long without reforming their economies. The book also notes that, whereas in the traditional energy system the main constraint is scarcity, with abundant renewables it is variability. This could be mitigated by cross-border energy trade, but that, too, could cause arguments,’ says The Economist.8The Economist Special Report on The geopolitics of Energy, March 17th 2018.

‘The EU wants to lead the clean-energy transition, aiming to reduce its greenhouse-gas emissions in 2050 by 80-95% from 1990 levels, which means almost entirely decarbonising its energy system. Germany reckons that its experience of launching an Energiewende (energy transition) in 2000 qualifies it to help lead the world away from fossil fuels. But not all its neighbours like the model it offers,’ says The Economist.9The Economist Special Report on The geopolitics of Energy, March 17th 2018.

CHINA – ENERGY

‘Non-fossil-fuel energy, chiefly hydro and nuclear, accounts for only 12% of its total energy mix. And China is far from self-sufficient. That is why, for the next decade at least, China’s main energy-related geopolitical concern will be the need to secure fossil fuels,’ says The Economist.10The Economist Special Report on The geopolitics of Energy, March 17th 2018.