The Future of Energy

Abstract

The three imperatives of sufficiency, safety, and sustainability of the global energy paradigm as it exists now along with the need to transition to a new energy paradigm are the two themes that are analyzed and evaluated in this report.

The fact that the existing oil based paradigm has led to wars and conflicts with the slogan of “blood for oil” capturing the human costs that are being expended is one of the prime drivers for a new energy paradigm. Next, the sufficiency of oil is another driver because of the fact that peak oil has arrived and it would not be long before oil becomes costlier to extract when compared to the benefits. Third, our current addiction to oil is having an impact on the climate as evidenced by global warming and climate change. Therefore, this report deals with these three imperatives as driving the need to transition to a new paradigm.

Having said that, it must be remembered that there are several challenges in transitioning to a new energy paradigm relating to the commercial viability of alternative energy sources, replacement of the current energy infrastructure, and the need to have an alternative that would match the scale and depth of the current oil based paradigm.

However, there are many opportunities as well and these relate to the way in which we can ensure that market driven incentives are provided for the alternative energy sources and through a collaborative effort involving all the stakeholders.

Finally, the need to transition is NOW and we cannot postpone the day of reckoning any longer. Therefore, this report concludes with an urgent call to arms and an alternative energy paradigm to be taken up on a war footing.

Introduction: Need to Transition to New Energy Sources

There are several reasons why the world must transition to a new energy paradigm. Paramount among the reasons are the fast depleting oil reserves, the reliance on unstable and hostile regimes in the oil producing regions, and the impact that fossil fuels or the hydrocarbon based fuels are having on the climate.

The first imperative is to do with how the arrival of peak oil has meant that the production of oil begins to slope downward and decline over time. It needs to be mentioned that just as the Stone Age did not end because we ran out of stones, the oil age will not end because we ran out of oil. Instead, what peak oil means is that we would be investing more than what we get in return in terms of energy for every barrel of oil that is extracted and refined.

In other words, the energy invested would be more than the energy returned because of peak oil.

The second imperative is geopolitical in nature and refers to the fact that most of the world’s oil reserves are located in countries that are unstable and volatile meaning that to safeguard the oil reserves on which the world critically depends on means that these regimes must be protected in military terms. Indeed, many of the wars in the Middle East are primarily as a result of the need to protect the reserves of oil in those countries and ensure that the spigots that control oil are continuously on.

The third imperative has to do with the fact that our addiction to oil is having an adverse impact on the environment. For instance, climate change and extreme weather patterns have been blamed on the CO2 emissions from the oil based infrastructure. Therefore, to ensure that we do not cross the “point of no return” in the way the world’s climate functions, we need to transition to an environmentally friendly energy paradigm on an urgent basis.

Creating Market Opportunities for Energy Transition

The biggest opportunity in transitioning to a new energy paradigm would lie in the way market based incentives are provided for the alternative energy sources. For instance, wind power has emerged as a key source of alternative energy, and with governments around the world willing to subsidize this source of energy in terms of tax breaks and incentives for the players; it is the case that governments can extend the benefits to other players in the alternative energy transition industry.

Moreover, natural gas or the CNG or Compressed Natural Gas is fast emerging as a cheaper, cleaner, and viable energy source. Already many Asian countries are providing market based incentives to the players in this field by subsidizing the costs entailed in building a supply chain for natural gas. For instance, as we shall discuss in the next section, the biggest imperative as far as transitioning to an alternative energy paradigm would lie in how well the supply chain from source to user experience is managed. In this respect, CNG and natural gas has the potential to become the alternative energy of choice.

Next, in a manner similar to the “carbon credits” that governments provide to mitigate the impact of CO2 emissions, market based incentives can be provided for Hydrogen based energy sources, which are touted to be the next big thing in the energy mix.

The point here is that unless there are economic incentives to transition, the industry would not be tempted or persuaded to adopt alternative energy. Therefore, by including economic incentives in the global energy game, we can ensure that we transition to a new energy paradigm.

Challenges in the Energy Transition

The biggest challenge faced in the transition to a “clean energy regime” is the commercial viability of such a transition. For instance, both solar power and fuel cells, which were hailed as the saviors for our oil-addicted planet, have been found to be unable to scale up and provide efficient cost benefit returns.

In other words, solar power is expensive when measured on a per unit cost and benefit basis and fuel cells have been found to be a rather inefficient way of producing power.

Moreover, both solar power and fuel cells cannot offer the scale and depth of oil in the way in which entire economies can be linked together in the energy paradigm. What this means is that as things stand now, solar power and fuel cells cannot provide the scale or the magnitude of the oil infrastructure.

Turning to Nuclear power that has long been touted as the alternative energy of the future, the Fukushima Nuclear plant meltdown after the Japanese Tsunami in March 2011 has raised the specter of safety and has rekindled the old fears about Nuclear Power being a risky gambit. However, it is the contention in this report that Nuclear Power can replace oil for non-transportation power purposes if adequate safeguards are followed.

Talking about the last point pertaining to the oil powering the infrastructure and transport, while we can replace oil with any other energy for heating our homes, fuelling industries, and other functions, the most important point to be noted is that where vehicular transportation is concerned, there is just nothing to beat oil considering the easy way in which it can move through the supply chain from field to the vehicle.

In other words, what this means is that oil is indispensable especially where vehicular uses are concerned.

Continuing on the same theme, the biggest challenge that the world faces when considering an energy transition is the fact that the whole supply chain from oil field to the car or the two-wheeler has been built around oil and hence, any alternatives must fulfill the condition that this infrastructure has to replace first. Indeed, experts say that replacing the current oil based supply chain can easily take a decade and therefore, it is more the reason for starting now.

Conclusion: The Path to a Clean Energy Future

Before concluding this report, it needs to be pointed out that the path to a clean energy future is indeed bumpy but given the right amount of economic incentives, prodding by the governments, and pressure from the activists and multilateral organizations such as the United Nations, we can transition to a new energy paradigm. The key point to be noted is that we are running out of time and hence, we must seize the moment before it is too late. After all, we have not inherited the earth but merely borrowed it from our children. This means that we have a duty towards future generations and their wellbeing and hence, to conclude, we cannot go on living as If the future does not matter.