The energy industry, not known for quick change, has been changing faster than in the past. Whether that pace will accelerate a lot or a little is the topic of a recent report.
The transition in question is essentially the change from a high-carbon, traditional industry to a low/no carbon, more flexible industry. Two paths are described, the Gradual Narrative and the Rapid Narrative.
That in itself may not seem like news, but the report breaks out four determinants of change that will affect the pace of the transition (from the report):
- What matters – stock or flow. Gradual advocates and scenarios focus on total demand (stock) and argue that new energy technologies are relatively small and will take decades to overtake fossil fuels. Rapid advocates focus on change (flow) and argue that new energy technologies will soon make up all the growth in energy supply.
- Technology growth – linear or exponential. Gradual advocates argue that new energy technologies are expensive and face insoluble economic or technical impediments to growth, meaning that growth rates will only be linear. Rapid advocates argue that solar and wind are already cheaper than fossil fuels for the generation of electricity … disruptive new energy technologies will continue to enjoy exponential growth.
- Policy – static or dynamic. Gradual advocates argue that it is necessary only to model policies that are certain to happen, that the forces of inertia are very powerful and that policy-makers will remain cautious and slow-moving. Rapid advocates argue that the forces for change are considerably greater than those for inertia, and that technology opens up the opportunity for policy-makers and regulators to design markets to better provide for all consumers’ needs.
- Emerging market energy pathways – copy or leapfrog. Gradual advocates argue that the emerging markets … will broadly follow the path taken by developed markets and use more fossil fuels as they get richer and energy demand rises. … Rapid advocates argue that the emerging markets will enjoy an energy leapfrog to new energy technologies …
ECC will add an old line, too: Follow the money. Some investors have called into question fossil fuel stocks. “Investors with $6.24 trillion in assets have now committed to divest from fossil fuels [Read: Often major oil companies]. … Pledges span 37 countries, and 66 percent of divesting institutions and individuals are based outside of the United States.” That is from a 2018 report.
These are not fringe players: “Earlier this year, Norway gave the go-ahead for its $1tn sovereign wealth fund, the largest in the world, to undertake the largest fossil fuel divestment to date,” said Petroleum Economist magazine. Norway has had a huge stake in oil since the 1970s.
“Finance is mobilizing for change,” is a marker noted by the Energy Transition report (p. 25). The $6 trillion figure might suggest that. The organizations making change might suggest that, too.
The “so what?” for the Carolinas is that we increasingly play alongside people and players well outside our state lines. Get accustomed to that and be ready for it. Our energy world, and those companies and policymakers working on the behalf of Carolina consumers, have to be highly attuned to local needs with an equally keen strategic eye for technology, policy, finance, and markets.
Simple, it isn’t.