August 12, 2019

Is Transition the Right Word for our Energy Changes?

Posted by Andrew Bradshaw
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The energy industry, particularly the oil and gas industry, loves its catchphrases.

In the UK in recent years we’ve had (in chronological order) the subsea factory/village, the great crew change, the downturn, the upswing from the downturn, collaboration, standardisation, cautious optimism and big data to name just a few – all mirroring the industry’s fortunes at a given time. And when we grow tired of one phrase we can always exhume an old favourite, such as peak oil.

The phrase of the moment is energy transition. It’s everywhere. It’s been the theme of conferences across the world and there will be much talk about it at Offshore Europe in Aberdeen at the beginning of September. But while there seems common agreement about the end game (a widespread global adoption of lower or no carbon energy sources) the question of the routes we should take to get there and the speed of travel illicit varying responses.

At the recent Dundee Energy Forum, Mohammed Barkindo, the secretary general of OPEC (The Organization of Petroleum Exporting Countries) claimed ‘transition’ was the wrong word to describe the changing nature of energy supply.

“I feel it is important to point out that when we talk of an energy transition, the word ‘transition’ can be misleading,” he said.

“The dictionary definition of transition focuses on the process of changing from one thing to another. But the energy transition does not necessarily mean moving from one energy source to another.

“The majority and balance consensus is that all forms of energy are required; a diverse mix of sources is the best way forward. It is also vital we appreciate just what each energy source can provide in the decades ahead.”

Barkindo added while renewables were “coming of age” with wind and solar power expanding rapidly, OPEC’s World Oil Outlook suggests they will make up just 19% of the global energy mix by 2040 – less than coal at 22% and significantly less than oil and gas which will still provide more than 50% of our energy requirements.

“We need to recognise the environmental challenge is not oil and gas themselves – it is the emissions that come from them. We in OPEC believe solutions can be found in technologies that reduce and ultimately eliminate these emissions.”

Referring to renewable energy sources he said: “We should not limit ourselves by putting all our eggs in one basket.”

The major oil companies support the notion the change in energy sources will be more an evolution than an ‘either or’ transition. In its Energy Outlook for 2019, BP echoes the notion that oil and gas will still make up half the world’s energy by 2040 and Shell has stressed the continued importance of fossil fuels in future energy provision.

While some may argue for a rapid switch from oil and gas to renewable energies, forecasts suggesting a 1.5 billion increase in the world’s population to 9.2 billion by 2040, along with a 33% increase in energy demand driven largely by Asian countries, do not point to such a wholesale change.

Indeed India, one of the leading performers in the Asian economy, is currently pursuing its most active oil and gas exploration campaign ever to reduce its reliance on imports.

Only two things are likely to force private enterprise to speed up the journey towards zero carbon energy adoption: strong governmental legislation or a seachange in shareholder/investor sentiment. Neither seems to be on the cards anytime soon.

So, while we have become used to the phrase energy transition, we should ask ourselves if it adequately covers what is really happening, or if we should consider an alternative that highlights the inclusive nature of future power provision. Energy evolution anyone?

 

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