If On A Winter’s Night: Energy in the 2020s and Beyond

Beginning

In his 1980 novel, If On A Winter’s Night A Traveler, Italo Calvino puts you, the reader, as the main character continually trying to finish various stories.

Each story is only ever partially completed, and the act of reading becomes the theme.

All these interrupted accounts, half-told tales, characters whose fate is never realised, makes for a frustrating but fascinating insight into our desire for narratives to play out, and be resolved.

Which future will happen for energy in the 2020s has similar attributes: many energy companies and institutions like to create scenarios, small fictions of how the future will work for them.

This is fine as long as we agree these fictions may be as accurate or inaccurate as Calvino’s interrupted stories.

In fact, mathematically they cannot be correct as they rely like any story on too many things happening, in too much of an order, to ever actually come about.

But perhaps they at least set a direction the authors say.

Perhaps.

But that seems thin gruel for 100 page expensive glossy stories: long, long accounts about something that never actually occurs, and is often self-serving.

Inspired by Calvino, we have therefore set out below a grid of possible stories or analyses if you will, that we have written, have partially written, or may never write other than the title, to describe how we see the energy world change in the 2020s and beyond.

Calvino noted the craft of writing itself told a story: perhaps this grid of ideas does too.

An enduring theme of the energy transition may be who gets to tell the best, most compelling stories: even as unfinished fragments, these accounts may encourage and motivate actors to invest in change.

Rather than accept the discouraging voices of fossil fuel establishment.

Each of these ideas, part-formed, in a little bit of order, presents 21 stories to tell about energy past, present and that which is yet to come.

A tiny design space of ideas, if you will, of the infinite stories that may be written about the energy transition.

Blue is a finished tale: greens are the ones we will discuss in brief below.

The structure here tries to tame the imagination how the transition may occur, in shape and time.

Energy, at least on Earth, relates mainly to mobility, heat and light, plus the promise of new technology.

And the actors are you, dear reader, along with energy companies, governments, markets, information and numbers, plus perhaps unexpected insights.

In jargon it is circumscribed by the sectors of energy, key stakeholders and themes: but we aim for the simple and call these stories; some complete, some interrupted, about how energy is working today, and how it may change tomorrow.

We have no time to discuss them all: in fact the title may be all some ever attain. Their only existence the concepts compressed into their heading.

Maybe someone else writes them instead.

Maybe they fold into a wider piece.

Who knows dear reader – you may wish to take the baton of their name and run with the piece yourself.

Let’s start with a finished tale to satisfy our desire for completeness.

A Finished Tale

Rise of the EM OEMs

The story begins at the end with the title Nothing To Lose But Your Chains, and the summary : “Emerging market oil importers are the key driver of the expected growth in oil demand. As they electrify their transport systems, they will liberate themselves from oil import dependency and bring the oil era to an end”.

The title of the story in our grid refers to a side-effect: that emerging market original engine manufacturers (EM OEMs), such as BYD and Nio from China, will also hasten this transition: two disruptions in one go.

First the oil era peaks right now, and starts to decline.

Second, China is not passive in this war: it will accelerate the demise of oil to lose its chains of import dependency, and then create a new form of dominance: the manufacturing of electric mobility machines (bikes, cars, buses, trucks, ships, airplanes..) for the world.

This is a tale of the rise, fall, and rise (yet) again of the Middle Kingdom, in the context of 21st century energy.

Interrupted Stories

All the other titles on the grid are of tales not yet told, but in the making.

Perhaps the Cold Dead Hand of Coal needs no more development (but we’ll see, as we have plans about that).

So we have chosen seven of the 21 fragments (highlighted green) to suggest how energy may advance in the coming years.

The Error of Smil

Vaclav Smil is widely regarded as a giant of energy history and how it transforms: but we disagree with much of his thesis.

He asserts that all energy transitions take a very long time: centuries or more, and points to the fact we still burn wood for energy in many countries, and are still 85% dependent on fossil fuels 200 years after their introduction.

To us, Smil makes analytical Errors, but his main Error is one of fatalism, and being unwilling to use his critical skillset outside his own beliefs.

Analytically, the world of energy may have never transitioned if we take fossil fuel burning as the primary form – that is, there is very little data to work on to suggest any large-arc Laws of Transition.

N, the number of transitions,  is very small or even zero, and so difficult to formulate into statistical Laws.

Smil’s assertion they will take a long time is not really a prediction, but an argument based on Personal Incredulity that they could happen far faster.

Like many in his viewpoint – Guardians of the Flame if you will – such as the late David MacKay, and the Incumbent, sorry,  International Energy Agency (IEA), their analysis of future energy developments often veer to the apocalyptic: wind turbines everywhere, solar panels covering the globe, not enough cement or steel, learning rates of new technology mysteriously reversing as industry somehow unlearns.

And underpinned by a lack of belief in progress and ingenuity, all the more pernicious because it seems to wish to shape reality rather than reflect it.

It may be too much to say that the current strongest voices in establishment energy: Smil, IEA, Daniel Yergin, Exxon, Shell and so on, are declinists, disinclined to worry about the consequences of such a future even as they predict it.

Or it may not.

Reality will likely shine through anyway: energy is moving away from the burning of extracted fuels to the clean conversion of sunlight and wind to electricity: it is changing in kind, not degree.

As soon as it can be manufactured profitably at large scale (ie right now) energy moves into the realm of learning curves, networks, digitisation, local creation and personal delivery, and leaves far behind the world of wells, ships, pipelines, trains, trucks and stations.

Already, in just an instant in Smil-time, we now see the rise of super-majors of the renewable world, matching the fossil-fuel counterparts.

Sure, markets can react many years ahead of actual on-the-ground transition: but they are always the opening chapter of any Book of Change.

A weightless economy replaces one heavy with ancient steel.

A cheaper more efficient, longer-lasting energy system for the planet (LCOE, the 9th Wonder of the World will cover this in more detail).

By 2030 we will use less energy but serve more people. That will be the prediction of this piece.

The sudden equal size of renewable energy firms, versus oil and gas incumbents suggests that Mr Smil’s idea of slow transitions may well be growing old.

Smil seems to have committed a large Error, both in analysis, and philosophy, in our assessment – let’s see how this story plays out.

NET Zero 2050: The World’s Most Dangerous Hoax

Perhaps less is more here.

Simply put 2050 Net Zero, especially when spoken by incumbent oil and fossil fuel industry titans, is a merely a stalling tactic.

We could stop there.

Let’s go one step more.

Take Shell.

It’s two main stories of the future world (the  Mountains and Oceans scenarios) have us using still more oil and gas in 2050 and even 2100 than today, but via magical realism, we are “saved” its consequences by negative emissions technologies (NETs): bioenergy with carbon capture and storage (BECCS) at global scale, afforestation, at global scale, geo-engineering such as Direct Air Capture (DAC) at global scale – and, well you get the point.

If NETs do not deliver,  – and they need to be able to remove about 10 billion tonnes per year of CO2 by 2050 essentially from a standing start – then the world is unlikely to do anything other than crash through the various high temperature scenarios that the IPCC and others predict. Also note that the IPCC also believe fervently in NETs.

NETs barely exist at the minute at any large scale – and it is uncertain how effective they will be even in 10-20 years time (see here for a background to this story).

What is certain is like an alcoholic dependent on a liver transplant, so they can still drink heavily, they allow us all to carry on with producing and burning fossil fuels with a warm internal glow in the belief NETs will “turn up” to sweep it all away (the Shell scenarios for example).

And don’t be fooled by that 2050 date either: 2050 is closer to you now, dear reader, than 1988, when the movie Die Hard was first released.

It may be too strong to state that NET Zero 2050 is the most dangerous hoax ever played on the planet.

But we should assume it might be, and stop hoping for the best, and prepare for something much worse.

This story will delve into the hoax and see where we get to.

We expect accelerated global scale investment in other technologies will be needed to wipe away the veil of this enormous confidence trick.

Some of these technologies staring at us right now, converting ageless energies and atoms into electricity.

Canute, Exxon and Humility

On a brighter note, it looks like Exxon will likely collapse and fade in the 2020s

This is not sarcasm: it’s a genuine prediction and thus a benefit to the world, as Exxon has for many decades been the cheerleader of unrestrained production of fossil fuels purely to serve its own ends, and has barely engaged with the outside world on any other point of view, except via legal defence.

Yet, its share price has halved in the last 5 years, and its dividend is under threat – even those it is supposed to serve first, its shareholders, have lost out.

The story of King Canute may be revealing: at least its proper telling. It’s often seen as a tale of the dangers of hubris, excessive pride, an earthy King telling waves to stop coming in and reverse back to the sea.

It appears the opposite is true: Canute was a pious thoughtful man it seems, and the incident was used by him to show his fawning courtiers that man had no control over nature, even when they suggested he could.

From that day onwards, it is said, he hung up his crown on a crucifix, and vowed to be more humble: his sycophants dismissed.

Darren Woods, current Exxon CEO, might wish to re-read the telling of this history, and perhaps be less trusting of his upstream production engineers telling him stories of great wealth from more and more oil, despite Nature’s arguments.

Even with this, we suspect he won’t hang his hat on a crucifix: but, let’s see how this play completes.

Act IV should be along soon.

No Sailing Ship Effect: why ICE cars will now get more expensive

Oil’s last fortress, transport, is now about to be breached.

The Sailing Ship effect suggests that when a strong incumbent technology, eg internal combustion engine (ICE) cars, faces a new adversary, eg electric vehicles (EVs), they rapidly respond with new innovations and ideas to hold the marauder at bay.

The concept is disputed, but you can see the logic – why give up easily when you have so much domain and wealth to preserve?

But given it is likely that peak ICE sales globally and in key markets was 2017, ICE vehicles are now in permanent market decline – see Gregor Macdonald’s analysis here of China, the largest car market in the world losing its chains of dependency on oil.

The Chinese ICE car market will never return to its 2017 levels, in direct contradiction of every oil company future scenario of oil demand.

With bans on ICE car sales  from 2025-2030 onwards gaining momentum in large markets eg the UK, you would expect incumbent manufacturers therefore to start to react with new ideas.

But actually we don’t expect to see much of this effect with ICE cars in the 2020s, and assume EVs will take over pretty much unhindered.

Why?

The story will likely be in three parts:

First, EVs as of 2020 are already cheaper to run on a total cost of ownership basis (TCO): this means they might cost 10-20% more to buy, but as most folks purchase new cars on a 3-4 year plan, when you add up finance costs, and running costs (fuel / taxes) , EVs are already cheaper.

And, due to battery cost reductions, EVs will be cheaper to buy up front by likely 2022: add that to the running costs, and you have a much cheaper transport option. Which will only get cheaper – and so on.

So – ICE car costs will respond with lower costs and better performance ?

We predict not. Why ?

Second point. When these economic arguments are crystal clear, and EVs show better performance, more convenience eg charging at home, low tax, access to low carbon zones, better residual value, and so on, those who choose to stay with ICE cars (especially new ones) will be seen as ideologically adhered to the technology.

At this point ICE manufacturers, especially laggards, will start to increase prices, to monetise the declining base of loyal buyers: reduce investment, increase price = better margins.

Finally – the larger story here will be why so many great brands chose to decline and fade when they had time to reform and re-invent.

We believe many giants of the 20th century road will be niche or museum pieces after 2030 – but that is a longer tale (to be covered in full in Christensen’s Law, and also partially here).

The Hidden Persuaders: Car as Device

Staying with cars.

In Europe, at the end of 2020, about 1 in 6 new cars sold have a plug.

The world of transport has moved electrical and online.

Buying cars may well be an Amazon-like experience from 2021 onwards.

It should not need electric vehicles to do this: this could have happened 10 years ago: but the car buying and fuelling experience has largely been an analogue affair for a long time.

A car is bought through a physical dealer or showroom or face to face, whether new or second-hand.

That model looks now looks instantly antiquated.

With car more as device, “fuelled” at home or via smart-card, an on-line purchase seems more natural, rather than exceptional.

With this will come the Hidden Persuaders, as Vance Packard called them in 1957: the marketing and targeting techniques and algorithms to coax us into our transport choice.

The car companies that adopt these will thrive, and learn about their customers, and on-sell.

Those that remain aloof, selling an off-line thermal machine, through hard physical channels will be consigned to specialist outlets.

It is about time.

With transport the main hold-out of oil consumption, and off-line experience, innovation in the car buying and selling experience has flat-lined for decades: think wily dealers and forecourts with fluttering bunting since the 1950s.

Instead, expect to see cars on subscription, free EV electricity in exchange for services, or free charging to lure new workers.

OEMs can start to develop post-purchase services and revenues: Or not.

Car as PC is not a metaphor, but a manufacturing and economic reality.

This story will play out soon, and totally re-shape our transport experience: buying, selling, owning and enjoying.

And here is the rub: the car industry could have embraced this change to EVs and made it a sustaining technology: but many resisted, and so turned it into a disruptive one for them and their shareholders.

Intermittency, interschmittency

The sun does not always shine, the wind does not always blow.

With these unique insights there is the end of wind and solar as an energy source.

If only the trillions of dollars and millions of jobs thrown at these technologies had listened to these home-spun homilies, we could have avoided wasting the effort on producing almost 1500GW of infrastructure now built across the world, providing almost 10% of world electricity at costs lower than operating gas, coal and nuclear assets.

Apologies for the cynicism.

But not a strong apology.

The negative view embedded in the sun / wind argument is one of reflexive anti-progress.

Problems are inevitable.

The fact of the sun and wind’s intermittency is actually quite simple in an engineering sense, at least to the accumulated quality of minds on this world, as it is deterministic: we know to the second when the sun will set and rise, and can predict weather and wind speeds accurately several days out.

Armed with that data and increasingly sophisticated analysis, plus cheap storage of electricity (time-shifting the actual shining of the sun, or the blowing of the wind) along with demand management, we have the basic tools today to make such “problems” of sunshine and wind vagaries increasingly manageable – and profitable.

We could go on – but this story is not about the sun and wind.

It is about how we can lock ourselves into the belief things are insolvable, to us as individuals, when in fact when we combine the solutions become clear.

This is not to downplay these problems. But it is to put them in their place, and recognise solving them is as much about mind-set as it is about technology.

See here the learning rate of manufactured energy – against incumbent technologies of fossil fuels and other thermal fuels (nuclear).

We. Can. Do. This.

We are doing this.

We will do this.

That will be the theme of that tale.

The Melancholy of Triumph

Let us suggest dear reader that we are at the point of victory of the energy transition.

We will get to, let us say, 2030 with major wins in terms of electrification, lower emissions, cleaner cities, lower costs, healthier people.

Utopia – Utopian?

No.

There will be losers in such a transition.

Incumbent firms will disappear.

But we should not worry about the leaders of such corporations, as they are rich and pensioned, but more for the 30 year-olds lured into them, who will have to re-train.

Countries endowed with fossil fuels too will have to adjust – but they also have time, and have been shown the future often enough.

But – for most of us, are we prepared for such success?

What will we do with the better energy we create for the next 100, 200 or 1,000 years ?

When we created coal and oil in the 1800s we didn’t foresee the year 2020s problems.

Equally from what we create now, what do we hold in store for 2220 ?

That is a giant story, and we should accept we may have done something tragic.

So in triumph it is best to sit down and contemplate what might go wrong, and also why it took us so long to win.

But – win we will.

Here is to 2021.

And beyond.

It Begins in a Station

So where are we, dear reader?

Let’s not do a chronology of the stories – they are only half-thoughts after all, along with a few long reports and outlines.

Perhaps the summary is that to survive long-term and thrive we invent a new story: not one based on gradual shift, or burdened by incumbent logic, but a smart new fast energy for all.

What is also clear is that if we challenge Nature head on with extraction and combustion, we will lose badly.

She is a terrifying opponent confronted.

But – if we work with Her by quietly converting the universal energy of photons, air molecules and other elements into electricity we may get by for a long, long time to come.

The quicker we tell that story, the better for us all.

Calvino’s story starts with a steam train in a station.

There may be less historic romance in a clean electric version.

But that is only because we haven’t written those alternative stories properly yet.

Let’s start to do that dear reader.

If On a Winter’s Night, 2050

The story begins in a railway station: an electric train idles quietly waiting to leave for its destination, fuelled by the spinning of machines 1,000 miles away; solitary sentinels channeling the forces of a wind-hunted sea…

 

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