By Anna Ebers Broughel, Vijay Betanabhatla, Aldo Flores, Dana Harmon, Scott Nguyen, and Sudeshna Pabi
As this turbulent and unpredictable year is nearing its end, most of us are looking with a mix of hope and dread into the future. The global pandemic has had a tremendous impact on the global energy system, changing energy consumption patterns and nearly bankrupting whole industries. The International Energy Agency has acknowledged that solar energy is the new ‘king’ of the electricity markets and provides the cheapest form of electricity. Analysis from BP shows that the world has already reached ‘peak oil’ ahead of schedule by decades, compared to the predictions of most long-term energy scenarios.
There were many other firsts this year – such as the construction of the first offshore wind project in U.S. federal waters, and the announcement by multiple countries, including the United Kingdom, Japan, China, Norway, and others, of a phase-out of internal combustion engine (ICE) vehicles over the next several decades.
In the next paragraphs, we describe a re-imagined vision for the common energy futures in the coming 20 years. How will it look like?
Back into the future – Energy System 2040
We invite the reader to envision the year 2040. The world is celebrating the 20th anniversary of the eradication of COVID-19. Two decades ago, the pandemic wreaked havoc across the globe, claiming hundreds of thousands of lives, bringing countries to a standstill, and collapsing economies. But a silver lining emerged from all this destruction.
It showed people with busy lives, who previously embraced congested streets, polluted air, and contaminated water, that there are better options for a happy life. Trillions of dollars of relief was injected into economies, kickstarting both the recovery and enabling a future energy system that is now cleaner, more sustainable and more equitable. Despite the gloomy projections back in 2020, when the Paris Targets seemed so hard to attain, countries came together and created the energy systems that allowed the global temperature rise to be kept well below 2°C.
Not only cleaner: more equitable
After the ‘gut-check’ that the pandemic provided, we created a new energy system that effectively serves us all and addresses long-standing structural inequalities. While incentivizing lower-carbon energy production, the new energy system helps building healthy and thriving communities. We recognized the power of co-developing solutions with the people they are intended to serve – from our densely populated cities to our vast rural landscapes – resulting in a rich and effective crop of new innovations. We fully embraced the power of data, technology, and incentivized markets to prioritize not just short-term financial gains, but full societal benefits, including decarbonization, lower pollution, better energy access, and workforce development.
The new energy system opened up employment to a whole new population, which some decades ago have been excluded from the energy transition. The number of people working in clean energy exceeds the incumbent industries by orders of magnitude.
The customer is in the driver’s seat
The energy industry has been turned inside out. The old concept of the customer that purchased available choices is now obsolete. In contrast, the power of social networks, access to data, technological choices and the shared economy has birthed a new ethos. Out of the ashes has emerged a new, more powerful consumer.
New technology companies are reinforcing this new consumer’s behavior, allowing information or services to be accessible on-demand at the tap of our fingers. The consumers expect hyper-personalized content and choices, and the market has responded. The electric grid is smarter and more interactive – while energy users became prosumers, buildings and personal vehicles ceased to be passive entities, and now dynamically engage with balancing the grid.
To respond to consumer preferences, the industry changes the default options in purchases of electricity, cars, houses to the ‘green default’, thus electric vehicles and zero-emissions buildings become the first option to be considered. This extends to pension fund investments, going green by default with the S&P no longer including polluting industries.
Policies and markets go together
The increase in CO2 has been arrested by changes in incentives and business models. Instead of incentives for utilities to adopt new technologies, the policy focus is on innovation.
Support for new ventures that take substantial risks allowed faster development of clean technologies. Carbon capture is incentivized with appropriate taxation of the ‘public bad’, the greenhouse gas emissions, such that technological solutions are not only cost-optimized, but also carbon optimized. Society as a whole started applying concepts of circular carbon economy in decision-making, evaluating the equity of outcomes.
Businesses are designing and manufacturing from cradle to cradle, while consumers have a full and transparent information about the supply chain. Traditional energy industry challenges are solved by taking advantage of emerging technologies, such as 3D printing, machine learning and artificial intelligence, augmented and virtual reality, IoT, self-regulating grids, better storage technologies, utilization of hydrogen as fuel, as well as large-scale deployment of carbon-negative technologies.
However, policymakers are not incentivizing specific technologies, but rather creating a level playing field. The instruments to support market innovation include cap-and-trade, carbon taxes, subsidies to forward-looking clean energy ventures, as well as clear targets with specific supports and penalties.
Will we be able to achieve that vision?
Here we would like to invoke the 80/20 rule, which asserts that 80% of results are achieved by only 20% of inputs. If we manage to identify and focus on the most impactful inputs, the reimagined energy system is more likely to become a reality.
What does this 20% of inputs include? The paragraphs above have already listed a number of the technologies that are likely to help the energy transition, and those need to be paired by sound domestic policies and international climate commitments.
There is much to look forward to in 2021, but perhaps the U.S. re-entering the Paris Agreement is one of the most significant steps, providing an unambiguous signal to the world that the U.S. takes its climate leadership seriously. We expect that more states, cities, and energy companies will join the growing 100% renewable movement, strengthening these commitments.
In turn, each individual can do their part and play a role in the energy transition. The UT Austin Energy Institute Fellows will keep working hard to move the needle in our respective fields to achieve a more sustainable energy future for 2040 and beyond.
The authors are current Energy Institute Fellows at The University of Texas at Austin.