The energy business experiences tectonic shifts as various structural trends rattle its foundation. Record high prices during the past two decades fueled innovation and spawned new technologies. What are the drivers of energy transition?
The increasingly multipolar world order nourishes calls for self-sufficiency to control economic dependencies and the emerging mindfulness on sustainability puts into focus the environmental issues coming from the way we produce and use energy. As society’s moral compass changes, so do individual consumption patterns and government regulation. In sum, technology and society rewrite the rules and principles by which the energy business operates. Long-standing business models become outdated and new ones emerge. The ‘energy transition’ theme is about showing the potential pathways and pitfalls towards a more democratised energy future, which favours technology over resources, rests on self-reliance rather than trade, and empowers small instead of big.
What once was a niche business living on public support has become a dominant force in energy markets. Thanks to progressing technology and manufacturing at scale, solar and wind turned into the technologies of choice, cost-competitive with their fossil fuel counterparts. With the help of digitalisation, the reliance on big power stations crumbles. Instead, a myriad of smartly connected and integrated clean energy sources supply an ever-growing share of electricity reliably. With still a long way to go on the learning curve, the rise of clean energy likely heralds an era of ample and low-cost energy.
Mobility is one of the artery systems of our economies, the element that, among other things, connects society and brings supply chains to life. While shale and clean energy turned the oil, gas and electricity markets upside down, the transport business seems only at the beginning of a period of profound change. In a first wave, electric cars seem to be on the verge of mass-market scale. The two driving forces behind this are the expanding offering and the dynamics of the S-curve. Both are interdependent. The available and upcoming mass-market models are likely to each capture sustainable market shares as they match specific client needs. This adoption should then fuel the typical S-curve momentum. The dynamics likely are diverse and might include accelerated automakers’ development plans or the faster expansion of charging infrastructure, with plugs at home and work becoming a common sight. In a second wave, autonomous driving could revolutionise mobility, turning cars into something anyone can use at any time. Such a future brings big promises and meaningful impacts: peak oil demand, less pollution, less traffic congestion, more productivity, more urban space, and better social cohesion. Because self-driving electric cars would offer affordable and accessible mobility also for those without a driving license today.
The electrification trend will also affect the freight business. Especially the shorter haul and lighter load segment looks set to electrify swiftly because the economics to do so are attractive. For the heavy-duty segment, technology uncertainties persist as both battery-only fuel-cell and natural-gas drive systems each have their competitive qualities. Irrespective of this uncertainty, fuel use is set to peak and decline longer term in the freight business too. Only for aviation and shipping does the outlook suggest comparably stable oil use growth beyond 2030. Hydrogen will have a future but is unlikely to become a viable fuel alternative for energy-intense industrial processes until well beyond 2030.