Three Trends Threaten Renewable Energy: Why Marty McFly demonstrates the opposite

There are three worrying trends emerging in the renewable energy sector identified in three separate reports on the energy sector: 1) “at the global level, investments and productivity growth rates are still historically low;”[1] 2) A decline of business investing into green energy R&D activities;[2] and 3) Stagnation and decline of investments into electricity networks, generation and storage. [3] Jointly, these could drive a reduction in investments and our ability to transition to a sustainable energy system.

The scale of the technological change is vast and this two-part post uncovers the tremendous opportunities and tech that is driving an effective diffusion of green energy tech. While the three trends point to a broad based decline or stagnation, it is important to understand instability in emerging industries – whether electric cars signified by Elon Musk melt downs or a drop in green patents, are short term set-backs, they do not portend the dominance of the fossil fuel industry. Here, I outline why we are actually set for a global growth in effective green technology while old fossil technologies die off and become dinosaurs once again (hint, they become zombies first).

First, we need to assess where we are on this transition timeline to determine whether: a) there is a green energy transition, and b) when do we cross the Rubicon for green tech. To do this we look at scenarios then define what diffusion and investment mean. And second, we assess the opportunities and motivations for making a sustainable energy transition. In the second part we’ll explore the stagnation of fossil fuels and the competitive edge that propels green tech forward – regardless of short term instabilities.

Future scenarios: Lazy and Ambitious

There are two basic future scenarios the International Energy Agency outlines for power generation. Figure 1. This ‘New Policies Scenario’ (NPS), is current or announced policies that impact the generation mix. Essentially, there’s an expansion of renewable energy technologies, but not a sufficient amount to displace current fossil fuels of coal and gas. Here, the technology trend is ‘opportunity focused’: the technology status quo is maintained with additional investments going towards renewables.

Figure 1: (Source: https://www.iea.org/weo/)

In Figure 2, in the ‘Sustainable Development Scenario (SDS), coal drops down and becomes marginal while natural gas stays consistent.  Importantly, because of policies, markets and sustained efforts, there is a ‘problem & opportunity’ focused effort to replace old tech with new tech. Essential to this is business drives change because fossil fuel is either overtly punished or constrained by government policies and markets. Firms feel profit pressures from both activities shareholders and in realized profits or lost opportunity costs in fossil fuels, (e.g. more money is made from renewables than fossil fuels). For a wide range of private firms, it’s more profitable to allocate resource to new tech, rather than old tech.

Figure 2: Source: https://www.iea.org/weo/

The pressures from governments, society and markets is now driving the shift towards the SDS image of more renewables and less fossil fuels in the power sector. This assumption runs counter to a number of recent indicators that demonstrate a lessening in R&D into renewables and investments into the power sector. In three 2018 studies there are similar trends in a drop-off or stagnation of investment and R&D in renewable energy and efforts to build an environmentally sustainable energy system. These three trends are:

  • A decline of business investing into R&D activities. From a growth of 8.1 % in 2006 to a reduction of growth to 4.2 % in 2016 [4] (Figure 3)
  • A decline of green energy patent filings.[5] That mirrors the R&D activities decline (Figure 4)
  • Stagnation and decline in the electricity sector in generation, networks and storage (Figure 5).[6]
Figure 3: Global R&D expenditures growth, 2006 – 2016, Business R&D expenditure (source: GII 2018, 5)
Figure 4: (Source: GII 2018, 13)
Figure 5: (Source: International Energy Agency. “World Energy Investment 2018,” 2018. https://webstore.iea.org/download/direct/1242?filename=wei2018.pdf. p 24

Overall, it looks like there’s stagnation and an emerging depression into the energy system that should be running high with new patents and investments to roll out new technologies to tackle climate change. However, this trend may not represent a decline or roll-back in efforts to build a more sustainable energy system. Rather, they could represent just the start – the tipping point – or even the pause – before the great transformation happens. And here’s why: Don’t confuse fiddling in the lab with deploying new tech.

The Marty McFly equation

Watch the video before proceeding. Because the answer lies in Back to the Future.

1.21 GW!! How is Doc Brown going to generate that much power?! Equally important for our theoretical discussion, is this demonstrates the ‘problem-opportunity’ nexus, or rather, what could be re-labeled as the ‘Back-to-the-Future Opportunity’. The problem: Get Marty back to the future so he can be with his girlfriend (if there’s ever a better reason to build a 1.2 GW power plant, “this is it,” as Doc Brown says).

The opportunity: By working to develop the technology to harness the power, you also develop usable technology to travel to the future or back to the future. Translating that to today’s problems: To ensure we even have a future, we need to break from our past and accelerate our deployment of technology to build a sustainable future. We do this through the motivation for love or for profits. Love and profits are now fueling the creation and deployment of sustainable energy technology. There’s a reason Elon Musk is leading this charge just through his vision and charisma, and it is working to push his own and other business leaders to deploy (not just develop) new technology.

An example is displayed in the movie, Revenge of the Electric Car. The movie charts the shutting of GMs electric car program to the rise of Silicon Valley and Musk taking over and pushing electric cars, with GM and Nissan also attempting to get (back) in the game. The motivation needs to exist to push-out electric cars (or other more sustainable tech) to enable a comprehensive energy transition. This positive motivation pushes out, rather than attempting to hold back – a technology.

Thus, drawing on our car analogies, in both Back to the Future and Tesla, the equation for launching a sustainable energy transition is:

Problem + Opportunity + Motivation+ Deployment = Solution

Deploying the flux capacitor in electric cars

The technology transitions literature, as the academic literature goes, describes decades for a change to happen (discussed more in part 2). If we consider our Back to the Future problem (for those that remember the movie), Marty will dead if 1.2 GW is not put into the car before him and his siblings disappear from the photograph, because Marty’s parents won’t get together. In a similar vein, the planet will be in very bad shape if technologies are not deployed. The speed of the transition, then must occur more rapidly than the languid transition from steam locomotives to diesel, this was an ‘opportunity’ transition, where profits were realized through the transition, rather than shifting because of an identified problem and looming market and regulatory disruptions (discussed in the second part).[7]

This ‘Back-to-the-Future Opportunity’, means the looming death of the planet – while not a sufficient encouragement for innovation for some – is fostering a technological push for innovation of new energy technologies. Just as electric cars and Doc Brown teach us, is not so much innovation in the lab, but deployment of the technology.

Fortunately, there’s a well of academic literature on the topic of deployment and diffusion of technology. There’s an important warning from Karshenas and Stoneman, regarding the R&D figures above. It may be a common fallacy, “to associate technological change with research and development or the generation of new technology. However, it is only as new technologies are introduced into the economy” that benefits are realized.”[8] Diffusion of technologies is essential and the measurement of technological change, not what technologies are sitting in labs. Separating R&D of firms from the diffusion of technology is important to keep in mind as we assess whether our present efforts for saving the world will impact our current technology shift towards a clean energy system – or embracing a languid energy transition.

While the decline in R&D appears to be across the energy sector, for both renewables and traditional fossil fuels, there continues to be a substantial growth in renewable energy generation. There is a steady growth in deployed RES projects, 2017 broke previous years’ growth in the capacity of RES projects. With solar leading deployed wind in terms of GW capacity added in 2017 (Figure 6).[9]

Figure 6: Source: International Renewable Energy Agency. “Renewable Capacity Highlights,” 2018 2018. http://www.irena.org/newsroom/pressreleases/2018/Apr/Global-Renewable-Generation-Continues-its-Strong-Growth-New-IRENA-Capacity-Data-Shows.

By comparing the information above (stagnation and decline of invested money into new ideas and projects), with RES capacity growth, the truth in the statement by Karshenas and Stoneman of decoupling R&D activity with diffusion activity becomes a reality. The good news is that RES is really being deployed globally and making a huge difference. Just as emerging market countries were able to leapfrog to mobile phone devices, they are avoiding the fixed fossil fuel infrastructure and embracing renewable energy.

Another picture provides a projected future trend. By removing all the fossil fuels and nuclear (from figure 2, above) we can see the compounded growth of RES in the electricity mix (Figure 7, below), with the amount doubling between the mid-2020s and 2040s. It’s almost an explosion of RES propelled by the problem of fossil fuels (which stagnates), positive opportunities in RES and the motivation to realize the benefits (profits, love or both) from contributing to a sustainable future. In short, we’ve built the flux capacitor, now it is time to deploy the technology. Fossil fuels decline because they can’t compete against, both the economic and the environmental benefits of RES. The same reason we no longer use steam locomotives with wagons of coal, instead diesel and electrified locomotives dominate. The technology is superior.

Figure 7: SDS edited Green scenario (Source: https://www.iea.org/weo/)

Conclusion:

So, can love save the world? In one sense, yes. Optimism, opportunities and options propel new energy tech towards global deployment. There are now options besides fossil fuels, and the technology is ripe for deployment. This technology, is not sitting in laboratories, but is being deployed. The short-term trends of lower R&D and patent filings could reflect either short-term declines or an acknowledgement that we have what we need to substantially push out – or at least reduce – fossil fuels.

There are still lingering questions that I have not addressed in this article. How do we know a decline in coal fired power plants will happen? How do we know we’ve reached a tipping point when the transition accelerates and decline of fossil fuels is happening? Some of the answers lie in zombie power plants with the solution foreseen in the movie Shaun of the Dead and in a fruit fight between energy transition academics. The answers will be found in the second article to be posted next week.

Figure 8: All energy pioneers (source: https://www.youtube.com/watch?v=f-77xulkB_U)

Finally, I think it is important to reflect on ‘Back-to-the-Future Opportunity’ equation. Each person pictured (Figure 8) transformed the entire fields of electricity production and distribution. The optimism that once dominated electrification of the world can assist – but not determine – the future energy system. Just as Elon Musk has gone a bit crazy on Twitter and in public, getting to the future isn’t without some craziness and false starts. Regardless, the broad-based field of energy requires a holistic transformation of the economy, politics, society and perceptions of the environment. Part two will begin to address how to assess our efforts in moving from optimistic projects to real action to reach a tipping point in a sustainable energy transition.

References:

[1] Soumitra Dutta, Bruno Lanvin, and Sacha Wunsch-Vincent, eds., “Global Innovation Report 2014 | The” (World Intellectual Property Organization, 2014), 4, http://www.globalinnovationindex.org/content.aspx?page=gii-full-report-2014.

[2] Deloitte, “Deloitte Insights: Global Renewable Energy Trends, Solar and Wind Move from Mainstream to Preferred” (Deloitte, 2018), https://www2.deloitte.com/insights/us/en/industry/power-and-utilities/global-renewable-energy-trends.html?id=gx%3A2el%3A3dc%3A4direnenergy%3A5awa%3A6di%3A09132018.

[3] International Energy Agency, “World Energy Investment 2018,” 2018, 24, https://webstore.iea.org/download/direct/1242?filename=wei2018.pdf.

[4] Deloitte, “Deloitte Insights: Global Renewable Energy Trends, Solar and Wind Move from Mainstream to Preferred” (Deloitte, 2018), https://www2.deloitte.com/insights/us/en/industry/power-and-utilities/global-renewable-energy-trends.html?id=gx%3A2el%3A3dc%3A4direnenergy%3A5awa%3A6di%3A09132018.

[5] Dutta, Lanvin, and Wunsch-Vincent, “Global Innovation Report 2014 | The,” XXXIV.

[6] International Energy Agency, “World Energy Investment 2018,” 2018, 24, https://webstore.iea.org/download/direct/1242?filename=wei2018.pdf.

[7] see Benjamin K Sovacool and Frank W. Geels, “Further Reflections on the Temporality of Energy Transitions: A Response to Critics,” Energy Research & Social Science 22 (December 2016): 232–37, https://doi.org/10.1016/j.erss.2016.08.013.

[8] Massoud Karshenas and Paul Stoneman, “Technoloigcal Diffusion,” in Handbook of the Economics of Innovation and Technological Change, ed. Paul Stoneman, second (London: Basil Blackwell, 1995), 265.

[9] International Renewable Energy Agency, “Renewable Capacity Highlights,” 2018 2018, http://www.irena.org/newsroom/pressreleases/2018/Apr/Global-Renewable-Generation-Continues-its-Strong-Growth-New-IRENA-Capacity-Data-Shows.

New Podcast, Energy and Innovation!

Wow. Today we’re launching (with the help of CEU and Ian Cook) a podcast called Energy and Innovation! So please take a listen. There’s some great guests and of course, great content.

Energy and Innovation Podcast

I thought it would be a modest extension of the blog in a new format. But things are a bit more complicated than I thought. So I still have a lot of learning to do, but I’m excited that we got this out and are preparing new episodes.

So take a listen and be sure to follow us in iTunes (and other platforms later).

Professor Stefan Bouzarovski was the first brave soul to take the plunge with me to talk about energy poverty. You can find a summary of the interview here, and the transcript of the interview are with the podcast episode.

CEU also has other podcasts that can be accessed here.

 

Make Innovation Great Again: Creative construction and destruction of energy innovation

In 1841, ‘The National System of Political Economy’ was put forward by Friedrich List attempting to explain how Germany could overtake England in industrial development.[1] National competition and attempts to understand this competition have a long history. Today, one of the many ways this is expressed is in statistical analysis and case study research. The latest example is the Global Innovation Index 2018 which focuses this year on energy innovation. The report provides a robust account of how nations innovate and in one sense, how nations beat other nations at the innovation game.[2]

What I like about the report is that innovation in the energy sector is viewed as a driving force that must save the world from climate change. This is why the topic of innovation holds such power over the energy sector: Just maybe we hold the keys to prevent our own demise. To improve our ability to prevent the destruction of the Earth and of the human race, we must innovate. An innate desire to improve our living by harnessing ideas and technologies. Nations innovate and compete. Those that do not stagnate and decline. Those that erode the means and complex interactions speed their demise.

The Global Innovation Index (GII) project was launched by Professor Dutta at INSEAD in 2007 with the simple goal of determining how to find metrics and approaches that better capture the richness of innovation in society and go beyond such traditional measures of innovation as the number of research articles and the level of research and development (R&D) expenditures (pg 55).

In one sense innovation got us into this environmental mess. The inventions that produced steam power, harnessed coal and facilitated mass transportation created more and more CO2. We must now redevelop our global energy system to prevent further environmental destruction. What makes the topic of innovation so exciting is it brings together issues of economy, society, politics and the environment. We must find new ways accelerate and foster innovation to deploy new technologies and reduce the use of natural resources.

The Global Innovation Index 2018 attempts to highlight the winning areas and combination of factors that facilitate energy innovation. The report provides both a global snapshot of technology trends and detailed case studies of how countries and companies drive and use innovation to transform the energy sector.

The GII 2018 provides an effective snapshot of the structure that surrounds the energy sector (see below). There are two primary categories, ‘Innovation Input’ and ‘Innovation Output’. The first includes, institutions, human capital and research, infrastructure, market sophistication and business sophistication. The second, of outputs, is focused on knowledge and technology outputs in the creative process. These factors are measured and mapped to produce a scoreboard of success (and failure). The report emphasizes successful examples, but it’s important to also take the inverse view of see those that don’t or choose not to succeed.

Figure 1 Inputs and Outputs for Global Innovation Index (source: Global Innovation Index 2018)

 

On the successful side, the ultimate goal of all this coordination and cooperation is to build successful clusters of industries where, as Freeman[3] finds references to 1890 when observations of “the secrets of industry were in the air”. Likewise, the GII 2018, has a special section on clusters identified by patent filings and journal publications, these outputs represent the agglomeration of other innovative factors that lead to the outputs (see above). These inputs and outputs based around academic and industry cooperation are important for a country’s standing in the global innovation index.

Making countries worse

On the unsuccessful side – in an inverse example, if a country wanted to become less competitive and less innovative than other countries in its category or neighboring countries, it would seek to shut down and kick out institutions and people that file patents and publish scientific articles. By contrast, if a country wanted to increase its ranking as an attractive and innovative place with a cluster of innovation – where “the secrets of industry were in the air”, then it would seek to attract and build strategies and implement policies to increase the number of people carrying out these activities in their country.

France and French President Macron’s appeal and invitation to scientists after US President Trump’s assault on climate change research is an example of a country actively building up its economy. Hungary’s Prime Minister Orban kicking Central European University (CEU) out of the country or shutting down gender studies programs is an example of a country choosing to become less competitive and innovative and choosing to become closed minded and static 🙁 . Underscoring this example is that if CEU moves to Vienna then all the journal publications would be counted in the favor of Vienna and Austria (ranked 66th) which already has a strong identifiable cluster of innovation. Budapest is not even on the global list, while regional peer Warsaw is ranked 98th. (see map below and pages 204-207).

Innovation clusters and public policy and politics go together taking decades and centuries to develop. If a country or city wants to become an innovation hub and foster a more dynamic economy, then it needs to facilitate an innovation focused local environment (it’s not lost here, that the Orban government has also taken funding away from the Hungarian Academy of Sciences – thereby preventing it from excelling like it’s Polish peer)

Figure 2: Map of Innovation Clusters in Europe (Source: Global Innovation Index 2018)[4]

Politics Trumps Innovation?

Warsaw’s 98th place in the cluster ranking and the Polish Academy of Sciences as the top scientific organization (near 20% of publications), as identified in the GII 2018 report, is notable for the only location and organization in Eastern Europe (outside of Russia) to be in the top 100 (ahead of two Chinese cities). Creating the environment for top performance of a city or region requires not just industrial engineering output, but as the report states, input from the creative industries.

As Freeman identifies, “List’s clear recognition of the interdependence of tangible and intangible investment has a decidedly modem ring. He saw too that industry should be linked to the formal institutions of science and of education.”[5] Freeman quotes List:

“There scarcely exists a manufacturing business which has no relation to physics, mechanics, chemistry, mathematics or to the art of design, etc. No progress, no new discoveries and inventions can be made in these sciences by which a hundred industries and processes could not be improved or altered. In the manufacturing State, therefore, sciences and arts must necessarily become popular” (my emphasis).[6]

Clustered innovative regions and cities go together with open mindsets and fostering of relations between universities and industries. A recent conversation with Professor Andreas Goldthau highlighted this Macron initiative to both attract scientists to France and solve the world’s environmental problem.

President Macron’s speech, now labelled as the “Make our Planet Great Again” has put serious money into the initiative. France put up €30 million and Germany €15 million, Professor Andreas Goldthau is benefiting from this Franco-German partnership. He is now developing a research project to examine the impact of the energy transition on the global south. Countries that want to be competitive invest in innovative ideas in areas of education and industry to tackle are most pressing societal and environmental needs. Countries that deny or ignore these issues fail to innovate in meaningful and impactful ways that improve the lives of their own citizens and those around the world.

” Societies that manage to create or attract critical masses of talented people (inventors, entrepreneurs, scientists, engineers, researchers) and give them the tools and environments to be creative have, in the long run, come out ahead.”

Peter Engelke

The GII 2018 is a great example of how nations compete in the area of innovative energy technologies and solutions. At a deeper level, the leaders in the field demonstrate the impact decades of building up institutions and cooperation between industry and academia. The connections are not always clear, but open societies where arts and free thinking are allowed flourish, in turn they benefit the industrial output of nations. This mindset and public policy make economies grow for the benefit of societies. Conversely, politicians like Trump and Orban that attempt to control academic output and thought push the human drivers of any industrial complex out or away from elevating a nation’s innovative eco-system to a new level. Better design, better social engagement are stamped out by the political machine that only is focused on elusive industrial output.

As Freeman states[7], just because the Soviet Union put greater resources into R&D didn’t guarantee better innovation, qualitative factors affecting the national system of innovation also are at the heart of a countries industrial output. Gas pipelines and nuclear plants feed industry, but it is the social scientist or artist that develop or influence social policy to ensure industry benefits society. It is the job of the politician to create the environment for these two spheres to come together for the benefit of society and the planet.

References

[1] Freeman, Christopher. “The ‘National System of Innovation’ in Historical Perspective.” Cambridge Journal of Economics 19 (1995): 5–24.

[2] Dutta, Soumitra, Bruno Lanvin, and Sacha Wunsch-Vincent, eds. “Global Innovation Index 2018: Energizing the World with Innovation.” Cornell SC Johnson College of Business; INSEAD; WIPO, 2018. https://www.globalinnovationindex.org/home

[3] as cited from Foray 1991; Freeman, “The ‘National System of Innovation’ in Historical Perspective,” 9.

[4] Dutta, Lanvin, and Wunsch-Vincent, “Global Innovation Index 2018: Energizing the World with Innovation,” 202.

[5] Freeman, “The ‘National System of Innovation’ in Historical Perspective,” 6.

[6] List 1841, cited by Freeman, 6.

[7] Freeman, 12.

Misdirected US Sanctions for Nord Stream 2: Empower European consumers instead

The US is getting ready to impose sanctions on Russia and companies building the Nord Stream 2 pipeline, running between Russia and Germany under the Baltic Sea. According to the Wall Street Journal, the US is aiming sanctions against firms and banks building and financing the construction. This would affect European based firms as well. The imposition of sanctions is a blunt and weak tool for the US to exert its influence over European energy policy. In particular, a limp response to extract Eastern Europe away from Russia’s leverage over European gas supplies.

There are two divisions in Europe over Nord Stream 2. The pipeline is opposed by most East European countries taking delivery of Russian piped gas through the Soviet era gas system. It will enable Ukrainian transit to be discontinued, resulting in higher priced gas shipped from Germany to be delivered to the Central Eastern European (CEE) region. The former Eastern bloc countries vehemently oppose the construction (except for Hungary, which weakly does – but as a enabler of Russian policy in NATO, the EU and the world, we shouldn’t be surprised).

The German argument for the expanded pipe, is Germany (and Austria) have been buying Russian gas since the Cold War. This co-dependency attempts to exert some financial influence over Russia by enabling important market access to West European markets. In addition, energy relations provide important areas of cooperation and relationship building between countries. The resource of gas and the pipelines provide an important area of cooperation between countries.

The US government is attempting to interfere in this relationship. This is consistent US policy. President Reagan imposed export restrictions on US technology for compressor stations used to build the original pipelines from the Soviet Union to Germany and Austria. This slowed down the building and operation of the pipelines (the Soviet replacements kept breaking down), but it did not stop it. Potential US sanctions will have the same effect. They will slow down but not stop the energy relation between Russia and Germany – or the EU perspective supporting Nord Stream 2. In fact, due to the deteriorated relations between Trump and Merkel, US opposition will only reinforce German (and French) support for Nord Stream 2.

The US opposition is self-serving due to the attempt to increase LNG exports to Europe. Consistency in policy is apparent in this, but so is the self-interest to increase US LNG exports to Europe. Which is a bit short sited, since LNG is market based and only limited bilateral relationship can overrule market prices to force countries and companies to take US gas. US LNG must still be globally competitive for European firms to buy and trade US gas over other LNG sources or against Russian pipeline gas.

A view from the deck of the LNG regasification ship (FSRU) Independence sitting in the harbor in Klaipada, Lithuania

If the US move is a geopolitical gesture to ensure the CEE region, from the Baltic states to the Hungary continue to have gas deliveries via Ukraine – and bring in transit payments to Ukraine, then the US should build a new energy strategy directed at the CEE region. One of the reasons I’ve stopped writing about Russian pipeline politics is the palm on the face idea of ‘why should we even use Russian gas?’ US policy should be directed at diversification of CEE energy technology and resources. The goal should be to reduce the need for Russian gas and use alternative American (or European) energy technologies.

Obviously, this includes supporting and encouraging the building of LNG facilities. The LNG terminal in Lithuania is a great example of diversification that erodes Russian leverage over the country and places Russian gas on a market basis with LNG. The US support for the Krk LNG terminal in Croatia is also a long standing one. LNG, just as US shale gas and hydraulic fracturing technology is also obviously self-serving examples of US attempting to export technologies and services to make money. It has a hegemonic ring to it. With the CEE region already balancing EU energy market rules with Russian resource dependency, US gas exports add an extra layer of complexity which only deliver superficial moral support to the idea of gas diversification.

Instead, the US needs to more actively engaged across the whole energy system. The EU has already linked the idea of energy security to energy efficiency and innovation. In the Energy Union, the core tenet for diversification and increase of security of supply is to create a competitive integrated energy market. Investment into energy innovation (as broad and undefined as this is) is a priority. Energy efficiency measures are also pushed on countries. However, policy implementation compared to the huge scale of needs is a drop in the bucket.

Sixty-eight percent of EU imported gas is used in the heating sector, according to the European Commission. If the US wants to counter Russian influence in the CEE region, then it needs to address directly what matters to the region’s politicians and citizens. Heating bills hold a direct leverage over political decision making. A disagreement with Russia holds the potential to aggravate and increase the price of gas – and heating. Lithuania directly challenged Russia and was met with higher import prices compared to its Baltic neighbors. The answer of Lithuanian politicians and business community was building up a biomass heating industry, from forest to city. A plethora of existing (US) technologies exist to alter and lower heating bills. From solar water heating to energy efficiency measures.

Importantly, the US should engage financially with consumers in the CEE region. The US government should invest through international financial institutions, such as the European Bank for Reconstruction and Development (EBRD) and private national and regional banks, to create a ‘green’ fund for consumers to borrow or receive grants to modernize their heating (and cooling) systems. EU and national institutions are failing to make an impact in this area. The US has an opportunity to build on EU policy initiatives and through a simple financial engagement go directly to the consumers of Russian gas. Rely on the already established financial system and infuse the region with the financial resources necessary to diversify and reduce the demand for Russian gas.

The cherished ‘masonry heater’

I can speak from my own personal experience attempting to renovate my flat and install a new electricity and gas central heating system. There is government and private bank financing available, but both the terms and complexity of getting it and paying it back can be difficult for the average consumer. My main heating unit sitting in the corner of the living room dates to 1925, when the building was built. My solidarity with the average CEE citizen is deeply felt in the wintertime. There is a lack of practical and affordable funding to modernize both individual flats and buildings (as I also know with my neighbors, as retired residents are unable to take out loans).

If the US is serious about countering Russian influence and re-engage with the CEE region then they should engage financially. For example, my simple idea is to set up a €1 billion fund for the CEE region to be distributed through private banks where a mortgage and home energy improvement loan can be distributed together. The idea of how this funding facility could work is not original nor difficult to implement. The financial risks are very small for funders. But if imported gas and the politics behind it are such an issue, than reducing this dependency at the source of demand needs to be done. The other advantage of working directly with commercial banks, through international financial institutions, local politician can be avoided who have a strong track recording of stealing and misdirecting funds (Hungary, again is a very good example of this).

A €1 billion investment is certainly less complex than sanctions and enforcement of these on European financial firms. Why €1 billion? It can be more, but invest a sufficient amount that begins to change consumption patterns and puts a dent into gas consumed for heating purposes and reduces the social pressure on politicians to ensure good relations with Russia exist just to assure low energy prices in the CEE region. But by all means, find a way to avoid the dirty hands of politicians. Incentives banks that must comply with international oversight.

Avoiding the pitfalls of politics enables a direct connection to the people and undermines politicians maintaining the status quo with Russia. Hungary’s close relation is an example of a country ideologically aligned with Russia’s interests. It also must keep gas prices low to prevent social pressure for political change. Economically, the Hungarian regime is dependent on Russian energy prices. Hungarian consumers are forced by the government to maintain their serfdom to Russia through gas prices. Relieving this price pressure reduces Russia’s political leverage in the CEE region.

US interests in the CEE region should extend beyond LNG exports and terminals. The US should draw on its established strength in financial markets and begin to engage directly in the CEE region through energy investments. Reagan attempted to prevent the expansion of Soviet and Russian gas in Europe. Gas geopolitics will not go away. The US can work to undermine the long term impact gas prices have over European consumer and politicians. Constructive engagement through construction and renovating heating systems holds a larger policy impact than sanctions.

Our Relation to Energy: Why study energy systems?

Energy can range from the excitement we feel zipping down a slide to the steam billowing from a coal fired power plant. We all have a different intimate experience with energy. For the mechanical engineer, how a car engine works is just as important as a sociologist studying how people are affected by the influx of rig operators in a remote community. The study of energy is not an isolated experience of mechanical levers or crime statistics. Rather, to understand how our energy system works, how it evolves and how we solve pressing environmental problems – from a variety of angles – we need both a broad overview of the energy sector, but also draw on specific academic and professional disciplines to improve current practices and products. This post justifies a need to learn a holistic perspective on the energy system.

Academic disciplines abound to study specific sectors of science or the economy. However, an academic discipline of ‘energy’ does not exist. Rather, this hybrid topic touches on all types of academic disciplines. Nonetheless, there is a need to understand both the importance of teaching and learning about the broad energy system to develop deeper understandings within a discipline, or even within a job or organization dealing with the energy sector.

Why study energy?

Both the study and the teaching of energy requires tactile and experiential interactions with the topic. The accountant sitting in an oil and gas firm may only see numbers all day, but are they aware how those numbers fit into the goals of the company? Energy firms and technologies are not static. Assumptions in the past, when monopolies reigned strong and infrastructure lasted decades, may have required a go-slow approach to internal and external changes. Certainly, the evolution of technology did occur as did pressure for profits from shareholders; but global markets and global diffusion of technologies reduce protected markets. The refinement of wind technology in China or Demark quickly affects power output and performance in the US wind power industry. The gas turbine business of both GE and Siemens are now low performers because of the global strength of the renewable power business.[i]

Past infrastructure like nuclear power plants, oil and gas pipelines are still useful integrated parts of the energy system. But any new expansion of plants or networks are met with arguments for investments into other technologies. New transmission lines can be replaced by localized energy storage technologies, while oil pipelines can be met with calls to increase the electrification of transport. The creation of monopolies to ensure financial returns on large scale power projects, like nuclear or hydroelectric facilities, are harder to justify as renewable and gas generation offer reduced financial risks and lower environmental impact. Replacing the old with the new takes time, money, and innovative thinking to create new services and products that (hopefully) propel the energy sector towards a more sustainable path.

The sustainable energy trajectory the world is on, can be exemplified in one example of the Trump administration attempt to subsidize and prioritize old coal and nuclear facilities over new gas and renewable energy technologies (below). The administration failed in their arguments to the US federal energy regulator that these older technologies were needed. The failed effort demonstrates the competitiveness of smaller and more nimble energy technologies. It also exemplifies who does determine the shape of the energy system: People. The energy sector is defined as the “conversion and use of energy by people,” then energy systems are also controlled and changed by people. Over long-periods of time, new energy systems are created by altering both the technologies and how energy is used.[ii] Just as people and industry moved on from cassettes to store and listen to music, so have they moved on – even just gradually – where they get their energy from.

 

Source: Puko, Timothy. “Federal Regulators Rule Against Trump Administration on Power Plants – WSJ.” Wall Street Journal, January 8, 2018, online edition. https://www.wsj.com/articles/federal-regulators-rule-against-trump-administration-on-power-plants-1515451534.

 

Our place in the energy system

Mindsets on technologies and ways of doing business can dramatically shift. The growth in low-cost airlines and the dramatic change in travel patterns demonstrates the power of market competition. A similar transition occurred in the energy sector. The introduction of competitive energy markets pushes firms and governments to adjust (on a smaller timescale) to newer technologies that affect both energy production and consumption. There is an important reason to gain a broader knowledge of the energy system. This can assist individuals to understand how an individualized or group effort adjusts to continual technological, regulatory, environmental and societal changes. Gaining a basic knowledge of the integration of the energy system assists in noticing changes, adapting to imminent challenges (such as economic downturns) and planning for the future. Firms, governments, society and the environment benefit by gaining a holistic perspective of the energy system and how they sit within a larger environmental, economic and political process of change.

So how can we begin to understand our place within the energy system and how the energy system works? The ‘traditional’ energy system diagram is represented through a stepped approach of components of the power system. This chart encompasses the interconnection between natural resource use and end-user services and the conversion technologies along the way. It is a good first step in a holistic understanding. The problem, it leaves out people.

Source: Global Energy Assessment. “Global Energy Assessment: Toward a Sustainable Future,” 2012. P 43 http://www.iiasa.ac.at/web/home/research/researchPrograms/Energy/GEA-Summary-web.pdf.

Another way to represent the energy sector is in Chart 2. Here, the two ends of the chart express characteristics of the Earth. ‘Resources’ are the tangible elements we feel and draw on everyday. ‘Environment’ is the conceptual element that expresses how we understand and experience our interaction with the environment around us. This experience can influence our decision making. From the outside-in, we can work the chart to arrive in the center where our jobs and the institutional structures reside. Here ‘people power’ can drive change to influence the choice of technologies and perceptions in society. We actively construct both our jobs and state institutions that allow the activities that affect the use of resources and the quality of the environment.

Energy System with the Environment and People

Fundamental to this chart and understanding the outside-in approach, is our individual and social roles in giving institutions permission to exploit or protect the environment. Examples abound of individuals and communities taking action to protect and improve their environment, to allow or deny the use of specific energy technologies. While there are examples of despot regimes isolated from the problems and ravaging both people and the environment, there are also plentiful examples of societal pressure inducing changes. The global switch and proliferation of renewable energy technology demonstrates how communities and nations can make a switch towards environmentally sustainable energy technologies.

How we understand energy systems changes over time. The job we hold, the personal experiences we gain from travel, the solar panels on our neighbor’s roof, energy infrastructure is all around us. The environmental impact of our energy choices is also becoming more and more apparent. The interlinkages in our energy system affects us, our communities and even global corporate giants embedded in the global political-economy. The untouchables, become touched by social and technological shifts in the energy system. Developing a broad understanding of the energy system can impact the transition towards a more sustainable energy system.

 

[i] Crooks, Ed, and Patrick McGee. “GE and Siemens: Power Pioneers Flying Too Far from the Sun.” Financial Times, November 12, 2017. https://www.ft.com/content/fc1467b8-c601-11e7-b2bb-322b2cb39656.

 

[ii] Cherp, Aleh, Vadim Vinichenko, Jessica Jewell, Elina Brutschin, and Benjamin Sovacool. “Integrating Techno-Economic, Socio-Technical and Political Perspectives on National Energy Transitions: A Meta-Theoretical Framework.” Energy Research & Social Science 37 (March 1, 2018): 175–90. https://doi.org/10.1016/j.erss.2017.09.015.