Sustainable Business Strategies: Energy Strategies

InnovationSustainable energy strategies need to recognize three key themes: the resurgence of natural gas in the mix of fossil-fuel energies, the mixed picture with regard to clean energy technologies, and the slowing down of energy efficiency gains.

Advice for the Corporate Sustainability Champion:

1. Keep a close eye on the rapidly changing fossil-fuel energy mix. The glut in natural gas availability is a mixed blessing since it could lead to complacency.

2. For the long-term, renewable energy sources are still the surer bet in terms of predictability and price, despite their slowing growth in the last year

3. Once the low-lying fruit have been picked on energy efficiency, further gains will require more careful planning and focused commitment.  Persistence is key.

Natural gas production was the story in 2012, at least in the US.  As a result, the EIA’s 2012 projections are that despite continued growth in demand for energy over the next 25 years, US reliance on imported oil will reduce as domestic production of natural gas and domestic crude oil (from tight oil and shale resources) exceeds consumption. Coal-fired plants are being retired at an increasing rate. 2012 put this retirement at 31 GW from a total US coal-fired fleet of 300 GW.  Natural gas and renewables will each grow by 5% (from 24% and 10% respectively) in the energy-mix and bring down coal’s share of power generation from 48% in 2008 to 38% in 2035.  As a result, energy-related carbon emissions will grow slowly but remain under 2005 peak levels (2% between now and 2035 levels of 5.8 billion tonnes). The big challenge is that emissions need to reduce for global warming to be contained at 2°C.

The global outlook for clean energy was both good and bad news in 2012.  The good news is that mature clean energy sources such as hydro, biomass, solar PV, and onshore wind made good progress, with countries such as China and India and many corporations making significant investments. The bad news is that the less mature clean energy sources, such as carbon sequestration and capture (CCS), offshore wind, and concentrated solar power, are not growing enough to contain global warming to 2°C.  The lack of progress on CCS is a real problem.

The other big problem is that the demand for fossil fuels is continuing to grow, locking in a high-carbon infrastructure that’s closing the window for containing warming to 2°C.  On the whole, despite some good news, progress in clean energy in 2012 was far too slow and much too alarming.

Despite corporate attention to energy efficiency, the worldwide lack of progress on it has been equally alarming. Energy efficiency needs to help reduce energy intensity, i.e., energy input per unit of GDP, by two-thirds in 2050 for 2°C containment.  This means that the 1.2% improvements we have seen annually in efficiency need to double to 2.4% by 2050.  This is not happening because of a lack of incentives and other barriers. But energy efficiency continues to be a real opportunity, despite the lack of progress.  In the US alone, potential savings of $1.2 trillion by 2020 are projected with millions of new jobs opening up in this sector, if energy efficiency is tackled aggressively through national policies.