Global Energy: Supply and Demand Scenarios in the Context of Short-Term Volatility
N
ick Welch, Head of Stakeholder Relations at Royal Dutch Shell, delivered a presentation on Shell Energy Scenarios, which attempt to formulate alternative versions of the future based on current realities, mental-mapping, and heavy number-crunching against assumptions.
Welch pointed out three hard truths related to global energy projections: energy demand will surge in the years to come; supply will struggle to keep pace; and environmental stresses will increase. According to Welch, the “interactions among these three truths will make the situation more interesting and challenging.”
The various challenges confronting exploitation of different energy sources were thus outlined by Welch: nuclear energy faces resistance on account of issues related to Uranium mining, funding, waste management, site issues and a shortage of experienced professionals; large scale Ethanol biofuel production is hindered due to its adverse impact on land use and perceived impact on global food prices; coal carries big implications for water and transportation; oil & gas resources are highly concentrated in terms of immediate supply and oil & gas resource holders frequently have competing demands for their funds.
Reassuring the audience, Welch emphasized that today, in response to such energy security and sustainability challenges, energy issues are being discussed and related responses are being pursued at every corner of the earth, at every moment. Also, there is a growing realization that these challenges are extremely complex and complicated, and equally convoluted are the solutions, or “trade-offs” to these challenges.
Elaborating on the Shell World Energy Model, Welch mentioned that researchers at Shell have predicted two plausible energy scenarios that the world could face.
The first such scenario is called Scramble, where the world is characterized by energy security and reactive change. In this scenario, people would prefer to adapt to different energy supply-demand situations rather than change their behavior toward energy consumption. People will eventually depend on the State to act on their behalf—which would entail greater focus on existing infrastructure, volatile energy prices, a shift towards larger coal consumption, and then biofuel production. To meet energy security, the use of renewable fuel will be enforced by mandates—not by economic market penetration, and excess demand in transport will be met by biofuels. We will witness knee-jerk reactions to climate change. In a nutshell, Scramble is a supply focus and late response situation.
The other scenario is Blueprints, where as with the previous scenario, people are at the heart of the storylines both individually and collectively. People will act on account of shared interests and such action will not be controlled by the State. In Blueprints, cities get together and work on sustainability issues; carbon capture and storage will become mainstream policy in which carbon-pricing plays a significant role. Welch asserted that this scenario will not be neat and tidy, but it will be a bottoms–up approach entailing a broader anticipation of challenges. CO2 capture and storage will reduce 30% of total emissions by 2050. It is characterized by an energy consumption revolution driven by enhanced efficiency and innovation in transport. Large-scale electrification will be observed under Blueprints. Blueprints is a multi-focus and early action situation.
Welch stated that although Shell is a liquid fuel company with limited current expertise in electrification, it prefers the Blueprints approach, as this model offers a more sustainable future for the planet. In addition, energy transitions being inevitable, the current challenge is to develop the right infrastructure in the next 4-5 years, which are bound to be crucial.
The presentation ended on a thoughtful note: “There are choices to be made, and no one silver bullet.”
Gaurav Relhan F10