BUS604: Innovation and Sustainability

The Energy Information Agency in Paris publishes the annual World Energy Outlook, which projects future trends in energy demand and consumption up to 2040. According to the 2013 report, global energy consumption will grow 56 per cent, and world electricity consumption will grow 93 per cent. Because this growth of demand is much faster than the growth of renewable energy sources, the ever-increasing challenge for the coming century is to satisfy demand while reducing carbon emissions to meet the targets set in the Kyoto process. If it is said that we need to reduce carbon emissions by 40 per cent by 2030, while global energy consumption will double, then what is really being asked is that CO₂ emissions need to be cut by 80 per cent.

There are no easy answers to this challenge, especially since renewable energy sources are not yet able to compete commercially with fossil fuels. Even if Europe and the West conserve the maximum amount of energy possible, this would have little effect on the growth of energy demand and consumption, especially in India and China.

We asked Jeroen van der Veer, the former CEO of Royal Dutch Shell, to share with us his thoughts about the future of energy: what visions and ideas for innovations and breakthroughs there are for overall energy systems; what processes these should be attached to; and how innovations should be managed to support the development of a viable energy future.

Addressing three factors - transitions in energy, the redesign of our energy system, and the increase in the use of renewables - van der Veer says: "It is relevant for all three factors that people simply don't realize the size of the world's energy system," both now and in future.

With the present energy system, van der Veer argues that one cannot simply identify a current problem with fossil fuels, and "do something intelligent in the desert, where we can develop solar energy and then we put some money into it and that solves the problem in ten or twenty years. That is nonsense, because in about forty years the energy system is going to double in size".

The world's population is set to grow from 7 billion to 9 billion with a growing middle class. "Whatever the middle class does - think about Asia - they will use more energy. And in that estimate of the system doubling in forty years, the assumptions of better energy conservation and improved energy efficiency are already included. If you don't assume that, then the energy system will more than double.

"So the first point is that the world energy system is huge. And to change that system will always take time. If you have a huge system, you can't change it in one day. You simply lack the investment capacity. Even if you agree on the vision, concept, and execution, it will take decades before you see material change".

The underestimation of the scale of the global energy system is only one part of the problem. At the international level, there is no shared vision on the future of energy.

"There is no consensus in the world about what the right solutions are. I am talking about the right mix of energy sources. Take for instance the World Economic Forum in Davos, where I chaired a session on the New Energy Architecture. They are now looking ahead to the year 2050 to help decide on the right energy mix. But there is absolutely no consensus about it today. And if there is no consensus about such an important question, what do you do?

"Then you have to go one abstraction level higher. Because there is no point in arguing if you can't agree. You can argue forever but you will never convince the other side".