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Finding opportunity in the challenge

Finding opportunity in the challenge
The world faces a major energy challenge. Global energy demand will double by 2050, driven by economic and population growth. At the same time, it will be necessary to curb emissions of greenhouse gases to avoid the environmental and economic damage of climate change. Business as usual is not an option.

The world faces a major energy challenge. Global energy demand will double by 2050, driven by economic and population growth. At the same time, it will be necessary to curb emissions of greenhouse gases to avoid the environmental and economic damage of climate change. Business as usual is not an option.

Tackling the energy challenge will require big investment and hard work. Industry and government regulation must change on a huge scale and at an unprecedented pace. But the size of the task also creates significant opportunity for countries and companies that move quickly to help society build a more sustainable energy system in the decades ahead.

Society must respond on two fronts. First, we must pursue significant improvements in energy efficiency across the economy – in transport, buildings and industry. By the middle of the century, we need to get a unit of economic output for one-third of the energy we use today.

Second, we must reduce the carbon intensity of energy. By mid-century, we’ll need to produce each unit of energy with one-third of today’s carbon dioxide (CO) emissions.

Alternative energy sources such as wind and solar that do not emit greenhouse gases will need to grow by 40-70 times. By 2050, alternative energies, including biofuels from waste and non-food crops, could be meeting a third or so of the world’s needs.

But even with gains in energy efficiency and growth in alternative energies, fossil fuels will continue to be the world’s main source of energy by mid-century. Alternative energies start from such a small base that they will be unable to keep pace with growing demand.

Society will need to promote technologies for reducing emissions from fossil fuels, such as carbon capture and storage (CCS) on coal-fired power plants, refineries and other large industrial installations.

That will build a bridge to the distant future when alternative energy will achieve the scale necessary to meet a significant share of world demand.

This poses three questions. Have we the technology? Have we the time? And have we the money? The answers are yes, perhaps and just about. But we must act swiftly.

We have already experienced tight energy supply and the environment is under increasing stress. To meet surging demand while safeguarding the environment, a range of energy technologies will need to be deployed on a large scale. They include nuclear, wind, solar and biofuels, as well as CCS.

None of this will come cheap. According to the International Energy Agency, by 2030, we will need to invest $5.5trillion merely in renewable energy. Billions more must go into upgrading electricity transmission networks to handle increased demand and the on-off power generated by wind and solar.

But the cost of doing nothing will be even higher.

To ensure that money is spent effectively, we need a regulatory framework that encourages research and investment in new technology. That means changing the terms of trade for energy so that making a profit and tackling climate change are complementary goals.

Specifically, we must move toward a world where there is a price on emitting CO. Governments must push hard for progress toward that goal at the United Nations Climate Change Conference in Copenhagen later this year.

We should be worried about climate change, but should not be daunted. With change comes opportunity for those who can see the new direction and who have solutions to offer. This creates new sources of jobs for countries and new business opportunities for companies.

Both countries and companies have choices to make. They have to think about what is needed and where they excel. Scotland and the UK have considerable skills in large-scale process engineering. That’s just what is needed for many low-carbon technologies, including CCS. The consortium led by ScottishPower hoping to develop a CCS project at Longannet is an excellent example.

Biofuels can also play to the nation’s strengths in biosciences. We should remember that Scotland has led the world in the commercialisation of bio-ethanol for about 500 years. We call it whisky.

Building tomorrow’s energy system will demand a new generation of skilled people. We must excite young people about the tremendous career prospects and job satisfaction offered by the energy industry.

This is a multi-disciplinary challenge like no other. Virtually every branch of science and technology will be pushed to the limits.

We will also need marketers, economists, lawyers, accountants, HR specialists, environmentalists and computer experts. And behavioural scientists must help all of us to change our ways to become more responsible users of the world’s precious energy resources.

The solutions are within our grasp.

Despite the hurdles, the push to tackle the energy challenge will benefit us all. Competition among energy sources will drive innovation, keep energy affordable and increase global energy security. But we must muster the common will to take concrete action. That takes political leadership. It takes companies developing new technologies and speaking up for the need to change. And it takes us, as individuals, to support the change and be more careful in our use of energy.

With that, the challenge becomes the opportunity.

James Smith is chairman of Shell UK and recently assumed the presidency of the Energy Institute

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