The pace of change in the modern world is often rapid and dizzying. Technologies that seem to be an integral part of our lives can, in what seems like a moment, become redundant and irrelevant.
Energy is a sector where innovation and new ideas matter a lot, as countries and companies try to find ways to transition to a society based on renewable energies like wind and solar rather than on fossil fuels such as coal, oil and natural gas.
During a panel discussion at last week’s World Economic Forum in Davos, Switzerland, one analyst expressed concern that the market did not appear to have learned from other technological revolutions.
Thomas Hohne-Sparborth, head of sustainability research at Lombard Odier, highlighted the huge changes taking place in the field of low and zero carbon technologies and, by extension, in society at large.
“We’ve seen past industrial revolutions, including past energy transitions,” Hohne-Sparborth said. “What we’re really seeing now is the complete transformation of our entire economy.”
“The demand side of our economy, the way we power vehicles, the way we heat our buildings, the way we use energy in industry – all of that needs to be transformed.”
We were, Hohne-Sparborth said, “looking at investment needs in the trillions of dollars.”
In terms of energy transition, the sums mentioned are indeed significant. Last year, the International Energy Agency’s “World Energy Outlook 2022” report indicated that investment in clean energy could exceed $2 trillion per year by 2030, an increase of more than 50% compared to today.
As the discussion in Davos – which was moderated by CNBC’s Joumanna Bercetche – progressed, Hohne-Sparborth was asked if clean energy is now affordable on the scale required.
The answer to that question was, he replied, “changing very rapidly, and today I would say, yes, it has become the cheapest source of energy”.
“What I think the market as a whole is underestimating is simply the pace at which this transition is taking place,” he added, explaining that lessons could be learned from history.
“We’ve done work on past technological revolutions, whether it’s the adoption of steamships, cell phones, any major type of new infrastructure technology.”
All of these transitions had, according to Hohne-Sparborth, “tended to follow a very similar pattern. They happen very slowly… then the transition is completed within 10 to 20 years”.
“Yet if you look today at what the market anticipates – how long it will take us to electrify our buildings, to electrify our vehicle fleets – the lead times there are still much longer.”
For Hohne-Sparborth, it didn’t seem like it would work out, “when a new superior technology emerges that becomes cost-competitive, that deployment can happen very quickly.”
Also on the CNBC panel was Andrés Gluski, the CEO of the energy company AES.
“What we are facing…is a sea change,” he said, adding that renewables are now “the cheapest form of energy, in most cases.”
“The issue is capacity – how to keep the lights on 24/7 – and that’s where you have to use lithium-ion batteries on a daily basis.”
Expanding on his point, he went on to stress the importance of adopting a variety of technologies.
“To really get to full decarbonization, we’ll need green hydrogen, we’ll probably need small modular nuclear bombs, etc.”
“And I also totally agree that what we need is for renewables to be more than just competitive – just better so that we reduce costs, [and] of equal quality.”
“And that’s honestly what the business sector is asking for a lot, and a lot of consumers.”