These podcasts are part of a special series on scenario planning, made possible in part by Shell.
Scenario planning – sometimes called scenario building – is a way of looking to the future. Corporations, and increasingly the public and private sectors, use scenario planning for decision-making. To learn more, LISTEN, WATCH, OR READ: audio podcasts above, video and text below.
Jeremy Bentham leads scenario planning for Shell. He told us that Shell’s early efforts at scenario planning, in the 1970s, let the company anticipate and plan for the rise and subsequent fall of oil prices. Today, he said, scenario planning is one reason Shell believes that collaboration between civil society and the public and private sectors is vital to addressing economic, energy, and environmental challenges in the years ahead. Bentham spoke about scenario planning in early 2011 with EarthSky’s Jorge Salazar.
What is scenario planning?
Scenario planning is one of the approaches that Shell uses to help give our most senior decision-makers a richer appreciation of the fundamental drivers and the fundamental uncertainties around our business. It involves thinking very deeply about the world’s energy system, the environmental system, and political and economic systems.
Scenario planning takes trends and projects them into the future. It creates alternate possible views of the future around which different decisions are optimized.
Scenario planning recognizes that people make choices – political choices, individual choices, consumer choices – and those actually can help shape different futures. And so, scenario planning gives a broader range of appreciation of the potential future landscape, around which we can think through our decisions.
How do scenarios help?
All business decisions have a variety of influences. But when I look back to the 1970s, when Shell first became active in scenario planning, I see it really helped us understand – in advance – the prospect of the oil price problems of the 1970s. And we were able to make good decisions based on on that.
If I look more recently, I see our scenario work has helped us understand the supply, demand, and environmental pressures in the global energy and environmental systems. It helped us be on the front foot as regards to thinking about climate change and the importance of emissions and emission pricing. It has helped us really understand how significant developments such as biofuels can be. So we are able to make decisions.
Shell first published its Energy Scenarios to 2050 three years ago. What was the outlook then?
The outlook was being driven by what Shell calls Three Hard Truths. First of all, the growth in population and prosperity – which is bringing hundreds of millions of people out of dire poverty and is a good thing – naturally is accompanied by various stresses and pressures. That includes pressure on all commodities including energies. So the outlook was for a surge in energy demands.
Our Energy Scenarios to 2050 explored how quickly supply could respond to that demand, given natural, geological, geographical, and political constraints. Also, what impact will this have on the environment? So our scenarios from three years ago explored that ground, and recognized two major patterns of choice, which we called Scramble and Blueprints.
The Scramble environment recognizes that our world has very complex pressures, and that people naturally look towards institutions to try to manage the pressures on their behalf. The natural institutions would be national governments, and they have different policy levers that they can pull. The easiest ones to pull are around supply – encouraging local supplies. But it’s difficult politically to respond to demand pressures and pull levers of policy on demand. So you get a sequential set of responses to pressures, which lead to periods of discontinuities and relatively slow change.
The Blueprints pattern of behavior recognizes other actors, in addition to national governments, who also play a role. In the Blueprints pattern, you see emerging coalitions between entrepreneurs and environmental groups. Eventually, you get a harmonization of developments, which actually – once it reaches critical mass – drives forward developments in the regulatory system more quickly. And that helps enable deployment of technological capabilities.
Which path are we pursuing now? Is it closer to the Scramble scenario or the Blueprints scenario?
If you look at developments of the last two or three years, you see a mixture, which is not surprising. That’s the way that scenarios are built. If you take it overall, there are more signals at this stage that are Scramble-like than Blueprints-like, which is actually a pessimistic conclusion to draw.
But looked at another way, it just emphasizes the opportunity for pushing and pressing towards more Blueprints-type choices. That requires much deeper collaboration between the public sector and the private sector.
What’s next? What’s the most important message you have for our audience?
It’s for people to recognize just how significant energy is to the well-being of everybody on the planet. Economic development and prosperity are important, and energy can be thought of almost as the oxygen of economic well-being and development.
We’re really in the foothills of an era of volatile transitions. But there are certain things that can be done to help unleash powerful developments in a positive direction. We believe that will entail deeper collaboration between the public sector and the private sector to develop the right frameworks for moving things in a positive direction – such as the pricing of greenhouse gas emissions and supporting developments like natural gas, which is a low-carbon fossil fuel and which is available now.
Almost the fastest and deepest way to have an impact in the next 10 years would be for there to be frameworks that encourage more deployments of natural gas in place of coal wherever that is in the world.
Finally, from an energy point of view, we have to look carefully at the connection between energy and water and food. And those are three areas that Shell will be putting a lot of its attention into in the coming year.
Our thanks today to Shell – encouraging dialogue on the energy challenge.