Wim Thomas on energy supply and demand

These podcasts are part of a special series on scenario planning, made possible in part by Shell. Wim Thomas is head of the Energy Analysis Team in Shell’s Global Scenario Group.

Scenarios are stories – created with scientific tools that analyze the large-scale trends and developments to paint a picture of possible future energy worlds. Corporations and other groups use them to understand how today’s choices can be expected to play out in coming decades. Shell has been using scenario planning since the 1970s. Learn what scenario analysis suggests about how global energy supply and demand will come to balance in the coming decades.

Wim Thomas is head of the Energy Analysis Team in Shell’s Global Scenario Group. Mr. Thomas is an expert on Shell scenarios related to the global energy system. In early 2011, he spoke with EarthSky’s Jorge Salazar.

What’s the most important thing you want people today to know about scenario planning for energy in the future?

That these scenarios are not forecasts. They’re just projections of possible, plausible futures. If you don’t like the outlook of this plausible future, you really have the choice to change it. It’s in your power to change that scenario and actually get a different outcome. But at the same time, that will need some vision and courage in both policy makers and the public at large to make those choices and decisions.

In 2008, Shell developed two energy scenarios – Scramble and Blueprints. They are a very long look ahead at the energy system to 2050. The reason we look so far ahead is that energy systems change very slowly over time.

These scenarios are rooted in human behavior, and in the choices people make to shape their environment and shape their energy systems. There were two archetypal behaviors. We call one of them the Scramble type of behavior. It’s where people stick with existing solutions, existing infrastructure, and existing technologies.

But that has its limitations. And when you don’t change in time, that will bring volatility in energy prices, and also supply and demand issues. There may actually be adaptation periods, where you have to decide what to do next. And it is, in a sense, an uneasy world.

On the other hand, we have our Blueprints scenario, where people are very much more anticipating change. They don’t want to delegate the transition to collective agreement of states on a global level. They say, well, that’s probably not going to happen, as we saw in Copenhagen (COP16). So let’s just start ourselves. We have the technology. And we can do it now. There are always entrepreneurs who actually promote these new technologies. But they have to get started.

One of these reasons to get started is to have a meaningful price for carbon. A meaningful price for carbon will stimulate low carbon energy technologies. And this carbon price, this carbon cost is normally kept within your own economy. Politicians have the opportunity to redistribute that pot of money to stimulate their own industry or in collaboration with neighbors.

And so innovation will accelerate. But also the incentive for energy efficiencies will accelerate in that kind of system. Blueprints is a very much more cooperative world, and a world that looks further ahead. Successes get replicated and copied. And then you see this critical mass of success coalescing into a greater system and it goes from country to regional to, hopefully, global.

Global population is growing. The world is becoming more prosperous. What does this mean for consumption of energy and other natural resources?

The key drivers for energy demand are population growth and economic growth. This is especially so in the coming decade, when emerging economies are in a particularly fast growing pace, and they need additional energy to do that.

At the moment we have 6.5 billion people on Earth. That’s about twice as many as 50 years ago. And we’re going for another 40% to 50% more people – around 9 billion people – by 2050. All those people want prosperity. They want their economies to grow, especially emerging economies. Relative to us in the West, they need more energy in that early phase of economic development when they industrialize and when they buy their first cars, and so on.

So – as China and India are in that particular spirit in economic growth – the world can expect accelerated demand growth for all types of energies in the coming decades.

What might we see as energy demand grows?

As energy demand accelerates, conventional, easy access supplies are really struggling to keep pace. Although you see a natural speed of innovation on demands, and more efficiencies – and natural innovation and increase in supply – still they will not fill that gap completely. So you need a kind of extraordinary demand reduction, or extraordinary supply acceleration, to come in time.

Now there are different ways of doing that. With demand reduction, obviously you have technological solutions, like highly efficient cars and so on. But, also, this extraordinary demand reduction will probably mean that we will have to do things differently, find different ways of transport, find different ways to still get a very good life.

On the other hand, on the supply side, we have to do things differently as well. That’s because conventional oil and gas resources, and coal resources aren’t sufficient to keep pace with the demand growth. So we need new sources of supply from renewables and from unconventional resources.

If politicians and the public at large are not aware that they need this extraordinary effort to bridge that supply and demand gap, then it can become pretty uncomfortable at some stages. And you can expect a great volatility in prices and times of adjustments.

Shell calls this gap a “zone of uncertainty.” Would you explain?

When you’re looking from today’s perspective, you can only see so far. You cannot see around the horizon to new technologies and new solutions. Just a couple of years ago, who would have thought unconventional gas in North America would be such a success? But it is a success.

Would you like to tie together these elements we’ve been talking about – future supply and demand of various energy sources today – oil, natural gas, coal, biofuels, other renewables? How will they help bridge the gap that future demand will bring?

The global energy system is set to grow fast, as it did in the past. We said that conventional supply will struggle to keep pace with that accelerated demand. So we have to make a transition to other supply sources as well, those being unconventional hydrocarbon or more renewable resources.

Now all these things take time. To build new power stations, that can take anything between five and more years planning permissions. And then you have to build it. And then it actually runs for another say 20 years, 40 years, or even longer. The decisions you make today, really determine the energy system of the future of your children and even of your grandchildren at some stage.

So, a sense of urgency and decision-making is important if you want to change the energy system say in 10 or 20 years time. Because in the coming 10 years, maybe even 15 years, the energy system has already been decided in that sense. And actually you see that we still need more hydrocarbon fuels – oil, gas, coal – to make a transition to a lower carbon world.

Now people like to go faster. Some say, “Why can’t we go straight away to renewables?” But the answer is that all the new renewables need new infrastructure. And that takes time to build. It is a different way of operating. It may need different market structure. It may need different legislation. It will certainly need subsidies in the beginning to make the technology cost-effective with existing technologies. And all that takes time for an energy system to change.

Are we able to reduce carbon emissions fast enough to achieve a sustainable energy future?

That’s very much the 64 million dollar question. Can we do it fast enough? I would say in a technological sense, yes we could. But can we politically, can we actually build the required change fast enough? And that is very much the question. I think politicians – but also the public at large – have to make some courageous decisions to change and to change now, if they really want a low carbon future, fast.

Our thanks today to Shell – encouraging dialogue on the energy challenge. EarthSky is a clear voice for science.