The energy market is changing: new policies, technologies and sources are prompting us to embark on a long journey towards a new world, an “energy transition” to achieve a sustainable consumption model and solutions to tackle global warming and climate change.
Where the new energy transition is taking us, how and why? In actual fact, drivers are like the steering mechanism and accelerator of a car, they can direct the vehicle toward the desired destination at the desired speed, but only when operated by the motorist. Who is driving the car in our case? Who decides the destination, route and adjusts the speed? Behind everything, there are mega-trends, i.e. the large driving forces of growth and change that affect and shape the entire social structure and production system, and which guide the collective consciousness and main choices of entrepreneurs, consumers and political decision-makers.
Essentially, mega-trends guide the new energy transition and its timeframes by maneuvering the drivers. They direct:
- political decisions, prompting lawmakers – for example – to produce stricter or less strict environmental norms and standards or to encourage or discourage the use of certain energy sources;
- technological innovation, encouraging industry and research to boost the development and commercialization of new technologies and energy sources to fulfill emerging needs;
- consumer preferences, making the technologies and energy sources available on the market either more or less attractive and competitive, ultimately changing the composition of the demand and, in turn, also the supply mix.
The end result of these forces is a new balance, a new energy paradigm that indirectly reflects the various end goals of the individual mega-trends.
Figure 1 shows some of the most important mega-trends (without being an exhaustive list) which guide the development of the energy system. Some of these are “historic”; that is to say they guided the last energy transition and will continue to have an influence in the future. Others, although more recent, will still play a considerable role in determining the path and destination of the upcoming energy transition.
The first mega-trend being considered is a phenomenon already mentioned when we discussed the fourth – and last, until now – epoch-making energy transition that began in the 18th century: industrial development. At the time, we identified it as the key driver of that process. Indeed, the increase in volumes of goods and services produced and the change to the mode of production for the mass market triggered by the first, second and third industrial revolution have marked a clear path for the energy system. They led us to the current paradigm which is characterized by the extensive use of coal, oil and natural gas, energy sources which are easily transported, stored and used for the production of work, heat and energy, but above all, which are available in sufficient quantities to meet an energy need that has grown exponentially over the last 150 years. As much of the world has not yet undergone widespread industrial development, we believe that this mega-trend has not yet exhausted its potential and will continue to fuel the economic growth of developing countries, triggering a persistent rise in the world’s energy demand.
On top of the first three industrial revolutions, we are now seeing the fourth industrial revolution, better known as the “digital revolution”. In a nutshell, this can be defined as a new mode of interaction between machines, man and data, thanks to the increasingly wide availability of digital information and the ability to process it, improving and partly automating many management and decision-making processes. Experts speculate that the fourth industrial revolution will have a large impact on the de-carbonization process of the energy system (another mega-trend which we will discuss later) and, more generally, on the sustainability of how goods and services are produced.
The second mega-trend is energy security, i.e. the guarantee of having a stable and reliable flow of energy over time, which can support the growing demand and maintain the level of well-being achieved. This mega-trend was already operating during the second momentous energy transition over ten thousand years ago, when primitive man transformed from a hunter-gatherer to a breeder-grower (the “the Neolithic Revolution”) precisely to ensure a safe and reliable supply of the main energy resources of the time (food and feed). Thousands of years later, this mega-trend still has an influence today. Indeed, the reasons behind decisions that promote a wider use of renewables often include the greater energy security provided by these energy sources, since they are available (almost) everywhere, unlike oil and natural gas which create a dependence on imports in countries which have little or no domestic resources.
The third mega-trend is the spread of mass transportation of people and goods, a phenomenon which, like industrial development, is still foreign to many countries. In the coming years, this will have a large impact on the world’s overall energy need, and particularly on the demand for sources that are economical and easy to use in the transport sector, based on the technology and infrastructure available.