The Energy Industry

Bruno Schenk and Akima Media

The power to move forward: Are we ready for the next energy challenge?

Of all the world’s great inventions, the creation, transmission and utilization of energy is, in my view, the single most impactful on humanity. And for the bulk of the 20th century, the energy sector has both shaped growth and industrial advancement and fuelled conflict as well as inflation prompted by the recent sharp rise in oil and natural gas. Today, energy generation is one of the most critical questions we face, as its impact on issues such as global warming will factor into our longevity on the only habitable planet we know. So, what are some of the issues that business leaders need to consider when it comes to energy?

Lightbulb moments

Since the first power plants of the 1880s, the cost per megawatt based on price parity has consistently fallen each decade. The economies of scale offered by larger power plants, more efficient national grids and the move away from coal to gas have further reduced the price per unit. The last 30 years have seen the emergence of renewables as the major driver of energy production and today, in countries like Switzerland, nearly 60 percent of our energy generation is based on renewables. However, before we give ourselves a congratulatory pat on the back, our nation still imports 70 percent of its total energy consumption. Over the last 5 years, Switzerland has consumed an annual average of around 225 terawatt-hours, with the most energy consumed in the form of petroleum and motor fuels (43 percent), followed by electricity (26 percent) and gas (15 percent).

Most of this energy is used by private households and transport (each one third), while manufacturing and services each account for just under one fifth. When you crunch all the numbers, only about 15 percent of total Swiss energy consumption is from renewables. However, the most positive note is that as a nation, each year, we are using less energy – in part through energy efficiency, a switch to electric vehicles and a reduction in high-energy-based manufacturing.

The bad years

The biggest shock of the last few years in respect to energy policy was the pandemic, followed by the war in Ukraine. To provide a sense of scale, in September 2019, the average monthly electricity wholesale price in Switzerland was 37 euros per megawatt-hour. By September 2021, this had jumped to 226 euros and by September 2022, it had rocketed to 403 euros. In response to surging prices, the Swiss government temporarily eased water-use rules to let some of Switzerland’s 693 hydropower plants boost capacity. It also released gasoline, diesel, heating oil, and kerosene from its strategic reserves to reduce the need for expensive imports.

Fortunately, Switzerland has had a longer-term strategy to invest in more sustainable energy, and the recent energy price shocks also helped propel legislation that facilitates the approval of large solar projects in the mountains, which can qualify for state funding, though it is up to the cantons to approve them.

Short memories

However, as energy prices have dropped back down to just 97 euros per megawatt-hour in September 2023, the desire for these large solar projects has already waned. In November 2023, voters in the southern Swiss canton of Valais rejected plans to allow large solar farms to be constructed in the Alps. And this leads to the biggest challenge we collectively face when it comes to energy. When times are good, it is easy to forget about issues such as sustainability, energy security, and the environmental impact of energy. Only 36 percent of people in Valais voted on the solar panel project, with vocal opposition from local environmentalists and the Swiss People's Party, which described the solar plant as an industrial eyesore on the pristine Swiss mountains.

The other impact of the recent energy crisis is the fate of nuclear power. Although, like Germany, the Swiss decided to exit nuclear after the tragic Fukushima disaster in 2011, only one of its five nuclear plants has started the decommissioning process. And there is no official data for the others to come offline. Public distaste for nuclear may also be fading, as a 2022 survey just before the Russian invasion of Ukraine found that 44 percent of respondents believed Switzerland should continue to use nuclear energy to generate electricity, in addition to renewable energies. One percent more than the 43 percent who said no.

Energy security

Irrespective of whether you are personally for or against nuclear or massive alpine solar plants, the reality is that with war in Europe and the potential for an enlarged conflict in the Middle East, a region that accounts for roughly a third of all oil production, energy security is high on the political agenda. Even as Europe moves away from Russian oil and gas and towards LNG imported by tankers, the potential for another crisis that leads to massive price rises or potential blackouts will make the need for compromise over the aesthetics of green projects like wind farms, dams, and other megalithic projects more likely. For all the doom and gloom, there are some positive trends.

The first one is that energy consumption per capita has been declining in Switzerland for years: Although the population grew by 28.7 percent between 1990 and 2020, energy consumption decreased by 5.9 percent during the same period. Secondly, in 2023, the Swiss people voted yes to a new Climate Protection Law that will see the country cut net greenhouse gas emissions to zero by 2050.

This means that its greenhouse gas emissions cannot exceed the quantity of harmful gases sucked in by its CO2 sinks, from forests to carbon capture technology. The new law will financially incentivize replacing oil and gas with clean energy, with the government pledging two billion francs over ten years towards the transition. Both of these factors are incredibly positive.

Cyber wakeup call

On a personal note: As the head of an organization working in the technology space, I want to flag caution around cybersecurity and remind people not to forget the Colonial Pipeline incident. In 2021, a ransomware attack on the US Colonial Pipeline effectively shut down the largest supplier of gasoline, diesel, and jet fuel on the US east coast for several days. It promoted 17 states to declare a state of emergency, and consumers suffered from oil supply shortages felt directly at the gas pump across the country. The 4.4-million-dollar ransom payout is nothing compared to the potential damage that could have been done if the hackers had decided to become malicious.

This has been a wake-up call for the global energy industry.

In Europe, I would urge all my CEO peers within the energy sector to not drag their heels in strengthening security, which includes meeting the requirements of the new NIS2 directive earlier than the September 2024 deadline.

Fuelling Our Future: Governments' Investment Sparks Green Energy Transition

So, what’s my conclusion? I firmly believe governments need to do their part by investing in the critical elements to allow us to transition to a greener and more secure energy position. This should include putting in the infrastructure, like charging points, to help us move to electric vehicles. It also means to assist with energy-efficient heating and insulation measures, plus the use of smart grids to ensure that we make the best use of complex energy supply and demand cycles.

However, we can’t underestimate our own crucial role by ensuring that we don’t forget about energy when pricing is low and our climate is scaring us with freakishly hot or cold weather spells. We need to be more understanding of the compromises that new solar, wind or hydroelectric projects will mean for our pristine countryside. We also need to consider the carbon footprint of all our actions and the suppliers we work with so that we can signal our intentions through our buying decisions.

Sources

All links are listed here https://lnkd.in/e2r27xV7 - also you gain access to my other 6 articles.