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18.11.19

[Article] Energy transition: A Climate for Change by Gabrielle Walker

During Trend Session 8 on September 30th, strategy expert Gabrielle Walker approached the subject of the energy transition during a 45-minute talk. We asked her to explore this topic further through an article. After first pointing out the urgency of the issue, Gabrielle then focuses on two sectors which can do a lot by changing a little, namely buildings and transport.
Her credo is “We have to get really serious right now!” 
Gabrielle shares her optimistic view on how the world could be a better place in the coming years if the climate crisis is taken seriously.

“The climate consequences are already with us”

I have just received an email from a cousin who lives in northern California. Yet again her home is menaced by a wildfire. She can smell the smoke, and see the eerie orange glow on the horizon. “It’s like a recurring nightmare,” she says. 

And this same nightmare is also recurring almost everywhere we look. Twenty or so years ago when I started speaking and writing about climate change, it was hard to find images to illustrate my talks. Now it’s hard to choose. As well as the devastating series of wildfires in California, there are also the ones that have recently ravaged Chile, Sweden, Australia, and Russia. And there are the heat waves, like the one this year in Europe that saw Paris sweltering under the hottest temperature in its history. And the mega hurricanes, battering the Caribbean, Japan, Southeast Asia, showing up farther north or south than they are expected, earlier or later in the season, and with an increasingly destructive impact. One investor at a conference I recently spoke at told me his holiday home in Barbados had been obliterated by hurricane Dorian earlier this year. “The whole area looked like a nuclear bomb had hit it,” he said. “I used to be a climate denier. I’m not anymore.”

Like a nuclear bomb, everyone is concerned

The bomb analogy is, sadly, an accurate one. Through our emissions of greenhouse gases, the heat we are putting into the atmosphere is the equivalent of four Hiroshima nuclear bombs every single second. And the climate consequences are already with us. The past five years - from 2014 to 2018 - were the warmest on record, and 2019 is shaping up to be warmer still. If we allow this to continue unabated the nightmare will grow steadily worse.

It is this realisation that has driven protestors onto the streets, shaken politicians into belated action and caused a seismic shift in the way that investors consider climate change when allocating their capital.

And this, of course, has injected a fresh sense of urgency into the energy transition. The world is already in the midst of a significant shift in how we make and use our energy, and the transition has recently been accelerating. That in turn brings significant risks for companies that fail to embrace the change, and significant opportunities for those that do.

The initial focus of the energy transition involved decarbonising the electricity grid, which has been greatly aided by the plummeting costs of renewables such as solar PV, and wind turbines. Now attention is turning to areas that are harder to abate, and of these I would highlight two key sectors: buildings and transport.

Number one key sector: buildings

According to the European Commission, buildings are responsible for nearly 40% of energy-related CO2 emissions, and this is likely to rise. The International Energy Agency predicts that over the next four decades the net increase in building floor area (after taking demolition rates into account) will be the equivalent of constructing the entire building stock of Japan every single year.

This means that, to stay on track for the Paris climate agreements, energy intensity per square metre needs to improve by 30% in the next ten years, and all buildings need to be carbon neutral by 2050. Some of this will be achieved by decarbonising the electricity and heat used in buildings, but it will also require a massive increase in the use of smart technologies to manage demand and increase efficiency.

Number two key sector: transport

Here the story is all about electrification, and electric vehicles are becoming mainstream. At the Frankfurt motor show in September, for instance, Volkswagen showcased its new all-electric hatchback – the ID3. (Three because this is the third period in the evolution of the people’s car, where the iconic beetle was number one, and the equally iconic golf, number two.)

What’s more, Volkswagen has committed to make all its vehicles fully carbon neutral by 2050. That involves counting the emissions not just when the car is running but the entire manufacturing and power-generation processes. This attention to emissions throughout the entire value chain is new and significant, especially for companies that form part of that chain. And Volkswagen are not alone. Daimler has made the same commitment but say that their entire passenger car fleet will be carbon neutral even earlier - by 2039.

Also significantly, this is not just a European endeavour. China dominates the e-vehicles market - nearly half of electric cars on the road in 2018 were in China compared to around 40% in 2017, while the rest were almost evenly split between Europe and the USA.

These are extraordinary developments and help explain why the International Energy Agency is now talking about a “rising tide” of electric vehicles. In one of their scenarios there will be more than 250 million electric vehicles on the road in just ten years’ time.

All of those vehicles will need access to charging stations, all will have implications for electricity supply, and all can potentially play a significant role in demand management and storage with the right smart grid infrastructure. The scale and pace of this change is, and will continue to be, astonishing.

Going green does not have to mean having a worse experience: the future is full of hope!

And there’s another reason that these two sectors are so important. I started this piece writing about the very real recurring nightmare of the unnatural climate disasters that are already upon us. Now, these two areas of the energy transition also show us the dream. The places where we live and work, and the vehicles in which we transport ourselves, are two of the most visible aspects of the energy transition for individuals, and they show that going green does not have to mean having a worse experience. 

The World Green Building Council has documented a slew of cases where improved energy efficiency, daylighting and better internal air quality have led to significant increases in employee satisfaction and productivity. 

The same applies to cars. The days when electric vehicles were little better than golf carts have long gone. At the same Frankfurt motor show where VW unveiled its ID3, Porsche also presented its sleek new all-electric Taycan, which had motor enthusiasts salivating. 

These are just a few examples, but they do show how, when we solve the climate crisis, we will also have built a world that is better to live in and work in and move around in. And that will be very good for business.

Gabrielle Walker
Expert strategist, speaker and moderator

When we solve the climate crisis, we will also have built a world that is better to live in and work in and move around in

Gabrielle Walker

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