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New Bottom Line Volume 3.22 – The Global Energy Economy: Turning the Corner

November 14, 1994

As we approach the middle of the last decade of the twentieth century, it’s instructive to look back at the turn of the last century–not because there’s anything inherently magical about years that end in double zeros, but because we stand on the brink of changes that will reshape the world economy.

“The basic shape of the modern energy system emerged in the short span of two decades, from 1890 until 1910,” Christopher Flavin and Nicholas Lenssen write in the new book Power Surge: Guide To The Coming Energy Revolution. “The conditions are ripe for a second energy revolution, with equally dramatic social and economic effects.”

In that transition one hundred years ago, petroleum became a significant commodity in the world economy. Electricity–centrally generated, primarily by burning fossil fuel–became increasingly commonplace. These two commodities, and the vast and powerful industries that sprang up to provide them, defined the twentieth century as much as anything else did. Automobile culture, fueled by petroleum, shaped the landscape, especially in the US. Electricity carried us from the industrial revolution to the computer revolution.

In the “second energy revolution” that Flavin and Lenssen project, solar, wind and geothermal energy, advanced technologies like fuel cells, energy efficiency improvements and natural gas as a transitional fossil fuel, significantly replace petroleum and coal as the central energy sources of industrial society. Environmentalists have been clamoring for this change for many years. According to Power Surge the change is upon us.

“Nearly unnoticed by government and industry, the world energy economy has entered a period of rapid change that may be as far-reaching as the computer and telecommunications revolutions. The giant oil refineries and coal-fired power plants that energized the twentieth century soon may be relics of the industrial revolution–as obsolete as the typewriter or Model T Ford…. Many giant oil, auto, and electric utility companies may find themselves in the position of IBM–overtaken by smaller competitors who are better able to anticipate the coming revolution.”

Power Surge is based on an energy futures scenario developed by the Worldwatch Institute, which projects that the use of coal and oil would fall by 73 and 20 percent respectively during the next 25 years. According to a Worldwatch Institute press release, “the study contrasts sharply with projections by the industry-oriented World Energy Council and the International Energy Agency, both of which expect skyrocketing oil imports, bankrupting energy bills in developing countries, and unprecedented disruptions to the global atmosphere. Flavin and Lenssen, on the other hand, foresee an economical transition to an efficient and sustainable world energy system.”

The technology trends they point to include: light bulbs that use 75% less electricity for the same amount of light; industrial motors 50% more efficient that predecessors; doubling or tripling of world natural gas use in a few decades; continuing declines in the cost of solar cells (down 90 percent from 1980 prices), and wind energy (down two-thirds); cars that use one-fifth the energy and emit one-tenth the pollution as today’s models; building technologies that use intelligent design and new materials to reduce energy use 90% without sacrificing comfort. The list goes on, a testimony to Buckminster Fuller’s frequent admonition to “do more with less.”

Some of these technologies are already on the market. Others are just over the horizon. All of them suggest major economic opportunities for investors, entrepreneurs–and for developing countries, which could bypass obsolete fossil fuel technologies, and even move ahead of the “advanced” economies.

Power Surge proposes four key changes in government policy to encourage these trends:

* Reduce subsidies for fossil fuels (an estimated $220 billion globally) and raise taxes on them to reflect the emissions-related damage to forests, fresh water lakes, and human health.

* Redirect research and development spending (which currently puts 85 percent of US energy funding into fossil fuels and nuclear energy) to focus on promising new energy technologies.

* Use market- driven, multi-year government purchases to enable companies to scale up production and capture greater economies-of-scale in manufacturing.

* Redirect international energy assistance for developing countries toward efficiency, natural gas, and renewable energy sources.

“Although some large energy companies may fail in the years ahead, new ones are likely to prosper,” according to Flavin and Lenssen. “Just as the great fortunes of Rockefeller, Ford, and many others flowed from the turn-of-the-century oil boom, the next energy transition promises to create a new generation of successful entrepreneurs.”

(c) 1994 Gil Friend. All rights reserved.

New Bottom Line is published periodically by Natural Logic, offering decision support software and strategic consulting that help companies and communities prosper by embedding the laws of nature at the heart of enterprise.

Gil Friend, systems ecologist and business strategist, is President and CEO of Natural Logic, Inc.

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