Megatrend: Cheap Clean Energy

Energy is the blood of the economy, but fossil energy sources are becoming scarce. They are also suspected of causing global warming. They pollute the air in our cities. Fossil fuels are becoming more and more expensive, thwarting economic progress around the world. We must – and will – solve this problem.

This is a part of our series about global megatrends. Please read the introductory post. Once upon a time, maybe a thousand years ago, it was easy to differentiate the haves and have-nots by just looking at their houses at dusk. Candles lit up rich people’s houses. Poor people’s houses were dark, except for occasional dim light coming from the fireplace. Candles were expensive. Today, energy costs are still rising because of new taxes, more government regulations, and higher energy production costs. Fewer people can afford to heat their houses properly during winter or to fill up their cars. The cost of energy has held the poor back for millenniums. That is about to change.

RATIONALE

Burning oil, gas, and coal to produce heat, motion, and electricity helped us accomplish miraculous progress. Today, fossil fuels have a bad reputation for heating the planet and polluting the air. The costs of harvesting energy from fossil sources are rising for several reasons.

• Pumping crude oil in the traditional, on-shore way has been declining. Due to the increasingly expensive technology required to pump crude oil from the seabed or ever deeper on-shore wells and increasing sensitivity to environmental issues, oil production costs have reached up to $50/barrel. While global crude oil reserves, according to some reports, will likely last for decades, crude oil prices will steeply rise in the long term. A similar argument applies to natural gas.
• The intensity of coal mining has increased in the past decades. Despite being the primary source of CO2 emissions, coal mining is still heavily subsidized in many countries. This is unsustainable for obvious reasons.

The demand for energy, including fossil sources, will further increase, especially in emerging economies. To meet this demand, scientists worldwide have been working on new energy sources. Some attempts failed or caused more harm than relief, for instance, the canola oil. Others seem more promising, especially solar energy. The recent effort of the Chinese government to combat the heavy smog problem in Chinese cities by replacing traditional car engines running on gasoline and diesel with electric cars may prove to be a turning point in the long cost-benefit struggle of the solar power industry. Due to the dramatic decline in the price of solar panels, electricity from solar panels is currently on the verge of becoming cheaper than fossil fuels due to China’s sheer economy of scale. While that sounds very promising, producing solar panels is a dirty, energy-consuming business. Besides, it is hard to imagine how our world would have to be covered by solar panels to supply all of the energy currently produced from fossil fuels. The future may, in fact, lie in more progressive energy sources, such as nuclear fusion. While still in an early stage, nuclear fusion promises to be near an endless and clean energy source. It currently has the highest potential of delivering a practically infinite amount of energy at a revolutionary low price. The current surprisingly energetic upswing in the solar panel industry demonstrates that governments and industries have recognized the urgent demand for cheap and clean energy. Energy costs have steadily increased in the past due to growing production costs and taxation justified by environmental concerns, but a turning point is in sight. Within the next three decades, the world will gain a practically endless source of clean energy.

CONSEQUENCES

Individuals:

• The trend from individual mobility to mass public transportation will reverse. Electric self-driving cars will replace the old-fashioned combustion-driven cars with steering wheels.
• Electricity will be the primary source of energy for all purposes. Homes will be electrically heated, and cars will be electrically powered. Even planes are likely to have electric engines. Traveling around the world will become a cheap commodity.
• Electric engineers will be in high demand because electric power will become ubiquitous and cheap.
• Because electronic devices need a lot of software, software developers will be in even higher demand.
•  With a global supply of cheap energy, emerging economies will more quickly catch up with the rest of the world.
• Scientists and scientific institutions that profit from huge funds pouring into their budgets for climate research will have to look for new income sources. The demand for climatologists will decrease.
• Cheap energy will practically eliminate manual work in factories (see remark about automated production below). That will increase the pressure on young people to pursue higher education, such as university and post-doc degrees.

Businesses:

• Energy taxes have become a huge income source for governments. Environmental arguments have justified those taxes. Clean energy means a loss of that justification. Businesses must follow taxation strategies carefully to adjust as early as possible. A possible tax could be an “electro-smog” or similar.
• Aluminum will become super cheap! So will other energy-consuming products, such as cement, steel, other non-ferrous metals, paper, glass, etc. That will induce an unprecedented boom in the construction and machinery industries. It may also lead to deflation in real estate prices in certain regions.
• Electric infrastructure will have to change. The transmission losses within the electric grid, i.e., on its way from its source to its consumers, will become a huge issue. This problem will likely be solved by building superconducting electric power highways transporting energy from power plants (i.e., fusion reactors) to a network of energy distribution hubs.
• E-cars will dominate. The combustion engine will go extinct.
• The race to develop small-scale, reliable working energy storage, i.e., batteries will intensify and succeed, presumably in powerful and quickly rechargeable capacitive batteries.
• Cheap energy will lead to the global dominance of fully automated manufacturing. The reliance on a lowly educated workforce, even in low-wage countries like China and others, will mostly vanish.
• Manufacturing will return to regions such as the USA and Europe.
• The deteriorating demand for a less-educated workforce will further increase the value of education. Educational facilities (especially private schools and colleges) will thrive.
• The carbon trade will collapse.
• The shift towards cheap, clean energy will shake up the energy industry establishment. While solar panels tend to decentralize the energy supply, the industry will play out the card of cheap fusion energy, trying to regain its central dominance in the energy market.
• Countries that today rely on their fossil resources as a source of their national wealth (Saudi Arabia, Norway, Russia, etc…) will have to find other income sources. Some will fail to do so.

CONCLUSIONS

Cheap energy is unthinkable today. Rising energy prices have forced us to accept the policy of using as little energy as possible. Affordable energy will be an incredible relief to all of humankind. Imagine a world where it does not matter what light bulbs we use, how far and how often we drive our cars, how intensely we heat our houses, how deep we dig in the earth in search of minerals, how much electricity our computer centers use, or how brightly our cities are illuminated at night. Individual and global mobility will put the global economy into overdrive. That is a great reason to look optimistically to the future.

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