While digital transformation has been the most hyped movement across industry for the past several years, if you work in the energy sector, you’ve probably been just as inundated with talk of energy transition—a thornier, more urgent, yet more uncertain path spurred by society’s need to limit greenhouse gas emissions and global climate change.
Across the industrial automation landscape, software provider Aveva, along with its corporate parent Schneider Electric, are banging perhaps the loudest drum of late around industry’s need to reduce overall energy consumption, while buying time to transition to a more sustainable mix. Indeed, sustainability enabled by digitalization was the central focus of the company’s Aveva World Digital virtual conference held the last week of January 2021.
“We’re of course focused on reducing our own carbon footprint,” CEO Craig Hayman said, “but also on increasing our ‘handprints’—the ways in which we're helping others along their paths.”
In the interest of full disclosure, let’s just say I’m somewhat of an energy nerd, with interests in sustainability dating back to graduate school research on solar energy in the mid-1980s. (I had to teach my way through school, since no corporate supporters wanted to invest in such folly with oil at $10/bbl.) And as an ardent reader of wonky, non-fiction around energy and industry over the years, I was especially intrigued to seen Daniel Yergin on the speaker docket for Aveva World.
For those not aware, Yergin penned 1993’s The Prize, a historical exploration of our last energy transition—to the one dominated by oil—and for which he earned the Pulitzer Prize. He revisited the changing geopolitics surrounding energy in 2011’s The Quest, and last year published The New Map, subtitled Energy, climate and the clash of nations. Yergin is currently vice chairman of IHS Markit, and joined Aveva’s Hayman (who frankly seemed as star-struck as me) for a wide-ranging virtual conversation on the complexities of energy transition.
Yergin began by stressing that the current energy transition has hardly begun, and that it won’t happen overnight. “We’re still at 80% oil, gas and coal for a $100 trillion economy. It can’t be changed over in the course of one electoral cycle.
“So far, renewables have only been energy additions, not transitions,” Yergin continued. And while some say that oil and gas demand may already have peaked pre-pandemic, Yergin believes oil and gas demand will resume its climb through 2030, then begin to slope down—despite a renewed focus among governments around the world to transition faster. “They’re pushing hard, but ‘the how’ and costs will be a struggle,” Yergin predicted.
First, the map to tomorrow has some bridges that are yet to be built. “There’s a knowledge and technology deficit to get to zero carbon,” Yergin said. “We just don’t know the how yet.”
Second, energy transition means different things for different countries—the Netherlands vs. India, for example. India and much of the developing world are seeking first to transition from dirty fuels to cleaner energy sources to address health issues from indoor cooking fires fueled by dung and other dirty sources. For them, a shift to natural gas would offer a tremendous improvement. “The developing world carries a lot of weight,” Yergin said.
Growing demand for petrochemicals will also buoy overall demand for oil and gas, Yergin predicted. In addition to just about everything else that supports modern society, “Plastics are critical to dealing with this plague. Tylenol is derived from oil, and oil plays a role in vaccines as well. Remember, even electric cars are 20% plastics,” he said.
Yergin sees a potential role for new technologies such as hydrogen and carbon capture to be part of the energy mix. But those technologies will need further development. He’s also bullish on the contributions of companies such as Aveva and Schneider toward a sustainable future. “At the end of the day, energy transition involves physical processes, and help is needed to solve fundamental problems—for companies and for the planet.”
