Should restoring the world’s energy surplus be seen as the most important ESG goal of the 2020s? This 12-page note outlines our top ten reasons energy shortage matters. Our energy balances have deteriorated even further in the last year. Under-supply could persist through 2030. Energy shortages have cruel consequences. And unexpected ripple effects. Energy surplus also helps energy transition.
Global energy is complex. Commentators often write long and equivocal reports, where key points can get lost. This note aims to illustrate a simple and unequivocal point. Getting back to ‘energy surplus’ should be the #1 ESG goal of the 2020s. We must avert the truly catastrophic scenario charted below.
Basic human needs require energy. Energy costs are now consuming an additional 10% of global incomes. It takes 0.09 units of modern energy to create each unit of food. And the single largest cause of environmentally damaging deforestation is a shortage of modern energy for the world’s poorest 4bn people (pages 3-6).
History shows that geopolitical tensions, changes of government and even outright wars and revolutions are all more likely during times of energy shortages. The pain and suffering caused by these events outweighs anything else in ESG (pages 7-8).
We want to achieve an energy transition. This is easier with an energy surplus. In the short term, building renewables and EVs consumes net energy (solar case study here). There are also materials bottlenecks. And CCS, batteries, biofuels, hydrogen have energy penalties (pages 9-11).
Our final consideration is that harnessing energy has been one of the greatest enablers of human progress. It truly has. One narrative for net zero is that we will unlock the best outcomes for humanity via a century of ‘energy thrifting’, and the goal is simply to take today’s energy system and decarbonize it. How depressing. A more exciting future for humanity might perhaps include new ways of using energy (page 12).
Energy transition is a crucial goal for the world. It involves meeting the future energy needs of human civilization, while decarbonizing, and protecting nature. But after reviewing the reasons energy shortage matters, we believe this goal is easier to achieve from a position of energy surplus, and may be near-impossible to achieve with persistent energy deficits. Here is hoping for more progress in 2023, including a constructive, ‘all of the above’ approach to unlock energy and infrastructure investment. This remains the focus in our energy transition research.