The next several decades could see more periods of energy-driven inflation, fuel shortages and lost economic growth as electricity supplies are left vulnerable to shocks.
The world is living through the first major energy crisis of the clean-power transition. It won’t be the last.
The shortages jolting natural gas and electricity markets from the U.K. to China are unfolding just as demand roars back from the pandemic. But the planet has faced volatile energy markets and supply squeezes for decades. What’s different now is that the richest economies are also undergoing one of the most ambitious overhauls of their power systems since the dawn of the electric age — with no easy way to store the energy generated from renewable sources.
The transition to cleaner energy is designed to make those systems more resilient, not less. But the actual switch will take decades, during which the world will still rely on fossil fuels even as major producers are now drastically shifting their output strategies.
“It is a cautionary message about how complex the energy transition is going to be,” said Daniel Yergin, one of the world’s foremost energy analysts and author of The New Map: Energy, Climate and the Clash of Nations.
In the throes of fundamental change, the world’s energy system has become strikingly more fragile and easier to shock.
Recipe for Volatility
Take the turmoil in Europe. After a colder-than-normal winter depleted natural gas inventories, gas and electricity prices soared as demand from rebounding economies surged too fast for supplies to match. Something similar probably would have happened had Covid-19 struck 20 years ago.
But now, the U.K. and Europe rely on a very different mix of energy sources. Coal has been cut back drastically, replaced in many instances by cleaner-burning gas. But surging global demand this year has left gas supplies scarce. At the same time, two other sources of power — wind and water — have had unusually low output, thanks to unexpectedly slower wind speeds and low rainfall in areas including Norway.
By David R Baker, Stephen Stapczynski, Dan Murtaugh, and Rachel Morison
Read Full Article on Bloomberg.com
