During the winter holiday break, I spent time with friends over dinner discussing the many challenges they faced in the building of their first house. Listening to them describe myriad “before we could do Y, we had to solve for X” type of construction problems made me appreciate my landlords all the more. The description of the process of getting connected to the electrical grid made me appreciate the larger community of professionals responsible for providing electricity all the more, too.
As oil and gas professionals, it is a community that you and I contribute to daily. Even though the world’s energy system is being restructured to include renewable forms of energy, ours is a community that will continue to be relied upon to provide the raw material to power future generations. However, while progress is being made in this reshaping, cracks in the key pillars of affordability, reliability and sustainability have emerged, according to the International Energy Agency’s World Energy Outlook 2018.
In regard to affordability, the report cited the falling costs of solar photovoltaics and wind while oil prices climbed above $80/bbl in 2018 for the first time in four years. On reliability, risks to oil and gas supply remain (e.g., Venezuela), and one in eight of the world’s population has no access to electricity. In examining sustainability, the report noted that after three flat years, global energy-related CO2 emissions rose by 1.6% in 2017 and early data suggest continued increases in 2018, far from a trajectory consistent with climate goals.
“Affordability, reliability and sustainability are closely interlinked; each of them and the trade-offs between them require a comprehensive approach to energy policy. The links between them are constantly evolving,” the report stated.
During December last year, shortly after the report was issued, the U.S. Department of the Interior’s Bureau of Ocean Energy Management (BOEM) conducted an auction for about 390,000 acres offshore Massachusetts for potential wind energy development. The auction drew 11 companies to participate, with three winning bids from Equinor, Mayflower Wind (a Shell and EDP Renewables joint venture) and Vineyard Wind totaling about $405 million. If fully developed, the areas could support approximately 4.1 GW of commercial wind generation, enough electricity to power nearly 1.5 million homes, according to a BOEM press release.
In the same month, oil prices dropped below $50 for the first time in a year. In its own special way, the deconstruction and reconstruction of a global energy system is a cyclical collection of “solve X before Y” challenges. Cracks will form, but cautious and continual planning for the next phase will ensure the wheels keep turning and the lights keep brightly shining.
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