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Oil and Gas Investor

[Editor's note: A version of this story appears in the April 2021 issue of Oil and Gas Investor magazine. Subscribe to the magazine here.]

The hottest debate in the energy world is not about how hot the globe is becoming; it is about the future of energy itself. But of course, the two problems are tied together and will not be separated. Which energy sources will be plentiful, affordable and easily distributed? Can any of these be permitted, accessed, produced and then consumed without further warming the atmosphere we depend on?

This debate shows up so many ways. One example for which you’ve already read too many claims and counter claims: The Great February Texas Freeze. More than enough finger pointing occurred, but it all comes down to this: Would you spend billions of dollars now to be prepared for a weather event that may or may not happen once every 30, 40, 50 years? The answer appears to be a resounding no.

The cities of Galveston and Houston have long debated what to do about flooding during a hurricane, yet they can’t agree on a solution or who would foot the bill for it in the first place. The devastation of Hurricane Harvey in 2017 still lingers and is a horrible example. Austin and Houston authorities have been arguing over who will control the distribution of billions of dollars that were set aside by the federal and state governments for repairs, rebuilds and mitigation.

Far removed from this scene, even leaders of the small towns and counties throughout New England are debating their energy future. Many have created local or statewide community power councils, which give local governments more control over where their electricity comes from. A city would buy electricity from renewable suppliers on behalf of its citizens, the ratepayers.

How they will access and pay for this electricity? Should they set up a municipal department to buy energy, ensuring it is from a renewable source, and then disperse it to residents? Would state legislatures even allow this?

Many towns have set ambitious net-zero carbon goals without understanding what that really means or what it will entail. I was aghast to read that one county commissioner in New Hampshire told his local newspaper, “I think the most the fossil fuel industry can hope for is to inconvenience us.”

To counteract this day-to-day turbulence, I step back sometimes from current controversies and challenges to get a different view of the broader picture, the long-term picture. What do the big thinkers think?

For that, I recently came across a fascinating report, “Barclays 2030 Thematic Roadmap,” subtitled Build Forward Better. What did it say about the future of investing across many sectors and industries, and specifically energy? It said COVID-19 is the defining event for this decade to 2030.

To start with, the report breaks down Barclays’ thinking across six broad investment themes: 1) tech and innovation; 2) consumer, food and retail; 3) industrials, manufacturing and transportation; 4) health and modern science; 5) energy and environment; and 6) society and culture.

In great detail, Barclays explored these six themes by analyzing how an astonishing 150 trends could be impacted in a post-COVID-19 world. The scenarios are based on a sophisticated word search or scan of hundreds of company reports and transcripts from the remarks of executives, using natural language processing capabilities.

As a result, Barclays foresees a greater emphasis in the future on public health, which would benefit investments in health companies and new sanitary technologies. They also see more emphasis on ESG, a rising agritech industry, much more government stimulus to “future-proof” the economies of the world, and more incentives toward a greener economy.

“Infrastructure will remain a key beneficiary,” Barclays said, pointing to investment ideas such as construction, transportation, real estate and capital goods. “Energy is likely to remain well positioned.”

Barclays drew quartiles ranking all 150 trends as to their likelihood of occurring, and their impact on society if they did. Imagine this: one quadrant where trends are likely but have little impact on society. Another where trends are less likely, yet they’d have a greater impact. A third quadrant contains trends with little likelihood and little impact, and finally, the fourth contains trends with a greater likelihood and greater impact.

Where did energy trends fall in these quadrants? High likelihood and high impact. The use of renewables ranked nearly 100% for likelihood of happening and nearly 100% for impact on society. Natural resource scarcity ranked 90% for likelihood and 85% for impact on society. Carbon capture and storage themes ranked a bit lower, at 80% for likelihood and 75% for impact.

There, you have one bank’s view of the big picture to 2030.