Probably most people remember the recent UK energy crisis, with extremely high energy prices, the collapse of at least 25 UK energy companies between September and December 2021, and increased numbers of people facing energy poverty. There was a lot of popular dispute about how bad the situation was, and what caused it [1], [2], [3], [4], [5], [6] but problems occurred. Similar, if less intense, energy problems appeared in Europe, especially for countries dependent on Russian gas, which was likewise possibly constrained by domestic need and production factors. China boosted its coal supplies and consumption to help provide heating for winter [7], [8], [9]. The previous year power had crashed out in Texas because of massive sudden demand, and a failure to invest and protect the grid and gas pipes against cold weather [10], [11], [12]. Texas also appears to have suffered from profiteering by electrical generation companies [13]. These events, are not just local, but part of a world wide energy crisis, [14]. The Northern winter is not yet over, hopefully it will pass ok, but we cannot be sure.
I shall suggest that these crises arise out of at least five interacting factors.
- A background of climate change and ecological destruction
- Increase in demand over supply, producing volatile prices;
- Lack of necessary investment in energy;
- Disruption from and to renewable transition; and
- Civlisational collapse.
These factors feed into each other. Climate change and ecological destruction is the background against which this all plays out (and is not discussed in any detail). The volatility of pricing, or attempts to keep profit high, disrupts energy investment. Lack of investment helps disrupt the renewable transition – the renewable transition is also affected by a lack of renewable energy to power the energy for transition. The lack of renewable transition feeds civilisational collapse through societies causing ecological and climate damage. Corporations and free markets will not save us; neither will the governments that they control. Collapse produces further uncertainty and defensiveness, which affects people’s ability to deal with the problems other than in the standard way of causing more problems by staying with what has worked, and refusing to change habits, organisation and world view.
Finally, it is suggested that models of psychological breakthrough hold some hope for system breakthrough, provided people are prepared to venture into the unknown. This essentially is yet another way of discussing the Toynbee cycle, of civilisations facing challenge and overcoming them through change of worldview and habits, or collapsing because they (or the dominant people) are incapable of abandoning a worldview that has previously brought success. To get around this may require individual and community level innovation, and the expansion of that innovation throughout the society.
The First Problem: Price and demand increase
The IMF recognised this crisis and blogged:
Spot prices for natural gas have more than quadrupled to record levels in Europe and Asia, and the persistence and global dimension of these price spikes are unprecedented…..
Brent crude oil prices, the global benchmark, recently reached a seven-year high above $85 per barrel, as more buyers sought alternatives for heating and power generation amid already tight supplies. Coal, the nearest substitute, is in high demand as power plants turn to it more. This has pushed prices to the highest level since 2001, driving a rise in European carbon emission permit costs.
Andrea Pescatori, Martin Stuermer, and Nico Valckx Surging Energy Prices May Not Ease Until Next Year
The return to coal and its pollution, does not bode well for solving our major problems of ecological destruction and climate change. Lurion De Mellon of Macquarie University also wrote in October about the increase in prices apparently leading to increased emissions:
the world is entering a new energy crisis the like of which hasn’t been seen since the 1970s…. [see footnote below on the oil crisis]
European and Asian gas prices are at an all-time high, the oil price is at a three-year high, and the price of coal is soaring on the back of energy shortages across China, India and Germany…..
The crunch in the gas market is forcing countries to revert to coal for electricity generation and for industry.
Lurion De Mellon Suddenly we are in the middle of a global energy crisis. What happened? The Conversation, 12 October 2021
The Economist reported similarly:
the first big energy scare of the green era is unfolding before [the eyes of people preparing for COP 26]. Since May the price of a basket of oil, coal and gas has soared by 95%. Britain, the host of the summit, has turned its coal-fired power stations back on, American petrol prices have hit $3 a gallon, blackouts have engulfed China and India, and Vladimir Putin has just reminded Europe that its supply of fuel relies on Russian goodwill…..
Editorial The first big energy shock of the green era. The Economist, 16 October 2021
The crisis is not confined to one area, and events in one country, or set of countries, have effects in others.
The Economist goes on to imply that the intermittent nature of contemporary renewables, may also destabilise the energy market and make it more vulnerable to shock. This could be especially so if the system has been geared towards continual supply, and if modern economies are dependent on non-disruptive weather for predictable trade and production, during a period in which climate change is kicking in.
Others imply this shortage happened because of the Covid reprieve of September to November of 2021, which led to a massive increase in production and demand. This may be being terminated by the Omicron chaos of December 2021, but it is too early to tell. The explosive demand is usually said to be higher than supplies of a great many products, which were wound down due to lack of demand during Covid.
However, Bridgewater states, in a somewhat self-contradictory report, that supply is not really the problem, but is the problem for, at least, energy and metals:
This is not, by and large, a pandemic-related supply problem: as we’ll show, supply of almost everything is at all-time highs. Rather, this is mostly [a policy] driven upward demand shock….
real goods production [in the US] is now higher than it was pre-COVID….
there’s not enough energy to power economic activity given the current levels of demand…
[Likewise] Metals prices have risen sharply since last year, as demand has far outstripped supply….
The gap between demand and supply is now large enough that high inflation is likely to be reasonably sustained, particularly because extremely easy policy is encouraging further demand rather than constricting it.
Greg Jensen, Melissa Saphier, Steve Secundo It’s Mostly a Demand Shock, Not a Supply Shock, and It’s Everywhere. Bridgewater, 19 October 2021
For whatever reason, demand for energy appears to be exceeding supply, and capitalist economics is possibly not experienced in deliberately trying to reduce consumption growth, which might be essential when we are dealing with an over-consumption and over-demand crisis. High prices may cut back demand, but they may not. Growth seems to be an inherent demand in the system. Politicians campaign for growth in GDP, and companies which do not grow in size and profit, are often thought to be in decline. That system demand seems to be present in people’s world views and habits.
On top of this temporary (?) lack of supply and ongoing demands for growth, it will eventually be the case that fossil fuels will reach a practical limit, when the energy needed to extract them becomes greater than the energy released through burning them, and there is little surplus energy other than that produced by non fossil fuel sources. That is, fossil fuels will reach depletion, or stagnation of production. Rather than simply pushing prices up to match demand, this may cause price volatility, as markets adjust spasmodically. Richard Heinberg, Senior Fellow-in-Residence of the Post Carbon Institute argues that shortages are already happening.
There has always been some volatility in fossil fuel markets. But as depletion continues, price spikes and troughs are likely to grow in amplitude, and to become more frequent. And that’s precisely what we are seeing….
Without depletion, there would still have been price variation—just as there would still be extreme weather events without climate change. But, like climate change, depletion is a slowly accumulating background condition that widens the envelope of day-to-day or year-to-year extremes….
Market volatility makes fossil fuel companies wary to expand operations, as new projects are often many years in development, and the comparatively few remaining prospective drilling sites are unlikely to yield profits absent stable, high prices.
Heinberg Museletter #345: How Much of the Worsening Energy Crisis is Due to Depletion?
In a volatile situation, investment is slow, as there is less certainty of profit, especially if there is a fear of stranded assets. It is may be easier to make money on money markets, than in production, and this will slow useful investment further.
Second Problem: Lack of investment in transition
The Economist continues:
The panic has also exposed deeper problems as the world shifts to a cleaner energy system, including inadequate investment in renewables and some transition fossil fuels, rising geopolitical risks and flimsy safety buffers in power markets. Without rapid reforms there will be more energy crises and, perhaps, a popular revolt against climate policies.
Editorial The first big energy shock of the green era. The Economist, 16 October 2021
The BP 2020 Review of Primary Energy Consumption states that, despite the first decline in energy consumption since 2009, in 2020:
- Oil provided 31.2% of the energy mix
- Coal provided 27.2%
- Methane (‘Natural Gas’) provided 24.7%
In this calculation, fossil Fuels provide a total of 83.1% of energy supply. The rest is made up of Hydro 6.9%, Nuclear 4.3%, Renewables 5.7% (although this category includes biofuels which are not always green-renewables), and presumably traditional sources of energy.
The preponderance of fossil fuels, the precariousness or failure of fossil fuel supply together with the failure to replace and phase out fossil fuels would seem to be make the energy crisis primarily a crisis of fossil fuels, not a renewable problem. However, the tiny amounts of renewables may add stress to a stressed system, as there is not enough of them to compensate, and unlikely to be enough of them, soon. Not enough constructive investment in energy is happening. The Economist claims that investment is running at half the level needed to reach net zero by 2050, and argues that energy transition:
will require capital spending on energy to more than double to $4trn-5trn a year. Yet from investors’ perspective, policy is baffling. Many countries have net-zero pledges but no plan of how to get there and have yet to square with the public that bills and taxes need to rise.
Editorial The first big energy shock of the green era. The Economist, 16 October 2021
Resistance to necessary change, resistance to dealing with the new, or a desire not to risk relationships with powerful corporations, can be expressed as confusion, and policy confusion may not help people to organise to defeat problems. This essentially comes down to refusal to challenge existing worldviews, habits or organised power structures.
It should be easy to agree that:
The green era, for all the talk and promises, hasn’t yet begun. The world’s energy sources in 2021 are little changed from the late 20th century. We are still deeply dependent on fossil fuels.
Editorial This isn’t the first energy shock of the green era. It’s the last energy shock of the fossil-fuel age. The Globe and Mail 18th October
Third Problem: Lack of Renewables
The previous section argued that there is not enough investment in renewables, and that volatility, and lack of policy clarity, may not mean enough renewables are produced. As suggested earlier, it seems easier to default to coal. However, countries and companies cannot keep expanding fossil fuel use to solve this energy problem if they are concerned about the serious problems of pollution, ecological destruction, and climate change. The more fossil fuels they produce the greater the problems.
The IEA adds to concerns by remarking that:
For all the advances being made by renewables and electric mobility, 2021 is seeing a large rebound in coal and oil use. Largely for this reason, it is also seeing the second-largest annual increase in CO2 emissions in history. Public spending on sustainable energy in economic recovery packages has only mobilised around one-third of the investment required to jolt the energy system onto a new set of rails…
Getting the world on track for 1.5 °C requires a surge in annual investment in clean energy projects and infrastructure to nearly USD 4 trillion by 2030.
IEA Executive summary World Energy Outlook 2021
To make the point yet again, it seems emissions are increasing to fix energy supply problems (increasing emissions is a habitual default position) and governments and corporations are not generating enough renewable energy to avoid this problem.
It is difficult to expand renewables if there are powerful vested interests resisting their expansion, if the necessary levels of renewables cost more than companies and governments are prepared to pay, the policy settings are confusing or otherwise not helpful, and if there is not enough energy to build renewables.
It takes energy to make solar panels, wind turbines, batteries, electric vehicles, heat pumps, and all the rest of the technology that policy makers propose to replace current fuel-burning infrastructure. Most of the energy that will be required for transition purposes, at least in the early stages, will have to come from fossil fuels….
If fossil energy prices are going haywire during the transition, that makes an already arduous and perilous process even more so.
Heinberg Museletter #345: How Much of the Worsening Energy Crisis is Due to Depletion?
Rystad Energy also argue that price volatility in manufacturing, materials and shipping, is affecting renewable energy:
The surging cost of manufacturing materials and shipping could threaten 50 gigawatts (GW) – a staggering 56% – of the 90 GW of global utility PV developments planned for 2022, a Rystad Energy analysis shows. Commodity price inflation and supply chain bottlenecks could lead to the postponement or even cancelation of some of these projects, impacting demand and consumer pricing for solar-generated power.
Rystad Most of 2022’s solar PV projects risk delay or cancelation due to soaring material and shipping costs. 26 October 2021
So, apart from not being able to hook renewables up to the grid in some places [15], there is another problem of price increases in renewables resulting from the current economic turmoil and possibly profit decline as collapse increases.
It can also be suggested that increased energy efficiency may just add to demand for energy, and new energy technology may not lessen the demand for old energy technology. Renewables have so far been built on top of coal, oil and gas rather than replacing them. Some societies might not have enough energy at the moment, but they may still have more than they did and it does not satisfy demand.
To me these seem primarily problems of government and scale, magnified by corporate domination, corporate habits and corporate power.
One thing that seems to have been conclusively demonstrated is that free markets and sensible investment will not save the world, neither will governments that are embedded in promoting those markets. Contemporary market led civilisation has failed to deal with its primary set of challenges of climate change, ecological destruction and emissions reduction. Indeed it has if anything tried to suppress awareness of those challenges. This will lead to civiliational collapse, unless there is a massive ‘rebirth’ driven by people outside of government and the corporate sector – not people pretending to be outside, and aiming for fascism.
The Fourth Problem: Civilisational collapse
There are some who argue that Contemporary Western Civilisation was generated by fossil fuels and depends on cheap and plentiful fossil fuels, and on cheap pollution, for the continuing growth (of the new technologies, material goods, profits and military strength) that it requires. Real renewable energy, and ecological care, may not be able to substitute for this ease of growth. If so, then emissions targets, emissions prices, and energy transition could lead to collapse.
Even if this is correct, habitual expansion almost always requires increasing energy use, to maintain that expansion (against resistance), and to maintain the added complexity that expansion adds to the organisational form which is expanding. So the continued workings of the current system may generate not a stable replacement of ‘bad’ energy sources with better, but demand an ongoing increase of energy supply (and disruptive pollution), especially if ‘developing’ countries are to ‘catch up’. That ‘need’ for energy expansion is further destabilising of transition processes.
We are in a period in which the processes which generate this dominant form of ‘civilisation’ also appear to producing the hottest years in recorded history, massive and apparently unprecedented forest fires, the increasing sparsity of ocean life, massive deforestation, massive decline of insect populations which will undermine pollination and food chains, and the flooding of ecologies with new chemicals of which we cannot yet know the synergies and consequences. The maintenance of any society depends upon maintaining its ecologies, adapting to their change, or at least the cessation of excessive destruction.
Some hope that economic growth/expansion can be ‘decoupled’ (separated) from environmental destruction and climate change. According to the European Environmental Bureau there is no evidence that such a position is possible.
not only is there no empirical evidence supporting the existence of a decoupling of economic growth from environmental pressures on anywhere near the scale needed to deal with environmental breakdown, but also, and perhaps more importantly, such decoupling appears unlikely to happen in the future.
Decoupling debunked – Evidence and arguments against green growth as a sole strategy for sustainability
On top of this, as mentioned earlier, societies may be facing problems of fossil fuel depletion soon, as fossil fuels get used up, and that will also cause problems. These civilisational effects are likely to add to price volatility, as supply chains and production sites get disrupted.
The result is that contemporary Western (and many other) Civilisations are in crisis with their ecology and with the energy available, and will therefore have to change or collapse. So this is a ‘wicked problem‘ with no easy solution, and probably no solution we can agree on in advance. It is a wicked problem, that is easier to deal with by pretending that everything will be ok, and that we can avoid challenges, or overcome them by magic.
However, the reality is that if people in large scale societies continue as they are continuing, then their civilisational collapse will continue, intensify and be even less capable of controlled change. We need change – perhaps more change than just a change in energy supply.
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Footnote: The 1970s Oil Shock
It may need to be said that this energy shock is not that similar to the 1970s oil shock. That was motivated by politics and by a demand for a fair price for oil. The oil shock only affected one source of energy, and was survived by increasing coal, gas and nuclear, and seeking fuel closer to home (North Sea fields etc). This is now largely impossible, without risking further collapse. Nuclear still seems way too slow to solve our problems in time, and again suffers the problem that it could just add to energy rather than replace it.
