Purpose and Profit: Driving The Energy Megatrend
A megatrend is an innovation that restructures society on a fundamental level. The printing press set 15th century Europe aflame, redefining continental power structures and control over the flow of information. Millenia before, the use of fire and the invention of the wheel changed the way humans lived. Somewhat more recently, the Internet did the same on a global scale. Online connectivity did not simply make existing work easier, it created new work, new questions, new problems, new answers, and new solutions.
As these were to information, other megatrends have fueled and reshaped civilization. The industrial revolution, steam power, the internal combustion engine, diesel, and electrification have forever changed transportation, industry and warfare.
Oil and gas have fueled not just cars but wars, diplomatic relations, economic growth, and migration patterns. Today, as the ramifications of that megatrend on the planet’s climate become increasingly pressing, a new megatrend has appeared.
Responsible stewardship of our environment, the role of private industry in spurring on innovation, geopolitical ties built around strategic resources, are driving the push for renewable, green energy. Some resist the megatrend while others embrace it, immediately or after initial hesitation.With wide-ranging changes come strong emotions.
Alexander Mirtchev’s The Prologue: The Alternative Energy Megatrend in the Age of Great Power Competition discusses the ways the renewable era might reshape the dealings of nations, creating as many opportunities for profit and cooperation as competition. Mirtchev, Vice Chairman of the Atlantic Council and a Distinguished Professor at the George Mason University, cuts through the emotions.
Undoubtedly the world economic map will change as a consequence of new resources and new societal needs, even if borders remain the same. As renewable fuels come of age, the influence of principal oil exporters — OPEC, Saudi Arabia, Russia, Venezuela, Iran — will diminish. The short-term gains of an increasing market share might prove profitable, but shrinking global demand will leave those unprepared high and dry.States like China, which dominate alternative energy industries and components such as photovoltaic panels, will rise.
As interesting, however, is the accompanying sociological wave, changing, as Mirtchev puts it, “the way society views social and economic challenges.”
To some, seeing the opportunity for further change, the renewable revolution has taken on an ideological angle, with hopes the innovation it spurs might alleviate society’s other ills. Others are trying to contextualize through frames of economic anger, resenting the notion that corporations made wealthy through fossil fuels should profit from investing that wealth into what comes after. Those people forget that profit and capital is what made our civilization a success it is.
As things stand, the far side of this megatrend may not be so grim as some predicted. Industry is rapidly approaching and acknowledging tipping points wherein adopting green practices will not simply bring good press but good growth.
Plunging battery costs may soon make electric cars as affordable as their fumes-spewing predecessors, at which point few manufacturers will have incentive to produce the old internal combustion engine vehicles. As the Biden Administration points to offshore wind farms as a worthwhile investment, companies such as BP, Equinor, and Shell have applied expertise gained from years of offshore drilling toward just that goal.
In some of the largest energy companies, investors are increasingly vocal in advocating for long-term transitional strategies. Shareholders have elected three pro-renewables members to ExxonMobil’s twelve-member board of directors, and similarly asked Chevron to heighten its targets for emission reduction.
This market-driven tipping point may have come just in time for a clash with the ideological adherents described in The Prologue’s epilogue. Germany’s Green Party has nominated a candidate for chancellor for the first time in its history, emboldened by unprecedented polling and public support.
The European Greens might indeed take power, but effective governance will come from a desire to seek consensus and coalition. With market forces and investors pushing companies to adopt greener practices, there exists incredible potential for synergy and growth.
On the flipside, policy intended to attack honest business might hinder what is already underway. Disdain for energy companies – or capitalism in general -- should not fuel the environmentalist movement, or hinder the market’s earnest response to the renewable energy megatrend. As Mirtchev consistently observes, the renewable moment can bring the greatest growth if disparate sides cooperate in taking full advantage of it.
Growing environmental conscientiousness and market trends favoring conservation are beneficial to everyone, as are clean air and water. To realize the full society-changing potential of renewable energy, however, those two forces must be brought into sync. By allowing companies to naturally become climate change agents rather than antagonists, the post-industrial societies can achieve a greater change and avert the worst possibilities of climate change.
Failure to bridge those ideological gaps will hinder our response and economic growth.Like it or not, a careful balance of purpose and profit will prove far stronger than either alone.
Daniel A. Witt is President of the International Tax and Investment Center (ITIC).