CERAWEEK 2023: Security, Affordability, Transition – Energy Trilemma in the Spotlight

Daniel Yergin, S&P Global Vice Chairman and Pulitzer Prize-winning author, hosted another CERAWeek in March, highlighting the challenges and opportunities in the global energy industry. Known as a fountain of knowledge on the history of energy markets, Yergin is comfortable looking back, even through the past tumultuous year; but looking forward is a whole different proposition. Today, making predictions is harder than ever before. The level of uncertainty is sky high and – whether it’s the Russian problem or global supply chain issues or Covid-19 legacy or green transition related challenges – reliability, the holy grail of certainty for investors and stakeholders, seems like a dream.

In Houston, one of the world’s energy capitals – where there is a shift underway, moving from oil and gas centre to energy transition home – leaders from the global energy space gathered for a week of insight, awareness, idea sharing, collaboration, and empowerment to bring about change and advance the future of energy.

CERAWeek is a product of Cambridge Energy Research Associates, a US consultancy offering up industry leading advice for governments and organsation on energy markets, geopolitics, and industry trends. First held in 1981, the event has attracted hundreds of thousands of attendees over the years, with the world’s most important speakers gracing the stage each year. Now delivered by global intelligence and insight business S&P, CERAWeek grows in popularity each year. Typically an event delivered from a US perspective, CERAWeek is a unquestionably global in importance, and with energy security now a top priority for most governments, knowledge about the way forward that comes from discussions at CERAWeek will help, as much as possible, as complicated planning is at the heart of country and company strategy.

In 2023, the key themes include volatility, sparked by the Russian invasion of Ukraine; technology and innovation, as existing infrastructure is either phased out of adapted to achieve Net Zero targets; finance and capital, with trillions of dollars needed to continue a transition against a backdrop of high inflation; supply chains and commodity markets, required to achieve any sort of transition but over complicated and overpriced as they are; and the workforce, which will need to be overhauled and upskilled to team up with AI to meet significant challenges. But the central question posed to almost all of the experts across the week, in some shape or form, is about the trilemma – security, affordability, and speed of change.

Building an energy system that is secure, sustainable, and affordable, while at the same time redesigning and redeveloping the global economy to address the climate change challenge – this is the problem facing organisations, and discussions at CERAWeek were underpinned by this key theme.

HIGH PROFILE

Darren Woods, CEO at ExxonMobil, told the conference: “We saw how quickly, when forced to prioritise supporting the economy or supporting people’s need for energy, we abandon climate objectives. We saw that in Europe as it went back to burning coal. The lesson there is to make sure that, as we move forward, we have policies that strike a balance and continue to manage all the dimensions of our energy need, providing affordable and reliable power to people around the world, at the same time finding ways to quickly reduce emissions. We can do both of those things, but policy needs to be structured to support that.”

He added that oil and gas remain vital as an energy source in the energy transition. “We recognised before unveiling our strategy in 2018, that it was underinvested. It’s a depletion business. Most people forget that with every barrel that is produced, that is then not available for the future and the industry has to continue to invest. In 2018, when everyone was pulling back, we leaned in – and we were heavily criticised at the time for doing so – but we recognised at some point that supply would be needed and we wanted to make sure we would be there to provide.”

Mike Wirth, CEO at Chevron, agreed, saying: “The world uses an enormous amount of energy. It’s what makes life possible and what makes life better in developed countries and those that are still developing. Affordable and reliable energy is essential to the quality of life and the advancement of human progress. The issue of how we best move towards a lower carbon future is one that is being reframed as we get some real experience in pushing these new technologies forward.

“The world runs on System A and we want to move to System B but it is only 2% built so you have to be very careful about turning System A off prematurely. System B needs to be scaled and proven in the conditions that are needed to provide the energy supply that the world depends on.”

Hon. John Kerry, the first United States Special Presidential Envoy for Climate, was clear in the message that a managed transition ensures success across the trilemma. “Demand is there globally. People are demanding that we keep our economies moving. You can’t suddenly just shut off the economy, shut off the lights, and shut of the heat – you have to keep things going. But at the same time, you can stay focused on reducing the emissions that are the by-product of the energy that keeps your economy moving. There is a shift in the marketplace, and that will continue. Companies are starting to move. They’re reducing their own emissions, and they’re looking at ways to have a clean supply chain.”

Clearly, a significant point from the event is that, despite the challenges driven by Russia, the commitments to emission reductions and achieving climate goals are not going to be neglected. The demand from people is clear – keep us energised, move us forward, but clean up your act – and do it all at the same time.

Herein lays the challenge, and this is where discussion in the event’s Innovation Agora become increasingly important.

FUTURE ENERGY

An expected hot topic across the Hilton Americas in Houston was hydrogen and its inevitable deployment within energy systems of the future. The abundant element and its use within the energy mix as unquestioned, but safe generation, storage, and deployment at scale remain experimental. Industry leader, Linde and the company’s VP Clean energy, David Burns was on hand to explain more about use in refinery processes. Alongside a panel of hydrogen experts, Burns highlighted the current level of expertise in the space and said that Linde is ready now. “For Linde, steel is already a very important business. We’re very familiar with it and we’re well connected with the major players. So as customers look to decarbonize, we’re in a good position to step in and support. The viability of green hydrogen is largely dependent on having a continuous and viable supply of green power. That’s what will determine the pace of uptake,” he said.

Driving a new conversation on the renewable front, Chris Griffin – CEO at Hover Energy – presented the company’s innovative wind powered micro grid solution and integrated energy management system, which has already been proven on rooftops around the world, taking the built environment from net energy consumer to contributor. With specially designed, highly efficient turbines, and a microgrid concept that is trademarked, Hover has been engaged by governments and private institutions to bring renewable energy into their asset portfolio. “To succeed, we need to move past the concept of a singular technology answer and start thinking about how we integrate technologies. Replacing grid level fossil fuels with grid level renewables is an important step already underway in many parts of the world. we believe our future is creating clean energy, right where it is consumed. Microgrids give people and cities the ability to create distributed energy with no transmission, thereby ensuring greater energy independence.”

In technology and innovation, California-based Moleaer was in attendance to discuss the growing phenomenon around nanobubbles. This relatively new area has already seen major success in the oil and gas industry, and is showing promise in hydrogen. Nanobubbles assist in a number of different applications, but in separation of product in mining and reducing water recycling in oil and gas, this is an innovation that will undoubtedly add value to operations. “By unlocking the power of water to enable industries to do more with less, Moleaer is protecting and growing the world’s resources,” said CEO Nick Dyner, explaining the company’s role in the energy transition.

Within the Innovation Agora – an open marketplace for the exchange of ideas and insights on energy innovation, emerging technologies, and solutions – more than 300 speakers gave special attention to the different lanes in which they run as part of the transition journey. Thankfully, 125 startups were also present giving hope that brilliant minds continue to enter the energy space and most see opportunities over challenges.

TAKE AWAY

After each CERAWeek, attendees leave with big ideas and hope for the year ahead, often with new partnerships and blossoming relationships in place, and this year was no different. The event continues to act as an ecosystem of invention, and a chamber of development in the energy industry.

“These insights help us foster collaboration in answering this century-defining challenge. I look forward to seeing how the big ideas and innovative solutions discussed throughout the week take shape as we forge ahead toward our global clean energy goals,” said Sandhya Ganapathy, CEO EDP Renewables North America, reflecting on her experience in Houston.

Some of the key take aways from the event surrounded the importance of collaboration, technology, and ambition. Firstly, again hinting at the damaging impact of the Russian invasion in Ukraine, many were keen to point out that the only sustainable way to achieve energy security and protect consumers from oil price waves is to reduce reliance on fossil fuels altogether – a sentiment backed by the big O&G players, albeit at a managed pace.  Secondly, the development of new technologies in the replacement of fossil fuels is essential, and hydrogen will definitely be a star in this regard. Third, digitalisation of systems is fundamental, and making the most of AI and technology advances will be key in decarbonising electricity – this includes grid improvement, waste reduction, clear understanding of grid patterns, and the ability to shift input as needed, embracing renewables. Lastly, collaboration is critical – this cannot be understated. The world’s big energy organsation, private and public, must share the cost and the glory in this challenge.

“Make no mistake,” said US Secretary of Energy, Jennifer Granholm, “enormous challenges remain across global energy markets. We have not yet vanquished the volatility that characterised so much of the last 12 months. The risks to energy security, and the vulnerabilities they leave for our national and economic security – those have not disappeared. And the imperative every country faces to meet the energy needs of its citizens will heighten as demand rises in the years ahead. It will take partnership between governments and private sectors to meet those challenges. A willingness to work together, even amid differing views. And here’s where we need to start: by acknowledging the clean energy transition is happening, and that we are growing the energy pie.”

Ultimately, this is the number one message from CERAWeek – a collaborative approach can see the energy transition succeed, and do so quickly. Partnerships between companies, countries, and the private and public sectors must be furthered, and global-scale funding must be established to advance some of the amazing technology innovations on display. With the next event set for 18-22 March 2024, there is hope that progress is being made, despite significant bumps in the road.

“The energy transition – a monumental undertaking under even the most stable conditions – has been made all the more challenging by a global economy beset with volatility and disruption,” said Daniel Yergin. “The sequential shocks of pandemic and war have brought with them a greater recognition that the energy future must be secure and affordable, as well as sustainable. Meeting this challenge will require keen strategies, smart investment and transformative technologies.”

Hopefully, this message is heeded companies look beyond their own bottom line towards a reality where energy of the future achieves all of that and more or energy of the past.