Security, resilience & opportunity: re-perceiving energy systems

Sudden disruptions to our energy systems shake our personal and collective worlds, threatening budgets, jobs, livelihoods and even lives. We can't do, build or move anything without energy. It is central to the security and resilience that much of the world is worrying about in these turbulent times.

Generally, the energy system is hidden behind the products and services that we actually use, the lights, the cars, the food, the clothes, the buildings, the phones, and we take it for granted until there are problems. However, when there is a problem, we see the ripples of impact spreading far and wide, and deep into the future.

For example, current blockages in the Strait of Hormuz are not only reducing oil and gas flows used directly as fuels in the broader economy, affecting the availability and price of thousands of goods and services across the world. They are also directly reducing the flow of one third of the world's fertilisers which are produced in the region because of its abundant and inexpensive energy availability. For years ahead, this will affect global food production, food affordability, and food availability for the most vulnerable people in society. Some people will starve as a result.

Energy disruptions are threats. They bring loss, or the fear of loss, and we are very sensitive to that prospect. Hence enhancements to our energy systems can broadly improve our security and resilience, bringing both public and private benefits. They also open up new opportunities as we have seen with renewable power sources, shale oil and gas, electric vehicles, and enabling power-hungry data centres that are delivering the growing Artificial Intelligence capabilities beginning to influence much of what we do. For this, energy systems should not be considered in isolation, but in combination with all the material, activity and information flows in our economies.

Security

What comes to your mind when you think about "Security"? Is it physical security? Or financial security? Or personal security? Possibly all of these things. Security is a broad landscape so there is a need to divide up the canvas somehow.

One way is to recognise that we can't survive or do anything without water, food and energy, so the security of these highly connected systems is fundamental. There is frequent reference to the Water-Food-Energy "Stress Nexus" because growing populations and human activity are increasing strains in all these different areas, and they are deeply linked.

These linkages may not be apparent to the casual observer, but even a little insight can be startling. For every calorie of food we consume, about five calories of fossil fuel energy are used in the supply chain, on average globally. And that rises to 40 calories for high-end produce like beef. Similarly, the production of one kilogram of beef can use about 15,000 litres of water as a global average. Even a cup of coffee takes 140 litres of water. Agriculture accounts for about 70% of global freshwater use, but energy providers are amongst the largest industrial consumers of freshwater. Conversely, energy is required for the supply, purification, distribution and treatment of water and wastewater. In some countries around the Persian Gulf, the energy to desalinate water accounts for almost two-thirds of domestic oil use, while in the US, it has been estimated that 75% of the cost of water comes from the energy required to transport and clean it.

My former team brought together top global specialists on security issues associated individually with water, food, and energy, and then investigated the many linkages. Among many other valuable outcomes, this exercise produced the following excellent graphic summary, which illustrates how the most influential factors across the whole security landscape can be identified as a result of their connectivity to other factors.

This analysis surfaced the following five most influential factors, or clusters of factors:

Smart & Sustainable Design

One of the two most influential factors surfaced in the centre of the whole network is the quality of urban development. Related to this are the efficiency of integrated infrastructure development and material use, and the quality of education and informed consumer/citizen choices. In rural system design, the efficiency of the food supply chain is particularly highlighted along with sustainable agriculture and land-use trade-offs.

Policy & Pricing

This includes the second large visible factor in the graphic. It refers mainly to the quality of alignment mechanisms for addressing climate pressures and shaping the efficiency of resource use. For example, the regulation and direct or indirect pricing of greenhouse gas emissions. In addition, there is the pricing of fresh water consumption and fossil energy to improve efficiency in their use and stimulate the development of more efficient technologies.

Natural Resource Nationalism & other similar constraints

Of course, limitations on supplying key resources to others for political or economic reasons have a direct impact on security. This may be through acts like damming rivers or limiting the availability of, for example, phosphorus for fertilisers or rare metals for battery production. Currently, of course, the simmering geopolitical conflict closing the Strait of Hormuz is an illustration of how politically inspired disruptions can have widespread impact on resource security.

Technological Innovations

Alongside renewable energy technologies like power from solar and wind that are already becoming established, two particular new technological approaches were highlighted by the analysis. The first of these was carbon dioxide capture and storage for hard-to-electrify sectors of the economy, again to reduce growing climate pressures. The second was energy storage to address power supply intermittency and interruptions, and the third was waste conversion to energy.

Population & Prosperity Growth

Of course, the underlying pressure on food, energy and water security stems from the extent of human activity and this is driven by the number of people on the planet and the amount of economic activity required for achieving at least a decent quality of life. At about 8 billion, there are already more than three times as many people in the world as when I was born, and this is generally expected to rise to over 10 billion before the end of the century. Nevertheless, we could still act to reduce population pressures over that longer term by around 30-40% through better educating girls and young women and empowering them to manage their reproductive choices. See, for example, the article "Want a healthy planet? Unleash women!"

In summary, the two most significant factors from this overarching analysis of long-horizon security fundamentals are addressing the quality of urban development and reducing greenhouse gas emissions, along with equipping people to make wiser choices. These are pervasive matters driving the underlying demand for key resources and also driving the growing environmental calamity that links them all.

However, the third "political" factor on the list above is currently very much more attention-grabbing due to the immediacy of its impact and the connection with contemporary events. Of course, this is important but, unfortunately, it can also deflect attention away from the less salient but even more significant longer-horizon issues.

The brutal truths of the damage our activities are inflicting on the environment are becoming increasingly evident, fuelling social and political unrest, including migration pressures. Many of these challenges were anticipated years ago in both scientific research and popular culture. Today, the realities we are witnessing, including the ferocious heatwaves I have experienced over the past month, suggest that some long-term developments are unfolding even faster than expected.

Resilience

This also reminds us that we conceive of Resilience in different ways on different time-scales. Immediate attention is drawn to "Structural" resilience, which is the basic capacity of a system to sustain a shock without falling apart or losing key functionality, and is enabled by features like buffers and diversification. These features are now top of the agenda for the many countries and businesses affected by current disruptions.

However, the analysis of security outlined previously also highlights the criticality of both "Integrative" and "Transformative" resilience which have broader scope and longer horizons. The former involves an appreciation of the multiple interacting physical and human systems at different scales (e.g. urban/rural) that affect activities, and how these may interact to create, for example, self-reinforcing cycles, boundaries and thresholds. The latter concerns the capacity of a system to evolve and even transform significantly as circumstances change, while retaining the deeper essence that defines its identity. It is enormously facilitated by a longer-horizon orientation.

As already noted, however, current events have focused attention narrowly on structural resilience seen through the lenses of military capability and supply chains for energy and other critical materials. From an individual business perspective, attention has been driven to diversifying supply sources and building up buffer stocks. All of these have their place, but the broader perspective on longer-horizon security highlights the even greater importance of moderating growing stresses through both demand-side perspectives and also reducing greenhouse gas emissions. These considerations highlight that energy systems, and energy transitions, should be at the very heart of all our deliberations on fundamental long-horizon resilience and security rather than being deemed secondary issues.

One challenge, however, is that it is much easier to conceive of energy systems purely from the supply side because there are a limited number of primary energy sources, whereas the activities they power extend across a myriad of business chains and end-uses. In addition, decades of political deliberation have framed energy transition as a single, slow-moving, uninspiring, costly and supply-led "hard slog."

Nevertheless, it is equally valid to re-perceive energy systems, along with other material flows, from the perspective of the end-use products and activities they enable. Through this, transitions can be recognised as a series of potentially fast, opportunity-rich, modest cost and demand-led tipping points, albeit of uncertain timing. The validity of this approach is explored in an earlier illuminem article on Re-perceiving Energy Transformations.

Such re-perceiving highlights opportunities for smart business, smart policy and smart politics that would both enrich individual successful leaders and also benefit everyone through enhancing security and resilience.

Opportunity

Unlocking many of these opportunities, however, means grappling with the complexity of understanding energy systems back from the demand-side perspective of downstream products and end-user activities. This goes well beyond the direct users of energy, like steel producers, but also the business chains downstream of these big direct energy users, like vehicle manufacturers and their customers or construction companies and their customers. Fortunately, two factors can be really helpful in this.

The first can guide prioritisation as just 8 full business chains account for over 50% of all emissions, food, fashion, electronics, automotives, construction, FMCG, professional services, and additional freight. The second is the explosive growth in capabilities for data gathering, management and analysis. If some of this capacity is appropriately directed, it could enable full traceability of the business chains behind selected products in major markets. This would help identify not only attractive business opportunities but also enable affordable standards to be applied to the environmental footprints of end-use products, driving economic incentives upstream to where big investments are required to reduce emissions.

This may seem like an overwhelming task. However, there are already data trails to build from as every link in a business chain involves a financial transaction. In addition, we already have examples of how some incredibly complex data gathering and analysis tasks can be accomplished successfully. Just think of, for example, Google Maps.

Will anybody grasp this business-chain mapping and data management opportunity? It will need a significant degree of focused attention but require only modest funding.

Fortunately, not-for-profit organisations like the World Business Council for Sustainable Development (WBCSD) and Mission Possible Partnership (MPP) are already beginning to put in the hard yards to fully map some of the key business-chains driving emissions. This will provide valuable foundations and highlight potentially attractive new business areas, but who will initiate serious subsequent investment in data management and footprint labelling? The not-for-profit sector doesn't command such resources although it can provide encouragement.

In contrast, the large IT and AI companies behind the current explosion in data centre construction have access to huge resources and capabilities that could be invested in this area. Do they have the necessary incentives to do this? They should be motivated by the potential to identify additional attractive new business opportunities in advance of others. They could also be encouraged to proceed in developing this public benefit in return, for example, for securing planning permission for their new data centres, thereby boosting their reputations and license to operate. Carrots and sticks?

In summary, we are all rightly concerned about security and resilience in our troubled world, and the broad-scope analysis outlined here highlights that attention to energy system development is fundamental in ensuring this. Achieving improvements guided by full business-chain transparency and enabled by emerging data management capabilities, would enhance public security and resilience over the long term and also surface new opportunities to deliver both public and private economic benefits.

We should all encourage this understanding. Together, we can make a difference.

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