The Battle Between Oil and Electricity

Energy is not only a battleground between different sources such as nuclear, renewables or fossil fuels. There is also a battle between different means of delivering energy to consumers to provide light, comfort and mobility. Over the last century or more, two energy carriers have effected radical changes on human society and paved the way for a truly global economy. Oil has transformed our ability to move goods and people huge distances over land, sea and air. Electricity has transformed our homes and enabled the transfer of vast quantities of information and virtually instantaneous communication between any two points on the globe.

From a consumer’s perspective, these appear to be two different industries. Oil and gas producers exploit resources upstream and maintain distribution networks that end at the petrol pump. A different set of companies transforms primary energy into electricity and brings it into people’s homes. Two different energy sectors effectively co-exist because their products are so different in character. Liquid fuels have a high energy density and can be stored on-board a vehicle giving it a range of 1,000 kilometres or more. Electricity is difficult and expensive to store, and supply and demand must balance instantaneously. However, electricity is a very high quality form of energy that can be turned to almost any purpose: lighting, heating, motive power and the carriage of information.

Can we take the boundary between these two energy carriers for granted? Although the division appears clear and logical at the moment, history shows that nothing can be taken for granted. When oil was first produced, it was not to fuel the internal combustion engine. It was to provide a fuel for lighting to replace ever scarcer whale oil. Oil fractions that could have been used for transport were discarded as waste. However, through the innovative efforts of Edison and Westinghouse and by virtue of its greater power, flexibility and safety, electricity drove oil and gas from lighting markets. Oil has retreated from other markets too. Against a background of abundance and low cost supplies, Winston Churchill felt able to switch the Royal Navy from coal to oil prior to the First World War. But the high prices and scarcity associated with the 1970s oil crises drove oil from its markets in power stations and industry as companies responded to price signals and governments responded strategically to a deteriorating energy security situation. Lower oil prices in the 1980s and 1990s have not reversed these trends. There is now a prospect that global demand for oil will peak in the next 10-15 years – it may even have peaked already. Meanwhile, global demand for electricity increases at a rate that will lead to a doubling every twenty years.

There are reasons to suppose that the battle of the energy carriers is not over. The International Energy Agency’s latest Energy Technology Perspectives report focuses specifically on harnessing electricity’s potential. The next battleground involving oil and electricity could be in the transport sector. Several factors are involved. Two are environmental. In emerging economies, where car ownership is growing rapidly, transport-related air pollution is a major cause for concern and the attractions of electric vehicles are considerable. Electric vehicles can also help in the fight against climate change by making use, indirectly, of low-carbon energy sources such as renewables or nuclear to fuel the transport sector. Technological change is also playing a role. Energy storage technologies are developing rapidly and the cost and performance of battery technology in particular are improving. This will extend the range of electric vehicles and partly (though certainly not completely) erode the advantage of oil in this respect. Finally, in an uncertain world, it will allow more countries to reduce their reliance on imported transport fuels.

The new battle will not necessarily be clear cut. Improvements in extractive technology and access to new unconventional sources mean that oil will not be physically scarce. As with any major technological transition, it may take decades to work through. And “compromise” technologies such as hybrid and plug-in hybrid vehicles may help to make the best of both worlds, though at a cost.

The “eco-machine” of the future is now up for grabs. It may take a long time before we see an all-electric future for vehicles. But it is certain that the future will be both more electrified and more electrifying.

Source: Huffington Post

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