There is a collorary to our economic system in nature. It’s not considered a single subject or discipline but involves a mixture of physical geography with ecology, biology and so on. Nature is truly circular to the extent that the outputs of one system feeds into the input of another and the overall grand scheme of things is in a kind of dynamic equilibrium that eventually shifts over time.
For a while humans have mimicked nature in creating circularity in our economy. And then we gave up because it was easier to scale things up and create wastage in order to fulfill profit motives. The unequality in an economy, the more wastage is produced because production gets inevitably skewed towards satisfying a demand that is aligned more to the distribution of “means” rather than a distribution of “needs”.
Nature behaves differently because the currency of nature is multi-dimensional and rich. There is no “monetisation”; nature do not base its value on a single commodity. You can’t exchange one calorie for another easily within the diet of most animals.
Real circularity involves richness that the industrial capitalist manner of approach cannot replicate.
Huge amounts of subsidies goes into fuel and energy. The companies are not necessarily being the ones subsidised to produce the fuel but rather, domestic markets of net exporters tend to be protected somewhat from international energy prices through subsidies. The notion is to help maintain internal price stability and hence cope with cost of living.
Australia is one of the few markets who are net exporters of natural gas for example and yet do not really “shield” its domestic market from international price impacts. The result is that the recent price spike in natural gas had Australians screaming in pain and for perhaps the first times in decades, businesses and households are seriously considering disconnecting from the grid and electrifying.
But there can be a middle ground. Subsidies can exist for these energy exporters to protect their domestic users given that these exporters stand to gain when the energy price increase. How can they share these windfall with their own economy and the users in local market? The government can subsidise users but make the subsidy transparent. This way, households are not paying the full prices and they are also given information about how much the government is helping to make them affordable. At the same time, it becomes more politically acceptable to pull back on such subsidies for those heavy users who are higher on income brackets and can afford it.
For far too long, we shield the markets from the proper price signals and artificially create false sense of affordability by subsidies, we reduce the resilience of our economies and contribute further to wastage and carbon emissions. Making subsidies transparent is a great first step, towards removing this political gridlock around domestic energy tariffs.
I have written about green ammonia and hydrogen before. And I might keep talking about them because they are important candidates as energy vectors in a decarbonised world. They are quite likely what is considered as the end points of the transition for the world towards zero carbon or low carbon. What does it mean to transit to green ammonia or green hydrogen? What needs to take place, and who will move first? What should the players be looking out for in order to make the switch?
We need to start defining intermediate steps for the switch. There is actually very little doubts about the inevitability of the switch. Yes there are concerns that it might be energy intensive, the costs are high, and the market is not formed yet. But realistically, most new things are like that. When the Apollo mission took up 60% of the computing power of United States in order to perform its calculations for the project, there wasn’t anyone saying the industry is not formed yet we should wait for better computers before we send man to the moon. We just viewed the mission as a series of problems to be solved, within the budget constraint.
The transition needs a budget; it can be a small one or it can be a large one. The issue is that the businesses needs to take a stance and say that climate change and the transition is a mission I want to be on, and to explore the series of problems to be solved in order to complete the mission. And we don’t wait for costs to come down before we make the transition, we take active steps towards it. That is also what leadership is about. That is really the only issue people should be considering.
So for example, if you’re providing equipment for natural gas systems – be it power generation, cogeneration, for steam methane reforming, etc. You need to start thinking about the smaller pieces of things: are your valves able to handle hydrogen? Do the membranes in your cryogenic tanks work if it was to be filled with hydrogen? What about your manpower, are they able to be trained in the safe handling of the gas? All these to prepare for the transition. You won’t be able to make the transition overnight or achieve it through a single project. It takes much smaller steps.
Transition means being in an in-between state, crossing over to something which is supposed to be perhaps a less temporary state. The challenge, however, is that one can get stuck in transit. Natural gas as a fuel risk being in that state because it wasn’t really adopted fast enough as a transition fuel. And now renewable electricity from solar and wind has more or less leapfrog it in terms of cost advantage. Once battery or other energy storage technology moves along the cost curve and decline sufficiently, natural gas might even be bypassed.
So the world is in a somewhat confused state. When is it right to use gas? What should be counted as alternatives for decarbonisation? In any case, gas prices are spiking now so what does it mean? Should that mean we move forward into more renewables which might even be more expensive? Or we move backward into coal?
These decisions are not meant to be made in categorically; because the entire system needs to be considered. And what is at the margin in terms of choice needs to be clearly identified. If the additional unit of power that satisfies both energy security and the quantity demanded can be obtained through renewables, it should be used. Of course if that is not available, one might have to step back into more carbon-intensive processes. Availability can also be based on budget.
Natural gas itself, needs to be displaced by greener fuels without threatening the underlying combustion technologies that underpin the gas turbines. But that is perhaps for another day.
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