The Uncertain Future Of Energy: Investing In Tomorrow’s Power Means Pursuing Clarity Today

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Ryan Moody, President and CEO, ABS Group of Companies, Inc.

The calls to develop more sustainable energy options are intensifying. Regardless of each individual’s view on climate change and its impact, it’s undeniable that a new era for the production, storage and distribution of energy is on the horizon as the public and private sectors—not to mention the public consciousness—have turned their focus to the rising financial and ecological costs associated with the current market.

In order to move forward, we cannot forget that the energy transition has several outcomes that must be solved for and balanced, often called the “energy trilemma” of reliability, affordability and sustainability.

From the U.K.’s recent updates to its 2018 “25 Year Environmental Plan” to the energy-related provisions of the Biden Administration’s March 2023 budget proposal to the Association of South East Asian Nations’ recent commitments to the effort, governments across the world are now attempting to regulate the energy sector into sustainability while keeping costs down for consumers worldwide.

While it’s all well-intentioned, this regulation-focused approach to defining energy’s future—led by outcomes and outsiders rather than industry insight—may actually do more harm than good in the long term. Rather than encouraging innovation, these regulatory calls to action may only serve to complicate the situation.


Short-Term Knowledge For Long-Term Decisions

Despite their best efforts, much of this regulation could end up running counter to its goals. Rather than pushing energy leaders to make big choices, the lack of clarity around the future of carbon pricing and potential related fines is stalling construction on necessary green- and brownfield energy projects. Meanwhile, conflicting messages about the best way forward are doing the same for widespread investments in renewable infrastructure.

To date, much of the movement toward greener energy has centered on what governments are doing and how regulations may affect the planet’s energy journey in the future. The problem is that, in an industry where project timelines can span decades, the projects a company undertakes today must account for fluctuating costs over time. Without certainty around what those costs might be, it’s hard to determine the best course of action. And the price of carbon is an increasingly large and variable project cost for which investors must account.

Of course, no one can predict the future. Global events, conflicts, accidents and other unforeseeable factors can get in the way of even the best-laid plans. Still, what regulators can do is define the framework they’ll use to predict and stabilize future carbon costs and better clarify their intentions for fines related to its continued use. Knowing the cost of the status quo option (in this case, carbon) will highlight which alternatives have the most potential to address the problems we face today and in the decades to come.

The Problem With Picking A Winner

Although the above approach may seem like it’s giving operators the green light to continue business as usual, there is more to it than that. Far from rolling back progress, these actions will serve as a catalyst for inventors, investors and current industry players alike to move forward with projects that have been stalled by uncertainty.

Yes, this kind of clarification may lead to continued investment in traditional energy sources at present, but it will also set the stage for the hybrid and renewables market to be led by the most promising alternatives rather than whichever appears to be leading the charge right now. Technology and innovation move fast, and examples of promising solutions that have been eclipsed by advancements in other fields abound. Consider CDs, DVDs, landline telephones and dot-matrix printers. They were all great options with the potential for longevity—until other technologies rendered their capabilities obsolete.

And therein lies the problem with the current “incentivize, deter and subsidize” approach. It aims to lead with outcomes, not technology. By picking a winner based on the present landscape and going all in on that option, we may get so far down one road that we miss out on a more effective tool. With something as important to the long-term stability of our communities as energy access and climate protection, we cannot afford to lose sight of the forest for the trees.

At present, wind and solar appear to be the front runners in the race for cleaner, more accessible energy—but it’s too early to write off other options. For all we know, nuclear fission, geothermal energy, hydropower or something we haven’t yet identified will end up being the solution we need for long-term success. More likely, it will be a thoughtful combination of investments in and advancements to all of these things—and an acceptance that fossil fuels will still play a part in the meantime—that will pave the way.

The key to identifying that solution will be letting the how lead instead of the what.

Taking A Chance On Change

Transitioning our fuel is about more than how much a given energy type costs to produce, store and distribute. It’s about finding ways to diversify the field to ensure everyone has reliable and affordable access to a limited resource that has become necessary to daily life.

Whether you agree that emissions are damaging the planet or not, the fact is that options breed innovation and improvement—and it is well past time that regulatory action and organizational decision-making reflect that fact. Rather than doubling down to support one energy source over another, government agencies need to focus on the outcome (reducing carbon) and provide clarity on the future price of carbon so businesses can invest in big ideas with more clarity on financial outcomes and returns.

In addition to demonstrating their acceptance of the fact that we do not have all the answers at present, it will lend certainty to the part of the journey we can control and give those who have made powering the world their life’s work the freedom to explore all the available options. It’s a commitment to investing in the process rather than betting on the outcome—and anyone will tell you that’s a much safer choice.

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