Looking back to look forward

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Courtesy of Energy Institute (EI)

In 2014 we are celebrating the 100th anniversary of the founding of the Institution of Petroleum Technologists, the oldest of the Energy Institute’s predecessor organisations. We will be publishing throughout the year a series of interviews with eminent figures from the world of energy, reflecting on how the past can inform the future. This month, Walt Patterson FEI takes a radical view of an energy industry that sells units of fuel and electricity, rather than optimising the energy input to the services that consumers actually require.

From your own perspective, how would you characterise the key challenges facing the energy industry and society today?

What now calls itself the ‘energy industry’ is still almost entirely what used to be called ‘fuel and power supply.’ Its traditional business model is now failing its customers, itself and the planet. Its revenue stream depends on the commodity business of selling ever more units of fuel and electricity. But its customers do not want fuel or electricity. They want comfort, cooked food, illumination, motive power, refrigeration, mobility and information.

They get these services not from fuel and electricity alone but from usertechnology – buildings, lamps, motors, vehicles, electronics and so on. The better the user-technology, the less fuel and electricity it requires to deliver the services. But that runs counter to the business model of the ‘energy industry.’

As a result, we still have gravely inadequate buildings and other usertechnology all over the planet. Feeding fires in houses, boilers, furnaces, power stations and vehicles makes air in many cities all but unbreathable. Acid rain from fires poisons waterways and kills forests. Carbon dioxide fromfires is perturbing the global climate and acidifying the oceans. We urgently need to change the ruling assumptions of energy policy worldwide.

We need governments and companies to focus not on commodity trading of fuel and electricity, but on providing the services we actually need. That includes, as top priority for real ‘energy policy,’ upgrading our user-technology, especially buildings, as a profitable business, enlisting the requisite investment, materials and skills. Many innovative business models to do so are now emerging.

At the same time we need to reduce our use of fire, with its dangerous consequences. As well as minimising waste, we need to accelerate the shift away from electricity based on fire and fuel, especially coal, to ‘infrastructure electricity,’ including wind power, solar power and hydroelectricity, especially small-scale, decentralised and local. To do so we need to change regulatory objectives, business models and financial arrangements to foster the necessary shift in focus.

Fortunately, such innovative changes are already happening in many places. Unfortunately they are not happening fast enough.

How can we use the experience of the past to plot the future? (Given hindsight, have mistakes been made in the past, and are we learning from these?)

See the answer to the first question – yes, mistakes have been made, going back more than a century. For instance: Thomas Edison’s early electricity system charged customers according to how many lamps they had. He was selling illumination – what people wanted. He had to optimise the entire system – steam engine, generator, cables, switches and lamps – to keep it somewhat less dauntingly expensive.

Then, in the mid-1880s, came the invention of the electricity meter. Suddenly Edison and other electric entrepreneurs were no longer selling illumination. They were selling electricity. Suddenly they made more money if customers used inefficient lamps, because customers then had to buymore electricity for the same service.

That perverse incentive still applies, not only to electricity but across the whole socalled ‘energy market,’ well over a century later. But we now devote enormous effort to this ‘market,’ selling electricity and fuel by the unit, which actively militates against improving user-technology. The lessons are there, mostly from past mistakes; but we have yet to learn enough from them.

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