We are in the early innings of a decades-long transformation that will significantly alter the shapes of business, finance, and education for the rest of our careers, as well as those of our children, and perhaps grandchildren. This change has the potential to create entirely new industries and to diminish or eliminate others.
We’re not talking about the digital transformation, which has its own significant and long-lasting implications for career development. Rather, we’re talking about the energy transition – the one that most people are only beginning to wrap their heads around. Here in the U.S., there are relatively few indications that significant change is on the way. We still drive cars that are mostly powered by internal combustion engines. We live in homes that generate little of the energy they consume. And we work in offices and other facilities that are heated and cooled as they have been for decades, with steam boilers or furnaces burning fossil fuels.
If you look more carefully, however, you’ll see evidence that big changes are afoot, and they are likely to accelerate from here. Importantly these changes aren’t due to government policy at the national or supra-national levels. So far it’s mostly due to incentives at state levels and to decisions made by businesses and other organizations that are in their own economic regardless of federal mandates. Congress and the current administration may enact legislation that facilitates the transition as it seeks to achieve national targets on carbon emissions in line with international treaties. But the pace of change was gaining momentum years ago and is likely to continue to do so regardless of what happens in Washington or in the international realm.
Start with the biggest change so far: electric power generation. In the span of a decade, the U.S. has greatly reduced its dependence on what had been its biggest source of fuel for electricity – coal – and replaced it with cleaner-burning natural gas and, increasingly, renewable sources. This industry will continue to develop rapidly as older thermal generation sources are phased out and less carbon-intensive ones are built to replace them.
The biggest challenge to the integration of renewable fuels is their intermittency. Without the ability to store power in the same way as other energy sources, grid operators tasked with balancing supply and demand have always favored more dependable sources over those that rise and fall with the sun, clouds, and wind. But battery storage is getting a lot better with improving technology and is being deployed in utility-scale operations today that are as instantaneous as any other power source. As renewable generation capacity grows, battery storage will increasingly be called upon to balance system requirements.
The transportation sector, including automobiles and trucks, has been slower to transition from carbon-based fuel to electricity. Auto manufacturers have been changing over their product lineups for years toward hybrid and, more recently, to fully electric models. But sales are still a tiny share of the overall market in the U.S. That share will only grow in the decades ahead with improving battery technology and the development of infrastructure such as charging stations for cars and trucks. Europe and Asia – especially China – are on a similar trajectory.
Residences, commercial properties, and manufacturing facilities also are only starting to transition their energy usage away from carbon-based fuels. The rollout of residential solar is the most obvious. It has established meaningful penetration in only a small portion of the U.S. so far, but has the potential to grow dramatically in the decades ahead as equipment costs continue to decline while performance improves. Indoor space heating by contrast, hasn’t really changed at all yet. But heating is likely to be more reliant on electricity in the future than on natural gas and oil. The same is true for powering equipment in various applications.
As in transportation, battery storage will be of great importance to residential and commercial applications given the need for flexibility in usage and to take advantage of market pricing opportunities such as charging during off-peak demand periods when prices are low and drawing power from storage devices during hours of peak usage. Smart devices – another sub-industry with huge growth prospects – provide the brains behind such systems as well as contributing to more efficient use of all energy sources.
The maritime and aviation industries appear to be the least likely to transition away from their well-established dependence on petroleum fuel; renewable energy sources may never be relevant to them. But the shipping industry is already embracing natural gas as an alternative to oil and could eventually shift a large portion of vessels to this less carbon-intensive energy source. Natural gas is rapidly expanding as an internationally traded energy source, so its availability is improving even in places where there isn’t any local production.
Perhaps even more interesting is the potential for hydrogen to take a greater role in providing energy to various sectors – including transportation – especially if it can be produced from renewable sources. Hydrogen can be produced from fossil fuels – primarily natural gas using heat – or from water using a lot of electricity. Today’s technology doesn’t allow cost-effective hydrogen production from electrolysis but as renewable generation grows and the cost of power declines, it is certainly possible that hydrogen production will become economically feasible without government support.
So-called green hydrogen could someday power just about anything. And because hydrogen can be transported anywhere in the world, in liquid form, it can be used to generate electricity on any scale, in any place. There are already hydrogen-powered cars on the road using fuel-cell technology. Similar technology could be used to heat and cool homes and offices, and to power factories and other machinery – without contributing to additional carbon emissions.
All of these changes have the potential to reduce global carbon emissions from current levels, but such a shift will take time, especially in developing countries. So, there’s an altogether different opportunity – on a parallel course – to process current and future carbon dioxide in a way that removes it from the atmosphere, typically by inserting it underground in geologic formations that don’t leak. Carbon capture and storage are already in use, though still a relatively small scale. But it has huge potential to economically dispose of carbon emissions if it can be done at a lower cost.
These challenges and potential solutions have significant implications for education, not only in engineering but more broadly in all aspects of STEM. Universities are taking note, with several forming interdisciplinary research organizations devoted to fostering academic collaboration as well as industrial research and development activity. Columbia University for example, recently announced the creation of its first new school in more than 25 years – the Columbia Climate School – that will be closely affiliated with an existing research organization focused on the energy transition.
The finance and legal professions meanwhile, are seizing upon opportunities to serve their clients in developing new sources of energy through capital-raising and advisory services. The U.S. has incentivized investment in several industries via its tax code, and the renewable energy industry is no exception. There is a significant need for skilled lawyers, bankers, and accountants who understand tax treatment and risk management around the financing of these assets. At the same time, they are helping other clients to invest in companies with an emphasis on environmental, social, and governance goals. The energy transition fits at least one of those attributes especially well.
This broad economic shift will have significant implications for the Hamilton community; not only for current and future students, but for anyone with career interests that will be affected by such changes. We intend to increase our efforts in the year ahead to ensure that our community helps lead professional and commercial thinking across various sectors. The goal is to bring together alumni, students, and faculty who are interested in sharing their perspectives on a variety of topics. We encourage you to join us in this effort.