Tisha’s Insights

The Moment: Reality Bites

June 13, 2024 Tisha Schuller

I’m writing my next book about The Moment and exploring the forces that shape it and the opportunities it creates in this summer’s Both True editions. Few recognize what The Moment is giving us: the most important opening we’ve had in our lifetimes to play a positive leadership role in the energy future. Join me in my explorations.

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What happens when net-zero aspirations collide with the magnitude and complexity of transforming the energy system?

An opportunity I’m calling The Moment—full of possibilities for your company to lead with practical solutions for the energy needs of today and tomorrow.

In recent Both Trues I’ve introduced the forces shaping The Moment and the industry’s conviction, grit, and resilience that you must tap to take advantage of this opportunity (rather than sitting back and gloating). Today: The openings created on four different fronts for our industry when net-zero aspirations meet net-zero reality.

Both of these things are true:

  • Forces are combining to lay bare the difficult tradeoffs inherent in the energy transition, and these tradeoffs will become obvious to policymakers and transition advocates—maybe even to the public.
  • The Moment creates opportunities for oil and gas leaders to lean into energy transition leadership, not take a pass.

The situation

In the Both True introducing The Moment, I covered the changing forecasts for energy demand created by likely AI needs and how the rapidly rising demand will help catalyze The Moment. Today we look at a second force driving The Moment: four areas where climate aspiration is meeting the pragmatic considerations of the real world.

1. Policy can get you only so far. Countries and states that have emphasized supply-side management of emissions sources are starting to bump into the limitations of this approach. It can spur only so much technical innovation, and it can drive only so much consumer demand. (Fire sale on EVs, anyone?) Supply-side management can squeeze incumbent industries—such as oil and gas production—only so far without viable available replacements. As Amy Cradic articulated on the Energy Thinks podcast, you can’t take away energy sources without adding new ones first.

2. Consumers are extremely sensitive to energy prices. One in every four Americans struggles to pay energy bills, and decarbonization so far isn’t helping. While climate-action optimists love to point to examples of decarbonization activities driving down costs, society-wide action does not show any such promise—and in the absence of sensible carbon pricing strategies, many well-intentioned decarbonization efforts are simply driving up consumer energy costs. For example, Energy Information Administration (EIA) data from January 2024 show that Californian residential consumers pay nearly twice as much for electricity as Americans on average. Political leaders know this cost sensitivity well; that’s why you saw the Biden administration releasing from the national reserve before the busy summer driving season.

3. Scale requires a lot of things to go right. Recent cancellations of offshore wind projects in New Jersey and New York highlight how hard infrastructure projects can be, even when they have a lot of regulatory and stakeholder support. Cost of capital and supply chain challenges are just two reasons it’s so difficult to put new infrastructure on the system.

4. Reliability is where the rubber meets the road. Nothing pisses off the otherwise charming retirees where I live in the mountains of Colorado more than three days (as we recently had) without power. And rightly so! It’s more than an inconvenience; three days without working water wells, septic systems, and medical oxygen became dangerous for some. Even before AI-driven demand got everyone’s attention, the North American Electric Reliability Corporation’s reliability assessment identified challenges for grid reliability. It spotted a host of red flags for power users across the country (i.e., for all of us) due to anticipated power shortfalls under both normal and extreme conditions.

Just as increased projected power demand for AI is a factor bringing us The Moment, these aspiration-meets-reality challenges contribute for the same three reasons:

  • Pressing need. These challenges will increasingly require urgent actions that compel everyone, from elected officials to local activist organizations, to ensure that energy needs are met reliably and affordably.
  • Shattering simplicity. The predominant narrative that the energy transition simply requires political will is running headlong into the real-world obstacles.
  • Changing landscape. The forces are each dynamic variables, ensuring that the one thing we can be sure of is that the energy-and-climate conversation will be dynamic.

Seize the day

Stepping into The Moment begins now. Here’s what you can be doing now to take advantage:

Translate the forces to your operations. In what ways do increasing power demand projections affect your operations? In what ways can your operations provide solutions? Similarly, as policymakers, customers, and partners run into obstacles—and even failure—in meeting their climate-action ambitions, look at how these developments interface with your business strategy. What new opportunities does this situation create, and where can you step in?

Look for opportunities to lead. For every civic, political, or business leader awakening to the myriad challenges of climate action, there is an opportunity—a Moment—to open up a dialogue of how you, your company, and our industry can help. These conversations will create space to explore tradeoffs and therefore revisit the pace and scale of change, because the pain points are becoming more apparent. Create a regular, internal framework for exploring the prevailing forces and the ways your company will step in.

Thank you to Bevin Pan for his research contributing to this piece. Want help exploring how to respond to the forces shaping The Moment with your leadership? This fall, I will be accepting a limited number of speaking engagements for my talk, Real Sustainability: How Oil and Gas Can Navigate the Era of Climate Justice & Woke Activism. Reach out if you are interested in a speaking proposal.

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Both of These Things Are True

By Tisha Schuller