While scenario thinking and planning are now relatively widespread in both government and the private sector, and several business schools include the discipline in their curricula, two aspects of the Shell scenario tradition remain distinctive. The first is the effort to draw links between global society and the future of energy. The second is the tradition of sharing these scenarios in public, to stimulate discussion and debate.*
In an earlier column titled "Alternative worlds of the future" (December 29, 2012), I had reflected on what makes for successful scenarios, describing them as fundamentally imaginative exercises but ones that are rooted in current reality, designed to give decision makers a shared language for confronting an uncertain future.
Shell's tradition is to articulate two scenarios, each captured in a memorable word or phrase, each plausible on its own terms but which between them bracket substantially different views of alternative energy futures. Shell's immediately previous scenarios, released in 2007, used the words "Scramble" and "Blueprints" to describe two paths for an energy-stressed but increasingly prosperous world.
The fundamental dynamic of those earlier scenarios was driven by what Shell calls the "three hard truths" of global energy. Energy demand would grow as emerging markets, particularly in Asia, hit their stride; additional sources of oil and gas were becoming increasingly expensive to develop; environmental constraints were becoming more pressing with potentially serious consequences for global warming. Yoked to these realities is the sheer amount of time that any new technology - such as renewable energy - takes to reach scale, for both technology and financing reasons: approximately 30 years.
Under these circumstances, there are great gains to be reaped by co-operative behaviour ("Blueprints") but a great temptation for unilateral action by governments in their haste to secure their energy future ("Scramble"). In what has since unfolded, it would seem that the world since then has gone further down the Scramble pathway than Blueprints.
Six years on, the new alternative "panoramas" have been christened "Mountains" and "Oceans". As before, the main differentiator between the two scenarios lies in the political sphere - but now with a much greater emphasis on the distribution of political and economic power within societies, not just between nation states.
The world of Mountains is a world of self-perpetuating oligarchies, primarily at the national level, but also linked globally. As the NLS publication puts it, in a Mountains world "advantage breeds advantage - influence remains concentrated in the hands of the currently powerful". This perpetuation of power, in turn, carries consequences for global energy, through effects on both energy demand and energy supply. The impact on energy demand arises because oligarchy, while good for centralised decision making, is ultimately seen as hurting innovation and slowing growth. In addition, centralised power facilitates important regulatory action in diverse areas such as compact urban design and energy efficiency, as well as committing resources to mitigation technologies such as carbon capture and storage (CCS).
By contrast, the world of Oceans is a world in which national political structures are sufficiently elastic to accommodate new forces and voices, not necessarily smoothly. V S Naipaul's "million mutinies", cited in the NLS text, are in the long run seen as desirable - indeed necessary - for societies to achieve their potential, though the journey may seem messy along the way. But not all good things go together, and some of the efficiency and conservation measures that are possible under Mountains are less likely in Oceans.
These two panoramas carry different implications for the evolution of the global energy system. They also carry different implications for greenhouse gases. In the Mountains panorama, the development and diffusion of techniques for carbon capture and storage (where CO2 emitted by fossil fuels, in power generation, refineries and industrial installations is captured and stored in underground reservoirs) allow natural gas to emerge as an acceptable, cleaner alternative to coal. The world of Mountains is also more comfortable with nuclear power. Finally, political commitment to new transportation technologies leads to a profound shift in transportation technologies, with oil being replaced by electricity and hydrogen by mid-century.
By contrast, in the more chaotic but more dynamic Oceans panorama, government policy has to share space with market developments and a more empowered civil society. This difference in the distribution of societal power, in turn, has implications for the adoption of nuclear power, for the acceptance of CCS and for the development of shale gas outside the United States. One consequence is that electricity generation becomes carbon-neutral globally some 30 years later in an Oceans world vis-à-vis the Mountains world. The greater pressure on global energy resources from faster growth and less efficiency does mean that oil prices stay high. In time high prices by themselves encourage both conservation and substitution.
Over the very long haul (by 2070), a major beneficiary is solar energy, which benefits from the higher sustained price of oil, and also from greater public acceptance of solar than of wind. It should come as little surprise that an Oceans world implies a more adverse prospect for greenhouse gases than does a Mountains world. Under Mountains such emissions begin to fall after 2030, but overshoot the target need to contain the rise in global temperatures to two degrees (above the pre-industrial norm). Under Oceans, emissions are some 25 per cent higher.
Neither of these futures is preordained, or necessarily even likely. In my view, the new lenses of the two scenarios do provide a core insight, namely that there is a deep relationship between political structures and energy choices, and that energy is perhaps too important to be left to technocrats. This is an insight that will be of considerable importance to India in the coming decades as the country becomes one of the key players in global energy.
The writer is chief economist, Shell international.
These views are his own
* The New Lens Scenarios are available at www.shell.com/scenarios and also as an app for the iPad
These views are his own
* The New Lens Scenarios are available at www.shell.com/scenarios and also as an app for the iPad