The right technology is critical to meet rising energy demands

Energy is a fundamental building block of economic growth. It is critical to power and heat our homes, provide a means of transportation, and produce the goods and services of our economies. Energy is essential, and there is no way around that reality.

Fundamental energy demand is rising

We also cannot avoid another critical fact that impacts energy markets and consumption: We live in a world with a rising global population and growing energy needs. According to the United Nations, the global population is set to rise by almost 2 billion in the next 30 years to 9.7 billion by 2050 from 7.7 billion in 2020. This will put a significant strain on energy resources for power, transportation, heating, manufacturing, and more.

As we ponder the future of energy from 2021, we already find ourselves living with commodities in high demand and global supply chains stretched thin. It is why at this moment we find ourselves acutely aware that raw materials and commodities are the building blocks of the global economy. While we often focus on energy efficiency and reducing energy consumption in the most advanced economies, we often forget that some low-income developing economies still suffer from energy poverty. This is important because around 50% of the global population growth (1 billion) over the next 30 years will be in those low-income, developing economies. These dynamics support a strong mid-century demand outlook for almost every kind of energy.

Hope for transitions, need for supply

While growing global energy demand is almost assured in the decades ahead, there is currently a significant focus on the transition from fossil fuels to renewable energy. This transition is likely to take many decades. Meanwhile, the absolute levels of demand for both power and transportation fuels are set to rise. Even with a rapid expansion in the production and adoption of electric vehicles, petroleum fuels demand is not likely to peak for another decade or two. And with the desire for both cost and carbon efficiency, there is a growing value proposition and operational imperative for stretching the impact of hydrocarbons – the main energy source throughout the globe, that are extracted. This is not just something for fuel markets, either. It is likely to prove critical for power generation as well.

Countries like the United States are transitioning to renewables in the long run, but they cannot survive without hydrocarbons in the short term. This is where the shortfalls in adopting renewables are being met with the stop-gap measure of transitioning from coal-fired power generation to natural gas. The intermediate power stage that supplants coal with natural gas is one that can reduce carbon emissions by 50 percent. For some power producers, that makes it a relatively easy and reliable win. The catch is that demand for natural gas is rising globally due to the efficacy of natural gas power as an intermediate option on the path to renewables. With such a strong carbon appeal, we will also need to make those natgas molecules stretch further than ever.

These realities of strong demand but limited supplies are where technology can be a critical operational value-add to stretch those molecules, by satisfying a world hungry for energy but also eager for hydrocarbon and emissions efficiency.

The value of technology

Technology presents many opportunities to be a lever of opportunity and create value for energy, hydrocarbon, and power markets. Smart grid and smart meter technology, powered by the Internet of Things (IoT), have been some of the world’s biggest and most successful energy technological adoption stories at scale. And there will be greater IoT energy management needs for this kind of rollout and adoption across advanced as well as developing economies. It will be especially critical for low-income developing economies with rapidly rising populations to capitalize on energy-related IoT innovation. While smart grids and smart meters have already had big impacts – and made big headlines – nationally and globally there are so many other technologies that can add value in the quest to optimize and improve energy company operational efficiency as well as hydrocarbon use.

At the most micro level, smart homes, smart appliances, more efficient HVAC systems, and more will help improve home power consumption and efficiency. Meanwhile, increases in residential solar power generation and battery technology could smooth some power grid operations and load serving. Of course, power dispatch could also be improved with the use of more powerful artificial intelligence (AI) and eventually with quantum computing to maximize grid efficiency and reduce electrical transmission losses.

The potential for data to be a high-value lever of efficiency also exists in oil and gas fields where AI and eventually quantum computing will have a significant impact in improving the efficiency of oil and gas extraction operations. Of course, there are also important physical technology opportunities as well. With tremendous strides being made in the fields of robotics, it seems like not too distant a future in which the increased use of automated machinery and robots in oil and gas extraction and asset maintenance could streamline operations significantly.

Some of these technologies will have gradual impacts and some, like quantum computing, will take longer to implement but could present step-change opportunities in efficiency for power markets as well as exploration and production.

Technology after COVID: Remote Work

Some technologies are in the “maybe someday” when it comes to implementation. But while people try to delineate between the potential for technology in the short- and the long-term, it’s important to remember that technology has had some tremendous recent impacts on energy markets during the COVID pandemic.

Many kinds of technology saw rapid adoption because of the COVID pandemic. Telemedicine, online education, e-commerce, online dating, and remote work all surged, as people’s cell phones and laptops became their gateways to the outside world. Computers, webcams, cell phones, and internet bandwidth have improved exponentially in the past decade and a half to the point where remote life was relatively easy for many people to transition to during COVID. For energy, the adoption of remote work during COVID proved most critical, as the spike in remote work led to a sharp drop-off in commuting and associated petroleum fuels demand.

There’s a lot of truth in the notion that you save 100% of the hydrocarbons you don’t use. With record levels of people teleworking, the demand for petroleum fuels and crude oil fell sharply. Now, as we stand on the verge of a post-COVID world, a return to commuting and traveling for work will increase for some. But on-road hydrocarbon consumption may remain below pre-COVID levels for some time.

Many companies were skeptical of remote work before COVID, but they embraced it out of necessity. For some companies trying to reduce their carbon footprints and their energy consumption, remote work has presented a tremendous opportunity. Looking ahead, the rollout of 5G technology and the planned expansion of broadband in the U.S. Infrastructure Investment and Jobs Act, remote work numbers are unlikely to ever fall back to 2019 levels again. Plus, even if the number of remote workers falls below peak 2020 figures in 2022, there is still more upside opportunity for remote work in the long run. This means that in the United States, and globally, telecommuting could be an ongoing critical future source of petroleum fuels demand abatement.

The War for Talent

Against the backdrop of strong remote work opportunities, a war for talent has emerged. In the wake of COVID and throughout 2021, the labor market became tight for certain intellectual capital jobs as well as essential industrial roles. While some industries, particularly the service sector, leisure, and hospitality, experienced protracted weakness long after 2020 had ended, goods-related industries were suffering from a lack of talent. This has been a particularly acute problem when finding people to work in the physical parts of the economy – industry, manufacturing, supply chain, and oil and gas. This also applies to many jobs in the energy world that are roles where people need to be physically present. This is true for any company that is an independent power producer (IPP) as well as for companies active in oil and gas extraction.

Part of the reason for general labor market tightness is that some people have permanently left the labor force. Some have retired, others have returned to school, and yet others may have abandoned the workforce following a relocation to lower-cost areas where two-income households are no longer a requirement.

Looking into 2022 and beyond, the labor market is likely to remain very tight. This is likely to exert continued cost and labor resource pressure on companies – especially industrial and physical businesses. The only solution to maximizing the human resources available is to augment them and use technology as a lever of productivity. Companies across the entire energy supply chain are likely to face an increased need for leverage from technology.

This presents a significant value proposition for using data and software to improve efficiency. And it supports the case for an acceleration in the use of robots and physical automation in the energy supply chain. Of course, it presents some large – and often overlooked – opportunities for cost savings and efficiency in pushing for tactical and operational automation in back-office operations, including robotic process automation or RPA.

Challenges Ahead

We live in a world of limited hydrocarbon resources and rising demand. Fortunately, technology can help improve efficiency and – in the case of remote work – can even lead to a reduction in petroleum fuels demand, or at least an abatement of future demand. Nevertheless, there are some risks ahead. Remote work requires home-office internet reliability on par with those in commercial office buildings. Plus, having a distributed workforce also greatly increases the technological and operational attack surface of corporate operations, which makes cybersecurity – and more specifically, energy cybersecurity needs a greater priority. For IPPs, cybersecurity concerns are likely to become increasingly important, even if workers are not distributed, simply because power security is not only critical to maintaining economic momentum, but they also rise to the threshold of a national security risk.

In sum, technology – from energy IoT to remote work, presents tremendous opportunities to improve the efficiency of energy extraction, consumption, and operations. But we must also be prepared to make the right investments to capture the upside as well as face any tradeoffs and challenges that accompany those benefits.

To learn more, explore the AT&T Business Energy and Utilities hub.

This post was sponsored by AT&T Business, but the opinions are my own and don’t necessarily represent positions or strategies of AT&T Business.