Today’s low oil prices ought to be a major boon to the global chemical industry. They mean that consumers have more discretionary income to spend on our products, as they reduce heating and transport costs for consumers. They also helpfully destroy the myth that claimed oil was always going to be priced above its relative energy value to gas. As I argued in my first ACS post back in February and in the Chemistry and the Economy webinars, this was never a realistic scenario.
But every silver lining has a cloud. And in this case, the cloud is the negative impact of these lower prices on the renewable energy industry and green chemistry. Will this mean the current, albeit halting, process towards a more sustainable future will be thrown off course? What will become of the new agreements only recently reached in Paris at the COP 21 Conference after so much effort?
I think the key is to look forward, not back, and create new business models that prioritise affordability alongside sustainability. In turn, this will enable us to take a long hard look at current technologies to determine which will have a realistic future. We can all accept that early-stage development is going to be expensive, but given that, which of today’s proposed solutions really have the potential to deliver technologies and products at a price that the broad mass of people can afford?
This question challenges us to think ‘outside of the box’. Could the best solutions stem from conservation and efficiency? Could ExxonMobil be right, for example, when it argued that “the most important ‘fuel’ of all, will be energy saved through fuel efficiency,“ and went on to suggest “that efficiency gains of about 300 quadrillion Btu a year can be achieved by 2030, equal to twice the growth in energy demand over the period.“
One of the disappointing trends of recent years, for me at least, has been the relative loss of focus on energy conservation. Initiatives in this area drove major efficiency gains during the last period of high oil prices in the 1973 – 1985 period, with insulation becoming a top priority. But whilst government has driven change in some key areas, such as auto fuel efficiency, the general public does not seem to have embraced the opportunity to conserve energy as they did in the past.
The chemical industry has also not taken the lead in the way I would have expected. New data from the American Chemistry Council shows that the metals and glass industries have actually regained market share over plastics in the battle to reduce the weight of cars. As the chart below shows, the gains plastics made before 2009 have mostly been lost. Competitor industries have clearly done a much better job of understanding auto manufacturer needs and creating new products such as Gorilla Glass and lightweight steel to meet them.
What can be done to reverse these trends? Must we rely on people such as Bill Gates to carry the flag for innovation in this critical area? Much to my surprise, I discovered from an interview in the New York Times that he was the person prodding the climate change conference to put energy innovation on their agenda, commenting: “Honestly, I’ve been a bit surprised that the climate talks historically haven’t had R&D on the agenda in any way, shape or form.”
The good news is that the COP 21 talks reached an agreement. And thanks to Bill Gates’s leadership, there is money available to help develop the affordable solutions that will be needed to reach the targets set. But from our industry’s vantage point, what are the most viable solutions?
- Should they be product oriented and, if so, which renewables can become competitive on a global or regional scale to reduce carbon footprints?
- Should they relate to energy storage - better batteries, smart grids, or more efficient transmission systems?
- Could they involve new ways of working – reducing energy use by nudging people to reduce costs and usage?
These are just a few of the questions and possible solutions running through my mind at the moment. What are yours? Could we develop an innovation forum to brainstorm about some of these concepts? And could we then find a way of leading proposed solutions into practical development, perhaps via our own employers or the American Chemical Society?
These issues are simply too important to be ignored. And collectively, as members of ACS, we must have more than enough brainpower and practical skills to turn ideas into action. Maybe Bill Gates would be keen to hear from us, if we could put together credible business cases.
Please give me your thoughts below in the comments box, and let’s see what we can come up with over the holiday season. Thanks!
Paul Hodges is chairman of International eChem (www.iec.eu.com), trusted advisers to the chemical industry and its investment community. He is a member of the World Economic Forum’s Industrial Council on chemicals, advanced materials and biotechnology, and presents the ACS ‘Chemistry & the Economy’ webinars.