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Our Insights 6 Dec 2010

Energy and Water on a Collision Course

By Jeff Erikson

Back in 2003, SustainAbility conducted some scenario planning for one of our clients in the transportation sector. We were exploring the future of energy, and the implications of different energy paths on the company’s market. Our scenarios were titled: Comfortable World, Energy Center Stage, and Day of Reckoning. As you might imagine by the titles, the scenarios painted increasingly severe pictures of the future of energy.

Looking back at those scenarios seven years hence, I can say frankly that different elements of each of those pictures exist in our current world. But the one that is most dominant is Energy Center Stage. The title seems to reflect exactly where the world is in 2010:

  • Energy is in the headlines of mainstream newspapers and on the covers of major magazines on a daily basis (the November 29 Wall Street Journal had an entire section dedicated to the topic).
  • The Climate/Energy bill passed in the US House of Representatives was hotly debated in the US Senate through the first half of 2010 (before ultimately failing). And the positions/beliefs of individual candidates for US Congress on energy and climate were a significant factor in the outcomes of the election.
  • The Deepwater Horizon explosion and subsequent environmental disaster dominated headlines all summer long, and new studies and revelations continue to garner press and public attention.
  • New natural gas discoveries in the US and advanced technology to extract the gas have the potential to change the energy economic equation and reduce carbon emissions related to electricity production, but also bring environmental risks. This week the New York State Legislature imposed a six-month moratorium on hydraulic fracturing to assess the risks. And the documentary film Gasland, which chronicles the environmental hazards, was shortlisted for a nomination for an Academy Award.
  • Government delegates (and NGOs, businessmen, media, etc.) from around the world are currently meeting in Cancun to continue to work toward a global agreement on climate change (though hope for any meaningful agreement is dim).
  • The “duelling electrics” (Nissan Leaf and Chevy Volt) are advertising heavily leading up to their public launches over the next couple of months.
  • In the absence of any cap/trade legislation, electric utilities in the US are making investments on their own – with significant financial returns expected – in the areas of energy efficiency, smartgrid technology and cleaner energy.
  • The interdependence – and competition – between energy and water is emerging as THE energy issue of the new decade. Circle of Blue recently completed an investigation of the coming collision of water and energy in the US in a series called Choke Point: US, and has just begun a similar exposé focused on China (Choke Point: China).

This last development should get everyone’s attention. The Choke Point stories demonstrate that we cannot continue in the way in which we are: developing our energy resources to meet ever-rising demand without substantial – sometimes fatal – impacts on water supplies. And the more “unconventional” the energy source (e.g. oil sands, shale gas), the bigger the impact on local water resources.

SustainAbility will be teaming with Circle of Blue and GlobeScan in early 2011 to initiate a research project called Collision Course, leveraging Choke Point: China, exploring the implications of the water/energy collision on various industries in China. The fierce competition between energy production and freshwater supplies could undermine China’s clean energy transition, weaken its emerging leadership, and put more pressure on the ability of its cities to provide energy and water to growing populations and businesses. It may also dramatically increase the risk for corporations with operations or supply chain in China, and for investments in water and energy infrastructure. Simultaneously, it is spurring an unprecedented race for solutions and opportunities.

How real, and how immediate, is the risk to your operations, your supply chain, your markets? What opportunities does this open up for solutions providers? How well prepared is business and government in places like China where the water/energy conflict will be profound? What can be done to avoid the collisions, and where the collisions are unavoidable, to prepare for them? These are some of the questions we’ll be exploring. Tell us what you think.



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