Our Future Energy Portfolio

October 27, 2020
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By: Luke Timper

The future of individual energy sector makeups is indeed an interesting topic to delve into, with more and more coverage of climate protests and the focus on the future of our planet, one often wonders what the world will be like in the next 30 years. In the past we’ve heavily relied on coal and oil by-products for the vast majority of our energy usage, at present, we’re beginning to start to see a slight shift to renewables. The flow chart below shows our energy generation and primary consumptions of the generated power in an easy to follow flow chart. As we can see fossil fuels and their by-products make up 80.2% of our yearly energy usage, compared to 14.9% of renewable generation¹. Similarly, from a 2009 flow chart from the same source, our fossil fuel portfolio was at 84.1%, roughly a 4% decrease¹.

The chart above, provided by Lawrence Livermore National Laboratory, has done an energy flow chart for each year for the previous 10 years, and one may expect them to continue doing this for our future years as we transition. The individual portfolios of generation will see a far greater change in this decade than the previous, far greater funding is being allocated federally and within energy companies such as Xcel Energy who are transitioning to 80% carbon neutral energy by 2030, this becoming 100% by 2050. Therefore, the coming decade of energy transition will be quite an exciting time to be part of the industry, especially if one is looking towards beginning a career in energy!

So, what will the actual energy portfolio of the future look like? There is no certainty with what this will truly be, that being said, there will be a few factors that this transition will rely on before we can start to make projections with regards to allocations of energy generation in the future. The two largest factors are likely, first, availability of funding for our green energy revolution. Germany is a great example for a country that is truly leading in respect to this, the “Energiewende”, has targets with this year of 2020 of 40% overall greenhouse gas emission reduction with even further funding being introduced towards this goal for the future². Total renewable energy within Germany has skyrocketed to 46%, showing that indeed a rapid transition is possible if we truly set our eyes on the prize of becoming carbon neutral. Besides introducing large amounts of funding, a secondary factor to our energy transition will be any technological breakthroughs. A breakthrough could be something, for instance, that vastly increases solar panel efficiency. This breakthrough could demonstrate to stakeholders that this is a truly viable method of powering our world.

Now that a background establishing the viability of renewables and demonstrating real success is established, the unanswered question remains, what will this look like? One of the driving factors of this will be the cost of renewables compared to fossil fuels, while this has nearly pushed coal out of the picture, natural gas remains as a viable option to investors. Therefore, our portfolio will depend largely on the price of natural gas in the coming years, the following figure provided by the Energy Information Administration, demonstrates the changing projections with natural gas prices³. If funding and the consensus of green energy continues in the trend they have been for the previous few years, regardless of the price of natural gas, it is likely us humans would like a green future. Ensuring the second projection in both figures below. A large amount of the energy added within renewables is expected to be solar, while wind remains a significant portion of the energy generated, it becomes less viable as it is even more heavily dependent on location than solar is. Ultimately, we cannot come up with precise expectations of what each sliver of the energy sector will be in the coming years, however, we can demonstrate the expected trend. Renewable energy will dominate in the coming years, particularly solar, and begin to rapidly phase out remaining fossil fuel energy generation.