Energy and Automation

Energy and Automation, the December issue of TerraJoule.us, explores the winners and losers that automation will create in the energy sector:

In the same way that the global coal sector has not only lost jobs, but will no longer add jobs in the future, the global oil and gas sector is likely headed towards the same fate—especially in an era of low demand growth for oil, and the electrification of economies. Early estimates are that in the US alone, the decline of oil prices has triggered the shedding of about 200,000 sector-related jobs, and the global oil and gas sector has roughly lost the same. Like the coal sector, the global oil and gas industry will continue to employ engineers, platform workers, and decision makers to serve existing demand. But as TerraJoule.us noted earlier in the year (now picked up by IEA in Paris) global oil demand growth has downshifted from roughly 2% to 1% per year. To repeat our previous commentary: that seemingly small shift is not small at all, and is profoundly impactful on the sector. There also is risk that the wider impact of that slowdown could be felt broadly, as many countries, pension funds, and workers are connected to professions in engineering, manufacturing, transport, and finance sustained by the oil and gas industry.

But there is good news: the acceleration in the buildout of solar and wind requires extensive physical labor and this is especially true in the Non-OECD. We have referenced previously the ultra-fast construction of Kamuthi solar, using over 7,000 workers in India. Moreover, in the US, employment in renewables has absolutely skyrocketed, and according to Bloomberg using one measure, solar employment has now edged ahead of oil and gas extraction. (see graphic, below). As the shift from fossil fuels to renewables plays out, there should be ample opportunities for workers to switch industries. But at some point, the labor-intensive extraction industries will go into a steeper decline, and, the less labor intensive energy capture industries—wind, hydro, and solar—will scale to a large base that needs only light maintenance. That is the wealth-creating promise of renewables, but is also a key factor in its disruptive potential. As TerraJoule.us has observed previously, most of the gains from renewables will be distributed to society through the benefits of a clean environment. But ownership may be quite concentrated.

In the continuously updating TerraJoule.us Global Grid Decarb Monitor, the forecast for power generation growth from wind and solar is maintained, for the third month in a row. We continue to expect that in 2017, a full 35% of the marginal growth in global power generation will come exclusively from these two sources..

Finally, The TerraJoule.us Transition Index, composed of 70% ETFs and 30% individual equities, finished the year at 104.22, having started 2016 at a notional value of 100. The index is henceforth rebalanced for 2017.

–Gregor Macdonald, Editor of TerraJoule.us – A Journal of Energy Transition.