Changes in technology have always driven changes in lucrativeness of various business lines for many years. These technological changes have to a good extent been linked to energy revolutions.
The first industrialisation which kicked off in the late 1700s was driven by revolutions in mechanisation. The invention of the steam engine was a spark in this revolutionary period, and along with it the coal extraction industry grew, as an energy supply.
A century later, the second industrial revolution rode on the discovery of oil and gas as well as electricity as means of energy. The internal combustion engine came into being, along with developments in chemical synthesis and changes in communication in the form of the telephone and telegraph.
The invention of the automobile and aeroplane marked the position of importance of this second revolution and its impact still lives with us today. The rise of electronics, telecommunications and computers in the 20th century marked the third industrial revolution.
Again with it, there was the manifestation of a hitherto untapped energy – nuclear energy. The fourth one is running on internet. Of course every revolution taps into the foundations of previous works in science and innovation and as such they are interlinked.
Transformations in energy sources have resulted in remarkable changes in the way the world runs, impacting economies and human livelihoods in significant ways. The first industrial revolution is reported to have speeded up urbanisation, and with this came the administrative framework necessary to run urbanised populations and workforces.
Capitalism, as an economic system, has a fair portion of its roots in this first revolution. Concentration of means of production in particular hands became cemented by emerging trends of that time.
The second industrial revolution changed the way people worked, transforming work patterns to run by the clock, as opposed to being woven around the rising and setting of the sun.
New modes of transport by trains, steam ships and other emerging means transformed trade as they enabled easy movement of farm and factory produce and personnel, eliminating any remaining traces of bartering trade systems. This accelerated and entrenched the modern financial system.
Today, as in yesteryears, energy falls at the centre of ongoing technological transformation. Today’s automobile, driven by the internal combustion engine, solved the nightmare of manure depositing horses on city streets.
It is said that at the time the automobile replaced the horse in New York, there were about 200,000 horses in the city, depositing manure at a rate of roughly 15 kilograms per day, per horse.
The shift from the era of the horse to the automobile is said to have disrupted business and the way of life significantly. According to Norton Greene, a U.S. historian, there were winners and losers. Businesses emerged and others collapsed.
The transition took about 50 years to complete. Thereafter, no city or town relied on horses as an essential means of transport. Even on farms, tractors dislodged the horse. The experience demonstrated the complexity of energy transitions, and how they impact business and the subsistence landscape.
However, the automobile has now built an even graver challenge than the horse manure challenge it solved. According to the Environmental Protection Agency of the United States, a typical passenger vehicle emits about 4.6 metric tonnes of carbon dioxide per year.
This automobile, and indeed other fossil fuel powered vehicles and machines, therefore contribute highly to global warming and the climate change challenge of today. And now, the whole world is running an agenda of combating climate change, and the energy transition is at the centre of it.
The solution to it cannot be detached from a major shift in the fuel preferences and choices for powering automobiles and other transportation vehicles as well as other machines that rely on fossil fuel today.
It is for this reason that the automobile industry is experiencing a shift away from the internal combustion engine, to battery powered vehicles that move principally on the strength of electricity. Some leading automobile manufacturers have actually targeted to cease producing fossil fuel powered cars within the next fifteen years. Similar works are ongoing in aviation.
Another energy transition is therefore upon us. It will create winners and losers. Logically, winners will be those who quickly adapt to embrace and invest in clean energy options that are set to replace fossil fuel. Losers will be among those that will remain insensitive to the ongoing transition.
Those that will not align their long term investment strategies to this transition could easily lose huge sums of capital, and possibly never recover. There are many factors at play, as the transition goes on, some socio-political in nature. However, the same factors existed during previous energy transitions. It therefore serves better to conclude that the transition will mature, as previous ones did.
Raymond is a Chartered Risk Analyst and risk management consultant