How Will Our Youngest Generation Consume Energy?

16 Feb How Will Our Youngest Generation Consume Energy?

Ford’s recent report on Generation Z fails to mention the most obvious elephant in the room: Teens don’t care about cars anymore.

Statoil recently published three scenarios for energy use in 2040. Not even the most low-carbon scenario envisioned the possibility that fossil fuels could constitute less than 75% of total energy consumption in 25 years.

It is an irony that when it comes to energy and transportation, most generational projections, consumer forecasts and scenarios are carried out by large companies. These quite often have vested interest in keeping status quo. And – surprise – most of these forecasts and scenarios project basically more of the same. Even a neutral institution like the International Energy Agency has been accused of failing to see the exponential trajectory in renewable energy. Even the “wildcard scenarios” stemming from these companies are typically conservative, well within the established industrial paradigms, the same paradigms that are starting to crumble around us. But we know changes are coming. And not only because the alternative could be a climatic apocalypse. Not because we are going to run out of oil any time soon. But because deep structural changes could make fossil based energy largely superfluous very soon. Everybody who hasn’t lived under a big rock or in a community of coal rollers for the past few years, have probably seen news reports revealing that the automobiles are quickly losing its all allure as a rite-of-passage object among teenagers today. Likewise, you might also pay heed to projections from architects, urban planners, forecasters in the renewable energy development as well as to signs that the whole infrastructure that underpins the current energy paradigm is awaiting some disruptive changes in the near future.

Most of the reports from both sides of the energy sector (fossil and renewable) focus on incremental projections of known and linear variables. For example, Statoil seems to base its projections on known demographic and economic trends of growth in population and income in emerging markets. These factors are not wrong in themselves of course, but disruptive forces, and mitigating and often surprising factors are not mentioned in their scenarios. The whole point of using scenarios is to account for complex systems that elicit radically different futures – or futures that differ from the present in kind, not only in degree. If we only make scenarios that are different variations of status quo we risk doing what statisticians call a Type II error, or failing to reject a false null hypothesis, with the null hypothesis being that the forces at play today will be the same forces at play 30-40 years from now. If change was linear, and all we did was perfecting the trends of decades past, imagine what kinds of typewriters we would use and outrageous mullet hairstyles we would sport today!

This is why oil companies, auto industry and the IEA tend to grossly overlook cultural shifts, disruptive technologies and the synergies that come out of this. So are a few variables that we believe could change the energy landscape for the next generation beyond considerations already accounted for:

1) Younger generations eschew car ownership.

Car no longer a status symbol. We have already seen the new trends with millennials. The sharing economy is all the hype now, and there is a shift towards embracing access to things than ownership. Much of this trend is due to their relative young age and their tendency to postpone adult investments and lifestyles. But some of this effect is generational too. Millennials saw their boomer dads driving their Chevy to the levee, but the levee was dry. “What’s the point of having big car loans just to flaunt money you on’t really have?”, will be the recurring question from Gen Z’ers who have much more realistic economic expectations than their parents.

Alternative transportation and car-sharing. Instead they rely on public transportation, car-sharing services and bikes. This is a long-term trend and does not indicate some psychographic blip where Generation Z can be expected to pick up the car-craze their Millennial predecessors didn’t have. (Despite what some biased surveys from auto-companies tend to suggest) From 1998 to 2008 the percentage of young household without cars increased with 20% to 28%.

Too expensive. Not only the recession, but a longterm trend of stagnation in income compromises young people’s ability to buy a car and maintain it. Due to the recent drop in oil prices we might see an uptick in car interest and the sales of cars have indeed been growing. Even with light trucks ahead of personal vehicles. But Christopher Leinberger, a senior  fellow at the Brookings Institution says low gas prices will not cause a complete bounce back: “Lower gas prices will not change what is a structural change in lifestyle and economic development decision making.”

The future of self-driving cars. We are probably decades away from self-driving cars becoming commonplace. Just getting the logistics together and changing out the fleet will take a long time. But self-driving cars have the potential of solving so many problems, relating to accidents, parking issues, inadequate public alternatives etc. that it seems inevitable. With self-driving cars all rational arguments for car ownership evaporate because door-to-door transportation can be ordered at the swipe of the finger. If you can order a self-driving car pick up with a few minutes’ notice, why store it in your garage – which you now can convert to an extra room? Self-driving cars will reduce a lot of idle time and possibly even the need for traffic lights. Moreover, fewer cars on the road means less pollution.

2) Urbanization and industrialization. Every week over 1 million people move to cities. Urbanization will quadruple within the next few decades. A vast study of 274 cities in China, Africa and the Middle East reveals global urban energy use will more than triple by 2050. Yet it is uncertain what effect future urbanization will have on energy consumption. On the one hand, urbanization is associated with industrialization and income increases, which traditionally has increased energy use. On the other hand, urbanization increases population density and allows for economies of scale. This is consistent with the findings of a recent report from Perry Sadorsky at York University. Urbanization alone is expected to be positively correlated with both renewable and non-renewable energy consumption, partly due to commuting from suburbs. But where will all the cars park in these megacities? Good luck finding parking in Shanghai in 2030! A recent study led by the University of Maryland suggests that urban planning and transport policies can limit the future increase in cities’ energy use by about one-quarter. This would taper off some of the energy demand. Moreover, most urbanization studies are based on previously observed development models which might be obsolete in a post-industrial society. We are beyond the days when new city dwellers commute by car to and back from work in energy intensive factories. Most people now commute from the suburbs to the city for office space, but gradually urban areas are becoming residential and corporations establish campuses on the outskirts of town.  Since many developing economies lack basic infrastructure today, they have great opportunities for leap-frogging, which would allow them to stake out completely new green trajectories that are difficult to implement in more established markets.

3) Growth in the renewable energy market. Germany is currently a leader in renewable energy consumption, and gets around 75% of its energy from renewables. And a recent report from National Academic Press indicates that technically we should be able to reduce 80% of our carbon dependency for motor vehicles by 2050. While history shows that inertia too often triumphs technological promise, something is amiss when such dramatic carbon reductions are not even mentioned in the petroleum sector’s scenarios. Either we can expect a lot of disruptive changes between 2040 and 2050 or Statoil’s scenarios are simply not visionary enough. Think about it this way, one hour of sunlight has the same volume of energy as a year of the world’s energy use. This means that once the capturing and storage of alternative energy sources is solved, the whole supply chain and access to resources is solved as well.

5) * The collaborative economy and distributed energy. One of the emerging trends we see in developing countries in many areas is the development of self-sufficient energy production. There are many reasons for this. In many regions hooking up villages to the central electricity grid is cost-prohibitive. Microgrids can ameliorate blackouts and grid-failure, and become a better back-up system than generators. Future threats of cyberattacks and the realization that the whole U.S. powergrid system is as obsolete as the fossil-based energy it transmits, is another good reason for people to make the investments. Moreover, microgrids are going through exponential efficiency and cost development similar to what Moore’s Law is for computing, which lowers the barriers to installation. Once installed with integrated smartmeters in either multi-family dwellings or individual residences, it might be possible to sell energy back to the grid, helping people become prosumers and gain a much welcome extra income in a market where jobs and wages have stagnated.

6) Telecommuting: cloud computing, virtual meetings and online education. We are living more of our lives online – including our professional lives. When Marissa Myers demanded all of her employees to physically work at Yahoo’s corporate office, this was a move against the trend rather than an example of its reversal. Since 2005 telecommuting increased by 80%. Various studies have indicated that Generation Z is on track to becoming more entrepreneurial, and this too would reduce work-hour traffic since they are likely to work at home, in co-working communities or in local makerspaces. Travel for educational reasons diminishes too as more people take online education.

4) Carbon bubble bust. This is possibly why oil prices have imploded. Oil was believed to be overpriced to begin with, but the dramatic drop in price could actually be a sign that OPEC-countries are trying to cash in before climate regulation and disruptive improvements in alternative energy start paying off. Because once that happens, there is going way back and oil will become obsolete. Or as Sheik Ahmed Zaki Yamani said: “The Stone Age didn’t end for lack of stone, and the oil age will end long before the world runs out of oil”.

Neither Ford’s generational report nor Statoil’s oil scenarios reveal details on how they arrived at their projections, so it is possible that they have considered the variables mentioned above. But there are few signs that they did. Nor do they look outside of the conventional framework of expected linear development, when instead the most likely course is one of tipping points and exponential curves. Once we learn how to optimally harness and store renewable energy, the oil economy will go the way of rotary phones and typewriters.

* Addendum 10-2015: The key obstacle toward renewable energy and microgrid conversion has been thought to be in limitation of storage deployment. Few households would accept intermittences that often occur with solar and wind, so storage of energy would become necessary for these systems to reach a tipping point in the market. But storage capacity and the price of lithium ion batteries (that also power EVs) are achieving breakthroughs and undergoing exponential improvements, see image below. Tesla’s Powerwall is already well-known. The Rocky Mountain institute believe storage improvements will make microgrids cost effective with 10-15 years.

A “wildcard scenario” should at least consider that possibility. However, signs of such considerations are completely absent. Strategic foresight is about establishing a multidisciplinary 360 degree field of vision where changes occurring in other spheres than your direct industry must be considered, and these are some of the most important methods underpinning After the Millennials’ work. To learn more about Strategic Foresight, please read about Our Methods.

Image: Point & Shoot @ 70MPH by Ellen Jantzen