Columnists: Hans Nilsson, Fourfact

Published on: 24 Oct 2017

Living in the energy hurricane

The say that when you are in the middle of a hurricane, “the eye” it is called, you do not notice anything. It is perfectly calm and all the turmoil surrounds you, but in the centre you are safe. This could be exactly what is happening with the energy systems right now.

We are surrounded by two changes, let us call them paradigm shifts, which both will profoundly change the landscape but we still do not know in detail how.

One is the technology change. There we feel the breeze but it is still in the beginning. The Information and communication technology (ICT) has been going on for some time and we have greeted it as being “smart”. Smart things, smart grids, smart buildings. But how smart are they? Can the come back and bite us? When there is smart there is good and there is smart. There are beneficial gadgets and there are – hackers! The latter may not be evil but they want to show their competence. And then there are the evil ones who want systems to break down. Will we be “smart” enough to take and keep control?

Another part of the technology change is the miniaturisation of supply technology that can match the demand and create small scale solutions where energy efficiency and renewable fuels fit together. The combination could provide cheaper, safer and more environmentally beneficial local systems, but we still need to learn how to combine the two. Who will put them to market – what business models will be developed?

The other change has to do with economy. This year’s Nobel laureate in economics, Richard Thaler is award for his achievements in behavioural economics. He makes the distinction between “Econs” and “Humans”. The Econs are always making economically educated rational choices. Problem is, he says, that they do not exist except in textbooks. Unfortunately this is the view that we have all been raised with in schools, universities and political debates. The opposite “the Humans” are what we are – irrational. We need to learn how and in particular how we can frame choices to enable us to do the right thing even if our instinct and training goes against.

Thaler’s findings are however not new. Several laureates before him have been on the same trail. Kahneman (thinking fast and slow), Akerlof (buying and selling lemons (used cars)), Shiller (promote fairness), Amartya Sen, Ellinor Ostrom – to mention a few. The impact Thaler, since he has coined the concept “behavioural economics” may however mean that we are finally prepared to put these findings into practical use and find way to deal with the demand side and energy efficiency in a way that appeals to real people.

We are already feeling the gusts from the technological shift but there might be more to come. We are according to some partly into the fourth industrial revolution. This is a change that holds many more both exciting and challenging opportunities. Will we be able to steer them into the direction of sustainability, recycling and inclusiveness or will we just be victims of the circumstances? Will we fall over or will we stand tall?

We are both fascinated and a bit humiliated by the messages from the behavioural economists. Some say that their findings are trivial and should not deserve a Nobel prize. This is just common sense and common knowledge they say. OK – but if so how come that we do not use such common sense in practical policy? There is a fair chance that we will deal a lot more with “nudges” and framing in the future. But we will have to remember that such instruments can also be used to manipulate us.

Are we prepared to face the hurricane(s) and walk new roads with the wind from behind?

 

 


Other columns by Hans Nilsson