Are we ready to pay for tomorrow’s energy?

It is our duty, as states, citizens and industry leaders, to make the energy transition a reality with the ultimate aim of reconciling two major priorities: to meet ever-increasing demand and to confront the complex issue of climate change.

These challenges, as we are all aware, determine the future of the planet as a whole. Overcoming them will involve changing the way we think and act as much as it will involve changing the systems that produce energy and deliver it to end users. Faced with this crucial duty, the oil industry is shouldering responsibility.

By definition, this transition will be long and slow, if for no other reason than the fact that fossil energies today account for 80% of the world’s energy mix. In other words, even if we decided to do it, it would be physically impossible to “decarbonize” our societies overnight. Meanwhile, considerable effort is more than ever needed in the fields of investment, research and development, technologies and innovation.

These endeavours explicitly raise the question of finance, and require long-term vision. At Total, our idea of how the energy mix should evolve is based on four defining concepts: access to energy, technical maturity, competitiveness, and, of course, societal acceptability. Fossil and nuclear energies, the result of several decades of investment and policy choices, meet the first three criteria.

To establish the orders of magnitude involved, Total estimates that oil and gas will still account for half of the world’s energy mix in 2035. We then estimate that gas and sustainable energies will take over from carbon energy. We believe that gas – abundant, low in CO₂ emissions and highly flexible, particularly in its liquid form (LPG) – will be the second most consumed energy in the world. We may add that gas is also highly suited to support the development of renewable energies, since it can be used to fill in gaps in supply from renewables.

Worldwide energy demand is expected to increase 30% between 2010 and 2035, according to our own estimates. To respond to changing needs, particularly in emerging countries, oil and gas will remain the core energy commodities worldwide. However, because they will be more difficult to produce, it will take more innovation to overcome technological and environmental constraints. These legitimate requirements entail massive investment, otherwise a shortage would inevitably lead to skyrocketing prices, something that nobody wants.

Meeting demand over the next 20 years means a more diversified energy mix, combining conventional and non-conventional hydrocarbons with renewable energies and where renewable energies will account for an increasingly greater share. As the world’s fifth largest oil company, Total has chosen biomass and solar technologies, a field in which it has been active for some 30 years. Acquired in 2011, our subsidiary SunPower now ranks us amongst the leading worldwide players in the sector. SunPower is the best illustration of our determination to embrace and diversify into the renewable energy field.

Consuming better, consuming less. Our efforts in the field of energy performance are not to be outdone either. For us, the goal is to begin working towards a complementarity energy model. From all its industrial platforms to its consumer products, this policy is Total’s axiom. To illustrate this, in 2000 we decided to reduce gas burn-off in the oil fields we operate. This choice will result in a 50% reduction in the volume of related gas burn-off in 2014 compared to 2005. At the other end of the process, we are offering our clients new products – both lubricants and fuel – and we are developing new, lighter and more intelligent materials based on our petrochemical know-how.

Today’s energy mix is the result of yesterday’s consumer habits, considerable investment and various political decisions. The potential of renewable energies, now a well-established fact, is undeniable if given the time to arrive at the technical and economic maturity that will free them from subsidization policies.

State interventionism must therefore take into account the twofold constraints of economic equilibrium and social models. The energy transition demands a clear vision of the steps that need to be taken and a stable, meaningful regulatory framework. It appears important to us to awaken public opinion to the fact that this transition will necessarily come at a cost and will, at least in the short term, involve a price increase.

In its energy roadmap 2050, the European Commission estimates that the price of electricity is expected to increase in Europe until 2030 and decrease from there on. Political and industry leaders should now be acting transparently and raising awareness about looming price increases and the necessity for operators to remain competitive.

Today, are we ready to pay the price to protect the environment and secure the energy we need both tomorrow and in the next 50 to 100 years? It will take courage and clarity to make the choices the energy transition is now demanding from our society.

Author: Christophe de Margerie is chairman and chief executive officer of Total. He is one of the Co-Chairs of the World Economic Forum’s Annual Meeting in Davos-Klosters.

Image: Soybeans are seen before being harvested on the outskirts of Buenos Aires. REUTERS/Nicolas Misculin