A short history of the energy industry

While humans have been using energy for millennia, the existence of the energy industry in its modern form has only been for a few centuries. And it was not a linear process, with innovations and breakthroughs across technologies competing with each other. And as with any innovation in history, it has been a process of improvements being made on top of each other that led to further progress. There are however some events and discoveries that lead to transformative changes and alter the course of history. We talk about three of those transformative changes in this post, how they have made the energy industry of today, and why that is changing.

The first transformative change was the invention of the steam engine by Thomas Newcomen in 1712, and the improvements to it. The innovation added to the steam engine by James Watt in the 1770s deserves special mention as it allowed more power to be generated, leading to improvements across the board. While earlier engines had limited uses, the innovations in Watt’s steam engine allowed for greater efficiency, leading to increased power output and allowing the engine to be used in a variety of industries. This was also one of the contributing factors to the industrial revolution taking off, which led to a rapid growth in the production of goods and commodities, increase in wealth, gains in transportation, and spillover effects in communication as well. Coal being the fuel for these engines, its use began to rise rapidly.

Coal Production and imports in the UK (1700–2019)
GDP in England (1650–2016)

(Source: Ourworldindata.org)

The increasing industrialization saw the growth of cities and the need to power them. Gas also began to be used to produce power, such as for heating in homes and lighting. London installed the first street lighting in the world in 1807, with other cities following soon after.

The second significant discovery was that of electricity. Multiple scientists were working on different aspects of electricity, with Alessandro Volta, Benjamin Franklin, and Michael Faraday playing a major role in the understanding of it. While energy was derived earlier in the form of thermal output, the discovery of electricity led to it being transmitted in a different form. The development of Alternating Current and Direct Current (AC and DC) by Thomas Edison and Nikola Tesla respectively, allowed power to be transmitted over long distances. Illumination was one of the first major applications which shifted to electricity from gas power and inventions across the 20th century saw electricity gain prominence as the major form of energy. Across residential, commercial, and industrial uses, electricity plays a major role and is fast gaining ground in transportation as well.

The third is the fuel that still sees major use in the transport sector and whose application in mobility allowed unprecedented gains in the last century — that of oil. Though humans have known about the existence of oil and used it for lighting for thousands of years, its use was limited till the modern era. The 19th century saw a flurry of developments with the first modern oil wells being developed in the 1840s and 1850s. However, it was primarily used for kerosene and in oil lamps. It was the invention of the Internal Combustion Engine (ICE), still used to this day in vehicles powered by fossil fuels, which saw oil demand in the form of petroleum shooting up.

Taken together, these three events have seen major changes across society, industry, and human civilization as a whole. Cities began to grow, new industries were birthed, and transportation boomed. How people and industries sourced energy also changed. While energy was earlier obtained by burning oil or wood to get heat, these new developments allowed for the creation of modern power plants. The first hydroelectric power plant and the first coal plants were both built in different continents in 1882, the Edison Electric Light Station in London being the first coal power station and the Vulcan Street Plant in Wisconsin in the USA being the first hydroelectric power station. The building of transmission lines over the 20th century saw electrification reach hundreds of millions of people, moving away from gas and oil as the primary ways that energy was generated at homes. The invention of various electrical appliances also saw a rise in living standards that was unimaginable in the 19th century.

However, there are limitations to the setup of centralized power generation, such as making it uneconomical to provide electricity to areas where populations are distributed over wide areas and are thus less densely populated. Across the world, about a billion people still do not have access to electricity, and approaching the issue from a different perspective might be able to help them in securing it, something that we will be covering in this series.

The biggest challenge to the way that the energy industry is currently structured is of its own making. While the use of coal, gas, and oil for energy production saw transformational changes in living standards, the burning of these fuels also emitted large amounts of greenhouse gases into the atmosphere. The trapping of these gases leads to what is called the greenhouse effect, warming the planet rapidly and on a scale that makes life on the planet hostile for all living creatures. As with the discoveries in energy in the previous centuries, the knowledge on climate change started being built up over the last few decades of the 20th century. The Intergovernmental Panel on Climate Change (IPCC) was established in 1988 to provide scientific knowledge on climate change and has published six assessment reports on the subject so far. There has also been global cooperation on tackling climate change under the United Nations Framework Convention on Climate Change (UNFCCC), which hosts yearly meetings to tackle the issue. Though it has been slow, progress has been made with the Paris Agreement calling for containing global warming within 2° Celsius pre-industrial levels.

Global fossil fuel consumption (1800–2019)
Annual Carbon dioxide emissions (1800–2019)

(Source: Ourworldindata.org)

Though the recognition of the dangers of climate change started becoming apparent in the 2000s, fossil fuel generation only kept increasing as they were the cheapest forms of generating electricity. However, the late 2000s and early 2010s saw prices of solar module and wind turbines declining at a pace that renewable energy as a share of new installations started outpacing energy produced using fossil fuels.

Renewable share of annual power capacity expansion (2001–2020)

(Source: IRENA)

However, the intermittency of solar and wind energy means that energy management begins to rise in importance. Compared to the earlier setup of steady energy output, wind and solar power will need to be stored either in batteries or other forms of energy storage, while also balancing the demand side. The uptake of solar energy by homes and businesses at the site of energy use means that it goes to a setup that resembles the pre-industrial age, when energy was generated at these places. The increasing electrification of the transport sector and efforts to decarbonize it mean that energy use enters a new paradigm with multiple possibilities.

Energy industry — past and future

All these changes translate to the modern energy industry seeing a transformative change. And how that change started, how it looks, and what it might look like depend on the role that renewables play. In our next post, we look at the rise of renewables, the decarbonization of energy use, and what the future of the industry might look like.



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