Underlying forces of transformation in technology, societies, and economies, can sometimes be dramatically accelerated by unexpected events.
Both World Wars sped up incredible social change (women’s suffrage, the welfare state, multilateralism) and technological change (powered flight, computers, nuclear weapons) in less than 30 years. Looking further back, the plague which afflicted Europe in the 14th century is now thought to have led to the emergence of the ‘middle-class’ and paved the way for the continent’s modernisation.
These changes would likely have happened anyway, but it was unexpected major events which acted to accelerate them. We would be foolish to think ‘now is different’.
We all witnessed a decade of technological change in genetic medicine and vaccine development happen in a matter of months in response to the COVID-19 pandemic. While we will have to wait a little longer to see the societal implications, they will be big.
This brings us to the latest major world event and its implications. The ongoing events in Ukraine are virtually impossible to predict on the ground, but we can predict which structural changes may be accelerated.
By far the biggest implication is in energy. Where a civilisation gets its energy from is fundamental to its success or failure, how far it can progress and grow. Ancient Rome relied on wood, animals, and humans, to generate the energy it needed, as did every other civilisation before or after, until two thousand years later somebody in the West of England invented the steam engine.
19th and 20th century civilisation’s greatest advance was to move away from a reliance on humans, animals, and wood, and shift to increasingly dense sources of energy, first with coal, later with crude oil and natural gas, and eventually to uranium which is 240,000 times more energy dense than wood and 89,000 times more energy dense than crude oil. To put uranium’s energy density into context, the weight of petrol you’d need to move a car 20 metres would, if it were the same weight of uranium, have enough stored energy to move the same car 1,625 kilometres.
For the past 20 years, the industrialised world has been shifting its energy systems away from fossil fuels and into renewable and lower-carbon sources of energy. ‘Wind, solar, hydro,’ and in some cases ‘…nuclear, are the future!’, politicians told us. And they were right, except progress has been excruciatingly slow.
Even today, after decades of investment, renewables make up less than 3% of global energy output. Nuclear has been a bit more successful, but even then, the total zero carbon energy mix globally is still less than 15% (fossil fuels make up the other 85%).
Enter to the stage, Vladimir Putin, and his poorly planned invasion of Ukraine. In a matter of days, most of the industrialised world has committed to a radical change to its entire energy infrastructure.
Renewables no longer look like a good idea because we need to limit temperature rises by 2050. They are a good idea because Europe and the United States need energy security today. Same too for nuclear power, the unloved hero of low carbon energy production, which is now back in vogue (even in some political circles in Germany).
Dramatic changes create investment risks and opportunities. Exposure to the sectors and businesses who should benefit from an acceleration in the energy transition offers investors a long-term exposure to what, in historical terms, is a rare opportunity to benefit from radically accelerated change.
Don’t miss it!
Disclaimer: The views expressed in this article are those of the author at the date of publication and not necessarily those of Dominion Capital Strategies Limited or its related companies. The content of this article is not intended as investment advice and will not be updated after publication. Images, video, quotations from literature and any such material which may be subject to copyright is reproduced in whole or in part in this article on the basis of Fair use as applied to news reporting and journalistic comment on events.
