Energy is the lifeblood of modern societies.

Amory B. Lovins

Energy Risks

In the past two centuries, the risk we contemplated related to energy was the volatility of the price. This was easily, if not always inexpensively, met by buying futures or hedges against the price changing within a set period of time. This approach has two serious flaws: it means you do not benefit from favourable price changes; and, it only works in the short term.

Moving forward, we have more serious issues to contemplate regarding energy risks, especially for remote communities.

We have passed the point of Peak Oil for conventional oil, worldwide. This means that someday, oil will be too expensive to use for its common applications today. In effect, it will stop flowing. For remote communities, it will stop coming earlier than in the connected, industrialized world. That is because it will actually cost more in remote locations, and richer parts of the world will pay more than remote communties will be able to afford. That's the dwindling supply issue.

Suppply disruptions are a somewhat different issue. Due to mechanical failures, company failures, geopolitical tensions or infrastructure issues, some days supplies just don't show up when expected or desired.

Of course, at some point oil will likely just become unaffordable. That could be related to dwindling supplies as mentioned above, but it could also be a function of governments no longer able to willing to subsidize energy prices, or the imposition of a carbon tax to help mitigate climate change, or at least try to slow it down. Finally, it is possible that the world's citizens may finally wake up and simply force a massive reduction in the use of carbon-based fossil fuels, but more likely climate change will force the issue directly and physically.

We also have to consider the consequences of the energy system decisions we make. In the industiralized world, we have largely come to understand the risks associated with using coal as a key energy source, and we are rapidly moving away from it. While oil and natural gas avoid some of the issues related to coal, they share many (damaging ecosystems which support life on a broad scale, destroying food sources or rendering them unsafe, making surface and ground water unfit to drink, and accelerting climate change. Until recent years we had to balance this against the benefits we derived from oil and natural gas use. Today, with the cost of renewable energy for heat and electricity and energy storage falling below the cost of new oil production and refining, and as we now have the technology to support a rapid transition to powering transportation with electric drive and biofuels, we no longer have to accept the risks which come with extreme oil extraction (offshore drilling, heavy oils, bitumen, etc.).

Here's one TEDx video which considers the impacts of mining bitumen in the Canadian boreal forest.