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The Most Expensive Energy Is the Energy You Don’t Have

By Katia Bernal - CITRUS
CEO

STORY INLINE POST

By Katia Bernal | CEO - Thu, 09/08/2022 - 10:00

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Human beings can sometimes find themselves in a psychological state of being in denial or disbelieving one’s situation when faced with grave and imminent danger or catastrophe. In other words, people tend to believe that things in life will continue the way they always have. This psychological state is known as “normalcy bias.”

By the 1950s, fossil fuels powered every aspect of growth and industrialization and Mexico had become a fossil-fueled society. The belief that we will always have unlimited, affordable fossil fuels became our normalcy bias.    

Industry is considered the engine of any economy in terms of economic growth, job creation and social development but for it to function, it needs energy. Nearly 70 percent of the total energy demand across sectors is heat, not electricity. The heat is used in many different industrial processes, such as pasteurization, drying, cooking, sanitation and so forth. This heat is generated by burning fossil fuels, primarily natural gas, which has been a fuel source that has propelled Mexico’s industrial activity for most of the century. As a result of increased economic activity, Mexico’s dependence on cheap, imported natural gas from the US has put its industry in a vulnerable position. Mexico, with its enormous industrial base, cannot afford to rely on the idea that it will always have access to an unlimited quantity of cheap natural gas. This fact is becoming increasingly clear for many industrial companies that are finding themselves in the illusion of a normalcy bias.

One of the main problems with the normalcy bias is that it produces a state of paralysis or evasive action until it may be too late.

In February 2021, many manufacturing plants in various industries were affected by a sudden increase in natural gas prices due to the cold weather in Texas. Some companies had to stop entire production lines or power their operations by using an alternative back-up energy source, such as diesel, which is both contaminating and expensive. All such strategies had a major impact on the companies’ cost structures. The sudden contextual change surprised many of these companies as it left them with no time to react.

In March 2022, the Ukraine war entered its hot phase, resulting in natural gas prices experiencing yet another spike, but this time it was not only a spike soon to fade back to normal; this time, it represented the beginning of a new era in terms supply and demand in the gas market.

Climate, political and even pandemic factors revealed that what we had once considered “normal,” could no longer be considered normal anymore. This paradigm shift has pushed the industry to re-evaluate the whole idea of risk in order to discover new, creative ways to keep producing their products at a competitive price; the industry never expected that the hour zero for the end of cheap, abundant natural gas supply would actually arrive.

Normalcy Bias No More

The industry is in for a paradigm shift never seen before. Inflating energy prices, energy scarcity and diversification of energy sources away from fossil fuels are some of the concepts that will come to shape companies’ operational reality moving forward. To ensure energy security, companies will have to adapt their operational requirements accordingly.

According to the IEA, energy security is defined as the uninterrupted availability of energy sources at an affordable price and it has four components: availability, affordability, accessibility, and acceptability.

Which type of energy source available to the industry complies with those four characteristics? The answer is none.

The solution lies in the diversification of a company’s energy matrix. In Mexico, solar thermal is an obvious alternative to industrial heat energy generation to feed industrial applications as well as displacing CO2 emissions. Furthermore, it adds to energy security due to its resilience against geopolitical and macroeconomic events resulting in supply shortages and price volatility of conventional energy sources. This makes it all the more important to raise awareness among industry players regarding the potential of using solar thermal as an alternative energy source in the industry.  

Solar thermal energy in Mexico is growing at an accelerated pace, especially in the residential and commercial sectors, such as the heating of water for hotels, hospitals and for district heating. However, despite Mexico, China and Germany being ranked as the Top 3 countries with the most industrial solar heat installations in the world, the penetration of industrial solar heat solutions is still in its infancy stage and there is an enormous industrial heat potential to fulfill in the food processing, pharmaceutical, agricultural, textile, personal care, and chemical industries. According to IRENA, concentrated solar technology alone can provide an estimated 5 percent of the total heat energy demand for industrial processes.

Another benefit is that solar thermal technologies can be integrated to work as a hybrid system together with natural gas or other fossil fuel heating systems to obtain the best of two worlds: clean, free, and infinite solar energy backed up with natural gas. The energy transition is inevitable. The technologies for diversification are already available and affordable and it is up to each company to take advantage of this opportunity.

The question really is: Can you afford not to?

At the end of the day, the most expensive energy is the energy you do not have.  

Photo by:   Katia Bernal

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