Despite rapid growth and seemingly unstoppable momentum, exponential challenges are not insurmountable.
Some global problems grow exponentially. One recent example is the Covid-19 pandemic, which grew exponentially before draconic measures tamed the beast. Another is climate change, which is worryingly built upon several acceleration loops, such as melting icecaps that would otherwise reflect sunlight and keep temperatures down.
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Exponential problems can be difficult for humans to understand and solve for several reasons. Intuitively, we tend to think linearly rather than exponentially. It’s natural for us to assume that the rate of change or growth for any phenomenon will remain constant, even if the evidence tells us that it is increasing exponentially. This predisposition can often lead us to underestimate the severity of an exponential problem.
Exponential problems can also be difficult to control. Because the rate of change or growth is increasing at an incredibly rapid pace, it can often be challenging to stop a problem from getting worse. Once an exponential problem has reached a tipping point, it can become impossible to reverse.
Solving an exponential problem usually requires a multifaceted approach. Climate change, for example, requires not just cutting emissions, but also innovation and research in order to better understand the problem.
Solutions can be exponential too
While all these factors make exponential problems particularly difficult to solve, the good news is that certain solutions can also grow exponentially.
Let us look at the energy transition, driven by the need to urgently decarbonize our economies. As I have analysed last year, a fast energy transition is cheaper and much cleaner than a gradual or delayed approach.
This is in large part because most new technologies follow an exponential growth trajectory once a tipping point has been reached. When a new, disruptive technology reaches approximately three per cent of market share, it often results in a shift in capital away from incumbents. For example, gas lighting demand in the UK peaked when electric lighting was two per cent of the market, and the use of landline phones in the US began to fall precipitously once mobile phones passed five per cent of the market.
In the case of climate change, many key technologies of the energy transition are already on the exponential growth path, or about to enter soon. In 2008, non-hydro renewable electricity passed three per cent of electricity and we have seen the exponential growth of renewables since. Currently 2.2 per cent of all cars are electric vehicles (EVs and PHEVs) and green hydrogen will be three-five per cent by 2025.
Moreover, as we have seen with cell phones, flat screens and solar panels, growth enables innovation and scaling up and leads to cost reduction, which fuels growth.
However, one central problem remains: the human brain is not hardwired to “understand” exponential growth. We keep underestimating technologies, primarily because we distill the future from the present situation. I, for example, have a personal history of systematically underestimating the growth of solar PV over the last 25 years, during which solar power has outperformed even the most ambitious scenarios of the past.
Now in 2023, we must learn to react more proactively to new technologies such as hydrogen.
I recently carried out an analysis of several hydrogen growth scenarios, and a comparison with the development of the solar PV market yields a potential global electrolyzer capacity of 12,650 GW by 2050, covering 50 per cent of final energy demand, following a constant annual growth percentage of 33.5 per cent. This is significantly higher than even the most optimistic scenario currently doing the rounds.
Why should we care? If we don’t predict and react correctly, we lack urgency in preparing for exponential growth. We don’t build ports, pipelines, transmission systems or factories, ultimately leading to reduced growth and increased costs down the line.
The Indian example
India, a net energy importer, is one of the few countries showing true urgency regarding hydrogen and the energy transition. India’s successful National Solar Mission, launched in 2010, overachieved its targets and serves as a blueprint for global policy making.
At the start of 2023, the Indian government approved an incentive plan of 174.9 billion rupees (2.11 billion US dollars) to promote green hydrogen in a bid to cut emissions and become a major exporter in the field. Much of India’s private sector, including Mukesh Ambani’s Reliance, is heavily investing in new energy solutions.
With both government and private sector support, India is emerging as a global energy leader equipped with an exponential solution for an exponential problem. Just this week, India Energy Week 2023 brought together major stakeholders and industry leaders to discuss the wide range of issues facing the energy sector and offer important insights into the country at the centre of the global energy transition.
As climate change continues to threaten vulnerable environments and communities around the world, global leadership must learn to better respond to exponential challenges. Despite rapid growth and seemingly unstoppable momentum, exponential challenges are not insurmountable. In fact, countries like India are demonstrating that investments in new technologies and true energy preparedness can go a long way in combatting the acceleration of climate change.
Therefore, while hydrogen may have its detractors and sceptics, embracing its potential and committing to its growth is the only smart decision.
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