Flux: Should We Prepare For A “Disorderly” Energy Transition?
The Energy Transition Trilemma as a Foundation to the Orderliness of the Transition
Successful execution of the energy transition given the constraining trilemma i.e. reliable/secure, affordable and low emissions energy is among the great optimization challenges that has faced the global economy. The complex interactions inherent to the optimization challenge involve the standard hurdles of financial and technological constraints that are common to most worthwhile challenges the world has faced e.g. improving health standards and infrastructure proliferation. What intensifies the trilemma optimization however is the socio-economic coordination problem that comes with the high number of involved parties from states and regulators to companies and other concerned civil societies and groups all with differing motivations and economic power. The cherry to the complexity cake is the underlying negative externality nature of the environmental and atmospheric impacts of hydrocarbon based energy conversion referring to how the downside impacts cannot be isolated to the direct participants of the energy value chain.
What makes the framework of viewing the energy transition challenge as a trilemma is that it also provides a useful foundation to define what constitutes an orderly/disorderly transition. Making use of this, we can view it as the degree to which the energy transition replaces high carbon with low carbon energy supply while balancing the increasing demand at affordable prices.
A lessons from the gibbon
Put another way, it is how/if the gradual retirement of higher carbon intensity assets with energy equivalent lower emission ones does so while minimizing any energy supply gaps that would raise price levels at prevailing demand levels. This would theoretically largely be driven by near term suppression of investment in the existing mature system that is reliant on high energy density carbon-based sources.
Here we can take a lesson from the evergreen forests of Southeast Asia which are home to the gibbon. The monkey is known as one of the best at tree branch/vine swinging aka brachiating. What underpins this evolutionary expertise among other physical attributes such as light body weight, shoulder and hand joint structures; is experience and instinctive ability to grab onto reliable branches and vines as it lets go of the preceding one. In this analogy therefore, we can be seen as trying to mimic this transfer of weight. That is, moving the fulfillment of energy needs to one energy system while letting go of another.
Given the significant challenge this presents combined with dynamics since the global financial crisis of 2007/08 and particularly the recent post COVID economic and it’s ensuing geopolitical dynamics, there is arguably merit to a hypothesis that there is and will continue to be an increasing degree of disorderliness to the energy transition. It is therefore prudent to take an initial high-level view on what the higher extent of disorder to the transition should inform us.
What are the key factors influencing the levels of disorder?
The core factors that influence the degree of disorder in the transition can be summarized into the below 5 aspects:
Tangible global policy coordination and the lead-time for global economic participants to adjust across key aspects that interact with the transition i.e. Trade (e.g. policies like Carbon Boarder Adjustment Tariffs) and other Central funding bodies (e.g. UNFCCC’s Green Climate Fund)
Economic environment primarily what happens with the elements that constrain households, companies and governments particularly interest rates, inflation, employment, poverty levels, inequality and financial markets performance. As economic pressure dials up, priorities tend to shift towards challenges of cost, something we have seen in the post 2020 world. Granted this takes an assumption of some level good economic governance to begin with.
Socio-political environment which is closely correlated to the economic environment and underpins the worldviews taken by global participants particularly those with power to decide the direction the world takes unified or otherwise i.e. geopolitical co-operation/war, just energy transition sentiment, nationalism, mis/disinformation and underlying biases.
Technological practicalities regarding how to fulfill the increasing global energy requirements in a way that satisfies collective prosperity.
Physical environment behavior and how the collective consciousness attributes the causes e.g. changing climate patterns and how dramatic and sudden changes to the climate system would evolve over time.
There maybe a temptation to consider the concept of disorder in absolute terms however as alluded to with reference to it as the “degree of disorder”, it is more useful and practical to view it as a spectrum given the complexity of the interactions on factors above that subsequently settle to an experienced equilibrium in the short to medium term. Note here that the experienced equilibrium is not a normative consideration i.e. It doesn’t attach a judgment in terms of “what ought to be” or what is “right”. This is an important consideration because we have seen in human history time and time again that we are adaptable for good or for bad, so a sub-optimal equilibrium is unfortunately among the ranges of possible outcomes.
Are there any historical parallels to a disorderly transition?
Trying to take some lessons from history regarding the nature of disorder in other effectively technology related transitions as the one required with energy e.g. the industrial revolution, the digital/internet revolution provides limited proxies. This is because these transitions had underlying significant efficiency gains with associated economic opportunity that naturally enamored the public with directly experienced gains driving momentum even with the inevitable resistance and naysayers that come with disruption.
In contrast, energy such as that from electricity or that fundamental to transportation or industrial processes, is more predicated on the issue of having access to it to begin with or for those who have sufficient access to it already, not disrupting the comfort of life it provides or economic activity it already enables. With such a dynamic, it means lower cost ends up as one of if not the most important consideration.
This is why for example when looking at various posited net zero scenarios, energy efficiency frequently represents a significant lever to the extent that it is sometimes even more than electrification of transport or renewable energy deployment. This is an indictment on the dependence the world has developed on the existing energy system and the activities it enables. These activities are therefore inherently expected to increase as population increases but while finding ways of increasing efficiency in order to do so using less energy. A comparable example from history is the movement beginning in the 2000s from halogen lights to LED lights where the same end goal of lighting is now being achieved at 80-90% the efficiency for the same Lumens of brightness additionally with longer lifespan and most importantly, cheaper cost.
What are the risks and what do they mean for the responses
As partly alluded to by the nature of the trilemma, the inherent risks therefore broadly fall into the following categories:
Inflation on energy costs which ripple in and through the global economy.
Disruption to continuous energy availability.
Segregation of trade between parties with the same world view on energy and implicit climate policy which is inherently disruptive given existing globalization levels even if this slows down under increasing protectionist policies.
On the ground adverse climate and environmental outcomes e.g. flooding, extreme heat or extreme cold and their respective impacts in relation to degrees of preparedness.
Increased share and stake holder tensions including those originating from earnings volatility particularly in energy industries e.g. traditional oil and gas, utilities, renewables as well as energy adjacent businesses e.g. petrochemicals (such as plastics), automotive and mining.
If we hold the hypothesis that a disorderly transition is increasingly likely and/or gaining momentum, then looking at the nature of risks listed above points to two main themes that should underpin mitigation of these risks.
Financial Resilience
The first and arguably most important is financial buffers designed to ride out the period for as far as it is possible. This is at all levels of economic participants i.e. households, companies and governments. If we look particularly at poorer nations, this means that the onus to address economic improvement and the governance required to do so is of utmost importance. Even the ways of responding to any adverse environmental developments such as physical damage to infrastructure, agricultural challenges or disrupted supply chains will itself require financial resources. Mentioning financial buffers can be considered rather obvious but it is an important step to visualize the why of what future finances would be required to do because it informs current economic development strategies e.g. Setting up well governed sovereign wealth funds, economic diversification, managing government finance leakages etc. It is also important to develop this economic muscle because in a world of differing views on how to prioritize energy and climate related policy, the practical natural laws of power dictate that self determination will be invariably linked to economic clout.
Flexibility
Closely related to this idea of economic development is the idea of building in flexibility and options. That is, as we create new infrastructure and service systems while also upgrading old ones, this must be done with flexibility in mind. Flexibility takes on many forms of which financial resources can ultimately be seen as one pillar hence the mention of it separately above. Flexibility in this point however is reference to elements more related to the infrastructure and service systems we lay today for the future because history tells us that once a network system is in place, there is high inertia in adjusting it. This is a good lesson particularly for countries coming off low economic bases where infrastructure is low to nonexistent. Some noteworthy examples of this approach are listed below:
Road and bridge infrastructure utilizing higher performance materials e.g. Higher permeability pavements, temperature fluctuation compatible geopolymers & cementitious composites, high resistance rubberized asphalt e.g. in United States, Japan, and Europe
Modular microgrids which would allow more grid independence and resilience.
Modular nuclear energy which offers smaller scale base load low emissions power. The controversy and resistance behind nuclear energy is understandable given the fear of incidents and concerns with waste disposal. The argument however is there have been significant improvements in managing the nuclear energy value chain and technological developments in making it modular. This means nuclear energy is worth considering and should not be viewed as a non-negotiable that is completely off the table given an emerging scenario where we need more options and flexibility.
Intentional and well thought through city and human settlement planning. This means elements like managing urban sprawl, maintaining drainage, limiting flood plains construction and well considered approaches to demographic patterns. It also requires managing decision maker behaviors that take a primarily vanity mega projects approach as seen in some heavily under-utilized new cities in parts of the Middle East and Asia
Conclusion
The global energy transition is a high-stakes transformation, and while some degree of disorder is inevitable, its impact severity depends on how we respond. Economic resilience, technological innovation, and policy adaptability will determine whether the transition fuels progress or deepens instability. A pragmatic approach—balancing financial preparedness with flexible infrastructure—can mitigate risks and create new economic opportunities. While uncertainty looms, history shows that societies capable of adapting to disruptive change ultimately emerge stronger. The energy transition, if navigated wisely, can lay the foundation for a more resilient, sustainable, and inclusive global economy.
