Planet
ENERGY MIX
Balancing sustainability, security, and affordability.
As the world embarks on the crucial journey towards lower-carbon energy, we confront a complex tapestry of interconnected challenges. While sustainability sits firmly at the forefront, achieving a truly successful transition requires careful consideration of two additional pillars: energy security and affordability. Striking a balance between these three intertwined priorities – the energy trilemma – demands collaboration and innovative solutions from policymakers and energy stakeholders alike.
There’s no one-size-fits-all approach to resolving the energy trilemma. Solutions tailored to the specific realities of each region – be it geographic, economic, or social – are key. We must look both to the supply side, where renewable energy and energy storage technologies offer promising possibilities, and to the demand side, where advancements in energy efficiency can unlock significant potential.
Furthermore, achieving Net Zero hinges not only on low-carbon energy provision but also on the meticulous protection and restoration of our natural world. Policy and technological innovation must harmonize to ensure that everyone, everywhere, has access to affordable, reliable, and sustainable energy.
At Mercuria, we are actively contributing to trying to solve the energy trilemma, by reducing carbon emissions and advancing the energy transition. Our strategy for this rests on three pillars:
- Leading the low-carbon charge: Exceeding our initial commitment, over 50% of our investment capital has been directed towards the low-carbon sector, driving the transition forward. Learn more about our investments on the dedicated investments page.
- Carbon footprint reduction in action: As a committment to carbon neutrality, we have offset our Scope 1 & 2 carbon emissions since 2022. Discover more about our sustainability efforts on the planet in 2023 page.
- Nature restoration at scale: Through Silvania, our $500 million investment vehicle dedicated to restoring and protecting land and forests, we are initially targeting 10 million hectares. Read more about our nature restoration and biodiversity initiatives on the focus on our world page.
We firmly believe that our combined efforts will contribute to a world with equitable access to the energy it needs, delivered in a way that ensures long-term sustainability for our planet.
The energy trilemma
Nick Lawson, Global Head of Low Carbon Strategy
The trilemma is the balancing of three dimensions of energy supply so that it is secure, equitable and environmentally sustainable.
- Energy security requires energy supplies, which are reliable, withstand, and bounce back from significant shocks.
- Energy equity is access to reliable, affordable, and abundant energy.
- Environmental sustainability – a system that minimizes potential environmental harm and climate change impacts.
Achieving and keeping each of these in balance is what constitutes a healthy energy system.
The past few years have thrust the energy trilemma into sharp focus. Prior to the COVID-19 pandemic, the focus was primarily on energy sustainability. But recent events have caused energy markets to contend with huge swings in demand, supply and prices. The pandemic saw global energy demand decline by 4% in 2020[1] leading to oversupply and negative prices in some markets as suppliers had to pay for product to be taken away. In 2022, the dynamics swung the other way with post pandemic economic demand recovery being stymied by supply shortages causing dramatic price spikes.
The future is no less straight forward as we face growing geopolitical fractures, increasing levels of nationalism and an urgent need to decarbonize energy systems.
In this context, attaining the delicate balance requires all energy market actors to play their part. Producers to unlock more supply, consumers to change behaviours, governments to provide the right frameworks and incentives and trading companies to bring market participants together.
The role of the trading company is often overlooked or at best misunderstood, despite having a key role across all dimensions of the energy trilemma from:
- Security: identifying new energy sources (e.g. Liquid Natural Gas) and ensuring it arrives where it is needed. Working with partners around the globe to develop these new sources through financing, off-take agreements, hedging, risk management and then deliver them to market.
- Equitability: providing pricing transparency and helping to create a market so prices are set at a fair market value and extending financing that might not otherwise be available.
- Sustainability: investing in and developing new forms of low carbon energy (e.g. renewables), establishing and stimulating carbon markets, and innovating to encourage lower carbon energy production and product shipping, and increasing the traceability of products to ensure they are responsibly sourced.
Sustainability must be at the heart of a healthy energy system, as low carbon energy will provide secure and equitable supply. However, for this to happen, managing the energy system will need innovation and imagination – as well as short-term fixes – and this is where trading companies play a crucial role in helping guide the energy system toward a sustainable future.
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