Introducing The Energy Accounting Stack

We live in an era where the health of our planet hangs in the balance, and we are closer than ever to the moment of reckoning. Energy markets are the critical battleground for climate change.

In this energy market, fossil fuels absolutely dominate - with a whopping 81.79% share of primary energy consumption ^[1] - and this needs to change fast ^[2].

Capital and the Energy Markets permalink

Capital markets are meant to be efficient allocators of capital, however this is only true when true costs are reflected in prices. However when there are externalities ^[3], prices are distorted because the benefits or costs are not borne by those not involved in the transactions. This can result in significant misallocation in the market. When this occurs, we need to rectify the distortions through well designed levers - incentives, taxes, policies, and laws.

Fossil fuels are cheap and abundant, and until relatively recently, they were the only technologically feasible solution to deliver the vast amounts of energy that we require. However they come with a litany of negative externalities, ranging from negative impacts on human health and nature, to climate change. ^[4]. The latter is the most pressing - we are running out of time fast. ^[2:1]

The energy markets are simultaneously powering all of humanity, and pushing us towards environmental brinkmanship, due to it not accounting for these hidden costs. In a nutshell, the energy markets should no longer allocate the majority of capital towards fossil fuels, and in theory should re-allocate this towards renewable energy instead. Yet, the market is so vast, pervasive, and seemingly entrenched, that it seems insurmountable. But the tools to correct this market are indeed within grasp.

From Information to Fixing the Energy Markets permalink

A market intervention is only as good as the accuracy of the information used in its design. The Energy Accounting Stack is a series of articles that delves into this very design process, and offers a roadmap to account for the true costs of energy production and consumption. This includes the application of technology ^[5] to collect, process, verify, store, and distribute the necessary data; as well the application of incentives, taxes, policies, and laws to enact changes in the energy markets.

An astute reader might ask: If we already know what the end outcome needs to be - to transition from fossil fuels to renewable energy - why do we need to go through the effort of energy accounting. The reason is twofold. First, not everyone is on board with that end outcome. Through energy accounting we are able to provide compelling, irrefutable data to make the case. Second, this transition is complex beyond measure, and would require a pace of societal change on par with the industrial revolution, and that too on a more compressed time scale ^[2:2]. Implementing that change is consequently also far more complex than making a single binary decision, as it will involve many decisions across multiple sectors that affect many aspects of human behaviour, technology, finance, and politics, to name a few. Those decisions require a level of careful calibration that can only truly be attained with the precise data that energy accounting can provide.

The Series permalink

This series is the product of a collaboration between Calvin Cheng and myself. Calvin has a rich history ranging from distributed ledger technologies at Hedera (as Developer Advocate), to electric transport at Ion Mobility (as CTO), and now spearheading Sembcorp’s push towards GHG-free energy at GoNetZero (as CDO).

Calvin and I first met at a Hedera hackathon^[6], and spoke at DApps Dev Club ^[7]. We have since found that, apart from Hedera, we have a common interest in doing something about climate change. Together we are committed towards shedding light on the complex interplay between economics, policy, technology, and how we can optimise this for the best outcome for Earth.

We invite you to engage with our work. This series will be available in its entirety online ^[8], and will be available open source on Github ^[8:1].

We hope to give everyone the tools to be able to harness the power of data, and design the proper levers to correct the energy markets. We hope to catalyse a change towards a more sustainable world. Finally, we hope to hear feedback from you, the readers of this article series. If you implement the energy accounting stack in your company/ field, we would like to get your field notes, and optimistically, your success stories too!

Footnotes, with additional commentary.