Circulating among businesses today are surveys asking employees their ability and desire to physically return to work. These surveys rank among the easiest to guess the outcome, as I believe the majority have no desire to return to the way things were. Here is another example of technology making our daily routines simpler, easier, and more efficient. If work-from-home becomes the new norm, the implications on energy infrastructure are immense. We of course recognize many jobs require in-person interactions, but employment is an area where: (1) even a 1% shift in behavior can have a meaningful impact on society, especially when (2) shifts occur in such a short time frame. It’s the latter point that piqued our curiosity as a blog topic because historically employment shifts occur over decades and not months.
So, let’s start with the question of how much of the workforce can reasonably work from home. Separate teams of economists from the University of Chicago and Norway paired survey data with broader employment statistics and concluded that roughly one-third of jobs can be performed from home. That would result in a substantial reduction of cars on the road, or buses or trains (energy savings + fewer accidents). Assuming these jobs would also require incremental computing power in the home office means residential electric demand will significantly increase, offset only partially by lower commercial electric demand that benefits from economies of scale. Think of the energy efficiency loss you get by replacing a large office for 100 small home offices. At the same time demand for package deliveries will move another step change higher, which with properly placed tax incentives could accelerate conversions of the commercial delivery fleet. The broader environment will likely suffer as sprawl driven by workers moving out of cities occurs, though this could provide a boost for microgrids, home-based battery systems, and solar panels.
Source: Global Workplace Analytics
We could go on about all the potential changes to society (not all positive) from an increasingly home-based work force, but the truth is your guess is as good as ours. We know that electric demand was already expected to significantly increase before the pandemic struck, and it seems that bar was raised even higher since the pandemic shattered employment paradigms. There are two key considerations when thinking about electric demand: (1) how is the electricity made? (2) how is it delivered to the consumer? The focus has historically been on the first question (i.e., solar, wind, hydro, biomass, etc.) while the second question (i.e., grids) gets much less attention. As shown below, an equivalent amount of capital (trillions of dollars) will be spent on “Electrification and Infrastructure” as will be spent on “Renewables”. We’re not sure why this part of the conversation doesn’t get more attention, but it should. The bottom line? There is an awful lot of capital that needs to be spent to support de-carbonization. Capital that if invested wisely will yield solid economic returns that will underpin decades of higher cash flow and reward income-oriented investors.
*Includes nuclear, carbon capture and storage (CCS), **Includes investment in power grids, energy flexibility, electrification of heat and transport applications as well as renewable hydrogen. “Energy efficiency” includes efficiency measures deployed in end-use sectors (industry, buildings and transport) and investments needed for buildings renovations and structural changes (excluding modal shift in transport). Renewables include investments needed for deployment of renewable technologies for power generation as well as direct end-use applications (e.g. solar thermal, geothermal) USD throughout the report indicates value in 2015.
RENEW Performance Tracker
Source: Bloomberg *Please review disclosure information at the end of this post.
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