THE BLOG
01/02/2013 04:12 pm ET Updated Mar 04, 2013

Energy Sector Disruption: Three Political Lessons From 2012

Working in the energy sector is an inherently political activity. I once sat opposite a friend of a friend at lunch, and when she found out that I covered the energy business and then quizzed me on the industry's practices, asked if I found people often wanted to hit me. I don't find that, but the way a modern economy depends on the energy business means that everyone - along the entire spectrum of beliefs -- also has opinions about its politics in ways that don't necessarily reflect a subtle, shifting, complex reality.

Over the course of 2012, we've been focusing on the issues at play in energy politics, and have gathered them together in a special hub that can be found on AOL Energy here.

A heavily contested presidential election against the background of sweeping changes in the energy sector itself proved a perfect time to reexamine long-held theories about the politics of energy. While the traditional cultural understanding of resource-access-obsessed oil and gas executives locked in battle with environmental activists constantly advocating for more stringent regulations remains an easy and valid way of portraying energy politics in the U.S. as we leave 2012 for the uncertain future of 2013, we also discovered some surprising new industry trends and political developments that may undermine the ferocity of old disputes while giving rise to new standoffs.

1. The Energy Sector is now a technology sector as much as it is an industrial sector.

Disruptive technology is usually held to be the province of laptop-fueled startups in trendy warehouse spaces, but the same questioning of long-held assumptions and reliance on innovation to drive change has emerged as a specialty at large, traditional oil and gas companies too.

Hydraulic fracturing -- fracking -- is the obvious technology change that has reawakened the U.S. domestic energy sector, but other changes have also swept across the industry. In situ development of oil sands, use of solar in extraction techniques and use of biomaterial in fracking fluids are signs of an industry alive with change and responsive to disruptive technology.

With new small-scale nuclear technology, rapidly climbing capacity factor for renewable energy and auto innovations driving long-overdue changes in the transportation sector, energy giants now have common cause with innovative firms across other sectors, including IT. That makes them part of the new economy, committed to innovation and policies that support it, no matter how stodgy they may at first appear.

2. Energy Policy needs to change to accommodate an era of fossil fuel abundance.

After an early head start, the U.S. responded to energy shortages in the Second World War by kicking off an energy policy designed to support production at all costs, and set up management and regulatory structures based on the belief that there will be less energy tomorrow than there was today. Despite a series of production booms and resulting price crashes, the perception that the world is "running out" of energy sooner rather than later continues to define political understanding of North American energy.

No longer. The same technology advances discussed above now mean that regulatory approaches to the sector will have to focus on how and why demand growth occurs; increasingly credible forecasts show that availability of oil and natural gas may be the least of the U.S. political problems around energy. Spending the resource wisely will be the focus of next-generation energy policy, and it doesn't take much to imagine that (to simplify matters) the difference between becoming a Norway and becoming a Venezuela lies in policy, regulation and national politics as much as it does in access to resources.

3. Traditional methods of distribution are not equipped to handle changes in use.

Early attempts to put the U.S. on a universal smart grid have fallen short of high ambitions, but the promise of technology that tracks usage on a much more granular level and feeds it back to production centers in real-time remains revolutionary in ways that go well beyond the vaunted "efficiencies" and "savings" that have set the tone in energy company communications to date.

Companies and customers awakened to the possibility of supply interruptions and reliability changes are now increasingly looking at integrating distributed generation into their portfolios, making them less reliant on centralized state-sanctioned power companies and the politics and regulatory structures that support them. Additionally, use of natural gas in everything from increased power production to transport flowing from regions without access to established distribution networks is shifting political allegiances and identities at the state and regional levels.

None of these shifts is complete, nor are the outcomes definite. But the changes are real, and energy politics is continuing to race to catch up to the reality that disruptive energy technology has begun to create. The rewards are enormous, so expect 2013 to be the year energy politics moves from mainstream consciousness to certifiable action.