For watt it’s worth: energy markets’ squeeze

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Hello and welcome to the Intelligence from the Economist. I'm your host, Jason Palmer. Every weekday we provide a fresh perspective on the events shaping your world. In June last year, a sweeping national security law in Hong Kong further crimped democracy. So when Britain offered visas to Hong Kongers, many took up the chance. We look at how their new communities differ from those of most other migrants. And for all the tech wizardry going on in the health sector, only a tiny amount of it is aimed at women's health. Medical research, too, tends to ignore women's biological needs and differences. Now some tech entrepreneurs are aiming to even things out. But first, Global prices for oil, gas and coal are rising steeply. Supplies just aren't meeting the demands of recovering economies.

Winter is coming.

Fears of the impending temperature drop in the Northern hemisphere have driven gas prices to record highs. Gas stations across Britain have had to shut down because a shortage of truckers has led to widespread lack of available fuel.

China's really struggling to get enough energy. Coal, for example, grew to record prices last year, is paying sky high prices for liquefied natural gas. India is facing major power shortages as the country's coal supplies dwindle. Now several states are looking at introducing mass blackouts in order to save energy reserves.

All of this scrambling for good old fashioned fossil fuels is A reminder of how much the world still depends, depends on them, despite a global push to tame the addiction. At the same time, it's a reminder that it's going to take lots of investment and resolve to kick the habit.

The idea of an energy shortage now may seem ridiculous. During the pandemic, there was a huge crash in oil prices.

Oil prices sinking overnight, with WTI slipping to its 18 year low.

That's below $20 a barrel.

And global energy demand dropped by 5%, the biggest fall since the Second World War.

US oil prices plunged into negative territory.

Meaning people would pay you today to take their oil off their hands. But demand picked up as soon as lockdown started to ease.

Henry Tricks, writes Schumpeter, the Economist's column on business and finance.

Factories came back, and when they were up and running, demand for fuel increased. Roads are clogged, drivers are driving again. So with winter coming on now, it's created a bit of a supply crunch.

But why does that crunch take so many forms? Why is it so global?

On the surface, I guess it looks fairly disparate. I mean, you see British drivers queuing up at petrol stations, blackouts in China, the lack of coal in power stations in India. It doesn't look as though there's an underlying theme. And yet there is. And the theme really is a lack of investment. It's the result of what used to be called the age of abundance. You know, there was a sense that there was so much oil in the ground that prices were going to stay low for a long time. There was masses of renewable energy to supply electricity, and a sense that because prices were going to stay low, there was not a lot of point in putting a lot of investment into new sources of energy. And this has been exacerbated by the question of climate change, which has led to a lot of, of unprecedented pressure on oil and gas producers, particularly in Europe. This is companies like Shell, bp, Total. They're being encouraged by their investors to shift away from fossil fuels. So really there hasn't been the impetus for investment that there always used to be. When prices started to rise.

You mentioned renewables in there. Can they not fill the gap here?

You'd think that they might be able to bridge the gap, if you like, but the gap is a huge one. I mean, we're talking about an energy system which still remains about 85% powered by fossil fuels. The other thing is that renewable sources of energy have been disrupted too. So it's been a curious feature of the summer that the wind in Europe has not blown as strongly as normal. And there have been droughts in Latin America, America that have cut hydropower outputs. And there is nothing like the investment into renewables that is supposed to have happened by this stage of the energy transition. On Wednesday, the International Energy Agency, it produced its annual report and it says investment needs to triple to $4 trillion in the next decade if we want to meet that goal of net zero carbon emissions by 2050.

So that's the midterm, the long term view. What about managing things in the short term amid all these shortages?

Well, it's a tough one. I mean, the fuel which is considered to be the bridging fuel from the fossil fuel past to the renewable future is natural gas, which is, to be sure, a fossil fuel. And it does create a lot of carbon dioxide emissions and methane emissions, but it's lower emitting than other forms of energy, especially coal. It's in a very high demand, especially as countries like China try to wean themselves off coal. The trouble is, again, investment there isn't very much of an increase in supply, partly because some of the big oil companies are as nervous about investing in big LNG facilities as they are investing in big oil wells. It's also just because there is a dearth of LNG terminals, as ever with oil and gas. There's also geopolitics here. The biggest supplier of natural gas to Europe is Russia, and that puts Europe in the hands of President Putin. And it's not a position that Europe is particularly comfortable to be in.

You keep mentioning investment, but what exactly needs to be done here? How to ensure adequate supplies into an indefinite future?

There are solutions that governments can enact. One of them, of course, is to support more energy production from renewables and in batteries, hydrogen and other ways of compensating for the intermittency of wind and solar. But we also need to change the structure of energy markets. It will be important if we continue to rely on natural gas as a sort of a buffer when the wind isn't blowing or the sun isn't shining, to find a way of incentivizing more natural gas storage. And countries also will need to get a lot better at trading electricity. It's remarkable how little electricity is actually sent from one country to another. Oil is transportable, but electricity much less. So. So we'll need to see more undersea power grids. And we'll also have to find ways of shipping more energy around the world through things like hydrogen.

And so in the run up to the big COP26 climate meeting next month. With all of these shortages going on, all of issues swirling around, how do you think that will affect discussions?

Well, people will obviously be keen to play up the importance of building more renewable capacity. There's plans hither and thither to put subsidies into more renewable energy and to develop technologies like carbon capture and storage and to promote hydrogen and that sort of thing. I think that the mood, though, in the energy markets is increasingly moving towards a really rigorous carbon price to be able to decide where really it makes sense to put that investment. Now, this is a carbon price that would raise money from the use of fossil fuels, and some of that money would have to be put back into the pockets of the poorer consumers of energy because it's bound to make their bills higher. But it does seem like an idea that is being taken more seriously as we move further into this transition towards clean energy.

Henry, thank you very much for your time.

Thank you, Jason.

For more analysis like this from our international network of correspondence, take out a subscription to the Economist. Get a great introductory deal@Equality.com IntelligenceOffer the link is in the show notes. When officials in mainland China pressed ahead with their national Security Law in Hong Kong, Britain made a promise.

We made clear, Mr. Speaker, that if China continued down this path, we would reintroduce a new route for those with British national overseas status to enter the UK Granting them limited leave to remain with the ability to live and work in the UK and thereafter to apply for citizenship. And that is precisely what we will do now.

In the first six months of this year, nearly 65,000 residents of Hong Kong applied for those special visas. Many of them have arrived, settling in some unlikely parts of the country. In a park in Sutton in South London, singing, face painting, balloons, and a bouncy castle formed part of a festival to welcome them. Already these Hong Kongers have begun rewriting Britain's immigrant story.

Hong Kongers are really different from other immigrants to Britain.

Joel Budd is the Economist's social policy editor.

They're older, they have more children, and they choose where to live in a completely different way from other immigrants.

And what's behind all of those differences?

I think a lot of it has to do with two things, really. I mean, first of all, there are not very many Hong Kongers in Britain at the moment. You know, if you're moving to Britain from somewhere like Pakistan, there are a great number of other Pakistanis already in Britain, but there are quite a lot fewer Hong Kongers. And so they tend not to have friends or family here already. And the second thing is that they often choose to move to Britain at very, very short notice. So they can't do the sort of research that immigrants normally do.

Meaning what? That they're ending up in maybe less obvious places in Britain?

Yeah, they're going to places that I think most British people could not place on a map. So in London, they're really keen on the borough of Sutton, which is, I have to say, a sort of fairly uninteresting part of South London. In Greater Manchester, they're really keen on Altrincham, which is a fairly staid middle class suburb. They're going to these places that are sort of not glamorous, sort of not exciting, but are known to have good schools and are known to have very low crime rates. Hong Kongers are very motivated by fear of crime, partly because Hong Kong has very little crime.

And how is it that they've settled on these, with apologies to Sutton, unexciting places?

To a large extent, they learned about them by watching YouTube videos. So there are people who, you know, we would call influencers, but in Hong Kong are known as kols, which stands for key opinion leaders.

Outstanding school.

And if you go on YouTube, you'll find lots and lots of videos in Cantonese discussing the pros and cons and showing you around the sorts of flats and houses that are available in those neighborhoods and discussing the local schools, you know, what sort of ratings the schools have. They're incredibly detailed. And because many Hong Kongers only decided to leave at pretty short notice, that was really all they had time to do was to, you know, was to sort of watch some videos for about a week and then kind of pick a place. So they're perhaps the first sort of Internet influenced migrant group into Britain.

But why was it such short notice?

Well, the visa route that the British government has created for Hong Kongers, it's called the British Nationals Overseas visa, is only for people born before 1997, when Britain relinquished control of Hong Kong, and their dependents. So it's partly for that reason that they tend to be a bit older.

And how's it going in terms of them integrating into these places?

So they're going about that in a sort of unusual way. What they're not doing for the most part is seeking help from established Chinese organizations. And the reason they're not doing that is that they often suspect those organizations of being somehow influenced by the Chinese Communist Party. And they worry that if they give their details to these organizations, those details will, you know, find their way to people who may Wish to spy on them or something like that. So to a large extent, they set up their own organizations and they're sort of self help groups. And these groups have emerged incredibly quickly. I mean, there are about 10 that have sprung up just in the last year or so.

And what exactly do those groups do?

The groups do all sorts of things. They conduct surveys of Hong Kongers, which is incredibly valuable because British local authorities are clueless about, you know, how many people are going to arrive, you know, do they have children, what sort of people are they? You know, can they speak English fluently, those sorts of things. So they conduct surveys of Hong Kongers. They also help them find housing, and they help them link up with local British organizations, especially churches, and they lobby parliament and they give testimony, and they've arranged walking tours of cities. I mean, all immigrant groups tend to get around to creating groups like this eventually, but the Hong Kongers have done so just extraordinarily quickly.

And so in that sense, do you think that over a shorter period of time, they'll be more like the rest of the migrants that are here than they are now?

I think they're distinctive in the way they think about integration. I think what they seem to believe is that, as it were, British society should not notice them as being distinct. In other words, sort of, as far as British people are concerned, they will just sort of blend into British society. So that's sort of their first objective. But their second objective is that they want to preserve among themselves a sense of being a community in exile and a sense of kind of Hong Konger identity. And it's going to be tricky, I think, to achieve both those two things at once.

Do you have a sense for how these groups are going to strike that tricky balance?

One of the people who created Hong Kongers for Britain, which is one of these self help groups, I asked him, well, do you have any model, you know, do you look to any other group in Britain as a model for what you're trying to do? And he said, yes, the model is British Jews. So British Jews are kind of completely integrated into British life in an economic sense, in a political sense, in a cultural sense, but they also retain a strong identity of being Jewish. And so he said, sort of, you know, really, that's what we're trying to achieve as well.

Joel, thank you very much for joining us.

Thank you.

I was just trying to feed my son the most fun, most basic thing you can, you know, want to try to do. And was having a really hard time.

Doing it when Layla Strickland became a mother. She, like so many, struggled with breastfeeding. So she used her background in cell biology to come up with an inventive solution.

I think just sort of the scientist in me wanted to understand what might be happening in my body, why I wasn't making enough milk for him.

She co founded a company called Biomilk to essentially grow milk from breast tissue cells in a dish. When it comes to matters of women's health, the tech world has lagged far behind. Yet Dr. Strickland has joined a growing group of female entrepreneurs, taking matters into their own hands and wooing investors in the process.

Femtech is a subcategory of health technology, also known as HealthTech, that caters specifically to women's care.

Ore Ogunbi writes about business affairs for the Economist.

It's a historically under invested industry, but venture capitalists are waking up to the opportunity.

And what kind of technologies are we talking about here?

I think when most people think femtech, they think period trackers. Flo, for example, is London based and is worth about $800 million and boasts over 200 million subscribers globally. But now a lot of femtechs are looking beyond periods and into women's wellness a bit more broadly. So take Jessica Ennis Hill, for example, British heptathlete, Olympic champion. She's just raised a million pounds for her fitness app, which was originally designed to help women with postnatal workouts, but now actually helps women optimize their menstrual cycles for exercise. Tell me a bit about you. First, I met with Tanya Bola from lv, which is one of the fastest gaining femtechs in the world. For me, it's always been very personal because my whole childhood was really dominated by, I would say, taboo health issues. She told me how prevalent vaginal prolapse is in women. It's a condition where loosened pelvic muscles cause part of the the vagina to slip out of position. And about a third of women will experience it in their lifetime. Tanya told me about the operation women sometimes have to fix a prolapse. You should put a fishing net, a metal net, and lift up your pelvic organs because they're falling, falling out. We were just seen as. So she designed a pelvic floor trainer that's meant to help women who are suffering from vaginal prolapse and to help prevent it as well.

And you say that investment in these kinds of companies is big and growing?

Yeah, it's growing. I think there are still big challenges for femtechs and companies who are wanting to get into that market. And it's really hard for people still to get funding, but there's just more funding going into the industry than before. Hi, how are you? So I spoke to Helen o', Neill, for example, who runs Hertility Health, which is a test which can non invasively diagnose nine of the most common gynecological conditions. And she closed a $5.9 million funding round in June, but described the process as soul destroying. The initial conversations that we were having were mind blowingly frustrating. It was predominantly gray haired men, just saying, not sure is there a market for this? And we're looking at them going 53%.

Of the planet, 53% of the planet.

Have a reproductive system.

Only 3% of all health tech funding in 2020 went to femtechs. In fact, 80% of healthcare venture capital firms have never invested in women' health firms at all.

And do you think that this reflects a failure to really look at women's conditions in healthcare in a more general sense?

I think yes, definitely. You know, this is a well documented fact that there's a gender research gap in clinical research. So women specific health issues tend to be neglected despite how prevalent they are. And femtechs are trying to fill those gaps by conducting a lot of studies in house. So take premenstrual syndrome for example. Nine in ten women will suffer some painful variation of it in their lifetime, yet there is still no drug specifically designed to treat it. So one femtech day is trying to innovate around that and have designed a tampon which is laced with CBD for targeted pain relief, even for conditions that affect everyone. So premenstrual syndrome aside, men are more commonly studied. In fact, even in animal testing, male mice are preferred. And in the minority of studies, which are then inclusive, results aren't often disaggregated by gender. So it's hard to see how diseases present differently in women and also how women might then respond to drugs differently.

And do you think all of this interest in this innovation in femtech can kind of push past those hurdles?

I think that's the plan. That's what a lot of them are aiming to do. The industry is predicted to be worth $50 billion by 2025, and some estimates are even higher. Femtech is seeing heightened competition, a good sign of industry maturity. And the target consumer is evolving beyond just women of reproductive ages and these more diverse product offerings. And I think a mainstreaming of female specific medical research might one day leave us with many former femtechs as they kind of outgrow the title and instead lots of more inclusive health techs.

Ore, thank you very much for your time.

Thank you, Jason.

That's all for this episode of the Intelligence. If you like us, leave us a rating and a review and see you back here tomorrow.

Sam.