The chances that we will be able to meet our climate targets are becoming increasingly slim, notes Christoph Frei, Secretary-General of the World Energy Council (WEC) in an interview with Energy Post. The main reason for this is that CCS (carbon capture and storage), a crucial element in any emission reduction strategy, “is not happening”. This means, says Frei, that “if no radical policy shift takes place, concerns will shift from mitigation to adaptation. And from an energy perspective this means we have to re-define what resilience means.” The Swiss-born Secretary-General of the 90-year old WEC hopes to convince world leaders at the upcoming 22nd World Energy Congress in Korea that the WEC’s “trilemma” approach to energy policy will help navigate the “unprecedented uncertainty” the energy sector is faced with.
Christoph Frei, Secretary-General of the World Energy Council (WEC), is a busy man right now, flying over the globe talking to policymakers and industry leaders in preparation of the upcoming 22nd World Energy Congress in Daegu, Korea, in October, which will bring together 50 Energy Ministers from across the world in addition to thousands of industry representatives. When he visited The Hague recently, to promote the work of the WEC to Dutch industry leaders, he took the time to talk to Energy Post to share with our readers his views on where the energy world is heading and how WEC tries to be at the centre of the global confluence of politics and markets.
The World Energy Council, he explains, spent five years developing what it calls the Energy Trilemma approach which is aimed at identifying and promoting energy policies that simultaneously achieve the three overriding objectives of energy security, energy equity and environmental sustainability. The Congress in Korea, says Frey, will be “a crystallizing moment for our Energy Trilemma”.
Frei and his colleagues, such as WEC Chairman Pierre Gadonneix, the former CEO of EDF, and Joan MacNaughton, Executive Chair of the World Energy Trilemma report, have been discussing their views mostly in bilateral meetings with policymakers. In Korea for the first time a ministerial roundtable will be dedicated to the Trilemma. “The challenge for us”, says Frei, “is to anchor our work in the collective consciousness of Energy Ministers from 50 countries”.
Why would those Ministers be interested in the ideas of the WEC? “Every single government”, says Frei, “needs to attract investment. But money is shy and will go to places where political risk is low. Political risk is low in places where there is a balance between the three objectives of the Trilemma. This is what we want to help policymakers achieve.”
Twenty years ago the world was relatively simple. Virtually the only thing that mattered was the oil price.
The timing for WEC’s message could not be better, since policymakers and industry are faced with unprecented uncertainty, says Frei. “The energy system has become much more complex. We have never seen such a degree of uncertainty. This makes it important to move away from opportunistic policies. If you have great uncertainty, you need to define robust policies. That puts our Energy Trilemma at the centre of the policy debate. It helps to build a robust policy framework.”
The idea that uncertainty has reached new heights is not just an assumption. WEC has actually been monitoring what “keeps energy leaders awake at night” . Every year it publishes a “World Energy Issues Monitor” based on interviews with some 700 key people in more than 80 countries. The most recent World Energy Issues report came out in February of this year and it shows, says Frei, how complex and fast-moving world energy markets have become. “Technological changes such as fracking, accidents such as Fukushima, economic upheavals such as solar costs going down – they all have an immediate impact on players in the energy market. There is no ‘slow energy’ anymore – which is a problem in a market that requires very long-term investments.”
Frei gives the example of Saudi Aramco, which he recently visited. “Why do they want to talk to us? Twenty years ago the world was relatively simple for them. Virtually the only thing that mattered was the oil price. Now they have to take into account what is going on in the gas market, in renewables, in climate change policy, and so on. They need signals, especially since they are faced with multibillion-dollar investments.”
Off the map
The World Energy Issues Report may be seen as a translation of the Trilemma Report into concrete terms, as it shows which issues energy leaders are mostly concerned with. At this moment the three most pressing uncertainties are: the recession, price volatility and the (lack of a) climate change framework. The issues that most urgently require strong action, according to the Issues Report, are: energy efficiency, the development of renewables and regional interconnection.
Peak oil is absolutely off the agenda
Fukushima, says Frei, has clearly impacted the perspective on nuclear power, not even so much in regard to safety as in regard to cost. “The cost implications of increased safety measures in combination with the availability of cheap shale gas has affected the outlook of nuclear power.”
“Unconventionals” are clearly having a great impact on the market, not just shale gas, but also shale oil, ntoes Frei. “There turns out to be four times as much unconventional oil available as conventional oil. As a result, peak oil is absolutely off the agenda.”
Most worrisome for Frei is that CCS (carbon capture and storage) is also “off the agenda”. It has simply “flown off the map”, says Frei. “People don’t see it happening. Not even in North America.” He finds that worrying because “we have no single plausible climate scenario that reaches the objective of 450 ppm without a very significant contribution from CCS. Without CCS we have no chance of reaching our climate objectives, unless we see very drastic changes in policy.”
Frei sees four reasons why CCS is not taking off. First, there is no credible carbon price mechanism in place to support it. Second, CCS technology is not easy to export, as geology is a critical concern and geological circumstances are very different from one place to the other. Third, for politicians it is more attractive to be seen to be pushing solar power or some other form of renewable energy than to support CCS. Fourth, CCS brings down efficiency in electricity production by 20% – which flies in the face of the trends towards ever higher efficiency.
What all this means, says Frei, is that “we are getting closer to a tipping point. It will be difficult to address climate change and even energy access without tremendous effort. We need to be honest about that.” If no radical policy shift takes place, many concerns “will shift from mitigation to adaptation”, says Frei. “From an energy perspective it means we have to re-define what resilience means. Resilience of infrastructure, resilience to extreme weather events, to the water-energy-food-security nexus, and also to things like cyberterrorism. I think that our efforts after the conference will increasingly focus on resilience.”
But regardless of how the various issues will develop, it is safe to predict that uncertainty in the energy sector isn’t about to vanish any time soon. That is where the Energy Trilemma will play a key role in the global energy policy setting, says Frei. “We will need the Trilemma approach to navigate the uncertainties.”
World Energy Council in Trilemma Report: “Energy Industry Must Play Greater Role in Transition”
On 24 September the World Energy Council (WEC) launched the fifth edition of its annual World Energy Trilemma Report. The report, produced with global management consulting firm Oliver Wyman, was based on interviews with more than 50 policymakers, including energy and environment ministers, leaders in development banks, governments, IGOs and NGOs, plus experts from more than 25 countries. Whereas the 2012 edition of the World Energy Trilemma focused on what industry wants from policymakers, the new edition, released in Washington DC, focuses on what public sector stakeholders expect from industry.
The main conclusion of the new report is that “the global energy industry must play a greater role in the transition to sustainable energy systems if United Nations development goals are to be met.” The potential “for billions of people benefiting from sustainable energy systems in future decades hangs in the balance without increased private sector support”, it says.
The report notes that “after decades of work to advance sustainable energy solutions, an energy gap continues to grow as energy systems around the world struggle under significant strain.” While global energy demand is expected to rise by between 27 and 61% by 2050, 1.2 billion people still do not have access to electricity. It will take between $19.3 trillion and $26.7 trillion in investments in electricity infrastructure alone between now and 2050 to close this gap.
What complicates matters is that “energy policies have been shifting and policy changes have become hard to predict because of radical changes in energy supply, such as that unleashed by the technological revolution in horizontal drilling in unconventional gas.” At the same time, notes the report, “some countries are shifting away from nuclear energy and increasing the demand for fossil fuels. These policy shifts could serve to decrease overall energy security as uncertainty around energy policy slows investment in new energy sources, in updating ageing infrastructure, and in building the new plants and networks necessary to support sustainable energy systems.”
The policymakers interviewed for the new Trilemma publication conclude that “it is not only more difficult, but also more important than ever, for public and private stakeholders to work together to develop a new governance for sustainable energy policies.” Public shareholders, it turns out, “expect more from the private sector. Public stakeholders encourage the private sector to think critically about their role in society.”
Interviewees acknowledged that, “in the absence of a regional or global consensus on climate change, and given the pace of technology development, it will remain difficult for both public and private stakeholders in the energy sector to determine the best course of action. But, they called on the energy industry to adopt and help promote a longterm energy vision and share information and knowledge on implications, realistic targets, and potential alternative approaches to overcome these hurdles and achieve the goals set.” They also called on industry to be “more proactive in improving energy policies” and “to assist in managing public perceptions through increased communication”.
The annual Trilemma Report also contains WEC’s Energy Sustainability Index. This evaluates how well countries balance the three often conflicting goals of energy security, energy equity, and environmental sustainability. Based on an analysis of 60 data sets used to develop 23 indicators across 129 countries (including 37 non-WEC member countries), the Index provides a comparative ranking and a balance score “for how well countries manage the trade-offs among the three core elements of sustainable energy systems”.
This year’s ranking shows that Switzerland is number 1 in sustainability, followed by Costa Rica and Albania. Canada scores highest on energy security, followed by Russia and Denmark. The US is number 1 in energy equity, followed by Canada and Australia. Combining the three scores into an overall score, Switzerland comes out as the most stable country, followed by Denmark and Sweden.