Not so long ago “energy security was seen primarily as a concern of industrialised countries”, but today “the challenge has become global”, says Executive Director Maria van der Hoeven of the International Energy Agency (IEA) in a recent interview with World Energy Focus, a publication of the World Energy Council. And it extends beyond oil. “With oil we are doing well. But I do worry when we take a broader definition of energy security.”
Q: Do you agree that instability and conflict seem to be on the increase in the world at the moment and how do you see this affecting energy security?
A: Recent geopolitical instability and conflict in major oil- and gas-producing regions are a cause for concern. The IEA has been closely monitoring developments in Eastern Europe and across the Middle East and North Africa to ascertain their impact on energy markets. Thus far, we have seen only relatively minor disruptions, which have been offset by well-supplied markets. And oil prices have actually weakened in the face of the tensions, indicating that markets feel comfortable about supply. But diplomacy has not yet resolved the underlying areas of contention, so we must remain vigilant. While a market response is always preferable, the IEA and its members stand ready to act if needed.
But collective action to release emergency oil stocks has always been a “last resort” strategy – though an effective one –and is short-term by nature. It is only one tool in the toolbox.And interestingly, it is something of a relic from a time when the definition of energy security was rooted solely in oil. That definition has changed in the 40 years since the IEA was created. And just as our definition of energy security has changed, the ways in which we work to achieve it also are changing.
Perhaps the most striking change in how we approach energy security is that while each country must find its own solutions, the challenge is now global. Initially, energy security was seen primarily as a concern of industrialised countries, but this is no longer the case. This is why we are exploring ways to develop stronger multilateral cooperation.
Q: Has the world made progress in energy security in recent years?
A: I think that if you use the narrow definition of energy security – that is, all about oil – then we are doing well. IEA emergency stocks have proven to be a reliable tool for responding to acute supply disruptions. It’s encouraging to see emerging economic giants like India and China develop their own emergency oil stocks, as this enhances overall oil security. But I do worry when we take a broader definition of energy security. We do not have such formal response mechanisms in place for gas or electricity security, although these are being discussed, especially in Europe. And furthermore, for hundreds of millions of people, energy security is a meaningless term because modern energy simply does not exist for them. Today, about a fifth of the world’s populace has no access to electricity, and while this ratio is expected to fall somewhat over the next 15 years, we still expect it to be unacceptably and stubbornly high. It’s time to focus on eradicating energy poverty as a moral imperative.
Q: The IEA only represents the OECD nations. What can you do to cope with energy security on a global scale?
A: One of the IEA’s mantras of recent years is that the global energy landscape is changing dramatically. Nothing illustrates those changes better than the evolution in global energy demand patterns. While IEA member countries accounted for around three-quarters of global energy demand when the IEA was founded in 1974, they now account for less than half. The IEA World Energy Outlook sees more than 90% of global net energy demand growth through 2035 coming from emerging economies. Although these countries do not currently meet the strict set of legal obligations that would allow them to be members of the IEA, it is nonetheless essential for the IEA and its 29 members to engage more closely with them. At our 2013 Ministerial Meeting, the IEA and six partner countries – Brazil, China, India, Indonesia, Russia and South Africa – for the first time expressed a mutual interest in pursuing a stronger, more enhanced form of multilateral co-operation. The so-called “association” that we have in mind would build on the already-strong bilateral ties that the IEA has with these countries. It would provide an efficient, voluntary means to work together on the basis of equity in areas of mutual interest, including: increasing information-sharing on common energy challenges and best practices; energy security; transparency and analysis of energy markets; energy technologies, energy efficiency and renewable energy; and other topics of mutual interest. This is a complicated process, and it requires patience from all parties. We are still in negotiations, and I believe it is vital to all sides that we get it right. That is going to take time, but it’s worth it considering the stakes.
Q: Has the US shale revolution affected the IEA’s relations with OPEC?
A: We have great and constantly improving relations with OPEC, and we look forward to continuing exchanges and collaboration between producers and consumers in future. Of course, some IEA countries are leading producers; the shale revolution in North America has further blurred some of those traditional lines.
Q: Do you see a relation between the growth of renewable energy and energy security? Can renewables help to increase energy security for many nations?
A: There is no question that renewables have the potential to enhance energy security by diversifying a portfolio of energy sources and by reducing import dependency. But countries must be careful about the way in which they deploy renewables, especially variable renewables (VREs) like wind or solar. Our recent work shows that a large share of wind and solar can be reliably and cost-effectively integrated into an energy system without putting security at risk. This requires a move to more flexible power systems with more flexible generations, grid enhancements, more storage and demand-side response. Such a power system will be more diverse and resilient and therefore increase energy security in its own right.
Q: You have been criticized in the past for underestimating the growth of renewables. Do you agree with that criticism? Have those criticisms led you to evaluate past projections?
A: The IEA does not make long-term forecasts for renewables or any other energy technology. Given the inherent uncertainties about what happens in the market, and the importance of policies in determining outcomes, we use a scenario approach based on the best policy, technical and market information available. The rapid growth and cost reductions associated with some renewables – notably solar PV – have surprised many analysts. We update our scenarios on the basis of changes in the market and technology costs as well as changes in the policy framework, not because of external criticism!
Q: Your latest report on Energy Efficiency forcefully describes this as the first fuel, and says awareness of this is growing. Yet at the same you write that there is not nearly enough awareness among – and action from – policymakers. Shouldn’t we try to achieve a Global Energy Efficiency Accord (and perhaps a Global Renewable Energy Accord) rather than a Global Climate Accord? That might be easier to achieve and ultimately lead to the same result.
A: You raise some very interesting ideas, and I suppose I would only ask why an accord is necessary when these are things that make sense right now on a number of levels!
Let’s just assume for the sake of argument that you are motivated purely by financial interests, and that climate concerns have no bearing on your decision-making. Even in this case, there would still be strong incentives for choosing renewables and energy efficiency. As costs continue to fall, renewables are cost-competitive with new fossil-fuel power generation in an increasing number of countries and regions. And as we showed in the World Energy Outlook 2012, payback periods for energy efficiency improvements can be as little as two years. More recently, we showed that there are multiple benefits to energy efficiency – positive outcomes that have nothing to do with climate but are instead related to macroeconomic developments, public budgets and industrial productivity. The point here is that you can wait for an accord to happen, or you can start making decisions about your energy production and consumption that make sense right now.
Q: With regard to the climate, haven’t we already given up on the 450 ppm scenario? Do you think it’s still achievable?
A: I must say that a 450 scenario is looking less and less likely with each passing day. We’re on the wrong path. This is nothing new: the IEA has been saying this for years. The problem is that the longer we delay climate action, the more expensive it becomes. This is why the stakes are so high for UN climate talks in Paris next year. I believe the period right now leading up to COP21 in Paris will be critical for determining the future global greenhouse gas emissions path. The role of the energy sector in this is crucial: the ability of the energy sector to radically transform and decarbonise – while maintaining energy security – will be essential to addressing climate change.
With this said, as an observer organisation to the UNFCCC negotiations, the IEA does not participate directly in the negotiations. IEA’s role is to provide expertise in energy topics of relevance to the negotiations. For example, the IEA provides statistics on emissions from energy use that underpin countries’ national inventories. We also undertake analysis of options for energy sector decarbonisation, through publications such as the World Energy Outlook, Energy Technology Perspectives, and others.
Finally, the IEA and OECD jointly support negotiators via the Climate Change Expert Group (CCXG), which brings together negotiators from developed and developing countries twice a year to discuss technical issues relevant to formulating the 2015 agreement. This creates a valuable forum for information exchange outside that of the UNFCCC negotiations.
Q: The IEA has become the world’s major publisher of energy analyses. Just in the last five or six months you have published major reports on Oil, Gas, Technology Perspectives, Investment, Energy Efficiency, Renewable Energy. Is the IEA now mainly an energy think tank?
A: We have always been an organisation devoted to energy security. We are similar to a think tank in that we produce analysis and recommendations, but through our emergency response mechanism, we can also act if directed by our member countries – something that think tanks cannot do. Energy security was at the root of our creation 40 years ago, and it remains at the core of our mission today. But as I indicated earlier, what’s changed is the definition of energy security. It used to be about mitigating the impact of disruptions in the supply of oil. Today, we define energy security as reliable access to affordable, ample and clean supplies of energy, globally. This is why we look at environmental sustainability, economic growth and global engagement –these are the pillars on which energy security rests.
Maria van der Hoeven, a former Dutch Minister of Economic Affairs for the Christian-Democratic party, has been Executive Director of the IEA since September 2011. This interview was first published by World Energy Focus, an annual and monthly publication of the World Energy Council prepared by Energy Post Productions. World Energy Focus is freely accessible via www.worldenergyfocus.org.