POWER December 2013 - 128

COMMENTARY
Defining the Future:
Time to Get Real
Christoph Frei
T
he global energy environment is increasing in complexity
and uncertainty. We are in a much more challenging world
than previously envisaged. The World Energy Council's (WEC)
analysis has exposed a number of myths that have influenced our
understanding of the global energy landscape:
■ Myth 1: Global energy demand will flatten out. Reality: Energy
demand will continue to increase and double by 2050.
■ Myth 2: Peak oil. Reality: There is no shortage in sight for fossil
fuel resources.
■ Myth 3: Demand growth will be fully met by new clean energy
sources. Reality: According to our scenarios, the contribution
of fossil fuels to global energy demand is still growing in absolute
terms.
■ Myth 4: We can reduce global greenhouse gas (GHG) emissions
by 50% by 2050. Reality: Even in the best case we will see a
near doubling of GHG emissions compared to 1990 levels.
■ Myth 5: Current business models and markets are delivering.
Reality: Current designs are unable to cope with the increasing
renewable shares, decentralized systems, or growing information
architecture.
■ Myth 6: Current programs will deliver universal access to energy
within the next 10 to 15 years. Reality: WEC's analysis
shows that on current paths, between 320 million and 530
million people will still be without electricity in 2050.
■ Myth 7: On a global scale capital is cheap and abundant. Reality:
Capital is extremely sensitive to perceived political and
regulatory risks. Moreover, due to the growing pressures on
public finances in most countries, public funds will not be
available to augment private energy financing.
Our studies reveal that current pathways fall short of delivering
on the global aspirations of energy access, energy security,
and environmental sustainability-the three pillars for balancing
the " energy trilemma. "
Busting these myths helps set us on the right path toward
agreeing on the actions for the future we need.
Defi ning the Future
Energy leaders in both the public and private sectors need to
make inspired decisions. Action is needed now. Energy leaders
agree on many of the actions necessary, but significantly, they
are not aligned on the nature, value, and importance of political
and institutional risks and their critical impact on investment.
Here's a brief look at the mismatch and how we can secure the
future we need.
We are looking in the wrong place. The focus of current
thinking about the energy system is biased and inadequate. The
focus must shift from the supply mix to demand efficiency. We
need more demand-side investments, innovation, incentives, and
stronger technical standards to reduce energy intensity. Price
controls, subsidies, trade barriers, and absolute targets for indi128
vidual
technologies distort the market and can have unintended
consequences, so policymakers must only use them sparingly.
In order to attract the needed investment, national policy
and regulatory frameworks have to be balanced. The " energy
trilemma " provides a solid framework for every country to
assess its own political risk and work towards balanced, predictable,
and stable policy and institutional frameworks. There
is little agreement between investors and governments on the
nature, price, and value of risks. Without an understanding about
risks, investment will not flow.
We need significant investments in research, development,
and demonstration. We urgently need to realize the
potential of breakthrough technologies such as electricity storage
and carbon capture, use, and storage (CCUS). WEC analysis
shows that the 450 parts per million CO2
goal cannot be achieved
without CCUS. It is essential that there are clear and unambiguous
policy and institutional frameworks to support investment in
this technology.
The energy map is changing, and our institutions need
to change to keep pace with developments. The center of
gravity in energy has moved outside Organisation for Economic
Co-operation and Development countries-and so have interactions
between countries and regions. Existing multilateral and
plurilateral energy institutions need to reflect these changes, be
more inclusive and responsive, or risk becoming obsolete.
To ensure universal access to energy, we need to derisk
and support entrepreneurial approaches. The WEC recognizes
the need for urgent additional action and supports the
objectives of the UN Secretary General's Sustainable Energy for
All initiative. The WEC further supports the inclusion of universal
energy access as a key and distinct element in the post-2015
Millennium Development Goals. However, we caution that without
supporting mechanisms and suitable funding, this goal will
be extremely difficult to achieve.
It's no longer just about mitigation. Risks from the energy/
water nexus, extreme weather events, or cyber attacks (to name
but a few) expose our energy infrastructure to potential disasters.
We need to urgently adapt, rethink, and redefine the resilience
for energy infrastructure.
Action Is Needed Now
How we can tackle these issues to secure tomorrow's energy today
was on top of the discussion agenda in October at the World
Energy Congress, the World Energy Council's flagship triennial
event. There, energy leaders-ministers, company chief executives,
and key decision-makers-were in agreement that if we
are to derive the full economic and social benefits from energy
resources, we must take incisive and urgent action to modify our
approach to energy solutions.
It's time to get real in defining our future. ■
-Christoph Frei, secretary general, World Energy Council, www.
worldenergy.org, @WECouncil
www.powermag.com
POWER | December 2013
http://www.worldenergy.org http://www.powermag.com
POWER December 2013

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