Understanding problems is often easier than finding a solution, and the energy market is a prime example. In the space of a week last month four influential figures in the market identified the same problems, but there is less consensus among them on a solution.
E.ON UK chief executive Paul Golby called on the industry to make sure that the energy market of the future is low carbon, secure and as low cost as possible.
In a speech to mark World Environment Day on 5 June, UN Secretary-General Ban Ki-Moon called global warming the era's defining issue, saying: ‘Our world is in the grip of a dangerous carbon habit.’
Speaking in Tokyo at the launch of the latest edition of Energy Technology Perspectives (ETP), IEA executive director Nobuo Tanaka, said: ‘The world faces the daunting combination of surging energy demand, rising greenhouse gas emissions and tightening resources.’
And at the launch of the 2008 BP Statistical Review of World Energy, BP chief executive Tony Hayward commented: ‘The defining feature of global energy markets remains high and volatile prices, reflecting a tight balance of supply and demand. This has put issues such as energy security and alternative energies at the forefront of the political agenda.’
The global energy market faces what Golby terms the ‘trilemma’ of developing a strategy that meets the policy objectives of reduced emissions, increased energy supply security and lower energy costs. Golby believes this is best addressed through an ‘honest’ policy debate, while the IEA believes that a global technology evolution is required.
Whether the market adopts the debating process that evolves the necessary market changes or signs up to a costly energy technology revolution, it is clear that current energy policies are not effectively address the future energy issues.
Returning to Golby’s assertion that the market faces an energy trilemma, clearly the two most important parts of this trilemma are supply security and carbon. But if we accept high energy prices will continue for the foreseeable future then the market is facing the same dilemma of the past few years; namely how to reconcile the goals of energy security with emission reductions.
In the IEA’s baseline scenario, the power generation sector accounts for 44% of total global emissions in 2050, followed by industry, transport, the fuel transformation sector and buildings.
In response to Japan’s proposal to halve CO2 emissions by 2050, the IEA calculates this will require the virtual decarbonisation of the power sector at a cost of $45tn and could be achieved by annual investment between 2010 and 2050 in 35 coal and 20 gas-fired plants being fitted with carbon capture and storage technology, 32 nuclear plants, and 17 500 new wind turbines.
The IEA rightly presents this as a ‘formidable challenge’ requiring ‘immediate policy action and technological transition on an unprecedented scale and facilitated through ‘a new global energy revolution, which would completely transform the way we produce and use energy.’
Unfortunately it is unlikely that the scale and timing of such a technology revolution can be met. The first commercial CCS technology will unlikely be available before 2015, new nuclear generation coming online will also likely miss the IEA’s 2010 start date, while the demand on turbines will not only massively exceed supply but will likely make wind power an economic burden. And the icing on the cake is that the IEA says for this technology revolution to be cost effective would require a carbon price between five and ten times today’s price.
While a technology revolution on the scale conceived by the IEA is unlikely to be economically feasible, it should at least promote an urgently needed open and honest debate that addresses the global energy/climate dilemma. And the forum for such a debate is this month’s G8 summit.
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