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Balance of Power
By Christoph Frei
January 1, 2012


Editor’s Note: We thank Florence Mazzone, Communications Manager at the World Energy Council, and Christoph Frei, Secretary General at the World Energy Council, for giving us the permission to publish this article. This article was first published in the South China Morning Post on October 3, 2011 (Monday).

 

 

In 2010, it had become commonplace to state that the world had fundamentally changed over the past decade. Yet the events of 2011 will be remembered for the profound effects on the global energy industry. The developments in the Middle East and North Africa and the tragedy at Fukushima have added to the pressure to adapt; they represent a significant setback in solving the global energy challenges.

 

The expected doubling or even tripling of the global energy demand by 2050, the need to cut global greenhouse gases by 50 per cent during the same period, the 1.5 billion people who are still without energy, and the requirement for improving global governance on the management of risks from large-scale accidents all require massive transformational efforts.

 

The responsibility therefore falls on the leaders of the global energy community to come together to seek practical responses to these challenges. Yet we can only advance a meaningful dialogue among the world's energy leaders if we know what keeps them awake at night. It is their perception of what is important that defines the global energy agenda.

 

The absence of a global climate framework and the lack of progress towards a significant agreement between the big blocs post 2012 have kept this issue as the dominant critical uncertainty for the sector. The impact of the "political spring" in the Middle East and North Africa on the Libyan oil supply has affected energy markets globally and triggered a rare stock release by the International Energy Agency. The Fukushima event has pushed the nuclear renaissance from a consensus to a critical uncertainty and, together with last year's oil spill in the Gulf of Mexico, has put large-scale accidents at the top of energy leaders' radar.

 

Short-term policy impacts indicate that, except for Germany, Switzerland, Italy and Japan, the leading nuclear nations have not signaled a change in their nuclear outlook. Russia, China and Korea represent two-thirds of the 61 new nuclear projects under way. This indicates an acceleration of the shift of nuclear from industrialized democracies to transition countries. Time will tell how increased safety costs affect the competitiveness of the technology and whether the ageing existing nuclear plants can be replaced in time to maintain the current nuclear share. In the short to medium term, natural gas is the most likely winner to replace the capacity not being provided by new nuclear plants, followed by coal and then renewables.

 

Hong Kong has great experience in harnessing nuclear power. The Daya Bay plant is one of the oldest in China and provides inspiration for the country's nuclear renaissance. China is well on its way to expanding its capacity, from 11 gigawatts to 40GW, but this will only go a small way to meeting the rising energy needs of such a fast-growing economy.

 

Renewable energies and efficiency remain dominant issues on the agenda. With energy efficiency, there is a better understanding that progress does not simply come with capital investment, but depends equally on investment in education and institutional frameworks to promote adequate behavior and solutions. While the unstable economic outlook keeps investors prudent on renewable energy development, smart grids, storage, electric vehicles and sustainable cities have progressed to become a solid presence on the global agenda.

 

China again is at the forefront of these new technologies as it seeks to reduce the share of coal from over 70 per cent of its energy mix to 50 per cent by 2020, an ambitious target for the country that has become the largest consumer of energy in the world. It is inevitable that, despite its efforts, the use of coal will continue to increase in absolute terms, driving China to seek a solution to the capture and sequestration of carbon, a critical issue if we are to manage our carbon dioxide emissions responsibly.

 

Carbon capture and storage has been among the highest uncertainties in the global energy agenda in the last two years but, in the absence of a climate framework, there will be no effective financing mechanisms and incentives to develop this technology beyond pilot schemes.

 

This is why we welcome the Carbon Sequestration Leadership Forum Ministerial Meeting (http://www.cslforum.org/) which took place in Beijing recently. This is an important initiative which is focused on the development of improved cost-effective technologies for the separation and capture of carbon dioxide. We look forward to playing our part in this process and challenging industry perceptions.

 

As the world's energy leaders, we must now come together, understanding the clear evidence base, to develop practical and pragmatic solutions to ensure the sustainable supply and use of energy for the greatest benefit of all.

 

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Christoph Frei is Secretary General of the World Energy Council and has an assignment as Titulary Professor and Advisor to the Energy Center of the Swiss Federal Institute of Technology, Lausanne. christoph.frei@epfl.ch; phone(s): +41793790470
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