Energy in transition - navigating through uncertainty Dr Christoph Frei Secretary General & CEO World Energy Council Acapulco, 11 September 2015 Mexican Energy Congress twitter: @chwfrei
World Energy Issues Monitor 2016 preview World uncertainty weak signals critical uncertainties cyber threats EU Cohesion electric storage Middle East dynamics hydrogen economy innovative transport climate framework terrorism decentralised systems global recession ccs large scale accidents extreme weather risks nuclear trade barriers commodity prices smart grids US policy China India sustainable cities exchange rates biofuels unconventionals talent electricity prices regional interconnection energy subsidies LNG Brazil energy water nexus capital markets renewable energies energy efficiency corruption energy poverty Russia land use energy affordability coal hydro market design need for action impact 2015
World Energy Issues Monitor 2016 preview World uncertainty hydrogen economy weak signals Russia market design critical uncertainties cyber threats EU Cohesion electric storage Middle East dynamics innovative transport climate framework terrorism decentralised systems ccs large scale accidents global recession extreme weather risks nuclear trade barriers smart grids US policy commodity prices China India sustainable cities biofuels exchange rates unconventionals talent electricity prices regional interconnection energy subsidies LNG energy water nexus capital markets renewable energies energy efficiency Brazil corruption energy poverty land use energy affordability coal hydro Price volatility, economic uncertainty, market design and electric storage are the top insomnia issues for energy leaders globally WHAT KEEPS ENERGY LEADERS AWAKE AT NIGHT need for action impact 2015
World Energy Issues Monitor 2016 preview World uncertainty hydrogen economy Brazil weak signals energy poverty land use energy affordability coal hydro capital markets renewable energies WHAT KEEPS ENERGY LEADERS BUSY AT WORK Regional interconnection, renewables, energy efficiency and transitioning subsidy regimes are issues keeping energy leaders most busy globally WHAT KEEPS ENERGY LEADERS AWAKE AT NIGHT Russia market design critical uncertainties cyber threats EU Cohesion electric storage Middle East dynamics innovative transport climate framework terrorism decentralised systems ccs large scale accidents global recession extreme weather risks nuclear trade barriers smart grids US policy commodity prices China India sustainable cities biofuels exchange rates talent regional interconnection unconventionals electricity prices LNG energy subsidies energy water nexus energy corruption efficiency need for action impact 2015
World Energy Issues Monitor 2016 preview World uncertainty hydrogen economy weak signals impact ccs terrorism Cyber threats and commodity prices are among the biggest up-wards movers on the energy leaders agenda Coal is moving downwards 2015 critical uncertainties extreme weather nuclear risks smart grids US policy commodity prices China India sustainable cities exchange rates talent biofuels unconventionals electricity prices regional interconnection energy subsidies LNG energy water nexus capital markets renewable energies energy efficiency Brazil corruption energy poverty Russia cyber threats land use electric storage EU Cohesion Middle East dynamics innovative transport climate framework large scale decentralised accidents systems global recession trade barriers coal energy affordability hydro market design need for action
World Energy Issues Monitor 2016 preview World uncertainty hydrogen economy Brazil weak signals ccs CCS, unconventional or nuclear are cooling down Renewables and energy efficiency are robust as top action items critical uncertainties China India nuclear sustainable cities biofuels exchange rates talent electricity prices regional interconnection unconventionals cyber threats EU Cohesion electric storage Middle East dynamics innovative transport climate framework terrorism decentralised systems global recession large scale accidents extreme weather risks trade barriers smart grids US policy energy poverty Russia energy water nexus land use corruption energy affordability coal hydro market design LNG capital markets energy subsidies renewable energies commodity prices energy efficiency need for action impact 2015
World Energy Issues Monitor 2016 preview Mexico uncertainty hydrogen economy biofuels coal unconventionals regional interconnection ccs terrorism extreme weather risks energy water nexus talent decentralised systems climate framework cyber threats China India innovative transport exchange rates smart grids energy poverty trade barriers large scale accidents energy subsidies electric storage energy efficiency nuclear critical uncertainties Middle East dynamics Brazil sustainable cities LNG energy affordability Russia EU Cohesion capital markets land use market design electricity prices renewable energies global recession commodity prices corruption US policy weak signals hydro need for action impact 2015
World Energy Issues Monitor 2016 preview uncertainty hydrogen economy Mexico WHAT KEEPS ENERGY LEADERS AWAKE AT NIGHT US policy market design corruption electricity prices global recession critical land use renewable energies uncertainties commodity prices regional interconnection ccs terrorism extreme weather risks energy water nexus talent decentralised systems climate framework cyber threats China India innovative transport exchange rates smart grids energy poverty trade barriers large scale accidents energy subsidies electric storage energy efficiency nuclear Middle East dynamics biofuels coal Brazil Russia EU Cohesion LNG energy affordability unconventionals sustainable cities capital markets weak signals hydro Price volatility, market design, US Policy are among to issues keeping energy leaders awake at night need for action impact 2015
World Energy Issues Monitor 2016 preview uncertainty hydrogen economy Mexico WHAT KEEPS ENERGY LEADERS AWAKE AT NIGHT US policy market design corruption electricity prices global recession critical land use renewable energies uncertainties commodity prices ccs terrorism extreme weather risks energy water nexus talent decentralised systems climate framework Middle East dynamics Brazil cyber threats China India innovative transport exchange rates smart energy grids subsidies energy poverty trade barriers large scale accidents electric storage energy efficiency biofuels coal Russia EU Cohesion LNG energy affordability unconventionals sustainable cities capital markets regional interconnection nuclear WHAT KEEPS ENERGY LEADERS BUSY AT WORK weak signals hydro Talent, energy efficiency and managing energy subsidies keeps energy leaders busy at work need for action impact 2015
World Energy Issues Monitor 2016 preview Mexico WHAT KEEPS ENERGY LEADERS AWAKE AT NIGHT US policy market design corruption unconventionals electricity prices critical land use global recession renewable energies sustainable cities uncertainties extreme weather risks commodity prices regional ccs interconnection terrorism energy water nexus talent decentralised systems climate framework Middle East Brazil dynamics cyber threats China India innovative transport exchange rates smart energy grids subsidies energy poverty trade barriers large scale accidents electric storage energy efficiency uncertainty hydrogen economy biofuels coal Russia EU Cohesion LNG energy affordability capital markets nuclear WHAT KEEPS ENERGY LEADERS BUSY AT WORK weak signals hydro Other top issues include extreme weather events, climate framework, regional integration need for action impact 2015
World Energy Issues Monitor 2016 preview World uncertainty weak signals extreme weather risks critical uncertainties electric storage cyber threats EU Cohesion Africa Middle East dynamics hydrogen economy innovative transport climate framework terrorism Consultancy Asia large scale decentralised accidents systems global recession ccs extreme NonOECD trade barriers weather risks Utilities commodity prices OECD nuclear smart grids US policy Oil & Gas China NAm G20 India sustainable cities exchange rates MENA talent biofuels unconventionals Europe electricity prices regional interconnection energy subsidies LNG energy water nexus capital markets renewable energies energy efficiency Brazil corruption energy poverty Russia land use Government energy affordability coal hydro LatAm market design Resilience / extreme weather events & water nexus are high on the agenda of LAC countries need for action impact 2015
World Energy Issues Monitor 2016 preview World uncertainty weak signals critical uncertainties market design Utilities climate framework Oil & Gas electric storage cyber threats EU Cohesion Middle East dynamics OECD G20 hydrogen economy LatAm Europe innovative transport climate framework terrorism large scale decentralised accidents systems global recession ccs trade MENA barriers NAm extreme weather nuclear risks NonOECD commodity prices smart grids Africa US policy China India Government sustainable cities exchange rates Asia talent biofuels unconventionals electricity prices regional interconnection energy subsidies LNG energy water nexus capital markets renewable energies energy efficiency Brazil corruption energy poverty Russia land use energy affordability coal hydro Consultancy Climate framework is less high on the agenda of LAC countries need for action impact 2015
Financing Resilient Energy Infrastructure preview Number of natural catastrophes, 1970-2014 200 Natural catastrophes Insured catastrophe losses, 1970-2014 180 160 140 120 100 80 60 40 20 0 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: Swiss Re Sigma 02/2015 Comparing the last 5 years to the last 20 years: The occurrence of extreme events has roughly doubled, which, according to the IPCC, is largely connected to the 40% increase of carbon dioxide in the atmosphere From impact-resistant hard safe-fail components to fail-safe soft systems The solution appears to be smarter not stronger Source: WEC Financing Resilience Report, 2015 (October 1); also Swiss Re, 2015: Sigma report No 2/2015
Financing Resilient Energy Infrastructure preview Strong cold/heavy snow (including blizzards) Heat wave/drought Hurricanes / (extra) tropical cyclones Flooding Convective Storms North America x x x x x Latin America & the Caribbean x x x Europe x x x x Asia x x x x x MENA x x x Sub-Saharan Africa x x x x
Myth 1: Demand growth will be fully met by clean energy sources Global total primary energy supply to 2050 JAZZ SYMPHONY 900 900 800 800 EJ/y 700 600 500 400 300 200 16 Gtoe 104 Gtoe Renewables Hydro Biomass Nuclear Gas Oil Coal EJ/y 700 600 500 400 300 200 Renewables Hydro Biomass Nuclear Gas Oil Coal 100 100 0 2010 2020 2030 2040 2050 Hydro and wind electricity are competitive Renewables account for roughly 30% of total electricity generation by 2050 0 2010 2020 2030 2040 2050 Renewables undergo rapid development, accounting for almost 50% of total electricity generation in 2050 (cf 20% in 2010) 35
Myth 2: We can reduce global GHG emissions by 50% by 2050 Emissions trajectories for atmospheric GHG concentration 80 70 CO 2 emissions (Gt/y) 60 50 40 30 20 10 0 2010 2020 2030 2040 2050 IPCC Categories (CO 2 eq) 445 490 ppm 490 535 ppm 535 590 ppm 590 710 ppm 710 855 ppm 855 1130 ppm JAZZ SYMPHONY 36
Myth 3: Universal access will be achieved over the next 10-15 years Population without access to electricity (in millions) 1,267 2010 JAZZ 2050 SYMPHONY 2050 29 0 Latin America & The Caribbean 0 589 402 266 Sub-Saharan Africa 20 0 0 Middle East & North Africa 135 Southeast Asia & Pacific 8 26 471 45 102 South & Central Asia 22 East Asia 0 0 319 World 530 JAZZ: 310 million without access in 2050 SYMPHONY: 530 million without access in 2050 37
World Energy Trilemma Balancing the Energy Trilemma Energy Security The effective management of primary energy supply from domestic and external sources, the reliability of energy infrastructure, and the ability of energy providers to meet current and future demand Energy Equity Accessibility and affordability of energy supply across the population Environmental Sustainability Encompasses the achievement of supply and demand side energy efficiencies and the development of energy supply from renewable and other low-carbon sources ENERGY EQUITY ENVIRONMENTAL SUSTAINABILITY 2015 38
World Energy Trilemma selection of CEM countries South Africa Sweden South Korea Brazil India Germany BBC Mexico AAC United States Indonesia Norway
World Energy Trilemma 2014 Colombia 44
World Energy Trilemma 2014 Germany 45
Scenarios and the importance of singular events History has witnessed a number of singular events (eg oil shocks) that have translated into moods, policy and mobilisation of capital in new technologies and thereby contributed to learning curves and sustainably changed the energy picture What will be next? Event Change of mind-set Innovation push, new players World War I Oil shocks (1973/79) Power & speed on sea is critical (Churchill) Oil independence Oil replacing coal for shipping Energy efficiency push 9-11 (2001) US energy independence Shale oil & gas push; by independents, not IOCs Financial crisis (2008) Fukushima (2011) [& Chernobyl 1986] Less leveraging, Basel III Anti-nuclear Ukraine (2014) EU gas diversification LNG push China «new normal» Qualitative instead of quantitative growth More equity required, less projects realised; conventional investors lost cushion, shift to new investors «Energiewende», solar & wind; HH and new players, not utilities as main actors Gas, nuclear, renewables, clean and water efficient 14-11 oil shock «It s not going to last» Oil instead of LNG? Cautioned unconventionals investors
Scenarios and the importance of singular events History has witnessed a number of singular events (eg oil shocks) that have translated into moods, policy and mobilisation of capital in new technologies and thereby contributed to learning curves and sustainably changed the energy picture What will be next? Event Change of mind-set Innovation push, new players Cyber disaster (UK, Germany, ) Draughts (Brazil, Africa, MENA, Australia) Hurricanes (Asia & Africa, NAm) Energy market design crisis Heightened geopolitics Nuclear risks & China Anti-monoculture in IT, anticentralised Regional water management co-dependency Fast recovery and local solutions Avoiding brown-outs and price peaks (S-Africa, Germany) Nationalistic agenda Scalable pragmatism Decentralised & disconnected local solutions (including storage) Large hydro + regional integration (or: more fossil or alternative storage as back-up in draughts) Soft resilience with local empowerment ; storage & (diesel, CHP) back-up generation, micro-grids (NY post Sandy) Local storage & (diesel, CHP) back-up generation Domestic / local resources & solutions Gas / LNG, renewables, efficiency (including storage & local solutions)
Scenarios and the importance of singular events History has witnessed a number of singular events (eg oil shocks) that have translated into moods, policy and mobilisation of capital in new technologies and thereby contributed to learning curves and sustainably changed the energy picture What will be next? Event Change of mind-set Innovation push, new players Cyber disaster (UK, Germany, ) Draughts (Brazil, Africa, MENA, Australia) Hurricanes (Asia & Africa, NAm) Energy market design crisis Heightened geopolitics Nuclear risks & China Anti-monoculture in IT, anticentralised Regional water management co-dependency Fast recovery and local solutions Avoiding brown-outs and price peaks (S-Africa, Germany) Nationalistic agenda Scalable pragmatism Decentralised & disconnected local solutions (including storage) Large hydro + regional integration (or: more fossil or alternative storage as back-up in draughts) Soft resilience with local empowerment ; storage & (diesel, CHP) back-up generation, micro-grids (NY post Sandy) Local storage & (diesel, CHP) back-up generation Domestic / local resources & solutions Gas / LNG, renewables, efficiency (including storage & local solutions) Key enablers are storage & local solutions, hand in hand with a democratisation of energy
Summing it up High energy price volatility: The new normal Download the 2015 World Energy Issues Monitor on worldenergyorg/publications