Gerald Doucet, WECThree Challenges
From WEC

By Gerald Doucet

Gerald Doucet is Secretary General of the World Energy Council. The 20th WEC is being held in Rome, Italy,
November 11-15, 2007

LONDON, UK--If we are to keep the world economy humming along and improve living standards for all, we are faced with a three-fold challenge over the next 30 years: how to provide energy services to every household in the world; how to slake the planet’s thirst for energy, and how to reduce greenhouse gas emissions at the same time.
Population growth and the subsequent growth in energy demand will come from the fast-growing economies of the developing world. Every three years the world’s population is increasing by 300 million, equivalent to the size of the United States. By 2050 the world population is expected to reach close to 9 billion people, the majority of which is seen in developing countries.

The World Energy Council (WEC) expects the demand for electricity and transportation to grow rapidly in all regions of the world, which will continue to depend upon fossil fuels for years to come. Though fossil fuels are expected to remain the largest energy source for the first half of the century, supplying 85% of the world’s primary energy needs. Faced with such strong demand, nations are now forced to seek new technically and economically efficient and environmentally sound ways to meet the expected growth.

Scientific assessments warning of environmental damage from man-made global warming call for action to be taken immediately, especially on a local level by the consumer. The rise in energy demand will undoubtedly lead to a rise in greenhouse gas emissions. For example, global CO2 emissions will double to 46 billion tonnes a year in 2050. In the developing world a rise of 200% is likely to occur; and by the end of the decade it is predicted that China will take the lead as the largest emitter, ahead of the US.

EU leaders claim that a 20% reduction in greenhouse gas emissions can be achieved by 2020, and a potential 30% if the US and developing world join in. These encouraging targets continue to receive praise from various groups. However, it has been postulated that despite the current long-term capital-intensive investment in clean energy technologies, a substantial new investment would be required if emissions are to fall before 2030; ten years beyond the current deadline. The growing shortfall in the amount of capital necessary to achieve this aim, especially for the construction of emissions reducing technologies, is the heart of the problem. Due to the growth in energy demand and subsequent emissions in the developing world, the environmental need to take immediate economic responsibility is vital.

iea estimates
The International Energy Agency estimates that, worldwide, $20 trillion of investment in the energy infrastructure alone is needed over the next quarter-century, equivalent to the total US government budget over seven years, or to break it down $800 billion a year. Unfortunately, only half of the $20 trillion has been committed, half of which is needed for power generation alone.

Furthermore, spending on research and development (R&D) for promising clean energy sources is running at $10 billion annually, well below R&D in other sectors, such as pharmaceuticals, and is concentrated in only a handful of countries. Potentially, this is owing to R&D outlays being somewhat difficult to justify in a competitive and liberalised energy market.

The value of carbon will dictate the pace of investments in clean technologies. The global carbon price will be determined by the extent to which national and regional policies or emissions trading systems are linked. For carbon capture and storage to achieve widespread use in power generation or for synthetic liquids (with zero emissions production) to become a sustainable fuel for transportation, the cost of CO2 captured and stored must fall to approximately US$30 per tonne, two thirds less than today’s cost.

Act Now
WEC maintains that swift action on climate change is needed and by addressing climate change now it will be less risky and costly to the economy than postponing action. Taking bold, early steps to curb greenhouse gas emissions appears to be profitable for businesses, governments and consumers.

A recent UK report estimates an annual least cost to stabilise emissions at 1% of GDP by 2050, although perhaps as much as 3.5% if we act now.

One way to stimulate energy investment in the developing world is to ensure that the Clean Development Mechanism, which allows countries to meet their Kyoto Protocol commitments by allowing investment into emissions-reducing projects, is widened to cover carbon-lowering technologies and energy efficiency schemes. An action that would in turn help decouple GDP growth from emissions growth by 2030.

To meet the rising energy demand, while curbing emissions, the number of public-private partnerships in the energy sector must be actively promoted. Collaboration between the energy industry, the financial community and governments is the key since no single partner has adequate resources to go it alone. There is a requirement for global accord and cooperation.

A good example comes from possibly the largest power generation project in the world, Grand Inga. Studies conducted in Africa the 1960s lead to the recommendation for the construction of four hydroelectric power stations in two phases.

Phase one of the study was concerned with the construction of three power stations in the Nkokolo Valley, where HV lines transmit the generated power to Zambia, Zaire, Zimbabwe, South Africa and Congo.

The second phase of the study concentrated on the development of the Grand Inga power station with a total capacity of 39,000MW, to be equipped with 52 power generators of 750 MW each.

A pre-feasibility study, carried out in 1997 by a consortium of EdF and Lahmeyer International assessed the potential development including power plant expansion, construction of transmission facilities from Inga site to Egypt and concluded that the project was technically feasible and economically viable.

The development of a project like Grand Inga, however, needs huge investments. The estimated costs of the entire project could be between US$30 and $US70 billion. Nevertheless, as an example, the price per kWh generated at the Inga site and transmitted to the Italian border would be lower than the market price in Italy today. Clearly a project that requires multiple financial backers and close government cooperation.

The significant investments required to meet future demand for cleaner energy will inevitably lead to higher global energy prices. This will undoubtedly act as a powerful motivator for greater consumer energy efficiency. One of the principal drivers of higher energy prices, in addition to the cost of clean technologies and their development throughout the world, will be the degree to which full fuel cycle costs are built into energy prices.

Government Policy Is Key

Government policy and regulation are key factors here. Governments and consumers at large need to see that higher energy prices bring higher quality and more sustainable energy services that help to reduce environmental and social costs in a measurable way.

In general, governments recognise the need for ambitious and far-sighted thinking to diminish emissions growth. Unfortunately this well-intentioned awareness rarely leads to substantial legislation, even in the EU where cutting edge, emissions trading schemes to fulfill Kyoto Protocol commitments is well underway, and in the US where voluntary agreements and technology are the norm.

It is logical to say that the form that the necessary polices take will vary according to the circumstance of each country or region. They will undoubtedly be linked to taxes, regulations, set standards, the removal of subsidies on carbon sources, subsidising low-carbon technologies and introducing trading carbon permits. Yet, ultimately the common global goal will remain the same.

On the energy production front, governments must remain broad-minded and not rule out any fuel source or technology option, if we are to remain steadfast in our goal of a low carbon world. Affordable renewable technologies, large-scale hydroelectricity, and carbon capture and storage must remain as options along with nuclear power generation.

Nuclear Energy

In 2005, the European Regional Group of the World Energy Council decided to launch a study to clarify the conditions nuclear energy should meet to be re-integrated into the European electricity market. The study demonstrates that many European countries are showing a keen interest in nuclear power as a way to tackle some of these challenges and also a means of introducing low-carbon energy sources into the energy mix.

There is little doubt that the economic and environmental factors will be the deciding forces in defining what kind of role nuclear power will play in the global energy sector in coming years, certainly nuclear power can offer environmental advantages. If carbon dioxide emissions were ever penalised, nuclear power would be a particularly competitive alternative. As nuclear power generation does not produce greenhouse gasses and emissions, the key sources in creating global climate change and air pollution, it would undoubtedly help tackle growing environmental concerns.

In March 2006, the European Union published the Green Paper. “A European Strategy for Sustainable, Competitive and Secure Energy” which emphasised that Europe would not be able to make any significant impact on reducing CO2 emissions without relying on nuclear energy.

Clearly, nuclear power will remain a controversial and much politicised affair if the major concerns facing the nuclear industry today are not dealt with. One of the major concerns is the management and disposal of spent nuclear fuel. There is, however, no single technical and financial solution suitable for every country for the management of its nuclear waste, as the operating environment is different for each country and every single power plant.

Investment programmes could be accelerated if a more simplified and rapid process for granting construction and operational licenses were available to potential investors.

It is possible to simplify the investment process even further in order to allow stable, consistent and predictable market rules and this would also go a long way to ensure an investor friendly environment. More accessible and accurate information is needed to ensure that consumers understand that nuclear power is one realistic option for electricity production.

Acting now or later with regard to setting legal and policy frameworks will radically affect the cost and timetable for making the necessary energy investments, to transfer proven clean technologies and systems to the developing world and to train and educate local workforce to build, operate and maintain theses facilities.

WEC estimates that, with the right policies and technologies in place, the rise in greenhouse gas emissions can be tempered in the short-term, their absolute level can be stabilised in the medium-term and reduced in the longer term.

GHG by 2015
The slowing of greenhouse gas emissions growth by 2015 is already in place. Efficiency measures have begun to bite and will gather momentum at the end of the period, with gains between 25% and 40% eventually achievable by: boosting power plant productivity; improving building methods, such as better insulation and energy-efficient lighting; tackling gas and electric transmission and distribution leaks or losses; solar water heating; and bringing online combined heat and power plants.

Extending nuclear power plant operating licenses and increased energy production from biomass and other green energy sources, especially wind and hydropower, are already playing a role to curb the growth of greenhouse gas emissions in this timeframe.

More natural gas can be captured and sold rather than flared. Alternative fuels for the internal combustion engine can be encouraged on a larger scale.

Developing countries can start by using more carbon-neutral technologies with the aid of better financing and firm policies. The development of legal policies on copyright, intellectual property and dispute settlement has the potential to attract much needed investments in the energy infrastructure, providing new incentives for private investment.

Looking Ahead to 2030
In order to maintain greenhouse gas emissions at a constant level by 2030 a wide array of new technologies will need to be commonly deployed, especially in the rapidly growing economies of the developing world.

Research and development is key particularly in areas concerning zero emissions power plants, second generation biofuels which complement the food chain on the basis of full fuel cost accounting, as well as research into energy generated from biomass, third generation nuclear power; macro combined heat and power plants; and active and passive solar heating.

Looking ahead, the reduction of emissions from 2030 onwards is possible if public-private partnerships are established today, in turn helping the coordination of investment internationally and lowering the costs of promising technologies.

By this time the share of nuclear power will increase, as fourth generation and fast spectrum reactors come on-stream. Carbon capture and storage will be applied to the gasification and combustion of coal and to the production of synthetic fuels. Fuel cell vehicles and fuels made from compressed or liquid hydrogen could start to play a major role towards the middle century.

The potential of nuclear fusion and hydrogen-based economies will also become better known by this time.
WEC aims to lead the way through raising awareness of policies that curb excessive emissions and promote sustainable living.