The global energy conversation: Transitions from West to East

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This report, edited by the Economist Intelligence Unit and supported by Shell, follows an event held in June 2011 that brought together energy experts based in London, Singapore and Shanghai for the world’s first live global conversation on the future of energy.

We have invited the same group of experts that participated in the debate to explain their views on the most challenging questions that arose during their discussion. The report also highlights some of the best contributions made in the online debate that surrounded their conversation.

We would like to thank all of those who participated in the research.

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The global energy conversation: Transitions from West to East

  1. 1. The Global Energy Conversation transitions from west to east
  2. 2. transitions from west to east 2 Prefacecontents 3 introduction From the Economist Intelligence Unit 4 Energy rebalancing by the numbers Findings from a worldwide EIU survey on energy rebalancing 6 Asia’s rise and the new global energy politics Pierre Noël, University of Cambridge (UK) 7 Meeting the world’s future energy needs Stephen Lincoln, University of Adelaide (Australia) 9 China: the world’s new energy giant Lin Boqiang, China Centre for Energy Economics Research (China) 10 Environment vs. development: where does the balance lie? John Sauven, Greenpeace (UK); Simon Trace, Practical Action (UK) 12 Regional strife Simon Tay, Singapore Institute of International Affairs (Singapore) 12 raising efficiency Rob Murray-Leach, Energy Efficiency Council (Australia) 13 Do we need a multilateral climate change deal? Simon Henry, Shell (UK) 14 The golden age of gas The Rt Hon Lord Howell of Guildford (UK) 15 The renewables challenge Viktor Bekink, Talesun Ltd (China) 16 appendix Survey results |1|
  3. 3. the global energy conversation Preface This report, edited by the Economist Intelligence Unit and supported by Shell, follows an event held in June 2011 that brought together energy experts based in London, Singapore and Shanghai for the world’s first live global conversation on the future of energy. We have invited the same group of experts that participated in the debate to explain their views on the most challenging questions that arose during their discussion. The report also highlights some of the best contributions made in the online debate that surrounded their conversation. We would like to thank all of those who participated in the research. If you would like to view the event, you can access it online by registering at http://live.economistconferences.co.uk energy rebalancing PANELIST by the numbers QUOTES To support the event, the Economist Where points made by panelists during the event Intelligence Unit conducted a survey of are relevant to articles written for the follow-up 767 people around the world. The survey report, these are noted in the text. was carried out between May and June 2011 and respondents were drawn from the Americas (30%), Europe (30%), Asia- Pacific (30%) and the Middle East and Africa (10%). PANELIST ARTICLES ONLINE A selection of the CONTRIBUTIONS experts who participated More than 1,600 people registered in this debate have to watch the event live online and more written articles for the than 400 contributions were received via the follow-up report. These event’s live feed. Where online contributions are articles are highlighted by particularly relevant to the topic being addressed a green bar in the text. in an article, these are noted in the text.|2|
  4. 4. transitions from west to east introductionThe economic and political circumstances surrounding energy consumption are in flux. As countries such as Chinaand India continue their rapid development, the world’s economy is rebalancing from West to East and the patternof global energy demand is shifting. As the articles in this collection clearly show, this rebalancing process isleading energy experts to question the achievability of existing environmental goals and worry about risingpolitical tensions.World energy consumption increased by 45% between 1990 and 2010, but rates of growth varied significantly.Over this period US consumption rose by 19% and Europe’s increased by 5%, but China’s went up by 149% and India’sincreased by 116%. Underlining the shift, China has now overtaken the US as the world’s largest consumer of energy.What does this kind of rebalancing mean for the world’s energy system? And how might it influence efforts to tackleclimate change? A poll of more than 760 executives conducted between May and June 2011 underlines just how worriedbusiness leaders are about the world’s energy future. Nearly three-quarters of those surveyed think the process ofeconomic rebalancing is going to create energy supply problems. Partly as a result, nine out of ten think that realenergy prices are going to increase over the next 40 years and 88% think that energy security will become more ofan issue.The expert contributors to this collection agree that energy-related political tensions are on the rise. Pierre Noël(see page 6), sees the potential for increased friction between the US, China and India as Asia’s emerging superpowersbegin to demand a greater role in securing international energy supplies. Similarly, Simon Tay (page 12) raisesconcerns about rising tensions in the South China Sea, as regional players such as China and the Philippines beginto clash over territorial claims in waters that could be rich in natural resources.Against this increasingly difficult backdrop, people are sceptical about the world’s capacity to come up with thesolutions needed to meet its energy challenges. For example, only 6% of survey respondents think governments willreach a meaningful international deal on climate change in the next five years, and 16% do not think a meaningful dealwill ever be reached.These figures will be a source of concern for those who think a multilateral deal is an indispensable part of dealing withthe world’s environmental challenges. Interestingly, however, elites are beginning to question whether a multilateraldeal is as crucial as originally thought. As Simon Henry argues (page 13), “demand growth is focused in a small numberof developing countries: if the right technology and systems, along with strong economic incentives, are put in placeby such countries, what governments do multilaterally may not matter as much.”Ultimately, progress on climate change is likely to rely on evolving preferences about the trade-off between economicgrowth and environmental sustainability. In dealing with this topic, John Sauven (page 10) argues that “we need anew system where human, social, manufacturing and finance capital exist within the boundaries of our natural assets.”That may well be so, but our survey offers a valuable insight about where people’s preferences currently lie. About two-thirds of respondents (64%) are concerned about climate change, but nearly four-fifths (78%) are concerned abouteconomic growth.These figures will be familiar to many pollsters. Once again, they confirm that in the trade-off between economyand environment, most people still value the former more highly than the latter. No wonder that less than 20% ofrespondents believe that the world’s governments are committed to dealing with climate change; in the presentcircumstances, any politician that made a serious attempt to do so would quickly be voted out of office. |3|
  5. 5. the global energy conversation transitions from west to east Energy rebalancing by the numbers ECONOMIC IMPLICATIONS OF REBALANCING FROM WEST TO EAST EU FOCUS ON THE FUTURE: ECONOMIC AND POLITICAL CHANGE 5% CHINA DURING A PERIOD OF TRANSITION of people think the process of economic rebalancing from West to People who think the process of economic rebalancing 149% When, if ever, do you expect the international community to reach a meaningful deal on climate change? from West to East will create energy supply problems East will create energy supply problems 100 30 28% 20 21% 74 17% 16% 50 10 6% 7% 6% 25 0 rs s+ s r s w s ve yr yr ar y no yr Ne 10 20 0 ye 40 tk 40 6- - - t5 n 11 21 ex Do en USA th In 19% ...but less than of people think INDIA governments are committed to achieving think that the world’s governments are people think real energy prices are 116% or maintaining economic growth... committed to dealing with climate change going to increase over the next 40 years Source: Economist Intelligence Unit. POLITICAL IMPLICATIONS OF REBALANCING FROM WEST TO EAST THE WORLD WILL HAVE SOLVED ITS ENERGY SUPPLY CHALLENGES BY 2050 of people think the development people believe there of countries like India and China will be an increase 17% should be cleaner than the West’s was not su in energy-related ee re 19 100 of people think energy security will become military conflicts over r % ag more of an issue over the next 40 years the next 40 years 75 64 50 25 think that climate change will become think that governments should consider military more of an issue over the next 40 years action as a way of securing energy supplies 64 % DIS 0 AG R E E Unless otherwise indicated, infographics depict the results of a survey of 767 people conducted by the Economist Intelligence Unit in May. 2011.|4| |5|
  6. 6. the global energy conversation Asia’s rise and the new GLOBAL ENERGY POLITICS Pierre Noël explains why economic rebalancing from West to East could have major consequences for the politics of energy supply and climate change As the source of global economic growth in nuclear, gas and even renewables, shifts towards emerging economies and coal still covers between two-thirds and In theory, a low-carbon especially fast-developing Asia, so does three-quarters of growth in primary economy would be more secure, the geography of energy consumption energy consumption (see chart). The but it’s all a question of cost. It’s growth. result is that China now consumes as a political task of a first order to much energy as the US, but emits more persuade people that they will have In 2010, the developed economies of the CO2 despite having an economy that is to pay more in order to subsidise the Organisation for Economic Co-operation only 25% of the size. new renewable technology. and Development (OECD) consumed The Rt Hon Lord Howell 2.4% more energy than they did in The rise of Asia has profound of Guildford, Minister of State, 2000. In comparison, energy demand implications for the two main items Foreign and has grown by 63% outside the OECD on the global energy policy agenda: Commonwealth Office and has nearly doubled in emerging the fight against global climate Asia.1 Recent projections by several change and the link between energy economies, the global problem is organisations show a continuation of and international security. not being meaningfully addressed, this trend: emerging Asia is expected leading to erosion in the support for to account for about 60% of global Without a quick and dramatic fall in green policies. energy consumption growth in the the cost of carbon-free sources of next 20 years, and non-OECD countries electricity and heat in the years to Internationally, the focus of climate in general are forecast to account for come, the rise of the emerging policy could move towards adaptation between 90% and 100%.2 world, especially energy and carbon- and attempts to manipulate the earth’s intensive Asia, will lead to a steady climate through geo-engineering. For The energy impact of China’s economic increase in global CO2 emissions way instance, if China and India are exposed rise has been particularly significant. beyond 2030. to severe impacts of climate change, In 1975 China represented 5% of global they could increase their support for primary energy consumption, but by In Europe, the public could finally ambitious programmes to develop and 2010 this had risen to 20%. China has realise that no matter how much they test geo-engineering solutions, which, now overtaken the US as the world’s are willing to pay to decarbonise their for example, could put large amounts of largest energy-consuming country and its consumption is currently growing by the equivalent of the total energy consumption of the UK each year (see chart). One of the problems is that economic growth in emerging Asia is three times more energy-intensive than in OECD economies, while the carbon intensity of energy – the released carbon used in its production – is 28% higher. The main reason for this is that coal, the most carbon-intensive of fossil fuels, plays a major role in fuelling economic growth in Asia, especially in China. Despite the impressive growth|6|
  7. 7. transitions from west to east issues could generate tensions, including Taiwan, the development of Chinese power projection and Sino-Indian rivalry. Objectively, the US and emerging Asian great powers have the same interests when it comes to international energy market security. Whether they can learn how to fulfil them collectively will be challenged by many geopolitical issues, most of which have nothing to do with energy. 1 Asia-Pacific region less Australia, New Zealand and Japan. Unless otherwise indicated, data are from BP Statistical Review of World Energy 2011. 2 See BP, BP Energy Outlook 2030, London, January 2011, p. 16-17; International Energy Agency, Worldsulphur particles into the atmosphere in international oil security. For several Energy Outlook 2010, Paris, p. 622 (“New Policies” scenario); ExxonMobil, The Outlook for Energy: Aorder to deflect sunlight. decades, the US has been at the centre View to 2030, Irving (TX), 2010, pp. 7-8; US Energy of the international oil security regime. Information Administration, International Energy Outlook 2010, Washington DC, table A1.Reliance on imported energy could also It has “sanctuarised” Saudi Arabia fromcause problems. China’s oil consumption regional security threats and providedhas doubled between 2000 and 2010 and security to global sea lanes. The US Author biographythe country accounted for 42% of global has also initiated a multilateral regimeoil consumption growth. Its net oil of emergency oil stock co-ordination Pierre Noël is a Senior Researchimports have grown by 13% per year on through the International Energy Agency Associate at the Electricity Policyaverage since 2000 and the country now (IEA). However, China and possibly India Research Group, an energy policyrelies on international markets for 55% will demand to participate in securing research group at the Judge Businessof its consumption, a level comparable international energy markets, and this School, University of Cambridge.to the US. could prove politically tricky. Mr Noël works on the political economy of international energyThe growing reliance of China- and Co-operation between the US, China and markets and policy, with specialincreasingly India- on internationally India on energy market security will have emphasis on oil and natural gas.traded energy will open a new era in to develop in a context where numerous Meeting the world’s future energy needs Stephen Lincoln reviews the options for meeting the world’s future energy needsWorld energy use has doubled over A total of 80% of world primary energythe last 40 years, bringing with it an comes from fossil fuels, with most of The proportion ofunprecedented level of prosperity to the rest generated from combustiblemuch of humanity. Many now expect biofuels and waste, hydroelectricity solar energy will becomedemand to double again over the next and nuclear power. The much heralded more significant as grid40 years as emerging economies go on wind, solar, wave, tidal and geothermal parity becomes a reality indeveloping and the world’s population technologies together contribute only bigger parts of the world.continues to rise. This surging demand about 1%. On this basis, fossil fuels will Victor Bekinkfor energy raises challenging questions dominate energy supply for some time Senior Manageraround supply. How can the world meet to come and carbon dioxide emissions Talesun Solarits future energy needs? will grow from the current level of 30bn |7|
  8. 8. the global energy conversation has the potential for water and soil a balanced energy supply and to avoid contamination. In addition, large dangerous climate change by 2050. The main concern is ice-like methane hydrate deposits not just higher energy prices, on continental shelves offer a Based on these perspectives, it is likely but greater volatility. The key challenging new source of natural gas. that global growth in natural gas use options to address this are These unconventional reserves are will outpace that of other fossil fuels strong policies to reduce energy largely outside the Middle East and owing to its increasing availability demand in all economies, and at major exploitation would change the and lower carbon dioxide emissions. the same time to drive forward geopolitics of energy supply. Meanwhile, nuclear power use will innovation and clean technology probably also increase, particularly deployment. Strong policies are Of course, using fossil fuels to meet the in the developing nations, despite needed, rather than waiting for world’s growing energy demands carries concerns about the Fukushima incident. significant risks. The related growth in Finally, the use of solar energy in its high fossil fuel price spikes to carbon dioxide emissions would increase various forms is set to grow from lead to changes. the risk of dangerous climate change its present low base as its Keith Allott, unless the efficiency of the technologies performance improves. WWF-UK, UNITED KINGDOM used to convert fossil fuels to energy is markedly improved. Such improvements are not out of the question, however. It is highly likely The possibilities around efficiency that there will be a are clear when we look at electricity generation, which makes up 18% rise in the real price of of world energy consumption. energy in the coming Manufacturing Currently, two-fifths of the world’s decades. Except for electricity is produced by burning coal industries/hubs should meet occasional short periods and is often delivered to the user with 30% of their energy demands efficiencies as low as 30%. A change of correction, the from renewable energy and to modern natural gas technology is economic growth of governments should make it capable of simultaneously increasing the giant economies of mandatory for core industries to efficiency to 50%, while also halving use renewable sources of energy. carbon emissions. the developing world – In India, it is already happening China, India, Indonesia, with a directive for telecom Another option is nuclear. This currently Vietnam, Turkey, towers to shift from diesel-based provides 6% of global primary energy, Brazil, and so on – source to renewable-based to but output could probably be tripled. The problem is that uranium is an is unstoppable. meet their energy demands. exhaustible resource and the Generation Manu Bhaskaran Abhishek R, Director and CEO Energy startup, 4 breeder reactors which could prolong Centennial Asia Advisors INDIA the use of nuclear power are unlikely to make significant contributions for several decades. Meanwhile, fusion tonnes per year unless innovative action power remains a distant dream despite is taken. on-going research. Author Biography Stephen Lincoln, from the University At current extraction rates, known This leaves the sun, which delivers an of Adelaide, was awarded in 2002 conventional reserves of liquid crude annual supply of energy equal to 8,000 the H. G. Smith Medal, the senior oil, natural gas and coal are likely times the world’s present energy use. research award of the Royal to last about 45, 60 and 120 years, Solar energy in the form of biofuels, Australian Institute. He frequently respectively. The “unconventional” wind energy, and photovoltaic, collaborates with top universities fossil fuels in oil shales and sands solar thermal and hydrogen energy in China and the United States to together with shale and coal seam gas show great promise. However, these produce new research in nanoscience, offer very large increases in reserves, technologies require improvement and energy and the environment. but their extraction is expensive and their use must be accelerated to secure|8|
  9. 9. transitions from west to east CHINA: THE WORLD’S NEW ENERGY GIANT China’s heavy reliance on coal will see its carbon emissions continue to increase, argues Lin BoqiangChina’s economy is developingquickly. What kind of pressure is In China, given the China andputting on its energy system? target for carbon emissions India have got theChina’s going through an intense and energy supply, it’s very opportunity to build anperiod of industrialisation and hard at the moment to give energy system that isurbanisation – both of which are up nuclear.putting enormous strain on its energy far more cost effective Professor Zou Jisystem. The economy’s been growing Director than that of Westernat about 10% per year for the last World Resources Institute China countries.decade, and it’s expected to go on Rob Murray-Leachexpanding at a similar rate over the Chief Executive Officernext decade. whereas the areas that are most Energy Efficiency Council suited to wind power are in the Australia At the same time, urbanisation is West. This raises the issue of theaccelerating across China. About cost of transmission to end users.48% of the population currently growth. There needs to belives in urban areas, with this share Another option is nuclear. China is a balance between reducingexpected to rise to around 62% by planning to construct at least 60 gw of carbon emissions and maintaining2020. As a result, about 300 million new facilities by 2020. There probably economic growth. However, ifpeople – roughly as many as currently would have been even more, but, reducing emissions is seen aslive in the United States – will move following the Fukushima incident in threatening growth, growth is likelyinto China’s cities over the next ten Japan earlier this year, concerns about to win.years. Facilitating that shift requires safety have grown and enthusiasm forconsiderable investment in new nuclear has waned a little. That said, the government ishousing and infrastructure, which in conscious that China’s energy demandturn calls for more energy to feed the Gas will also be an important part of will continue to rise and that fossilincreased demand for construction the equation. It is cleaner than coal fuels are an exhaustible resource.materials, such as steel and cement. and gas-fired power stations are quick This is why it is keen on renewable to build, so the use of gas is most energy as a long-term solution toHow is China planning to meet its likely to grow significantly over the China’s energy needs. That renewablegrowing energy needs? coming years. If China is to reduce its energy also happens to be cleanThe government wants to reduce use of coal, nuclear and gas will be energy could be of secondaryChina’s dependence on coal from 75% central parts of the solution. importance, but it will certainlyto 65% of the total energy supply help to reduce carbon emissions.over the next ten years, but there are How serious do you think China’sserious concerns about whether it will government is about reducing carbon Author Biographybe able to achieve this goal while also emissions? Dr Lin Boqiang is Director of themeeting rising energy needs. The Chinese government is committed China Centre for Energy Economics to reducing carbon emissions because Research at Xiamen University andChina has made remarkable progress it wants to be seen as a responsible a member of the National Energyon wind power over the last decade, member of the international Consultation Committee underbut wind remains a small part of the community. However, maintaining the National Energy Commission.overall energy mix. Also, most of social stability is the policy priority From 1993 to 2006, Mr Lin wasChina’s economic and population that trumps all others in China - and Principal Energy Economist at thegrowth is taking place in the East, that means sustaining economic Asian Development Bank (ADB). |9|
  10. 10. the global energy conversation transitions from west to east Environment vs. development: where does the balance lie? At heart, the world’s problems are We urgently need to ask the In the debates about climate 2. educe global energy intensity by R economic. Economic growth is a means question of what we want to change the question is often raised: 40% by 2030. to an end, not an end in itself. But achieve from economic growth and “is it possible for us to strike a balance John society has forgotten this. Every time development. These words have been between the pursuit of economic growth Reliable and affordable modern Simon we talk about “the global economic used for decades to promote a high in developing countries and the need to energy supplies are vital to provide Sauven downturn” or the need to “stimulate the resource extraction, carbon-heavy reduce global carbon emissions?” The essential services in the home (for Trace Author Biography economy”, what we are doing is urging industrial growth – a model which is simple answer to that question is that lighting, cooking, heating, cooling Author Biography John Sauven joined Greenpeace more expenditure without regard to its now failing. we have to. Progress towards higher and preservation of food, and, Simon Trace is the Chief Executive in the early 1990s and has been environmental and social consequences. standards of living in the developing communications) and the community of Practical Action. He has Executive Director since 2007. We need a new system where human, world is not an optional extra to be (electricity for refrigerating vaccines nearly 30 years’ experience in He co-ordinated the international There is no economic value put on our social, manufacturing and finance pursued if we have the carbon budget in health posts or providing lighting international development and campaign to secure a moratorium standing forests, our water, our soil, capital exist within the boundaries to spare; it is essential. in schools, for example). They are also took up his current post with on further destruction of the the life in our oceans or our biosphere – of our natural assets. But it can essential as a platform for establishing Practical Action in 2005. Amazon by soya producers. all of which are vital to sustaining life only succeed if we find a mechanism It is essential, on moral grounds, that we businesses and creating the livelihoods on the planet. But the economic for sharing the burden of costs and address the suffering that is represented that will eventually help people out model we have created is built on the potential discomforts. Per head fossil by absolute poverty – the 2.5 billion plus of poverty. The UN’s proposal is that liquidation of these natural assets. fuel CO2 emissions in the United States people still living on less than US$2 per the elimination of energy poverty be are more than 20 times higher than in day, the 1.5 billion that still lack access recognised as a priority for development What kind of world will that leave most of Sub-Saharan Africa. Ultimately, to basic services such as safe water assistance over the coming years. us with? A climate changing world for our security we need to see humanity supplies or electricity, the 72 million represents a critical threat to our way as a single vulnerable species rather children still out of schools, or the Reducing energy intensity is clearly of life, especially in developing than a collection of nations locked in 26,000 children that die every day from the global challenge that will countries. Many of the 1.4 billion people pointless and perpetual competition largely treatable or preventable causes. determine whether we manage to avoid who now live in severe poverty already and conflict. catastrophic climate change or not. face serious ecological debts - in water, But it is also now, perhaps for the The UN argues that this is achievable soil, and forests – and these will be Our leaders, in public at least, accept first time in history, essential on and realistic but would “…require the exacerbated by changing consumption two imperatives – carbon stabilisation enlightened self-interest grounds as international community to harmonise patterns, rising wealth, urbanisation and continuing economic development. well. Climate change has no respect for key energy-consuming products and and climate change. They must, as a corollary, accept an for national boundaries and has to equipment, to accelerate the transfer absolute duty to dramatically increase be dealt with as a global problem of know-how and good practices and to The world’s ecological crisis is not the level of “carbon productivity” in the requiring a global solution. As the UN’s catalyse increased private capital flows a matter for tomorrow after today’s economy. In other words, more output 2009 Copenhagen conference showed, into investments in energy efficiency”. financial crisis has been solved. So far, for far less energy and natural resources. developing countries are not going to our reaction to warnings of terminal We need a tenfold increase in carbon sign up to a deal on carbon that fails to In reality, universal energy access is planetary disease has been to dismiss productivity by 2050, which will require reflect adequately where the historical affordable — the International Energy them. Almost 15 years after the world radical changes in the world economy. responsibility for emissions lies or fails Agency estimates that around US$35 I think we should began negotiating the Kyoto Protocol, to provide sufficient assistance to help billion per year would be required to concentrate our efforts on the levels of greenhouse gases are Ultimately, addressing climate change them make the transition to a clean 2030, only around 3% of the expected conserving energy and harnessing accelerating. Nearly 25 years after the is neither a scientific nor an economic development path. global annual investment in energy new methods of renewable energy. Brundtland Report alerted the world challenge – it is a human challenge, infrastructure over the same period. There are many ways of harnessing Domestically, many where capitalism needs to tell the The UN Secretary-General’s Advisory Ensuring that this goal is met must be new energy. Nothing much has to the urgency of moving towards countries are guilty of having been done by most countries in sustainable development, the planet’s ecological truth. The potential for Group on Energy and Climate Change part of the overall package of actions a pre conceived answer to what the world, except for Japan and stock of natural resources continues technological improvements, renewable proposed two key goals in this respect necessary to reach an international the climate change or energy Northern Europe, about utilising to be depleted and degraded at an energy, carbon sequestration and in its April 2010 report: settlement on carbon. security needs. garbage, which is a big headache. alarmingly rapid rate. perhaps a hydrogen-based economy Simon Tay, is far from being exhausted. But it is a 1. nsure access to modern energy E Charles Tang, Chairman, Singapore Institute Chairman, Brazil-China, radical transformation in a short time services for the 2 to 3 billion people of International Affairs; Senior Chamber of Commerce Consultant, WongPartnership scale requiring huge investment and currently excluded from them by 2030. and Industry resources.|10| |11|
  11. 11. the global energy conversation Regional strife Energy issues will put a major strain on Asia’s regional politics, argues Simon Tay The continuing rise of developing Asia Asian countries that are new to the The power balance is shifting globally. contrasts with the economic difficulties industry and yet have committed to Asian powers do not have an established being experienced in the US, Europe building plants - Indonesia, Vietnam, order acceptable to all. The region’s and Japan. Yet, Asia’s economic growth Malaysia and Thailand - would be well energy concerns will not simply be depends on energy and unless affordable advised to proceed only after extensive technical but unavoidably connected and sustainable resources are found, the investigations into safety to politics, economics and security. energy challenge may constrain growth in and transparency. The Asian people will find good reasons the region. why the words “energy” and “power” Asia’s energy challenges also lead are often synonymous. Consider recent events in the Middle to disputes over territory. The rising East and in Japan. While there has been tension in the South China Sea, with Author Biography no major disruption of oil supplies differing claims over different islets and Simon Tay is Chairman of to date, the Arab Spring has alarmed shoals, is not sentimental. Explorations the Singapore Institute of markets and the long-term view cannot are being conducted in what could be International Affairs, Professor of take the previous stability for granted. a resource-rich area for future energy. International Law at the National In Japan, the tragedy concerning the Maritime power projection will be part University of Singapore and Senior Fukushima nuclear reactor has created of this equation and protecting shipping Consultant at the WongPartnership. enormous concern about nuclear safety. lanes will be vital to the supply of oil. RAISING EFFICIENCY Rob Murray-Leach explains the role that energy efficiency can play in helping to deal with climate change Asia’s rapidly growing demand for energy In total, less than 2% of the energy in is driving up the global prices of coal, coal is turned into light. E fficiency is definitely a first gas and oil. While rises in fuel costs step, but the energy market will increase the incentive for energy In contrast, a cogeneration system loses needs to move away from a efficiency in both the East and the West, less than 30% of the energy in gas, centralised supply. governments need to tackle a series of because when it generates electricity market failures that prevent us from fully it uses the waste heat to warm and posted by @AliciaAyars realising the benefits of energy efficiency. cool buildings. There are virtually no via twitter on losses between the generator and the June 28th 2011 10:06 A smart mix of generation and end-use appliances it powers, and by using a technologies across the economy could compact florescent bulb you get in total dramatically increase the services that five times as much light out of the energy critical to focus on ensuring that we get from each unit of fuel. Coal-fired in the gas. new infrastructure and equipment generators in Australia lose about 70% are as efficient as possible. of the energy in coal as heat. A further The West and the East will need to In contrast, much of the infrastructure 10% of the energy is lost during approach energy efficiency in slightly in the West is well established. transmission, and an astonishing 95% different ways. In Asia, there are a lot of For example, it is estimated that two- of the remaining energy is wasted in a new buildings and industrial sites being thirds of Australia’s commercial building conventional light bulb. constructed right now, which makes it stock in 2030 will be buildings that|12|
  12. 12. transitions from west to eastalready exist. This means that while education and information. Alongside be critical for both climate change andthe West also needs to ensure that new traditional information programmes, this economic growth.vehicles and appliances are efficient, it means establishing mandatory energywill also need to focus on “retrofitting” efficiency rating programmes for buildings Author Biographyexisting infrastructure. and equipment to help prospective buyers Rob Murray-Leach is the Chief determine how efficient they are. Executive Officer of the EnergyNevertheless, there is a lot of common Efficiency Council, the peak body forground. Irrespective of their location, Finally, there are some areas where commercial and industrial energymost countries need seriously to international co-operation could boost efficiency in Australia. He was recentlyoverhaul their energy markets to support the global economy, including investing an adviser to the Prime Minister’sdistributed generation and ensure that in RD and setting international energy Task Group on Energy Efficiency andthey invest in energy efficiency when it’s efficiency standards for vehicles and previously part of the Garnaut Climatemore cost effective than supply. Similarly, appliances. How countries collaborate on Change Review secretariat.every country needs to invest in skills, energy demand and energy efficiency will Do we need a multilateral climate change deal? A meaningful international deal on climate change still seems a distant goal, but this might not be as damaging as many fear, argues Simon HenryThe global energy system is in the earlystages of a historic transformation.It is being propelled by the growing China and India have It is really not aglobal population, mainly in the the opportunity to surge ahead question of whether it isdeveloping world, which could reach in the “green race” by taking a legitimate to expect China,9 billion people by 2050, resulting in a systems approach to energy - India and other developingsurge in energy demand. Shell’s scenario leap-frogging incumbent energy economies to adopt cleanerplanners believe that if we continue infrastructure and systems in energy than the West usedto use energy as we do today, energy the developed world. This will during its economic take-demand could rise as much as three not only benefit their economies off. The risks to the globaltimes by 2050, from its level in 2000. but will also benefit the planet. environment are much moreThis would lead to a big gap emerging Mark Griffiths, serious now than during SecondNature Partnership,between demand and supply of energy, UNITED KINGDOM the West’s take-off: anywhich will have to be filled either by a responsible country has todramatic reduction of demand or a jump find ways to co-operate within supply, or a combination of both. but we do see national governments the rest of the world to reinBut exactly how this is going to happen acting in their own interest, and these in energy use.remains unclear. Hence, our scenario interests generally correspond to Manu Bhaskaranplanners call this a “zone of uncertainty”. cleaner energy systems. The demand Director and CEOFurthermore, even as we work to meet growth is focused in a small number Centennial Asia Advisorsthe surging energy demand, there is of developing countries: if the rightclear agreement among scientists that technology and systems, along withthe world must take action to halve CO2 strong economic incentives, are put perhaps through cap-and-tradeemissions by 2050. in place by such countries, what systems - will help to encourage governments do multilaterally may a switch to lower CO2 options.What then might be done to help the not matter as much. This, together with stable, long-termworld meet this twin challenge? investment regimes, will also encourage Instead, other forms of action could companies to develop the technologiesRight now, we don’t see multilateral make a difference. For example, putting needed to help the world meet its futureagreements to reduce CO2 working an appropriate price on carbon – energy needs in a more sustainable way. |13|
  13. 13. the global energy conversation for 2.5 billion people, will take. China, a big difference, whether or not the I think people are going for example, plans to reduce its CO2 world reaches a global agreement. to move very quickly towards emissions per unit of GDP by 17%, as To meet the world’s surging energy climate policies that do not need part of its Five Year Plan. It is already demands and address the environmental international agreement, that attempting to move away from its heavy impact at the same time will require is, a mix of adaptation and geo reliance on coal-fired power plants, a major effort by countries, communities engineering, and I think it’s the which currently provide 80% of its and companies. direction we’re taking for now. electricity. It is investing heavily in Pierre Noël, Research Associate natural gas, the cleanest burning fossil Author Biography and Director of Energy Policy fuel, is rapidly deploying renewable Simon Henry became Chief Forum, Judge Business School, energies like wind and solar, and is University of Cambridge Financial Officer of Royal Dutch a world leader in developing battery Shell in May 2009. Prior to this technology for vehicle electrification. he was Chief Financial Officer for Exploration and Production (EP), The key question is which route Such steps taken by China, where leading global EP finance, planning major developing countries such as energy demand is expected to double and supply chain functions. China and India, together accounting over the next 40 years, could make THE GOLDEN AGE OF GAS The Rt Hon Lord Howell of Guildford, Minister of State, Foreign and Commonwealth Office Climate change is a threat to the world’s carbon emissions by 27% between security and its prosperity. There is a 1990 and 2009, while electricity bills Gas can be a stepping stone large body of robust scientific evidence dropped and the economy grew an towards decarbonisation, but it showing that the impact of climate average 2% per year. won’t necessarily be. In the UK, change will be increasingly widespread we need to decarbonise our power and severe. Climate change is a security In the future, as production increases sector by 2030 - other wealthy threat multiplier: by accelerating famine, and gas becomes a more tradeable countries should be aiming for flooding and migration, it exacerbates commodity, prices can be expected to similar rates of decarbonisation. tensions in some of the most vulnerable fall. The number of nations importing We need policies to make CCS regions of the world. The world cannot liquefied natural gas (LNG) has already realistic for retrofitting and an afford to stand idle: if we fail to act, doubled in the last decade and trade electricity market that ensures we use gas for peaking alongside – not climate change could cost the equivalent is evolving towards a true multi-point, instead of – renewables. of at least 5% of global GDP each year. multi-basin delivery. Over 120 years of conventional resources remain, Dustin Benton, Green Alliance, Some speculate that ambition to tackle and advancements in horizontal UNITED KINGDOM climate change is incongruent with drilling and hydraulic fracturing have the need for low-cost energy. This is a revolutionised access to unconventional mistake: in combination with nuclear and reserves. Supply has already expanded With the addition of Carbon renewable technologies, gas can provide dramatically and prices have fallen, Capture and Storage (CCS) to gas an affordable road to achieving major particularly in America. It is vital that generation, gas could be a long-term reductions in greenhouse emission. investment in these unconventional feature of the low carbon future. Gas technologies be climate-smart and generation with CCS leads to a near Gas is the cleanest fossil fuel under more certainty is needed about their 90% net reduction in carbon dioxide traditional generation: at combustion it carbon lifecycle. But with substantial emissions, but significant challenges generates 50% less carbon dioxide per unconventional reserves in emerging remain and its commercial viability needs kilowatt-hour than coal and a fraction of powers, particularly China, the to be proven. The UK is committed to its nitrogen dioxide emissions. Switching opportunity to move from a coal- providing public sector investment in four from coal to gas helped the UK to reduce addicted world is clear. CCS demonstration projects, including|14|
  14. 14. transitions from west to east£1 billion of capital funding for the initial US$312 billion was wasted on fossil fuel affordable path to a low carbon future,project, and it is incumbent on all nations, subsidies that distort the market and and if CCS works, gas could be more thanEast and West, to invest in CCS. render global prices unaffordable. Energy just a stepping stone; instead it could efficiency is a win-win as it cuts costs become part of the destination.While gas could be a significant step for the individual business and helps totowards a low carbon future, it is equally reduce energy prices when implemented Author Biographyimportant to moderate demand and collectively. Rt Hon Lord David Howell wasdiversify supply. Investing in renewable appointed Minister of State at theenergy can help to stimulate innovation Emerging and developed economies Foreign and Commonwealth Officeand job creation in the short term, and alike are bound by the common goal of in May 2010. He was for ten yearscatalyse technological improvements prosperity. Renewables, energy efficiency chairman of the UK-Japan 21stthat reduce energy costs in the long and subsidy reform enhance that Century Group – formerly theterm. Whereas US$75 billion was invested prosperity, while catastrophic climate UK-Japan 2000 Group.globally in renewable energy in 2009, change could poison it. Gas offers an The renewables challenge Victor Bekink of Talesun, a Chinese solar panel manufacturer, answers questions about the renewable energy industry and explains why we should be wary of gas as an energy source Countries like China and the UK have but I think it’s going to be one of There is seems to be growing been investing a lot in wind power over the largest components of the power enthusiasm for gas as a low-carbon the past decade. Which technology is mix going forward, and I think it’s alternative to coal. What’s your take winning the renewable energy race? proportion is set to grow for many on that debate? I don’t really see a race on renewables. years to come. We don’t really see gas as a viable I think a lot of the technologies are alternative to renewables. First, gas complementary and need to be deployed What’s holding the renewables isn’t actually low carbon, it just burns selectively depending on the conditions industry back? cleaner and better than coal, which prevailing in each individual area. First of all, the environmental isn’t much of a compliment because If you’ve got an area with a lot of externalities related to fossil fuel coal is really dirty. Second, gas isn’t a sunlight and no one using the land, consumption aren’t being priced renewable energy source so it doesn’t then go for solar. If you’re located near properly. We’ve got an unrealistic and solve the long-term energy supply the coast and have a lot of open sea, incomplete understanding of the cost problem that we’re facing. The world then go for wind. of fossil fuels, which means they’re still is developing rapidly and energy being used at prices that are far too low. demand is increasing rapidly too. There are a lot of different factors to If externalities were factored into the We’re sceptical that fossil fuels can keep take into consideration, but at the price, then there’d be a much stronger up with demand over the long term. end of the day I’ve got my reasons incentive to bring forward renewables, Even when you ignore the arguments for being part of the solar industry. including solar. about environmental sustainability, the One of those is that I think solar is world needs to have renewable energy most appropriate for urban settings. Another issue is that, utilities and to fuel its long-term growth. It’s an In cities where you’ve got a lot people governments are hugely bureaucratic energy security issue and fossil fuels crammed in together and a lot of organisations that take a long time can’t provide that security over the demand, then solar seems to work. to change direction. Where energy is long term. It’s more practical where space is at a concerned we need to remember that premium; if you have a south-facing they’ve built up this huge infrastructure Author Biography roof, that’ll do. That’s why 70% of our around fossil fuels, which is very Victor Bekink is the Senior industry now is roof-mounted. expensive to replace. The sort of shift Manager for Business Development we’re talking about was never going to at Talesun, a solar panel I don’t think solar is the only answer, happen over night. manufacturer based in China. |15|
  15. 15. the global energy conversation appendix: survey results These are the full results of a survey on energy challenges conducted by the Economist Intelligence Unit and supported by Shell. The survey was conducted May-June 2011. Compared to your peer group, how knowledgeable do you consider yourself to be about energy issues? (% respondents) Limited awareness 7 About average 44 Better than average 45 Expert 5 What do you see as the key economic challenges facing the worlds energy system up to 2050? Select up to two. (% respondents) Rising energy demand 42 Insufficient rates of innovation in energy related technologies 30 The need to contain carbon emissions 27 Rising energy prices 26 Insufficient energy infrastructure 23 Insufficient supply 17 Energy price volatility 16 Other, please specify 4 No economic problems 0 Dont know 0|16|

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