Energy Policy Scenarios to 2050
7.2. Associated Messages
This study has drawn on the collective wisdom and experience of people actively engaged in the field of energy supplies and services, as well as those who study energy from the outside. A broad range of issues, concerns, and aspirations were gathered from the energy community at large. Not surprisingly, although the view of the future differs from region to region, overarching messages emerged. These messages resonate in all regions of the world and are fundamental to the achievement of the WEC Goals of Accessibility, Availability, and Acceptability.
These messages are a clarion call to those accountable for the formulation and implementation of energy policy throughout the world and highlight some fundamental gaps in the energy fabric of today's society. These messages are grouped into three main themes:
Managing change and complexity through partnerships.
7.2.1. Managing Change and Complexity through Partnerships
The global energy sector will transform through 2050 and will become increasingly complex. The pressure on decision makers in both the public and private sectors will increase and, in particular, the demands on those responsible for energy policy will intensify. Policies formulated today and the resulting actions and behaviours of citizens will have effects and consequences far into the future. Political expediency will have dire consequences for energy sustainability.
The future is far from certain and the rate of technology change in both the supply and demand sides of the energy sector is increasing. Government policies must therefore be quite clear in their intent and less prescriptive in terms of the means, permitting those responsible for implementation the requisite degree of freedom to apply the best technology solutions and systems to meet the objectives. Countries or corporations where policy explicitly favours or restricts certain technology options may find it difficult to keep up with the evolution of the global energy sector.
Just as it is expected of governments to become more direct in expressing policy intent, at the national level but increasingly also at the regional or global level, it is also necessary for private enterprise to become overtly engaged in policy implementation. Industry leaders have to ensure that corporate policy, investment criteria, and business practices are all geared to deliver the goods and services that support the government's policy intent.
Policy initiatives are not only necessary at the national level but also must consistently cascade down to sub-national and local levels. These initiatives have to pay particular attention to the development of transportation systems, planning towns and cities, modernisation of communication systems, and work practices.
Business Practices, Transportation, and Urban Planning
Energy for transportation is or is becoming a significant portion of peoples' daily discretionary energy usage, depending on locality. The effectiveness (efficiency, convenience, and cost) of the mode of transportation is a key factor. It is necessary for policymakers in the public and private sectors to seriously consider transportation requirements. Transportation corridors and systems must be both effective in meeting the needs of consumers and efficient in terms of energy and environmental performance. This is a complex challenge interwoven with city planning and the business and social habits of commuters.
Private sector leaders can review business policies and practices. A majority of businesses still require office workers to commute daily to a central office. This consumes both time and energy and the commute itself is often a stressful experience. Modern communication systems make it possible to carry out much office work from remote locations and rapid advances in computer and communications technology are making it easier.
By taking the lead, private sector leaders send a clear signal to their employees that personal transport considerations are to be encouraged, with potential spillover into attendant social behaviour. This may trigger a new approach to mid- and long-range planning at all levels of government as well as appropriate integration with town and urban planning. In the developing world, significant opportunities to plan towns and cities exist in such a way that as these cities grow, they remain efficient and effective in their energy use. The early provision of mass-transport systems is essential, as the cost of retrofitting is exorbitantly expensive and disruptive to daily business and social concourse. Lessons learned in urban planning by the developed world can be shared with the developing world and there is a significant opportunity for governments to facilitate transfer of knowledge, expertise, and experience.
The demand for energy will continue to grow to 2050, although the rate of growth indicated in this study slows during the later years. Thus, energy tensions (the imbalance between supply and demand) will continue to grow for most forms of energy. In some cases, tension may be due to physical or economic constraints relating to the exploitation of resources of primary energy. In other cases, tension may be due to constrained transfer of technology for political, ideological, or capability reasons (e.g., the deployment of advanced nuclear power technology to the developing world).
To achieve the 3 A's and the aspiration of energy sustainability, it is necessary to relax or alleviate these tensions. New technologies are required. On the supply side, it is necessary to find the means to explore, develop, extract, and convert diverse sources of primary energy that can be economically and sustainably exploited. On the demand side, the price of energy will likely increase as more and more marginal sources are exploited and more and more consumers are supplied. The precise role of clean technology will be the key to affordability and achieving the 3 A's.
Innovation has traditionally been the preserve of entrepreneurs and scientists and most new inventions of the 19th century arose from the private sector. In the 20th century, the cost and risk of fundamental research and development grew and so did the role of governments in undertaking (or at least funding) major research. National research programmes were established and networks of national laboratories were set up, mainly in the developed world. With the drive toward privatisation and deregulation, and new priorities in the last part of the 20th century (post-Cold War), many of these programmes were scaled down. Governments assumed the market would take care of RDD&D, and regulators had a hard time taking private research into account.
Long-term, energy-related research and the associated risk are now beyond the investment appetite of all but the largest of private sector institutions. As a result, innovation in the energy sector over the last 20 years has not anticipated or kept up with need. Innovative capability has not been entirely lost, but has instead been directed at projects that have a shorter time-to-market and a quicker payback profile.
If the 3 A goals are to be achieved, this situation must be reversed. Governments can assist by having clear policies, both in terms of long-term energy goals and with long-term funding, that foster the RD&D. This will help mitigate the private sector risk of undertaking such work and also attract individuals to government-funded projects.
Partnerships between the public and private sectors are essential, if the risks associated with long-term R&D are to be managed and mitigated. The private sector will deliver innovation and ensure that R&D programmes are meaningful, relevant, and that they will deliver new technologies efficiently and effectively. For the demonstration and deployment phase, careful handling of financial support until such time as they are established in the market is required, demonstrating the benefit of cooperative effort of the public and private sectors to achieve the 3 A goals.
Cooperation and Integration (including Public-Private Partnerships)
Energy sustainability is a golden thread that runs through the long-term survival of economies and indeed society. Government has a clear role to formulate, approve, and issue policies that support society's need for energy. At the same time, wasteful exploitation of resources or careless damage to the environment cannot be condoned. Clear and consistent policies that respect the environment while providing the energy necessary are required. An integrated view across the many facets of government is necessary. In fact, it is difficult to identify any one facet of government that does not contribute to and at the same time depend on a sustainable supply of energy.
Delivery of energy systems and technologies is the role of the private sector. The efficient and effective delivery of programmes and projects are private sector competencies. The private sector is accountable in giving effect to government policy. Therefore, partnerships between the public and private sectors are essential if long-term sustainability is to be ensured through the achievement of the 3 A's. This study has shown that the nature of this partnership is one of the most noticeable differences among regions.
There are many examples where cooperation within regions and between regions has delivered benefits to all participants (e.g., power pools). Integrated planning on a broad scale can provide for the development of plans necessary to achieve the 3 A's. This helps to ensure buy-in from all sectors and assurance that the goals of the plans are achieved. Such plans clearly indicate requirements for technology and funding and provide a basis for action by the private sector. Through the assessment of plans, the developed world can clearly understand the aspirations and needs of the developing world and can work toward mutually beneficial exchanges of experience and capability. New mechanisms for the transfer of technology and funding can thus be found based on the clarity of intent and respect under established rules of clear property rights. These can also be encouraged and promoted between the regions and countries in the developing world.
In developed countries, the private sector is well developed and fully capable of taking on the described role. For the most part, government is then able to play an enabling role, setting policy that states intent and leaves it to the private sector to deliver. However, in developing regions, the private sector is often less mature and does not always have the capacity or the capability to deliver, at least on a macro scale. In these regions, the opportunity exists for the private sector to initiate the transfer of capability and capacity from the developed to the developing regions. If this does not happen, or if it happens in an inequitable fashion, developing country governments will have no choice but to move into the void and take on some of the roles normally expected of the private sector. However, the public sector may not yet have the capacity to assume this responsibility. In such cases, international development agencies or governments in the developed world can play a significant supporting role.
Whatever the level of development, a partnership between the public and private sectors - within and across regions - is essential, through which risk and reward are apportioned. This is achieved when there is regular and constructive dialogue and a joint commitment to a national, regional, or even inter-regional vision, backed by a measurable action plan.
7.2.2. Demand-Side Mobilisation
Study participants confirmed that achievement of the 3 A goals is an important measure of the achievement of energy sustainability. It is also generally accepted that acting now to achieve the 3 A's is less costly than doing it later, when measured in terms of future social, economic, and environmental costs.
While all the 3 A's are important, it is difficult to place equal priority on their achievement. In the developing world, Accessibility demands priority. People who have no access to a minimum level of commercial energy services have little interest in the issues of Availability and Acceptability. Conversely, in the developed world where access is generally no longer an issue, great strides have been made in dealing with Availability and attention is now focused more on Acceptability.
Accessibility remains a major problem and threatens global society and the environment. If people do not have access to commercial forms of energy, they will continue to survive by foraging. The demand for traditional biomass is unsustainable and environmentally debilitating as it exceeds the rate of regeneration. Access therefore needs continued strong focus. Because environmental degradation knows no political boundaries, it behooves the developed and the developing worlds to understand the root cause of this energy poverty spiral and to work toward achieving universal access. While overtly working toward the achievement of the Accessibility goal, this will as a matter of course also contribute significantly toward the Acceptability goal.
Historically, governments and supply-side private sector players drive the achievement of the 3 A's. Pressure has been directed at energy supply companies to deliver access, ensure availability, and do so in an acceptable manner. Under this paradigm, some progress has been made toward achieving the 3 A's. However, if we are to make significant progress toward these goals over the next 50 years, then we need a step-change in our approach. It is time for consumers to become as actively engaged in matters of energy sustainability from the end-use side of the equation.
It is in the transportation and stationary energy-use sectors that the biggest opportunities for change exist. Educated energy consumers commit to conducting business and their daily lives in a more energy efficient manner.
Examples of this need abound:
The motor vehicle industry has improved energy efficiency through better engine and body design. In many regions, consumer behaviour trends toward larger and more powerful vehicles, somewhat negating these achievements.
There is a great need for education in all sectors of the energy economy (political, residential, commercial, and industrial). A public poorly informed as to the energy implications of its daily choices and decisions is not helpful. In turn, a poorly informed government can be counter-productive.
In the building industry, there has been progress in the developed world and new buildings are much more energy efficient than in the past. However, these technologies have not been implemented in old buildings and in the developing world, either because the technology has not been made available or it is too expensive, and so houses, factories, warehouses, and many public buildings remain energy inefficient.
Governments, particularly in the developing world, can introduce policies to improve Accessibility and also address Availability and Acceptability. The experience from the developed world can be used to design entry level housing that is energy efficient, appropriate, and affordable for those without access. This, coupled with education, can help inhabitants use energy effectively in an affordable manner with a positive affect on the human condition.
The private sector can play a major role in investing in the quality of life of its workforce. Assisting employees to acquire housing, offering courses on basic home maintenance and handicrafts, safety, etc. can contribute toward helping the poor while improving productivity.
Transfer of technology and skills is not solely the preserve of large corporations. Every business can make a contribution and individual employees can share their knowledge and skills with others, thereby working toward a general elevation of skills, productivity and employability. Key is sound integrated planning that addresses the supply and demand for energy. At a national level, this can only be achieved through effective cooperation of the public and private sectors on both the supply and demand sides of the energy sector. "Competitive advantage" can be used as an excuse for withholding information that is really essential for the national planning of energy systems and the formulation of integrated policies that support the achievement of the 3 A's.
7.2.3. Energy Leadership
The study focused on energy policy and did not attempt to delve into questions of energy resources and other physical dimensions. Importantly, "policy" is something people have control over. Policy is not determined or pre-ordained by physical states of nature but represents conscious human choices. The burden placed on policymakers is therefore onerous.
It is common to consider policy formulation and approval as the domain of government, but it is not exclusive to government. Captains of industry and commerce as well as civil society also have a crucial role to play in terms of policy, both in terms of their capacity to influence government policy and in terms of their own business policies and their effect on energy sustainability (e.g., a policy to only conduct RD&D where the time to market is relatively short or a policy to only invest in projects where there is minimal location risk).
There is a common misconception that free and open energy markets are sufficient and that governments' role is limited to benign oversight. This would be plausible if all players in the market have equivalent market power and freedom of choice. Where this is not the case, some players can dominate and, over time, the energy market can become increasingly distorted, to the detriment of the public interest. At some stage, governments may have to intervene to prevent exploitation of the weak and to restore balance. This is usually achieved through regulations and/or laws.
It is also apparent that market forces, if left to themselves, may create considerable volatility and attendant risk for market participants. Therefore, some form of pragmatic regulation is necessary to ensure sustainable energy supply, particularly in developing countries. It is most certainly necessary for governments to play a larger role than is now the case, to provide a risk-mitigation damper on highly volatile markets, to ensure equitable treatment of all players, and to provide longer-term direction for the development of necessary infrastructure. This role requires very strong leadership from government. There is a fine balance for governments so as to reap the full benefits of good markets while still ensuring that market power is not abused. Governments are expected to issue policies that are clear on their intentions with regard to supplying sustainable energy and that these policies provide frameworks that guide and encourage the private sector to deliver energy goods and services that achieve the policy intent.
At the same time, those at the head of business must engage with government to ensure that they fully understand policy intent and are able to influence it, should that be necessary. Corporate leaders are expected to exhibit strong leadership to ensure market effectiveness and delivery of the policy intent. Strong partnerships are required between the public and private sectors to see that risk is appropriately allocated and mitigated and that rewards are commensurate with the real risks involved.
It is important that corporate leaders in the developed world consider the basis on which they transfer knowledge, technology, education, and funding to the developing world. For the 3 A's to be achieved, this needs to happen in an equitable and affordable manner, otherwise the developing regions may continue to struggle and the energy poverty spiral might accelerate. Such a situation may invite greater international governance that might quickly turn into interference at the national level. However, the successful transfer of technology to developing countries could lead to new opportunities elsewhere. Again, it is very important that public and private sectors engage one another and form partnerships that ensure the achievement of the 3 A's. Particularly, the role of civil society should be stressed and valuable stakeholder involvement in many areas must be encouraged.
Governments need to articulate energy policy and be prepared to help mitigate the risk of long-term R&D. The provision of energy infrastructure may also need to be supported by government policy.
The private sector must take the lead in the delivery of the goods and services necessary to give effect to the national or regional energy policy, doing so within the frameworks provided and making use of the knowledge and technology of the day. At the same time, the private sector needs to work with government on the longer-term vision to try to ensure there is an appropriate balance between the real risk of the project and the reward.
In addition to such public-private partnerships, corporate leaders can actively partner with like-minded corporations as a means of mitigating the risk of projects in developing countries. It may be desirable to partner with local companies in developing countries as a means of achieving effective transfer of technology and funds.
It is important that developing country governments have policies and institutions that support foreign investment and technology transfer. These policies are on such important matters as intellectual property rights and mitigation of financial risk. If not in place, it is unrealistic to expect the developed world to become involved in the developing world.