TODAY’S STUDY: MISSED OPPORTUNITIES IN NEW ENERGY

Energy Technology Perspectives 2012; Pathways to a Clean Energy System (Excerpts)

April 2012 (International Energy Agency) Energy Technology Perspectives 2012; Pathways to a Clean Energy System

Global demand for energy shows no signs of slowing; carbon dioxide emissions keep surging to new records; and political uprisings, natural disasters and volatile energy markets put the security of energy supplies to the test.

More than ever, the need for a fundamental shift to a cleaner and more reliable energy system is clear. What technologies can make that transition happen? How do they work? And how much will it all cost?

click to enlarge

The 2012 edition of Energy Technology Perspectives (ETP), to be released in June, answers these and other fundamental questions. Its up-to-date analysis, data and associated website are an indispensible resource for energy technology and policy professionals in the public and private sectors.

ETP 2012 is the International Energy Agency’s most ambitious and comprehensive publication on new energy technology developments. It demonstrates how technologies – from electric vehicles to wind farms – can make a decisive difference in achieving the internationally agreed objective of limiting global temperature rise to 2°C above pre-industrial levels. It also provides guidance for decision makers on how to reshape current energy trends to build a clean, secure and competitive energy future.

click to enlarge

Key Findings

Recent environmental, economic and energy security trends point to major challenges: energy related CO2 emissions are at an historic high, the global economy remains in a fragile state, and energy demand continues to rise. The past two years (2010 and 2011) also saw the Deepwater Horizon oil spill off the Gulf of Mexico, the Fukushima nuclear accident in Japan, and the Arab Spring, which led to oil supply disruptions from North Africa. Taken together, these trends and events emphasise the need to rethink our global energy system. Whether the priority is to ensure energy security, rebuild national and regional economies, or address climate change and local pollution, the accelerated transition towards a lower-carbon energy system offers opportunities in all of these areas.

The Energy Technology Perspectives 2012 2OC Scenario (ETP 2DS)1 highlights that achieving this transition is technically feasible, if timely and significant government policy action is taken, and a range of clean energy technologies are developed and deployed globally. Based on current trends, are we on track to achieving this transition? Are clean energy technologies being deployed quickly enough? Are emerging technologies making the necessary progress to play an important role in the future energy mix? These are the key questions addressed in this report.

click to enlarge

In summary, the following analysis finds that a few clean energy technologies are currently on track to meet the 2DS objectives. Cost reductions over the past decade and significant annual growth rates have been seen for onshore wind (27%) and solar photo-voltaic (PV) (42%). This is positive, but maintaining this progress will be challenging. Government targets for electric vehicles stock (20 million by 2020) are ambitious, as are continued government nuclear expansion plans in many countries, in both of these cases, significant public and private sector efforts will be necessary to translate plans into reality.

The technologies with the greatest potential for energy and carbon dioxide (CO2) emissions savings, however, are making the slowest progress: carbon capture and storage (CCS) is not seeing the necessary rates of investment into full-scale demonstration projects and nearly one-half of new coal-fired power plants are still being built with inefficient technology; vehicle fuel-efficiency improvement is slow; and significant untapped energy-efficiency potential remains in the building and industry sectors.

click to enlarge

The transition to a low-carbon energy sector is affordable and represents tremendous business opportunities, but investor confidence remains low due to policy frameworks that do not provide certainty and address key barriers to technology deployment. Private sector financing will only reach the levels required if governments create and maintain supportive business environments for low-carbon energy technologies.

click to enlarge

Recommendations for Energy Ministers

Member governments of the Clean Energy Ministerial (CEM)2 process not only represent 80% of today’s global energy consumption, but also about two-thirds of projected global growth in energy demand over the next decade. If the 2DS objectives are achieved, CO2 emissions among CEM member countries would decrease by over 5 gigatonnes (Gt), and they would save 7 700 million tonnes of oil equivalent (Mtoe)3 through reduced fuel purchases. Globally, the near-term additional investment cost of achieving these objectives would amount to USD 5 trillion by 2020, but USD 4 trillion will be saved through lower fossil fuel use over this period. The net costs over the next decade are therefore estimated at over USD 1 trillion4. More impressively, by 2050, energy and emissions savings increase significantly as CO2 emissions peak, and begin to decline from 2015. In this timeframe, benefits of fuel savings are also expected to surpass additional investment requirements for decarbonising the energy sector. Potential savings among CEM countries in 2050 amount to over 29 Gt of CO2 emissions and about 160 000 Mtoe through reduced fuel purchases. This is equivalent to more than a 50% reduction in CO2 emissions from 2010 levels, and fuel purchase savings equivalent to twice total CEM country energy imports over the past 40 years. This combination of reduced energy demand and diversification of energy sources will result in far reaching energy security benefits.

Currently, CEM and governments around the world are not on track to realising these benefits. Few forums have as significant a potential to make a major impact on global clean energy deployment, and possess the operational flexibility to make it happen: this opportunity and momentum must be seized. Joint commitments taken at the third Clean Energy Ministerial can help overcome existing barriers to clean energy technology deployment, and scale-up action where it is most needed. This can be achieved by raising the ambition of Clean Energy Ministerial efforts to:

click to enlarge

* Encourage national clean energy technology goals – supported by policy action and appropriate energy pricing – that send strong signals to the markets that governments are committed to clean energy technology deployment.

* Escalate the ambition of international collaboration – by building on the CEM Initiatives to take joint actionable commitments, and closely monitor progress against them.

With these two objectives in mind, if taken up by energy ministers, the following three key recommendations, and specific supporting actions, can help move clean energy technologies from fringe to main-stream markets.

1. Level the playing field for clean energy technologies

Price energy appropriately and encourage investment in clean energy technology The Clean Energy Ministerial has proven to be a valuable mechanism to support actions that address individual technology challenges, but the national policy frameworks that create large-scale markets for clean energy technology uptake are even more critical. First, energy prices must appropriately reflect the “true cost” of energy (e.g. through carbon pricing) so that the positive and negative impacts of energy production and consumption are fully taken into account. Second, inefficient fossil fuel subsidies must be removed, while ensuring that all citizens have access to affordable energy. In 2010, fossil fuel subsidies were estimated at USD 409 billion (up more than 37% from 2009), against the USD 66 billion allotted for renewable energy support. The phasing-out of inefficient fossil fuel subsidies is estimated to cut growth in energy demand by 4.1% by 2020 (IEA, 2011a). Third, governments must develop policy frameworks that encourage private sector investment in lower-carbon energy options. Financing remains a challenge for low-carbon energy technologies despite availability of capital. The question is how to transition traditional energy investments into investments in low-carbon technologies. An appropriate policy framework needs to cover not just climate policy, but also include energy and energy technology policy, and, critically, investment policy. These three actions will allow clean energy technologies to more effectively compete for private sector capital.

click to enlarge

Develop policies to address energy systems as whole

Segmented approaches to energy investments rationalise the need for targeted initiatives, but overlook the potential for optimising the energy system as a whole. Electricity systems are experiencing increased deployment of variable renewables; more electricity will be used for electric vehicles and heating applications; and peak and global electricity consumption is rising. These three changes in the electricity sector urgently require new approaches that allow smarter energy delivery and consumption.

The understanding of energy production, delivery and use from an integrated, systems perspective will help leverage investments from one sector to another. This will require a better understanding of new technologies and stakeholders, who have traditionally not been involved in the energy sector. Revised approaches to energy system deployment must utilise existing and new infrastructure to develop flexible and smarter systems that allow for accelerated deployment, while simultaneously reducing costs.

Step-up to the CCS challenge

CCS technologies deserve to be singled out. CCS remains critical to reducing CO2 emissions from the power and industry sectors, but fundamental challenges must be addressed if this technology is to meet its potential. Public funding for demonstration projects remains inadequate compared with the level of ambition associated with CCS; large-scale integrated projects are coming on line far too slowly; beyond demonstration projects, incentives to develop CCS projects are lacking; and too little attention has so far been given to CCS applications in industries other than the power sector, such as iron and steel, cement manufacturing, refining or biofuel production. Without CCS technologies, the cost of achieving CO2 emissions reduction objectives will increase.

Energy ministers should:

* Commit to, and report on, national actions that aim to appropriately reflect the true cost of energy production and consumption. * Build on G-20 efforts to phase-out the use of inefficient fossil fuel subsidies, while ensuring access to affordable energy for all citizens. * Consider how new mechanisms for systems thinking could be established, by increasing the CEM focus on cross-cutting energy systems issues. CEM governments should build on insights from the High Renewable Electricity Penetration case studies completed for discussion at CEM3, the work of the International Smart Grid Action Network (ISGAN), and the Clean Energy Solutions Center, to accelerate the creation of tools and best practices for optimising electricity systems.

* Accelerate progress against the seven recommendations made by the Carbon Capture, Use and Storage Action Group (CCUS) during CEM2. It is especially important to scale-up funding for first-mover demonstration projects and focus on opportunities for CCS applications in industry. Governments should also implement the recommendations presented by the CCUS Action Group to CEM3.

click to enlarge

2. Unlock the potential of energy efficiency

Implement energy efficiency policies and enhance efficiency standards

There have been incremental improvements in energy efficiency globally, but its large potential has yet to be tapped. In the buildings sector, improvements in the efficiency of the building shell will have the largest impact on energy savings. This can be achieved through the stringent application of integrated minimum energy performance codes and standards for new and existing buildings, retrofitting the current building stock, and deploying available energy-efficient technologies. For industry, major potential still remains for energy and economic savings through the use of best available technologies and adoption of energy management systems. In transport, improving fuel economy is the number one action needed to reduce CO2 emissions within the next decade.

The IEA has developed 25 energy efficiency recommendations to help governments achieve the full potential of energy efficiency improvements across all energy-consuming sectors. If implemented globally without delay, actions outlined in the recommendations could cumulatively save around 7.3 Gt of CO2 emissions per year by 2030 (IEA, 2011b).

Leverage the role of energy providers in delivering energy efficiency

Energy providers have proven effective in delivering energy efficiency if the right regulatory framework and enabling conditions are established. In fact, over USD 10 billion per year is spent by energy providers on end-use energy efficiency, and this amount is expected to double over the next five years. Given this success to date, and the pressing need to scale-up energy efficiency investments, governments should consider carefully how to mobilise energy providers to deliver energy efficiency.

Energy ministers should:

* Commit to the application of the 25 Energy Efficiency policy recommendations to help leverage energy efficiency potential across all energy-consuming sectors.

* Expand the focus of the Super-Efficient Equipment and Appliance Deployment Initiative (SEAD) to strive for more stringent efficiency standards and harmonised test procedures globally. SEAD or other CEM initiatives could also broaden their focus to look at global best practices in building energy codes and standards, to help governments to design and implement integrated building energy savings policies.

* Cooperate with the four Global Fuel Economy Initiative (GFEI) partners (IEA, International Transport Forum, United Nations Environment Programme and FIA Foundation) to expand efforts related to the development and implementation of stringent fuel economy standards, and fiscal support measures. Broadening the GFEI’s mandate could also be considered, with a view to addressing the challenge of fuel economy from freight trucks, buses and other modes of transport; and to explore government coordination to improve and eventually align fuel economy test procedures, in order to maximise on-road fuel efficiency and cut compliance costs.

* Promote cooperation and knowledge-sharing through large-scale energy efficiency programmes, such as energy provider delivery of energy efficiency to their customers. This can be done by building on the outputs of the PEPDEE (Policies for Energy Provider Delivery of Energy Efficiency) Initiative5, to implement identified regulatory mechanism options that could help mobilise energy providers to deliver energy efficiency.

click to enlarge

3. Accelerate energy innovation and public RD&D <;p> In a period of continued fiscal austerity, government support for technology innovation remains critical. Annual global public RD&D spending remains lower than what is necessary to achieve the performance and cost objectives required to make clean energy competitive. However, promising renewable energy technologies, such as offshore wind and CSP, and capital intensive technologies, such as CCS and Integrated Gasification Combined Cycle (IGCC), face impediments to deployment. While public RD&D peaked in 2009 as a result of economic stimulus spending, it declined in 2010 to just above 2008 levels. Preliminary 2011 data suggests, however, that spending is again on the rise. Overall, the energy sector only accounts for about 4% of total government R&D spending, down from above 11% in 1980. This small share and significant decline represents a major challenge given the strategic importance of this sector. Coupled with continued measures aimed at fostering early deployment to provide opportunities of learning and cost reduction for more mature technologies, targeted RD&D efforts will help bring key early stage clean energy technologies to market.

Energy ministers should:

* Share technology specific data on public spending on energy RD&D to help develop a global picture of RD&D gaps and needs. Additionally, CEM governments should consider joint RD&D efforts to improve the performance and reduce the costs of technologies at the early innovation phase, including sharing lessons learned on innovative RD&D models.

* Broaden the scope of the Multilateral Solar and Wind Working Group, by collectively pledging to joint RD&D efforts to improve the performance and reduce the costs of renewable energy technologies entering the deployment phase. For example, to address the challenges faced by offshore wind technologies, critical elements include the development of the larger scale wind turbines that can be deployed off-shore and platforms suited to deeper water. For CSP, improved heat-transport media and storage systems are essential. To further spur deployment of renewable energy technologies, governments should also consider best policies for encouraging generators to increase investment in such technologies, including by facilitating novel business models and the development of voluntary labeling programmes.

* To support governments in achieving their current electric vehicle targets, the Electric Vehicle Initiative (EVI) could be strengthened, with resources to effectively co-ordinate EV RD&D and planning efforts, and expand work to ensure adequate coordination, among governments, manufacturers, and other stakeholders around the world.

Part 1…Tracking Clean Energy Progress…Part 2…Financing the Clean Energy Revolution…

Tweet