Tag Archives: Carbon

We like our shale gas a little naughty and the Earth a little dirty

The shale gas industry, may be headed for a meteoric rise as global demand for the ‘cleaner’ fossil fuel grows, but the word ‘clean’ will need to be applied to the gas extracted 2 miles below the surface to 10 miles above the surface. Somehow the irony of extracting a ‘clean’ fossil fuel, that ‘only’ emits half the CO2 of oil encapsulates the trade-offs the world is attempting to address climate change. Even the global forum of Rio+20, now taking place, reflects a half-hearted attempt to try to find a global solution to the pressing environmental issues. Shale gas becomes representative of our times. “We’ll try to be clean, but we also like being a little dirty.”

Becoming a celibate renewable energy and energy efficient world, even when the potential of ‘green jobs’ is floated, like now in Rio de Janeiro or in the EU’s new energy efficient directive, is not enough. Because society, politicians and capital markets are only slowly developing innovative and joined-up strategies to incentivize a new energy paradigm. The result is busying ourselves with regulatory practices that ensure shale gas fracking practices do not pollute ground and surface water, along with preventing methane emissions into the atmosphere.

These two above paragraphs just took me two hours to write. What I had set out to write was about the identified limitations to regulatory enforcement of the shale gas industry and the awareness by the financial community of the dangers of methane release by extracting shale gas – which zeros-out the benefits of using gas. There are a ton of new articles over the past month, demonstrating the increasing attention to how shale gas is extracted, the moratoriums in Europe on fracking and the continued international push by the US for other countries to use the technology. The Golden Age of Gas, according to the IEA, may be emerging, altering our current energy usage and inhibiting a concerted push into renewable and really clean energy.

The title of this post, should be ‘The Glocalization of Shale Gas’, thus signaling both the global diffusion of the technology and the local aspects of the technology. ‘Glocalization’ is a term from the 1990s to describe the fusion of global practices with local practices. Using the term enables the capturing of broad global processes with the continued importance of the local. But let’s admit it, we like it dirty more than we like it clean. We can all hail the decision by huge institutional investors, which control $20 trillion, to demand that the shale gas industry prevents methane emissions. We can appreciate the go-slow approach of France, Bulgaria and now Romania to impose moratoriums on fracking technology. However, this only boots assessment of the technology into professional commissions that examine the narrow technological aspects of the technology, and out of public emotional reactions. Thus after studying the technology, they will proclaim the technology ‘clean’ if done properly and with regulatory oversight. The light will turn green.

But what is ‘green’? The world likes it dirty – we are naughty to be playing with carbon. Why not have a little more extraction here, and here and oh- over here; even here are some deposits in my backyard. Locally, it is just a little bit more and then some more. The mineral rights and taxes produce income for the state, for the landholder, and keep energy prices just a little lower, so maybe we can all create more jobs. In these times, it is more jobs that we need. Just as we all pretended financial wealth was being created for the past thirty years, the global economic crisis has exposed just how much the global financial landscape has changed. Middle class wealth has been dramatically cut and the credit that fueled the boom is now gone (but where?). The global green credit that we are riding refers to the ecological wealth we are withdrawing from the Earth – we are transforming it into CO2 that we pump into the atmosphere. Literally, burning carbon credits and putting them out of our reach. 

So what is the result? Well, we can spend our time developing best practices to limit methane emissions from gas wells, but it really is not a great start, it is counting beans that will not grow and won’t enable us to get the golden goose. Jack may have climbed the beanstalk and climbed into the clouds to come back down with the golden goose, but counting whether shale gas can be extracted and is our golden goose to a clean fossil fuel era is a fallacy. We will just burn more of it, thinking that it is clean, but the golden goose has already choked on our emissions in the atmosphere. Above the clouds, on the ground and in the oceans, our use of fossil fuels continues to alter the environment – to our detriment. Rather than using the term ‘glocalization’ to represent an economic and social condition, maybe it is better to understand it as fusing the consequences of our local actions with the global implications of our actions. Shale gas may be good for our local economies, but we collectively fail to address the global impact of our actions.

Why regulation protects utilities from politicians

‘All politics is local,’ is the commonly held phrase. This same phrase can be easily applied to energy. ‘All energy is local.’ The evolution of the energy sector is from the bottom up, from the gasification of street lamps to universal electricity service, the electricity and gas sectors are rooted in community and politics. This relationship is essential to understand in the deployment of low carbon technologies and energy efficiency measures.

To steal a headlining grabbing quote, “Prostitution, horse racing, gambling and electricity are irresistible to politicians, says John Rowe, the CEO of the Chicago-based utility Exelon. The interview in the Wall Street Journal with this practical executive provides an important perspective of how the utility industry balances the constant political demands with the understanding that regulations are the industry’s best friend. Not that regulation just protects the industry from the worse excesses that itself engages in, but also from political meddling that interferes and disrupts the long-term planning horizons necessary in the industry.

 

An effective regulatory environment that accounts for the environmental impact of the utility industry can play an important role in shaping the long term investment strategy of companies.

“What we are trying to do,” Mr. Rowe argues, “partly out of self-interest and partly to avoid sticking our customers with things that are really expensive, is to push for some sort of orderly environmental framework on the markets.” 

An orderly regulatory framework can provide the structure to advance technology (see his quotes against nuclear and carbon capture and storage) to invest in the most economically efficient plants and, presumably, overall technology (grid, smart meters, etc.) that will reduce carbon emissions while meeting the needs of consumers at the least possible costs. Regulations and market efficiency do not have to be separate.

The comparison in how the markets are handled by governments in the US and EU are stark. I won’t go into great detail to highlight their differences, the overall approach, whether federal or multilateral EU-style, does need to be uniform in pushing towards a common direction of low carbon and prompting the investment in new technologies. The EU is better organized in this respect while the US is having to relying on local and state governments to force and incentives the utility sector to change. This is not the most efficient approach when you consider the large multi-state scale of the utility industry and the significant infrastructure investments that need to occur. While small can work, large is can make a significant impact.

I’ve emphasized here the role that regulation, rather than politics, can play to induce change and investments. The politics, as Mr. Rowe points out is intertwined in the types of investments and the types of regulations. While job creation and pandering to votes is the politician’s main job, so should be the longer term vision of an efficient energy system that uses not the most politically favored ‘green’ energy, but technology that costs less and pollutes less. Less is more in the low carbon energy sector.

Energy is as irresistible to politicians as gambling and horse racing

 

Making institutions that serve our children

The matter that institutions are made of is routines, rules and structure. This can both prompt and inhibit innovation. New institutions are conceived in a time and place to meet pressing needs. Overtime, the rules and structures that were put in place age, however as both external and internal factors change (i.e. personnel, technologies and political-social circumstances) institutions can become restrictive unable to meet new demands and address opportunities.

Institutions are essential for change, but they can hold back ideas and technologies, leading to institutional and technological lock-in..

 

The examination I have done on the topic of risk governance applies to broad based institutions. My recent keynote speech at the EU-US Summit on Science, Technology and Sustainable Economic Growth, addressed the need to “break rulez” to prompt a more rapid uptake in new low/zero carbon technologies.  The presentation was a challenge for me, because I had both the opportunity to show my well constructed research to a wide audience but I also wanted to convey a sense of urgency – radical urgency. And convey it with emphasis that stays within an academic discourse (thus keeping people just on the edge of falling asleep).

The reason for my emphasis on ‘urgency,’ or ‘the pace of change’ as I framed it, is essential if we are to achieve an almost zero carbon energy system by 2050. Therefore it becomes almost impossible to speak of reaching these goals without discussing how to revitalize, restructure and revamp institutional processes in an urgent manner. Rulez need to be broken.

During the day long program, the urgency of the need to develop and deploy zero carbon processes and technologies was stated well by Nick Gotts, of the James Hutton Institute, when he rebuked another speaker that said we need to gradually roll out  new technology. Nick said we can’t wait another generation or two to begin rolling out new technologies, the significant consequences of failing to act now, will only be felt after 2050. Patrick Criqui, director at the Centre National de la Recherche Scientifique (CNRS), later finished this thought by stating that we are working for the babies of today. And he is absolutely right.

My two year-old son was sick last weekend and had a high fever.  Whenever there is a fever in the house, my wife and I go through the same discussion. She takes the temperature, looks at the thermometer and then says, “Oh – its 39 degrees.”  And then I ask “what’s that in Fahrenheit? Is it high?” –  I only know what ‘normal’ and ‘high’ are in Fahrenheit. So I feel the child’s forehead. Then I know how hot the fever is. But really, at the end of the day, does it matter if the fever is 38 or 40? You have to take action to reduce the fever. Even with his high fever, my son kept telling me, “let’s go dad, let’s go outside.” He’s picked up my restlessness.

Inaction only perpetuates the current condition. My effort to break institutional lock-in and ensure the wide deployment of new technologies is based on this restlessness. At least, when my son is older, he can understand why I was always pushing for all of us to get going. It doesn’t matter what the temperature will be in 2050. It will be hot, and the environment and us will suffer, thus action must be taken now. The current pace of change is not enough to stop the fever. The rulez institutions hold onto, like mementos from their own childhoods, need to be broken. It is the children of today that the institutions need to serve.

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The question becomes can you carry the inspiration for fighting institutions from your youth to middle age and beyond? Can the energy of the mosh pits of the 1990’s be transformed to fight climate change? Do we become lazy and content like the baby boomers and fail to make change like they said they would in the 1960’s and 1970’s. Can we afford to fail the next generation?

 

 

Visions beyond flat-earthers: Providing leadership on low carbon energy

I sometimes wonder if those top people that fly in and fly out for conferences ever actually remember what they say. The top CEO’s and politicians for events must give the same speech 20 times before they begin to alter it. Well, while I don’t discount this practice, I was struck by Ferdinando Beccali-Falco, the President and CEO of GE Europe and North Asia. This time I heard him at the 21st Economic Forum in Krynica Zdroj, Poland on September 9, 2011.

Getting tired of waiting for the future energy system

Mr. Beccali-Falco was also at the Energy Forum that took place in 2008 in Budapest. The main topic was about regional energy markets. There I remember him, and others, made a good case for the need to increase regional coordination in the energy sector. Although not much has happened since. This year, he even referred to his previous speech in the region and the need to increase economies of scale. He laminated on the lack of progress since then. He places this down to the lack of political will along with not enough vision and understanding that a new energy system can bring. For him, we are hitting the roadblock for implementing policies, with politicians and bureaucracy central in this roadblock.

The speakers at the Economic Forum – generally – could be divided into two groups. The first group had the vision and knowledge that a more integrated, low carbon, and smart energy system can provide – at around the same cost as the current system. The second group, were grappling with old arguments of price and uncertainty that an integrated energy system with high levels of renewable energy sources brings. Thus the second group views gas as an essential element to bridge to a low carbon energy system. Although this is a false view, as enough technologies exist to begin to strongly re-invent the energy system.

My contribution to the conference was in the form as a commentator to the panel discussion on ‘After Fukushima: Europe’s future energy mix.’ Lacking on the panel was someone that represented the renewable energy sector, and while they were present in other sessions, I focused my comments on the strong need to reduce energy use, increase RES and quickly begin the transition to a post-carbon energy system. According to the European Climate Foundation, to make the transition happen within a moderate investment climate, it must begin within the next five years. The inability of governments, regulators and energy companies to cooperate in the CEE region, fails to provide the foundation for this long – but fruitful – transition. (see my earlier post on the necessary cooperation).

Overall, the conference was informative and inspiring. There is widespread agreement, at least in the energy industry, that the smart grid and demand reduction are essential for the future energy system. Both Schneider Electric and Alstrom had strong speakers describing the benefits that a smart grid bring. The political tension that previously marked energy conferences, has given way to more practical and technical issues. However, it can expected that this aspect will emerge again. One of the essential elements of a smart grid is complete market transparency in the electricity system. For those like, Mr. Beccali-Falco who are calling for regional integration and rolling-out new technologies at a large scale, it is distrust and vested interests into nationally controlled energy markets, which remain as the primary barriers for the emergence of the smart energy system of today.

 

Future speaking engagements on post-carbon EU energy transition

August has emerged as an important month to charge my batteries and get my thoughts straight on  a number of energy related topics. This is essential as I’ve been asked to speak at two big events in September.

Outta of this world energy

 

The organizers from the Eastern Partnership have been kind enough to invite me to their high level gathering, the 21st Economic Forum in Krynica Zdroj, Poland, from September 7 -9, 2011. Previously, the organizers at the Eastern Partnership invited me to speak and moderate at their Energy Forum that occurred last November. In September, I’ll be on the panel discussion about the post-Fukushima era in the Central European region. At this point, I think I will concentrate on assessing the investment/political risk environment in the CEE region and how this will influence the roll-out of the next generation of large scale energy systems. The root of my talk lies in two studies. One, the assessment of the post-privatization of electricity distribution companies in three countries and, two, an article on the identification of contractual

risks and risk regimes that influence short and long term energy investments in the EU during the push for a post-carbon world. This is based on an EU FP7 research project that is now being completed.

The other engagement, that I’m equally humbled to accept, is the ”EU-US Summit on Science, Technology and Sustainable Economic Growth.’ I’ll be one of two keynote speakers. This will be September 29th, in Brussels and hosted by the European Commission. The background to the summit, and the events surrounding it, can be found here. As the page for the 2010 launch of the program explains,

With support from the National Science Foundation, the Department of Energy, and the European Commission, the Howard Baker Center for Public Policy, the Woodrow Wilson International Center for Scholars, and Oak Ridge National Laboratory are coordinating a year-long dialogue between the U.S. and the EU on science, technology, innovation, and sustainable economic growth (STISEG). The purpose is to enhance our understanding of the ways in which science, technology, and innovation affect sustainable economic growth, to identify impediments to the flow of science from the “bench” to applications; and to explore policy options that might enhance the impact of science on economic activity and societal needs.

This is really a surprise and honor, as it comes out of the EU FP7 PACT project that I’ve been working on for a few years now. I’ll be presenting the results from the portion of the project that asked stakeholders how to make the transition happen. Some of this is incorporated into my article for Energy Policy (still in progress). My presentation will draw on how the transition process is perceived to be taking place in the EU and the risk governance structure.

So, if you are in town for either of these events, stop in, not to just to see  me, but to see some really fine speakers and a high level of engaging dialogue about the future of the EU’s (and US) transition to a more sustainable and integrated energy system.

Nuclear Power in Europe – Debate results

The push for or against nuclear power has taken on a new dimension since the Fukushima nuclear accident in Japan earlier this year. The German government decision to go it alone, without nuclear power, is influencing the debate in Europe. These were some parameters of the debate last night at the Common Sense Society event that was held at the Ybl Palota in Budapest.

The organizers were kind enough to invite me to debate the merits of nuclear power in Europe. The discussion was moderated by András Deák (Center for EU Enlargement Studies), while Ada Ámon (Energiaklub) took the opposing side of why nuclear power is not needed in Europe. I argued for nuclear power and why it is central for reducing carbon emissions. However, it needs to be stated that I’m not an expert on nuclear power. But I feel strongly enough and informed enough, as I told the organizers, that I can explain why we need nuclear power to keep climate change in check. I believe I made a coherent case for it last night – or at least within the 7 minutes alloted and in the follow up questions. I thought I would share my bare bone notes here.

I'm clean and green.

My argument was based on the following:

Introduction:

1. Nuclear power is needed because of the failure of society and politicians to advance a more green agenda, with clean technology, earlier and fast enough.

2. Europe and the world need nuclear power for two reasons, because it admits zero greenhouse gases and it is a proven technology

My argument is based on T and T: Time and Technology.

  • We are almost out of Time
  • Green Technology needs to be widely deployed

However, there are strong time and technological limits that must be dealt with. The most pressing limit, is the rise in global temperatures due to CO2 emissions. This is particularly scary, when we consider the following study. There is now a greater than 50% chance that global temperatures will exceed 3°C increase by 2100. This is based on a study that says, pledges by countries are not sufficient to keep global temperature rises below the 2°C agreed in the Copenhagen Accord. Therefore TIME is of the essence.

Since time is of the essence we need to consider the evolutionary timeline of energy systems laid out by the United States Energy Secretary, Steven Chu. “Look how long it took to make the transition from wood to coal, coal to oil and gas: 50-60 years. We cannot make this transition in another 50 or 60 years. It will be too late for the climate” (Thompson 2010). Therefore, there is an urgency to transition to a new energy system. Only through a concerted effort, like in Germany, where there is a strong political and social agreement, that the high short-term price will be paid to transition to an energy system without nuclear power.

This transition in Germany is particularly important. (this point comes out of the discussion after the debate, but is very important). Germany is now ready to finance the shut-down of viable nuclear power plants. The ratepayers and the taxpayers of Germany will have to pay an extra amount to the owners of these facilities NOT to use them. This is a substantial development, as it indicates the importance of the transition. This is what occurred in the United States when they moved from a monopolistic to a ‘competitive’ electricity market. The sunk costs that had accrued under the monopolistic system, were taken over by states, in order to foster a more competitive electricity market, under the belief that electricity prices would be lowered. This is an important political and financial decision that does represent a systemic transformation in the dominant energy regime.

Time and Technology:

Homer can save the earth with his nuclear power

We need to consider the GLOBAL SCALE of climate change:

  • Downsides: Nuclear waste remains with us for 100,000 years. Finland is building a storage facility to last for 100,000 years.
  • Climate change caused by human activity, releasing CO2, remains with us for 100,000 years. If we don’t act within the next few years we will not be able to keep global temperatures low and even worse cataclysmic events will occur. How many people does severe weather kill each year – as a result of climate change? What will be the result of drought on global food supplies? (for a great discussion on this 100,000 year timeline listen to this podcast, with Curt Stager).

We also need to consider the LOCAL SCALE impact of nuclear power:

  • Fucushima has demonstrated the worst case scenarios of total meltdown of three reactors. The result has been a minimal environmental impact. No doubt very bad for the locals but on a global scale, much much less compared to the impact of global warming and the carbon and toxic emissions from coal power plants.
  • Third generation nuclear power is safer, less wasteful and is more efficient
  • Passive safety features. European regulators will require core catchers. A containment vessel around the main containment vessel.
  • Nuclear power is the outcome of the pursuit for a more sustainable and independent energy system from the 1960s and 1970s.

It is important to remember that energy systems are local. Local opinions and the governance systems matter – they choose the path for technology that will be producing zero carbon emissions by 2050. WE MUST DEVELOP MORE NON-CARBON BASED ENERGY SOURCES NOW. NUCLEAR GETS US TO WHERE WE NEED TO BE WITHIN THE TIMEFRAME. Not just because it is clean, but because it works.

The EU’s Second Strategic Energy Review, calls for decarbonizing Europe’s electricity system by 2050. How can we get there? Nuclear power is a product of past efforts to create a more sustainable and clean energy system. It was a concerted goal that had political, social and agreement with industry. We don’t have time to reinvent the wheel. Therefore, nuclear power is needed.

Conclusion:

The present energy system is based on a concerted government, economic and social regime. Focused over years, decades, to build a particular system. It is these factors that will shape whether we need to use nuclear power to meet our future energy demands. It would be great not to use nuclear power, but is that realistic? At least for the next 100 years? If gas is the present bridge fuel for another 20 or 30 years, then nuclear – and third generation nuclear is the bridge fuel for the next 60 to 100 years. The focus is on carbon reduction, AND QUICKLY. If we don’t do that then the planet for the next 100,000 years will be broadly impacted. Fukushima and Chernobyl show us the devastating localized impact of nuclear power accidents. We need to consider not just the developed economies of Europe, but the planet as a whole and the impact that our demand for energy has on the planet. If society, politicians and the economic sacrifices can build a zero carbon energy system without nuclear power – great, but so far outside of Germany there is not this widespread support. Six European countries overwhelming rely on nuclear power as their main source for power. Forcing them to develop a new energy system, along with other countries that use nuclear power too, will require a very long lead time. 50 or 60 years, we do not have that long. Nuclear power, because it is the product of a previous energy regime, can be used as a key power source to transition the planet to the next clean energy system.

 

 

 

    1. Time and Technology

  1. GLOBAL SCALE

  2. Downsides: Nuclear waste remains with us for 100,000 years. Finland building a storage facility to last for 100,000 years

  3. Climate change caused by human activity, releasing CO2, remains with us for 100,000 years. …………….If we don’t act within the next few years.. … How many people does severe weather kill each year – as a result of climate change?

LOCAL SCALE

  1. Fucushima has demonstrated the worst case scenarios of total meltdown of three reactors. The result has been a mininumal environmental impact. No doubt very bad for the locals but on a global scale, much much less compared to the impact of global warming and the carbon and toxic emissions from coal power plants.

    1. Third generation nuclear power is safer,less waste and is more efficient

    2. Passive safety features. European regulators core catcher

    3. Nuclear power is the outcome of the pursuit for a more sustainable and independent energy system.

    4. Why is nuclear power positioned so well for this transition?

  2. Energy systems are local. Local opinions and the governance systems matter – they choose the path for technology that will be producing zero carbon emissions by 2050. MUST DEVELOP NON-CARBON BASED ENERGY SOURCES NOW. NUCLEAR GETS US TO WHERE WE NEED TO BE WITHIN THE TIMEFRAME. Not just because it is clean, but because it works.

  3. EU’s Second Strategic Energy Review, calls for decarbonizing Europe’s electricity system by 2050. How can we get there? Nuclear power is a product of past efforts to create a more sustainable and clean energy system. It was a concerted goal that had political, social and agreement with industry. We don’t have time to reinvent the wheel.

After Fukushima: Assessing nuclear power projects in CEE/SEE

The critical situation at the Japanese Fukushima Daiichi nuclear power plant has already influenced European energy policies but may have limited impact in Central Eastern Europe. The Japanese nuclear crisis is in its early days, but is characterized by the attempt to prevent massive amounts of radiation being unleashed from damaged nuclear reactors, destabilized by two cataclysmic natural disasters. Whether a third man-made calamity, can be prevented remains to be seen. In Europe the political response was swift. Germany shut down seven nuclear power plants and is conducting a full scale review, while the European Commission is developing common EU nuclear standards to be issued in a Directive in the summer. In Central Eastern and Southeast Europe the disaster will have a limited impact on the already faltering efforts to build new nuclear power generation.

The social and political tensions over nuclear power center on the dangers of harnessing an inherently harmful energy source to produce ‘clean’ electricity. Despite these misgivings, the necessity for low carbon energy sources is critical. The projected ‘renaissance’ of nuclear power was seen as playing an important role that could contribute to producing sufficient quantities of power with zero carbon emissions. In Central Eastern and South East Europe, most countries have a long history with nuclear power. They now have plans to expand the amount of nuclear power, however these are faltering due to the significant upfront costs. Any reconsideration of expansion plans in this region due to events in Japan will be minimal.

Projects throughout the region can be seen to be far from being developed. Romania has long considered adding additional nuclear capacity to use for electricity exports and to replace aging coal fired generation. In January 2011, the consortium that was to build two nuclear reactor blocs in Romania fell apart; structuring the financing for the facility was a continuous problem. In March 2011, Bulgaria began to reexamine the cost and viability of a 2,000 MW nuclear power plant to be built by Russia’s Rosatom; disagreement over the price and financial conditions are the main points of contention. The Czech Republic and Poland both have plans to build new reactors but deadlines are continuously missed. Hungary remains committed to replacing its present nuclear capacity by 2030; the bidding process for building another bloc is to begin in 2013. Financing is expected to come from the private sector but Hungary is strongly politically committed to nuclear power and with a lack of natural resources for low carbon generation, the state may finance portions of this project. For all these projects, like in Hungary, it will have to be determined whether it is in the national strategic interest to build these plants as they will need to shoulder more of the financial risks to make the projects viable.

Pressure to actually build these plants in the CEE and SEE region may increase after 2013. This is when the EU’s Emissions Trading System will require power plants to purchase carbon allowances. The cost of producing electricity from coal will increase and be felt by consumers. As one utility executive stated in an interview (drawn from a recent research project by this author), “In Europe they push for dramatic and rapid CO2 targets, but no nuclear, no coal, whatever technological mix is left is costly and will not support European industry” (Energy Utility Executive 2009).  This is the crux of nuclear power: What are projected high costs today may be low in 2030 when carbon based energy will be substantially more expensive.

The safety issues of nuclear power will always surround the technology. Events in Japan, presented in dramatic helicopter water drops, demonstrate the failure of the technology. However, the countries in the CEE and SEE regions are geographically close to the last nuclear disaster of Chernobyl, the experience of nuclear failure is not new. While there has been considerable activity over the past week in Western Europe and at the EU level, suspending and reconsidering nuclear projects, none of these projects in the CEE and SEE region have received similar treatment. In fact Reuters reported on March 17, 2011, the Czech Republic’s Prime Minister, Petr Necas stating, “There is absolutely no reason to limit (Czech nuclear power plants). The government would have to be a bunch of fools to take such a step.” The region remains dedicated to nuclear power.

The current impediments to nuclear power projects in the region are numerous enough, new safety concerns may add an additional variable in decision making, but will not sink the projects. Over the long term, the necessity of having affordable base load generation will prompt the building, of what could be described as, ‘debt prone and day-late’ nuclear power plants. The present EU energy strategy is focused on stopping the much broader disaster of climate change. Nuclear power will remain a central pillar for CEE and SEE countries to reduce their carbon emissions.

Impressions of the 5th Energy Forum

The difficult transition to a low carbon energy sector is strikingly apparent when looking at the Polish market. However, as the participants at the 5th Energy Forum, held this year in Sopot, Poland, displayed – some market actors are more willing to make this transition than others.

Michael LaBelle, Limax Energy, moderating panel discussion on the Modernization of the Energy Sector in Central Europe

The reason that I mention Poland as a challenging place to make this transition is the country’s almost total reliance on coal. Over 90%. The advantage of traveling to another country for a conference is that you can learn a lot about that country’s energy sector. And not just by the statistics, but by talking to the different officials from government agencies and companies. What I took away, whether correct or not, is a strong resistance from established companies and some government institutions about the purpose of moving towards a low carbon economy. In a way, for Poland, under the present energy mix, reductions may seem pointless. That is moving from 94% dependency to 60%, is like switching from a vodka martini to vodka and orange juice. Are you really going to feel the difference in the morning?

I would argue yes, the short term health benefits from the additional orange juice, can lead to further reduction in alcohol over the long term. If you don’t start at some point, then you’ll never make it.

On another note, the organizers of the conference were not only kind enough to invite me but also to have me moderate the session on the Modernization of the Energy Sector in Central Europe. They arranged a great, and diverse panel, which proved really successful in assessing some of the key aspects of the market developments in the CEE region and how some of these aspects can be applied to the Ukraine and Russia. Interestingly for me, Mr. Khotey from the State Property Fund of the Ukraine outlined how the country was preparing to privatize some of its energy companies, and notably distribution companies. I previously did on a study on this topic for USAID examining the efforts in Bulgaria, Romania and Macedonia.

Michael LaBelle, Limax Energy (L) moderating panel discussion on Modernisation of the Energy Sector in Central Europe; Panel members: Igor Khotey, Deputy Head, State Property Fund of Ukraine, Heimo Stauchner, Director, Co–Head Energy, Erste Group Bank AG, Austria, Franz Scheiber, Head of Business Unit Market Central Europe North, Alpiq AG, Switzerland, Vladimir Knyaginin, Director, “Center for Strategic Research North–West” Foundation, Russia

It was also mentioned by one of the speakers that role of the energy regulator was to ensure the interest of the consumer, which for him, is connected to low prices. On this point, I would also have to take issue, as not only is it in the interest of the consumers to pay a fair price, but also ensure that the energy system is transformed over the long term. While there are different regulatory philosophies, ensuring that consumers benefit from low(er) carbon energy sources is essential.

Energy prices and coal are interlinked for Poland. There is no doubt that renewable energy when priced against coal, with no carbon pricing, is more expensive. However, if  CCS technology is priced in with the cost of coal, then the opposite is true – coal becomes more expensive than renewable energy. So if Poland is waiting for CCS technology, in order to ensure the place of coal in the country’s generation mix, and to maintain cheap generation, the consumers will be footing an even higher bill in the future. Therefore, as distasteful as it is in the short term, switching to vodka and orange juice, will not only improve your health, but save you money as well.

Reaching Zero Carbon by 2050

I was invited to give a presentation at the CEE Energy 2010 conference organized by EastEuro Link in Budapest September 30th and October 1, 2010. I decided to diverge from the typical conference presentation about energy developments and the need for cross border cooperation and how companies operate in the CEE and SEE region. Instead I went straight to the urgent need to speed up our institutional and professional efforts at reducing carbon output.

[slideshare id=5410892&doc=reachingzerocarbonlabelle-101011031245-phpapp01]

I drew on a current project that I’m doing for the Regional Centre for Energy Policy Research (REKK) at Corvinus University. It is the Pathways for Carbon Transitions – or PACT, an EU financed FP7 project. For this study I interviewed over 30 people and analyzed the risks associated for companies and institutions in transitioning to a carbon neutral society by 2050. This is a chief goal of the EU’s second strategic energy review (past posting here, on old blog).

To simplify the findings I’ve developed a very simple equation that attempts to capture the key elements that can lead us to reducing carbon output (in the energy sector) to near zero. Or more realistically, to really be on a path where this is entrenched into the institutional and business practices (along with society). The equation is this:

pace of change = institutional change + technological development + (political/social capital)

The pace of change is essential for getting us there on time. To express this I use the quote by Steven Chu, the US Energy Secretary.

Look how long it took to make the transition from wood to coal, coal to oil and gas: 50- 60 years. We cannot make this transition in another 50 or 60 years. It will be too late for the climate.

Therefore, we must speed up how we do things. I purpose that identification of risks can speed institutional and market change. This includes closer scrutiny and identification of the elements associated with risk governance that can enable faster change to come about. Governance risks involves: regulatory, geopolitical, institutional lock-in and technological lock-in and investment risk. For a full analysis please read a recent article I’ve submitted for review to a journal(Risk Governance and Technologies LaBelle).

The presentation offers a more simple explanation of the approach and ties it to periods of market and regulatory change in the CEE/SEE region. A key proposition I made during the speech is that we can learn a lot by looking at past periods of change in the energy sector. Most recently the deregulation of electricity markets in the US and the privatization of energy companies. All profound changes that have (and have not) brought about how energy markets operate. The limitations of change should be noted, but also how change did occur.