The IEA dares not lose faith in a "clean energy future"

July 26, 2012 | 00:00

The IEA dares not lose faith in a "clean energy future"

The International Energy Agency's latest Energy Technology Perspectives report presents a bleak picture of the world's current state of progress towards a low-carbon energy system. Nevertheless, the IEA tries to put a brave face on things. "We can still get on track on a clean energy future", says Executive Director Maria van der Hoeven. Probably the brighest spot is the growing enthusiasm worldwide for emission trading - just at a time when the EU's Emission Trading Scheme (ETS) has fallen into disrepair.

The ETP2012 paints a bleak picture of our current progress in clean energy (c) Renewable Energy Magazine

The IEA, wasn't that the club that predicted last summer that the world is about to enter a "golden age of gas"? Last month, it sounded a slightly different note, when it published its Energy Technology Perspectives 2012, its major bi-annual report that lays out "pathways to a clean energy system".

Around 2030, said IEA Executive Director Maria van der Hoeven at the presentation of report on 11 June, natural gas becomes a "high-carbon" fuel. This is because by that time it does not replace coal anymore in power generation. To keep gas in the mix, gas-fired power will then have to be combined with carbon capture and storage (CCS) or we will have to envisage a decline in its use, said Van der Hoeven.

Is the IEA contradicting itself here? Not really. It would be better to say that the IEA is an organisation that has two faces. With its "realistic" face, it tells the world what energy trends to expect in a business-as-usual scenario. Gas occupies the top spot in this case. But the IEA also has an idealistic, highly climate-conscious face. This is when it is warning the world that drastic measures are needed to avoid a climate catastrophe. For instance, that natural gas cannot be continued to be used indefinitely (beyond 2030) in the same way as today, unless very, very heavy investments are made in CCS.

Golden opportunity

The Energy Technology Perspectives 2012 (ETP2012) report falls in the category of the IEA's "idealistic" publications. That is to say, it shows the world what is needed to get us "on track to a clean energy future", as Maria van der Hoeven put it. ETP2012 repeats a message that the IEA has been giving out for some time now. And it is a mixed message.

In Van der Hoeven's words: "Are we on track to a clean energy future? No. Can we get on track? Yes."

But can we, really? Of course it is understandable that the IEA wants to sound inspiring rather than defeatist. Van der Hoeven stressed that the energy transformation needed to limit the expected rise in temperature as a result of global warming to 2 degrees Celsius, represents a "golden opportunity" for low-carbon technologies. "If significant policy action is taken", she said, "we can still achieve the huge potential for these technologies to reduce CO2 emissions and boost energy security."

Indeed, according to the IEA, the transformation to a low-carbon energy system will actually save us money. "The technological revolution will not be cheap", says the IEA, "but the long-term benefits far outweigh the costs." Although an "additional" $36 trillion of investment is required "to overhaul the world's current energy system by the middle of the century", this would be offset "by $100 trillion in savings through reduced use of fossil fuels." Even at a 10% discount rate, this still represents savings of $5 trillion between now and 2050.

And that's not all, for the proposed energy transformation also boosts energy security and leads to lower government spending: "energy efficiency and accelerated deployment of low-carbon technologies can help cut goverment expenditure" and "reduce energy import dependency", resulting in "far-reaching energy security and economic benefits".

Bleak picture

So if the energy transformation is such a clear winner on the environmental, economic and political fronts, what is stopping us from achieving it? For the ETP2012 is hardly an optimistic account of the current state of affairs.

Out of ten technologies that hold the most potential for reducing CO2 emissions, nine are failing to show sufficient progress
On the contrary, it paints, in its own words, a "bleak picture" of our "current progress in clean energy". Out of ten technologies that hold the most potential for reducing CO2 emissions, nine are failing to show sufficient progress. (The one exception is "a portfolio of mature renewable energy technologies, such as solar PV, biomass and onshore wind power".) Particularly worrisome, says the IEA, "is the slow uptake of energy efficiency technologies, the lack of progress in carbon capture and storage (CCS), and, to a lesser extent, of offshore wind and concentrated solar power (CSP)."

With regard to CCS, the IEA says that this has probably the greatest potential for reducing CO2 emissions (20% of what is required by 2050) but it makes the slowest progress. Currently, there are "no large-scale CCS demonstrations in electricity generation and few in industry".

Energy efficiency may be an even more important instrument, but in this area too progress is lacking. If energy efficiency is to achieve its full potential, annual improvements in energy intensity must double from 1.2% on average over the last 40 years to 2.4% in the coming four decades, says the IEA. In fact, however, "the rate of improvement" in energy intensity has slowed in recent years.

So why is not enough progress being made on the transition to a low-carbon energy system? One reason is the well-known problem that large upfront investments are needed which will only be recouped over a long period. But the IEA identifies another obstacle as well, namely the fact that energy policy "must address the entire energy system" at once. "Success", says the report, "will critically depend on the overall functioning of the energy system, not just on individual technologies. The most important challenge for policymakers over the next decade will likely be the shift away from a supply-driven perspective, to one that recognises the need for systems integration."

The IEA notes that "roles in the energy markets will change. Current consumers of energy will act as energy generators through distributed generation from solar PV or waste heat recovery. Consumers will also contribute to a smoother operation of the electricity system through demand response and energy storage. Enabling and encouraging technologies and behaviour that optimise the entire energy system, rather than only individual parts of it, can unlock tremendous economic benefits."

Stringent codes

Clearly for the IEA the solution ultimately has to come from "policymakers". As the ETP2012 report puts it: "Governments must play a decisive role in

Clearly for the IEA the solution ultimately has to come from "policymakers" 
encouraging the shift to efficient and low-carbon technologies." Thus, governments need to take measures to improve energy efficiency, for example develop more stringent building codes. They need to make sure CCS gets off the ground: of the $36 trillion in additional investments, between $2 and $3 trillion will have to be devoted to CCS - and these funds will have to be provided "by political means", says the IEA, otherwise they will not be forthcoming.

Governments also have to help build "a new transport industry": by 2050 more than 90% of light-duty vehicles need to be electric. Governments must also pay much more attention to the potential of heating and cooling. And they must spend more on Research & Development: the report notes that the share of energy-related investment in publicly funded R&D has fallen by two-thirds since the 1980s - from a global average of 12% in 1980 to less than 4% in 2010. The IEA is not quite sure why this is so: apparently, it says, governments are choosing different priorities.

Interestingly, the ETP2012 report does not say anything about nuclear power in its Executive Summary - a discussion of nuclear energy is confined to the body of the report itself. By contrast, the previous ETP report, of 2010, clearly stressed the need for more nuclear power in its Executive Summary: "Decarbonising the power sector, the second-largest source of emissions reductions, is crucial and must involve dramatically increasing the shares of renewables and nuclear power", the 2010-report said.

Indeed, ETP2010 envisaged the construction of twenty to thirty new nuclear plants every year for 40 years. Of course after Fukushima, this seems unlikely to happen. ETP2010 also envisaged 85 major CCS projects every year, which - as ETP2012 notes - are nowhere in sight yet.

Theoretically and idealistically, then, "we can get on track" to a decarbonised energy future. Realistically, it’s going to be an uphill battle.

 

Will the EU lose its lead in emission trading?

The EU has always been the proud frontrunner in emission trading with its Emission Trading Scheme (ETS), which is by far the largest such scheme in the world to date. But the IEA notes that the EU ETS currently provides only "limited incentives" to low-carbon technologies, whereas "encouraging developments are now evident outside of Europe". Indeed, according to the ETP2012, "carbon pricing could become the norm rather than the exception" in the world. An ETS has been in operation in New Zealand since 2009, Australia and South Korea will start a system in 2015 and California in 2013. The North Eastern States in the US have had a system since 2009, although this too suffers from low prices. The Canadian province of Alberta also has a carbon price system in place.

But most importantly, says the IEA, China has now launched six carbon market pilots, covering four cities (including Beijing and Shanghai) and two provinces. If successful, China will roll out a nationwide system by 2015. Other developing countries are also showing an interest, including Brazil, South Africa, India, Turkey, Indonesia and Mexico. The IEA notes that at the Climate Conference in Durban last year, countries agreed to establish a "new market mechanism of broader reach than the project-based Clean Development Mechanism."

 

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