T HE ENERGY TRANSITION OPPORTUNITIES AND CHALLENGES Margherita Bianchi Istituto Affari Internazionali (IAI) Università della Calabria, 21 October 2019
CONTENTS ENERGY, A FUNDAMENTAL RESOURCE WHAT CHALLENGES? CURRENT CHANGES AND TRENDS ANSWERS FOR A SUSTAINABLE GROWTH FUTURE GEOPOLITICAL SCENARIOS 2
ENERGY, A CRUCIAL RESOURCE 3
Energy = Development 25 September 2015: the United Nations approve the Global Agenda for sustainable development and its related 17 “ SDGs ”, expressed in 169 targets to be reached by 2030. “No - one left behind” Goal n. 7 seeks to ensure everyone an affordable, sustainable and modern access to energy. 4
SDGs 5
A "bridge" between countries and regions/ 1 Physical interconnections and economic relations between states and regions Interconnections (gas + electricity) in the Mediterranean (Sources: ENTSO-E, ENTSO-G, 2017, 2018) 6
A "bridge" between countries and regions/ 2 The Arab Gas Pipeline (Source: Observatoire Méditerranéen de l’ ènergie (2011) 7
A "bridge" between countries and regions/ 3 Physical interconnections and economic relations Between states and regions United Kingdom, Interconnections (gas + electricity) (Source: English Parliament, 2018) 8
A platform for dialogue… The Association of Energy Regulators, MedReg , includes Israel and Palestine working together for gas exchanges between Gaza and Israel . Egypt, Cyprus, Greece, Italy, Israel, Jordan, Palestinian National Authority discuss how to bring Eastern Mediterranean Gas (EMGF) to market RU-UKR-EU Dialogue Table 9
A key to read crises The amount of damages caused by the war and aerial bombings in Syria is noticeable from lighting across the country after 2011, which has registered a 83% reduction in four years . The energy production in the country has dropped to almost zero. Direct + indirect losses in the energy sector are calculated in 58 billion dollars. Now, in 2019, way worse. Electricity connections in the Levant through Syria have been interrupted by Lighting in Syria, 2011-2015) the civil war (Source: The Telegraph, 2015 10
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In synthesis: the energy trilemma Balancing the three dimensions of the energy trilemma is considered crucial for the competitiveness and the prosperity of every country. 12
Sustainability/ 1 Energy is the main source of CO2 emissions (+0,4% annually until 2040). … we are heading towards +2,7 C ° by 2100, risking the irreversibility of the consequences of global warming and disastrous environmental, economic and social costs. Fluctuations in the level of CO2 in the atmosphere (Source: NASA, 2018). Glacial age: CO2 levels were about 200 parts Growth of CO2 emissions related to per million (ppm). Interglacial periods: 280 ppm. In 2013, energy (Source: IEA, WEO - NPS 2017) CO2 levels exceeded 400 ppm. This unstoppable increase shows a constant relationship with the combustion of fossil 13 fuels
Sustainability/ 2 Coal intensity and CO2 emissions for energy generation - by region (Source: IEA, WEO - 2018) China : its levels of consumption per capita are much lower than other states that consume less electricity in total. 14
Energy poverty/ 1 (Source: IEA, WEO 2017) Risk: population growth overcomes electrification efforts 2014: In Sub-Saharan Africa 28 gigawatts are available to generate electricity … … as in Arizona (USA) alone. But the two population differ widely: 860 million people vs. 6.5 China has used carbon for electricity taking 600.000.000 people out of poverty. It is also a European concern: EU Energy Poverty Observatory, launched in 2018 . 15
Energy poverty/ 2 Population without access to electricity, 2017 (Source IEA, WEO 2018) The 2017 was the first year in which people without access to electricity fell below one billion 16
Energy poverty/ 3 Earth at night. Source: NASA, 2016 17
Security/ 1 Traditionally limited and geographically localized (oil and gas), energy has strong strategic and security components: it could be a source of instability and hostility, of vulnerability for producers, for importers and for many consumers, of volatility and speculation. “Uninterrupted phisical availability of energy products on the market at an affordable price for all consumers.” (European Commission) A condition in which a nation […] has access to sufficient energy resources at reasonable prices for the foreseeable future free from serious risks of major disruption of service. (Barton) 18
Security/ 2 Producers OECD – Consuming countries • Revenues generated by exports are • 47.5% of oil consumes; 15% of reserves fundamental • 46.5% of gas consumes; 10% of reserves • Also for their welfare system: subsidies • Predictable and consistent export levels help the economic and social planning of these China & India governments • Energy is fundamental to guarantee • Key factor in maintaining national security economic growth and the relative apparatus and internal order international status. • Drivers of the increase in demand OPEC Statute, Art. 2: • "The organization must devise ways and means to ensure the stabilization of [energy] prices on international markets, in order to eliminate harmful and unnecessary fluctuations". Two-way dependency , "security of demand". Russia's dependence on oil and gas exports amounts to 360 billion dollars in 2013, 68% of total exports, 52% of the Russian federal budget. Countries of transit : Ukrainian case, Turkish case. RU-UK-EU table to solve the Ukrainian case. 19
Security/ 3 Cyprus Exclusive Economic Zone (EEZ) 20
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How is the energy sector evolving? How to read scenarios? Today changes are occuring at an unprecedented pace: In international relations In global trends In the role of major emitters In the development of technologies Evolution of the energy mix, 1800 – 2040 (Source: Vaclav Smil, Energy Transitions) 22
In international relations/ 1 Trade balances: exporting countries are becoming importers; importers exporters; producers are dealing with momentous changes MENA, with the Arab Spring The United States, with the shale gas revolution Saudi Arabia, with the drop of oil prices The routes: new strategies are develop to “ diversify ” suppliers and transit countries Russia & Ukraine, post 2006, 2009, 2014 Foreign policy: cooperation is or could be strenghtened in new regions Conflicting or coinciding interests in Eastern Mediterranean 23
In international relations/ 2 Gas market: end of regional prices, beginning of a global market. From «pipeline war» to sea control Rise in the Liquefied Natural Gas (LNG) trade, today around 30-35% of the entire global gas exchange. The fight against climate change: turnabout of main powers United States, Trump announces the withdrawal from the Paris Agreements … But this turnabout also applies, in the opposite direction, to China. 24
Focus China /1 China has launched its national carbon trading scheme in December 2017. The system aims to cover more than 3 billion tons of GHG emissions and 1700 power companies (Source: UNFCCC). In China, the production of electricity from Sales of electric vehicles in China have risen coal is decreasing. A different trend is by 53% in 2017. The government is registred in India. committed to ban internal-combustion (Source: World Bank, 2017) engine vehicles by 2040. (Source: Forbes, 2018) 25
Focus China /2 Chinese energy intensity is decreasing faster compared to other countries. By 2040, China’s economic growth will be among the less energy -intensive in the world. (Source: IEA, WEO 2017) 26
In global trends/ 1 How does the energy demand change? The main determinants of its increase are, in addition to energy policies, the rates at which economic activity and population grow Overall GDP will grow at an average rate of 3.4% per year and the population will increase from 7.4 billion in 2016 to 9.1 billion in 2040 (WEO 2017). Important factor: urbanization = A 30% growth in the global energy demand is foreseen by 2040. 27
In global trends/ 2 Where does it change? Non-OECD countries lead the rise in energy demand: in the next twenty years demand will stabilize in industrialized countries, but not in India or China, and it will considerably rise also in Eastern and Southern Mediterranean countries. Change in primary energy demand, 2016- • 2040, Mtoe 1/3 of energy demand comes from India (Source: IEA, WEO 2017) • Oil: China, India and the ME responsible for its d. growth (moderate) • Gas: Asia overcomes Europe as n.1 importing region 28 • New areas in the game: Arctic , South China Sea…
ANSWERS 29
Joining forces: institutions, politics International commitments: keep the rise in temperature (well) below 2 ° C. COP21: 184 countries responsible for around 96% of CO2 emissions: INDC. Regional goals: Targets: UE 2050 Roadmap, decarbonisation goal at 80-85% Comprehensive legislative and regulatory frameworks : Clean Energy Package – European Union) Infrastructures & interconnections : gas, electricity Cooperational frameworks: North-South Mediterranean shores Dialogue platforms : MedReg, MedTSO, China – Europe on ETS. 30
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