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T HE ENERGY TRANSITION OPPORTUNITIES AND CHALLENGES Margherita Bianchi Istituto Affari Internazionali (IAI) Universit della Calabria, 21 October 2019 CONTENTS ENERGY, A FUNDAMENTAL RESOURCE WHAT CHALLENGES? CURRENT CHANGES AND TRENDS
Università della Calabria, 21 October 2019
Margherita Bianchi Istituto Affari Internazionali (IAI)
ENERGY, A FUNDAMENTAL RESOURCE WHAT CHALLENGES? CURRENT CHANGES AND TRENDS ANSWERS FOR A SUSTAINABLE GROWTH FUTURE GEOPOLITICAL SCENARIOS
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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.
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Interconnections (gas + electricity) in the Mediterranean (Sources: ENTSO-E, ENTSO-G, 2017, 2018)
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The Arab Gas Pipeline (Source: Observatoire Méditerranéen de l’ ènergie (2011)
Physical interconnections and economic relations Between states and regions
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United Kingdom, Interconnections (gas + electricity) (Source: English Parliament, 2018)
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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
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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. 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.
Lighting in Syria, 2011-2015) (Source: The Telegraph, 2015
Electricity connections in the Levant through Syria have been interrupted by the civil war
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Balancing the three dimensions of the energy trilemma is considered crucial for the competitiveness and the prosperity of every country.
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.
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Growth of CO2 emissions related to energy (Source: IEA, WEO - NPS 2017) Fluctuations in the level of CO2 in the atmosphere (Source: NASA, 2018). Glacial age: CO2 levels were about 200 parts per million (ppm). Interglacial periods: 280 ppm. In 2013, CO2 levels exceeded 400 ppm. This unstoppable increase shows a constant relationship with the combustion of fossil fuels
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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.
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(Source: IEA, WEO 2017)
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.
Risk: population growth overcomes electrification efforts
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(Source IEA, WEO 2018)
The 2017 was the first year in which people without access to electricity fell below one billion
Population without access to electricity, 2017
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Earth at night. Source: NASA, 2016
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“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)
19 OECD – Consuming countries
China & India
economic growth and the relative international status.
Producers
fundamental
the economic and social planning of these governments
apparatus and internal order OPEC Statute, Art. 2:
means to ensure the stabilization of [energy] prices on international markets, in
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.
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Cyprus Exclusive Economic Zone (EEZ)
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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)
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Trade balances: exporting countries are becoming importers; importers exporters; producers are dealing with momentous changes The routes: new strategies are develop to “diversify” suppliers and transit countries Foreign policy: cooperation is or could be strenghtened in new regions
MENA, with the Arab Spring The United States, with the shale gas revolution Saudi Arabia, with the drop of oil prices Russia & Ukraine, post 2006, 2009, 2014 Conflicting or coinciding interests in Eastern Mediterranean
Gas market: end of regional prices, beginning of a global market. From «pipeline war» to sea control
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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.
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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).
Sales of electric vehicles in China have risen by 53% in 2017. The government is committed to ban internal-combustion engine vehicles by 2040. (Source: Forbes, 2018) In China, the production of electricity from coal is decreasing. A different trend is registred in India. (Source: World Bank, 2017)
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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)
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
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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.
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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 (Source: IEA, WEO 2017)
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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.
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Assuring technological transfer, access to credit Supporting investments in renewables from different actors to increase their competitiveness Economic instruments: carbon pricing R&D: Carbon Capture & Storage, batteries, development of new technologies Nuclear Energy: a way to decarbonise, but has controversial aspects and high costs Sustainable mobility: electric vehicles, but also gas and hydrogen “Bottom up” inclusion in the energy transition: role of the cities, of local actors, of women; Circular economy
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In the short and medium term
The role of gas
The less polluting among fossil fuels (many try to switch from coal to gas) National plans, as the italian SEN, to phase out coal
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We expect gas consumption to grow faster than other sources in the medium term (Source: IEA, 2017)
gas as a “back up”, as a “bridging fuel” in the energy transition; Gas is central in the“Energy Union” stategy
The priority: decarbonising the economy by fostering inclusive growth
The tools: The most convenient? Energy efficiency New opportunities: digitalization, decentralization, “smart grids”, new technologies, R&D;
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The revolution of renewables, their development, lower costs and accessibility: Democratic aspect of renewables: they allow to overcome energy
industrial revolution. …but there’s a gap to fill before clean energy can completely overtake fossil fuels: storage, distribution, flexibility, security (capacity≠ electricity produced).
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reserves.
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Historically, national electrification programmes have been based on large-scale power plants and in line extensions powered by fossil fuels. Things are changing. Estimates indicate that off-grid solutions could provide about 60% of the additional generation needed to reach the universal energy access target by 2030 (IRENA, 2019).
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Costs of RES technologies are falling. Since 2010 the average cost of electricity produced from solar PV and wind power has decreased by 73% and 22%. The cost of lithium-ion batteries used in electric vehicles has decreased by 80% since 2010; Pollution and climate change. The first one kills 7 million people a year. Given that the energy sector accounts for two thirds of global emissions, RES+energy efficiency are the answers (90% of the answer to achieve the Paris Agreement); Renewable Targets. 57 countries have developed plans to decarbonise their electricity sector and 179 have set national or state targets for renewable energy; Technological innovation will allow renewable energies to penetrate a growing share
Investments at "COP24", a group of 415 investors ($32 billion) reiterated their full support for the Paris Agreement. State sovereign funds and private companies start disinvesting infossils; Public opinion
For two centuries, the geographical concentration of oil, natural gas and coal has defined the international geopolitical landscape. Coal and steam have defined the industrial revolution which, in turn, shaped geopolitics in the 19th century. Since then, control of oil production and trade has been a key feature in the 20th century. A transition from fossil fuels to renewable energy could transform everything again.
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The United States are close to energy self-sufficiency. "Shale revolution”. Net exporter of natural gas in 2017 + expected to become a net exporter of oil in
electric vehicles. China Currently remains heavily dependent on oil imports. Will benefit from the energy transition for its energy security. It has a leading position in manufacturing, but also in innovation and the use of renewable energy
Europe and Japan depend heavily on imported fossil fuels. Japan is the most dependent; its net imports of fossil fuels amount to 5% of GDP. Well placed in renewable technologies. In Europe, Germany is at the forefront with nearly 31,000 patents on renewable energy.
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India is one of the fastest growing economies in the world in recent years, lifting millions out of poverty. It is ready to overtake China as the largest growing energy market in the world by the end of the 2020s. It has set a target of 175 GW of renewable energy by 2022. Russia, the world's largest gas exporter and second largest oil exporter, has a wider and more diversified economy than any oil producer in the Middle East. Oil and gas profits are a vital component of the state budget (40% of tax revenues). The spread of renewable energy is now more intense and the country invests in R&D, but is lagging behind China and the US on patents for RES technologies.
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MENA area exposed to a reduction in fossil fuel revenues. On average, these regions have net fossil fuel exports corresponding to a quarter of their GDP. The decline in export revenues will negatively affect their economic growth prospects and national
Sub-Saharan Africa (SSA) will benefit from reduced fossil fuel imports and renewable energy generation at the national level, as this will foster job creation and economic growth. Exceptions: Nigeria and Angola; South Asia spends more than 3% of its GDP on fossil fuel imports and will benefit from energy transformation;
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Three types of countries have the potential to emerge as new leaders:
to be 75% greater than its combined coal, gas, oil and uranium
resources in the world, as well as wind, hydro, geothermal and ocean energy potential. Bhutan already exports hydropower to India.
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eight countries produce lithium, four of which manage more than 93% of the global production (Australia placed fist with around 45%, followed by Chile, China and Argentina). Congo manages 50% of the reserves and 55% of the cobalt production. China is responsible for more than 72% of global production of rare earths.
Overall, it is now the largest producer and exporter of solar panels, wind turbines, batteries and electric vehicles. The race for clean energy technology could however result into a dominant situation. This situstion could become similar to what already happens in the sector of mobile technology.
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The current governance mechanisms in the energy sector - essentially based on the dualism between groups of consumer and producer countries - appear inadequate to deal with the changes taking place and will continue to do so, making it clear that there is an urgent need to define new stable and inclusive architectures of international governance.
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1. Need to change alliances and foreign policy. Ex. Italy: our foreign policy, being a major importing country, has in recent decades favored strong relationships with exporting countries, supporting continuity with traditional energy partners and foreign action in strategic areas for conventional sources. This will partly
2. More strategic regional networks of global markets. Electricity becomes a protagonist. Unlike oil and LNG, electricity is traded
national security.
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energy resources as foreign policy instruments. In a world powered mainly by RES, many energy resources will lose much of their value as geopolitical tools. Dependence on biofuels, emerging fuels such as hydrogen or critical materials, could create new forms of dependence and vulnerability.
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Margherita Bianchi m.bianchi@iai.it @marghebianchi