Towards a sustainable energy system

by Owen Wilson, Manager, Group Health, Safety and Environment with the Electricity Service Board (Republic of Ireland)

The Irish state electricity company believes that global climate change rather than oil and gas depletion will force Ireland to move to a sustainable energy system. Building the latter, it says, will be a political and ideological exercise as much as a technical and economic one.

The social and economic development of human societies is inextricably linked to energy use. However, in developed countries today the linkage between growth in energy consumption and economic growth shows signs of de-coupling. Nonetheless it is doing so at a level (4.7 toe/capita in the OECD) that is significantly above the current energy consumption levels of the least developed countries (0.6 toe/capita in Africa). The continued growth in global population and the justifiable demand for all humans to have access to energy will ensure that total annual global energy consumption will continue to increase well into the future (from approximately 10 Gtoe p.a. in 2000 to 25 Gtoe p.a. in 2050) under business-as-usual conditions. In this context, the recent World Summit on Sustainable Development (WSSD) in Johannesburg placed heavy emphasis on the need for developing countries, with the support of developed countries, to create energy systems that are 'reliable, affordable, economically viable, socially acceptable and environmentally sound' as an essential element in eliminating poverty.

These five requirements essentially define the basis for the sustainable energy systems that will be put in place to serve the majority of humanity for the next 40-50 years. While emphasising a strong role for energy efficiency, conservation and renewables, the WSSD recognised the continuing dominant role that fossil fuels will play. In terms of energy supply, even under high growth scenarios, no shortfall in coal, oil or gas supplies is anticipated given current estimates of proven reserves and projected resources (e.g. WEC/IIASA, Shell forecasts).


However, sustainability addresses more than energy supply and it is recognised that the limiting resource in the future will be the capacity of the biosphere to absorb emissions from the extraction, transformation, distribution and use of fuels.

The requirements for sustainable energy applied by the WSSD reflect substantively the three pillars of Ireland's domestic energy policy - competitiveness, security and environmental protection. The issue today is what pressures apply in the developed world that will drive the shape of global energy systems up to and beyond the 2050 period. Assuming reserves of fossil fuels are not a critical factor then it is supply security, cost and, above all, environmental factors which will mould future global energy systems.

SUPPLY SECURITY

The goal of the UN, individual governments and consumers is to have available a reliable supply of energy to meet the current needs of individuals for heat, light, power, transport and electrical energy. No international agency is suggesting that any other societal imperative justifies measures to ration energy supplies by curtailing their availability or reliability. The availability and reliability of energy services are satisfied through functioning distribution infrastructures with fuel and source diversity supporting transparent energy markets.

Significant investments are required to keep in place the various infrastructures needed for energy delivery including extraction, transformation (electricity generation), transportation, distribution and use. The recognised concerns affecting security of supply relate to geo-political instability and, in those sectors where market structures have not been well established, regulatory risk. Concerns in relation to Middle East oil or North African or Russian gas are well recognised and, to the extent political events in these regions affect the continuity of supplies (and fuel prices), they drive the exploration cycle in more stable regions of the globe. More interesting in the short-term will be the effectiveness of new energy regulatory regimes in providing the necessary stability and incentives for investment in the recently liberalised energy sectors (gas and electricity). Significant teething problems are being encountered in these two areas which have important contributions to make in moving towards and facilitating sustainable energy supplies.

Additionally, supply security must be subject to societal expectations. In this context, nuclear energy is not considered a desirable component of the energy mix in certain countries. Equally, some societies may place greater value on other objectives (e.g. the preservation of unspoilt landscapes) above the exploitation of available renewable resources (wind, monoculture biomass).

ENERGY COST

Affordable energy is a key goal of policy-makers. In more developed countries affordability relates primarily to industrial/commercial consumers with the objective of maintaining national economic competitiveness. However, affordable energy for consumers must also be economically viable from an investor perspective if affordability is to be sustained over the long-term and sufficient support for research and development of new technologies is to be provided. As with energy security, the primary risks to affordable energy relate to supply and/or market failures.

ENVIRONMENT

As noted above, the impact of energy extraction, transport, transformation and use on the environment is the main driver for change in an energy system that effectively meets the current economic and social needs of developed countries. The global issue of climate change (the capacity of the atmosphere to absorb increasing amounts of CO2) and policy responses in this area will provide the major impetus towards long-term energy sustainability, moderated by the need to maintain security and affordability. The Kyoto Protocol to the UNFCCC establishes, to a degree, a carbon constrained future well ahead of any physical shortages of fossil fuels. For the developed world the Kyoto Protocol will require progressive reductions in the carbon intensity (tCO2/$GDP) and energy intensity (GJ/$GDP) of national economies to sustain economic growth into the future. In the longer term all economies will face an environmental carbon constraint. In essence this means greater efficiency will be required in the patterns and systems of fossil energy transformation and end use. It will require progressive reduction in the reliance on fossil fuels and their substitution by renewable energies, hydrogen and, in countries where it is deemed acceptable, nuclear power. In the interim it will involve a greater dependence on gas.

By the end of the current century, the average surface temperature of the Earth could be between 1.5 oc to 6oc higher according to Intergovernmental Panel on Climate Change scenarios.
Source: IPCC, Third Assessment Peport, 2002

The key issues facing developed economies are the related factors of the speed and cost of transition to an environmentally driven sustainable energy system given the current distance from the desired objective of stabilisation of CO2 in the atmosphere at a level that will not cause irreparable damage to the planet. Because policy responses will impact on individuals, most notably in terms of increased energy cost, building the basis for a sustainable energy system will be as much a political and ideological exercise as it is a technical and economic one. Recent experience with the Nice Referendum is hopeful, suggesting that debate can facilitate the public in ordering priorities on complex issues such as this.

However, by placing a price on CO2 the Kyoto Protocol provides the most significant step at present towards developing a sustainable system. Kyoto provides the necessary conditions to promote energy efficiency, conservation, renewable energy and technological research and development by requiring that the externality cost associated with climate change be included in energy prices and providing for this to be addressed in a market-based framework. It is therefore critical that the Kyoto Protocol be seen to succeed as its collapse will stall the political drive necessary to achieve a sustainable energy future.

The key risk in implementing measures to comply with the Kyoto Protocol is the scale and timing of the impact they will have on energy prices. Sudden, large-scale increases in energy prices brought about by rapid stranding of energy infrastructure assets (e.g. electricity generation, distribution systems) will cause social and economic difficulties and, possibly, the collapse of the Kyoto Protocol. The main restraint on this is the linkage of the Protocol requirements with market mechanisms that will facilitate the transition to an environmentally sustainable energy system in an economically logical fashion. Nonetheless, care is required in designing the market systems necessary to implement the Protocol in order to avoid market failures. Despite major progress to date in the development of the proposed emissions trading Directive, which will provide the main vehicle for implementing Kyoto in the EU, significant weaknesses remain in relation to the proposals for market management that could yet result in its collapse.

PATHWAY

Ireland will not determine the technological global pathway to sustainable energy. It is a technology taker rather than an innovator due to the scale of investment in research and development required to radically restructure its energy systems compared to the size of its economy and its openness to global forces. Ireland can shape the path internally to one that best suits its economy and society. A number of elements will be required in order to do so including the following:

  • Educate and build consensus around problem definition and solutions. Work has been progressing on sustainable development and climate change at a technical and institutional level for some time. There must be more general acceptance of the need to radically reduce the use of fossil fuels and replace them with renewable forms of energy. However, is the public really engaged in this debate other than to complain that global warming isn't working?
  • Use markets and policy measures that integrate with markets to the extent possible. Properly functioning, transparent markets provide the best opportunity to achieve environmental sustainability goals at least economic cost. Nonetheless, markets may not provide solutions to all issues aimed at promoting behaviour supportive of sustainability or discouraging contradictory behaviour and other policy instruments may be required (e.g. building standards). Do we posses the perfect foresight now to predict the structure of a sustainable energy system and the least cost way to get there?
  • Put in place stable regulatory frameworks for the new energy markets. Regulatory certainty is a critical element of investment decisions in energy infrastructure given the scale of individual investments. Certainty applies equally to measures aimed at modifying the markets to support other specific policy objectives such as security, accessibility and affordability. Why would investors risk their money in conditions of uncertainty?
  • Establish frameworks to support and reward technological research, development and dissemination (RD&D) that deliver improvements in sustainability. However, economic sustainability dictates that Ireland must maintain the competitiveness of its energy infrastructure in line with that of its trading partners in reality RD&D investment resources are limited. In this context, facilitating uptake of new technologies at the same rate as national competitors may be the most appropriate response in many cases.
  • Develop and strengthen the national infrastructure for gas and electricity. Natural gas will act as the main transition fuel to a lower carbon intensive economy. Electricity is the means by which most renewable forms of energy are delivered.
  • Address the social issues arising from higher energy costs, including responses to fuel poverty. Sustainability will not be achieved if it means high costs, lower living standards and no alternatives.

In the end we must all accept and respond to the fact that the global environment must be capable of sustaining the world the global economic game is creating.

This is one of almost 50 chapters and articles in the 336-page large format book, Before the Wells Run Dry. Copies of the book are available for £9.95 from Green Books.

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Continue to Part B of section 5:The challenge to the National Grid in coping with renewable power

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