Energy

I got a feeling! – A quick wrap up of the Berlin Energy Transition Dialogue 2019

This article is written by Mona Hosseini.

The Berlin Energy Transition Dialogue 2019 has been a intense two days conference gathering more than 2,000 participants from more than 90 countries. Among these participants 50 ministers from the Global North and Global South have attended the BETD 2019. In many panels with a female quota of 60% the civil society and international leaders have discussed the urgent questions of a global energy transition. The German government has put itself into the scene even though its most recent climate policy regarding a fossil fuel phase-out is outrageous.

Berlin Energy Transition Dialogue 2019

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4sea, Climate Politics, Energy, Oceans

Development of wind farms on the high seas: a new challenge for the international law of the sea

 This article is part of the 4sea project.

Climate change and growth of the world population is finally making us create a common wake-up call about to be taken serious: the use of fossil fuels must be reduced. As a result of this, development of renewable energy is gaining ground. For a long time, renewable energy has been developed land-based, however there is now a growing trend for renewable energy to be developed in the sea. Because of the benefits of offshore renewable resources, sea is becoming a playing field for new developments. For example, as for wind energy, marine winds are more abundant, stronger, and blow more consistently than land winds.

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Energy

Out of the frying pan into the fire: from peak oil to peak carbon?

The USA is currently experiencing a little energy revolution. In 2011, it imported just 45% of its liquid fuel requirements, down from 60% in 2005. Domestic production of oil and gas has been booming, driven by higher prices and technological improvements such as fracking. High prices, changing behaviors, much improved vehicle fuel efficiency standards adopted by the Obama administration, and the weak economic situation have driven down consumption of liquid fuels by about 9% since only 2007.

What are the implications of this revolution for climate policy, the economy and geopolitics? Firstly, oil prices remain an economic threat. Few people realize the important role that oil prices played in the 2007/8 subprime mortgage crisis, which ignited the global financial crisis. When the oil price rose from roughly $30 in 2003/4 to $145 in 2008, household budgets were severely constrained. Interest rates rose fivefold in response to the price increase, further increasing the mortgage repayment burden. In their study, Kaufman et al conclude: “…increasing energy expenditures are among the most important drivers of the post 2005 increase in mortgage delinquency rates.” And in 2011, when the recovery was just taking hold, oil prices jumped on the back of the Libyan war. That price increase dragged significantly on the recovery in the US and EU. Now, the threat of an Israeli/American attack on Iran is again driving up oil prices, helped by political instability in Syria, Yemen, Sudan, etc.

Obama too might be forgiven for saying “what energy revolution?” High gas prices are one of the central issues in the upcoming elections. Indeed, gas prices may be the kingmaker come November. Trevor Houser’s fascinating analysis shows the state-by-state fallout of higher gas prices in the US election. Neither Obama, nor the Republicans, nor the US can cut themselves off from global markets, still less from a global economy vulnerable to highly volatile energy prices.

Secondly, the USA’s reduction in oil dependency should be welcomed, insofar as it is based on a sustainable shift in energy policy (which it is mostly not). There is no way that the US would dare push sanctions on Iran to the extent they have, if they had not succeeded in reducing their energy dependence. A nuclear armed Iran would be a catastrophe; the US’s ability to conduct a strong policy here shows already the geopolitical benefits of reducing energy dependency. However, the big risk now is a false sense of security. The US cannot risk worsening its lock-in into oil and fossil fuel intensive infrastructure and behavior. The catastrophic economic impact of high oil prices in 2007/8 shows the risks.

Thirdly, what does this mean for climate policy? For some time, the argument of “energy security” has been central in driving the climate agenda in the US, but also elsewhere. The current situation shows the risks of this focus. Essentially, there are enough commercially accessible fossil fuels to fry the planet. Energy security can motivate some climate action, but not enough. The graph below shows the forward price curve for oil futures (contracts for delivery at a future date). The decline shows that market participants expect oil prices to decline, as higher prices motivate investment in new production, energy efficiency and behavior change. This suggests that oil prices will moderate at least for the coming decade, which is crucial for climate action. Alongside is a graph showing the cost of new oil wells in the US. It shows that oil extraction has grown more and more expensive, as geological and technological frontiers are pushed, and materials such as steel grow more expensive due to booming global demand. It shows how new production is growing more intensive, in monetary, resource (steel/energy/water) and environmental terms.

Forward curve for oil futures (left) and cost per well (right).

 

Source: HSCB left, EIA right.

These two graphs may seem to present a contradictory picture. Here is my sense of the complex debate:

  1. There are enough commercially available fossil fuels to fry the planet. Energy security will never be a sufficient motivation for taking sufficient climate action. We need to worry more about peak carbon than peak oil.
  2. Nonetheless, the global economy is highly exposed to resource prices, in particular oil. Recent reductions in US energy dependence show the benefits of taking action. The current US pressure on Iran would be unthinkable with an energy dependence of 60%, as in 2005.
  3. This opportunity must be used to reduce structural dependence by investing in energy efficiency and fossil fuel alternatives. Prolonging the dependence on this fuel will only increase the lock-in of infrastructure and behavior, and worsen the environmental and economic risks. The amount and cost of remaining oil is uncertain; we have control over the factors to reduce global exposure to this uncertainty, such as efficiency and fossil fuel alternatives.
  4. Oil prices will likely remain high (above $100) and volatile in the coming 5 or so years. The increased cost of new production and growing demand from emerging countries will put a floor on oil prices. However, structural factors, i.e. real physical scarcity or a demand/supply gap, are unlikely to drive real prices to levels of above $150 in the next 5 or so years years. Geopolitical events could do this quickly at any time. Again, it makes sense to reduce our exposure to this risk as much as we can.
Energy

What Future for the French Industry in Renewable Energy?

Last month, the French producer of photovoltaic panels Photowatt was at the centre of media’s attention. Mishandled by the global decrease of photovoltaic panels’ costs, the bankruptcy proceedings of the company came along with the presidential campaign and its debates concerning the revival of the French industry. Beyond the case study of Photowatt though, is there a real potential in France for the development of an industry in renewable energies?

It is often pointed out that the industrial inertia caused by the French nuclear system is one of the major causes for the backwardness in the field of renewables compared to its beloved neighbour Germany, which can proudly count on world-known companies in building wind power plants and solar panels. The Nuclear problem is real, but it should be completed with a more accurate analysis: being quite new, most of renewable technologies are still in on the path of industrial development. These technologies can thus be classified according to emerging, developing and mature markets.

The mature market for renewables covers the technologies which can already be produced at competitive costs responding to growing demand. It encompasses hydropower and solid biomass, but also onshore wind power, first generations of biofuels and solar panels. Having been quite late in developing public policies to support these technologies, France will be barely able to fill the gap that has been dug by German, American and Chinese industries, except for first generation biofuels.

The developing market includes technologies that development is taking off, such as second generation biofuels and solar panel, geothermal, electricity produced out of biomass and offshore wind power.  The French position is in that respect quite heterogeneous: being one of the world leader in 2nd generation biofuels, the gap between France and other countries have already widen up in the field of 2nd generation solar panels and biomass-electricity, despite a huge natural potential in the latter field for being one of the most effective crops producer in the world.  Although Germany and Denmark can rely on their expertise in onshore wind power, the specificity of offshore power generation has left the door open for new actors in the wind energy market, mainly the United Kingdom and France which has launched five calls for tender earlier this year in order to develop offshore wind power plants along the French shores.

Investing in emerging market for renewables could be the way for France to release its potential. These emerging technologies have in common to be new and costly, but they could become competitive with the sharp rise of global energy costs.  Having already developed solid knowledge in first and second biofuels generations, France could be the most credible competitor to the United States in developing “third generation” algae biofuels. This field could be merged with the emerging marine energies, using the force of tides, waves, ocean thermal energy and osmotic power (energetic properties of salt). Because they have a strong potential for development, France could benefit from its natural and industrial advantage to find in these technologies the path to world leading positions in renewable energies.