As I started to read this year’s World Energy Outlook (WEO 2013)
from the International Energy Agency (IEA), it was the very first line
in the executive summary that caught my interest. The report starts out
with “Many of the long-held tenets of the energy sector are being rewritten.”
It then goes on to explain: “Major importers are becoming exporters, while countries long-defined as major energy exporters are also becoming leading centres of global demand growth. The right combination
of policies and technologies is proving that the links between economic
growth, energy demand and energy-related CO2 emissions can be weakened.
The rise of unconventional oil and gas and of renewables is transforming our understanding of the distribution of the world’s energy resources. Awareness of the dynamics underpinning energy markets is essential for decision makers attempting to reconcile economic, energy and environmental objectives. Those that anticipate
global energy developments successfully can derive an advantage, while
those that fail to do so risk making poor policy and investment
decisions.”
What is clear is that energy is important! Most
of all there is change in the air – ignore it at your peril. And with
change comes opportunity. This is where I want to focus my discussion
this month. But before I go on, I think it is useful to summarize the
key points from the report to further clarify the paragraph above. The
WEO 2013 is concluding the following:
- The centre of gravity of energy demand is switching decisively to the emerging economies, particularly China, India and the Middle East, which drive global energy use one-third higher.
- As the source of two-thirds of global greenhouse-gas emissions, the energy sector will be pivotal in determining whether or not climate change goals are achieved.
- Large differences in regional energy prices have started a debate about the role of energy in unleashing or frustrating economic growth.
- Energy price variations are set to affect industrial competitiveness, influencing investment decisions and company strategies.
- Countries can reduce the impact of high prices by promoting more efficient, competitive and interconnected energy markets.
- A renewed focus on energy efficiency is taking hold and is set to deliver benefits that extend well beyond improvements in competitiveness.
- Enhancing energy competitiveness does not mean diminishing efforts to tackle climate change. Renewables account for nearly half of the increase in global power generation to 2035, with variable sources – wind and solar photovoltaics – making up 45% of the expansion in renewables.
- Coal remains a cheaper option than gas for generating electricity in many regions, but policy interventions to improve efficiency, curtail local air pollution and mitigate climate change will be critical in determining its longer-term prospects.
- Market conditions vary strikingly in different regions of the world, but the flexibility and environmental benefits of natural gas compared with other fossil fuels put it in a position to prosper over the longer term.
So
there you have it. The fastest growing economies have the fastest
growing demand, high energy prices are slowing growth in some markets
and giving an economic advantage to others with lower prices; and
climate change is having an impact on energy decisions.
The above
makes it sound as if the path to a low carbon future is built on more
renewables and gas. But is it really? Looking at the following chart
we can see that in the OECD countries where demand growth is modest and
electricity supply is already robust, gas is the go-to fuel both due to
cost and as a cleaner alternative to coal; and renewables are the
supposed clean generation of the future. Not surprisingly in the
non-OECD countries where demand is growing much more quickly (read
mostly China!), they are doing everything they can to develop all kinds
of supply – including more coal, more gas, more renewables and yes, more
nuclear.
So what does this mean for nuclear power? According to the IEA, “Nuclear power generation increases by two-thirds in the New Policies Scenario, reaching 4,300terawatt-hours
(TWh) in 2035. Demand is driven heavily by expansion in just a few
countries: China accounts for around half of the global increase; Korea experiences the next largest increase over the projection
period (the only OECD country to see appreciable growth), followed by
India and Russia. Overall, non-OECD economies see their share of global
demand for nuclear power jump from less than 20% to nearly 45% in 2035.
While prospects for nuclear power at the global level are now less
uncertain than they were two years ago, there are still key issues that remain unclear. These include the possibility of further changes in government policy, implications of the ongoing safety upgrades for plant economics and public confidence, and the impact of increased competition from shale gas.”
It
should not be a surprise that those countries with the largest demand
growth see a large benefit from increasing the use of nuclear power.
They need clean reliable baseload and nuclear meets this need. In the
more advanced OECD countries, many of these already have significant
nuclear fleets (80% of current nuclear capacity is in OECD countries),
have lower baseload growth and can (or at least they think they can)
look at other alternatives. Gas is replacing coal as a cleaner fossil
option so long as it remains competitive and the challenges of new
nuclear coupled with low demand growth put it more on the back burner.
But is this the right path? As I said last year when I reported on the WEO 2012,
it is important to remember the WEO is not a forecast per se; rather it
is a projection of how existing and potential government policies would
look once implemented. And what we still see one year later is a world
investing heavily in fossil fuels to protect the status quo while also
investing in renewables as a token path to the future. Of more
importance, the WEO shows a path to meet climate change goals that is
based on efficiency to lower demand, movement from coal to gas and CCS
technology to clean up some of the coal and then more renewables.
What
goes unsaid is how this is fantasy. Not that the world will continue
down the path of burning fossil fuels for our electricity, but rather
that we can do so and meet climate goals. The 2013 WEO New Policy
scenario “leaves the world on a trajectory consistent with a long
term average temperature increase of 3.6C, far above the internationally
agreed 2C target”. In their 450 scenario where the target is 2
degrees, there is more renewables, more conservation, more technology to
clean fossil fuels and yes, a little more nuclear.
Given the need
to decarbonize the electricity sector and the limits to using wind and
solar (about half the renewable additions), it should be obvious that
nuclear be a stronger option. Yes, currently in North America low gas
prices are challenging its competitiveness while in Europe, green
ideology has a larger impact. There is a onetime carbon improvement as
coal is replaced by gas; but then gas becomes the largest carbon
producer on the system – so where do we go from there? And renewables
will remain intermittent and likely costly for some time to come.
Nuclear power is clean, reliable and in most cases, economic; but of
most importance – abundant. Yes, in a resource constrained world, the
amount of electricity we can potentially generate with nuclear power is
almost limitless. So why don’t we see more of it in the developed
world?
The answer is that we still don’t have the political will. And that comes from lack of public support. Just this week the World Bank reiterated its policy
that they don’t support nuclear power – even though they support all
other forms of electricity generation. Continued negative press about
the status of Fukushima keep the public on edge. For example this past
month TEPCO started to remove the used fuel from the Unit 4 spent fuel
bay. This should have been a good news story yet most stories made it
seem like a horrifically dangerous undertaking (and of course it is
not).
The WEO makes the case that government support is what drives nuclear. “The
rate of expansion of nuclear power continues to be mainly policy
driven. It expands in markets where there is a supportive policy
framework, which in some cases actively targets a larger role for
nuclear in the mix in order to achieve energy security aims. But policy
frameworks can also hinder or eliminate nuclear power, often as a result
of public opposition: even where there is no explicit ban, long
permitting processes, such as in the United States, can significantly
hinder development by increasing uncertainty about project completion
and increasing costs.”
I was listening to a radio interview this past week with climate change scientist Richard Peltier. [Interview starts at about 31:40 in the link].
He makes a strong case for getting the message out about scientific
consensus. While he notes that between 95 and 98% of scientists agree
on the science of climate change, the press reports make it seem there
is much more disagreement than there really is with the result that the
public is confused. The answer is to get out and speak at the grass
roots level. Governments will not strongly support policies that battle
climate change until the public believes it is necessary. The same is
true for nuclear power. Governments will not strongly support
increasing its use until the public are in agreement that it is safe and
necessary.
We are seeing some progress. In Pandora’s Promise,
five environmentalists are now convinced of the advantages of nuclear
power and they are actively advocating its use. This past month four
other environmentalists have released an open letter calling on world leaders to support development of safer nuclear power systems. In their letter they state, “As
climate and energy scientists concerned with global climate change, we
are writing to urge you to advocate the development and deployment of
safer nuclear energy systems. We appreciate your organization’s concern
about global warming, and your advocacy of renewable energy. But
continued opposition to nuclear power threatens humanity’s ability to
avoid dangerous climate change.”
Some governments are also
taking on the challenge. In the UK there is pretty much political
unanimity that new nuclear is required to meet their climate goals. The
result is strong political support for nuclear new build. A recent
quote by Hergen Haye, Head of New Nuclear & Strategy, Department of Energy and Climate Change (DECC), UK government
“To replace Hinkley alone, we have to build 6000 wind turbines. Nuclear
will help us to cut costs and to face the other environmental
challenges. We cannot do without nuclear because renewables will not do
things alone without making electricity bills rise.” (21 November 2013 in Brussels).
In
France, after pandering to the greens and committing to close
Fessenheim, the French government is finally saying that there will not
be more closures. We see strong political support where nuclear is
needed most in China, Russia and India although Korea is wrestling with
their future plan due to recent scandals.
I come back to the first line of the WEO 2013, “Many of the long-held tenets of the energy sector are being rewritten.”
This is a time of great opportunity. So let’s make sure nuclear power
is playing its increasingly important role by providing clean reliable
generation to support economic growth and a brighter more secure future
for us all.
http://theenergycollective.com/mzconsulting/311981/meeting-energy-needs-21st-century-it-time-real-nuclear-renaissance
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