Tapping technology and efficiency to secure a clean energy future

26 November 2012

IEA Executive Director Maria van der Hoeven

This article appears courtesy of Planet B Magazine

Neither renewable energy nor energy efficiency are anything new. Humans have been using biomass for heat and cooking for millennia, and hydropower has been around for decades. Meanwhile, reducing energy inputs to produce the same output has been part of economic competition for centuries, and modern concerns with energy conservation have seen energy intensity across developed economies broadly improving since the 1970s.

However, both renewable energy and the trajectory of energy efficiency gains have changed in recent years. We are seeing the rapid development of a portfolio of renewable technologies, including newer forms such as wind and solar power. That kind of renewable energy is emerging as a fundamental part of the global energy mix.

At the same time, the rise of emerging economies has risen millions out of poverty, but these countries tend to put relatively less emphasis on energy efficiency, reversing the global trend toward lower energy intensity in the past few years. The technologies are often already there, but new enabling frameworks and mechanisms are being developed to unlock efficiency gains, both in developed and emerging economies.

Looking forward, energy efficiency and renewable energy technologies will play a vital role in the transition to the secure and sustainable energy future that we seek.

This transition certainly entails challenges for policy, but experience shows us time and again that unlocking the power of private sector investment is the only way to achieve the sustainability goals that societies demand. Creating the proper market structures and incentives, while at the same time minimising interference in business decisions and ensuring policy stability, can be tricky. That is why cooperation between government and business is so important – to recognise what works and what does not, to learn from our experiences, and to follow the right path to optimal technology deployment.

At the International Energy Agency, energy security sits at the core of our mandate, and that is precisely why we recognise that sustainability is such a prized goal. An efficient and low carbon energy system reduces reliance on energy supply for economic growth, mitigates threats to energy security coming from climate change, and reduces the global economy’s exposure to disruptions in fossil fuel supply.

Energy efficiency measures, by reducing energy intensity, contribute to short-term energy security by reducing our dependence on global energy supply chains. The most secure energy is the barrel or megawatt we never have to use.

However, over the longer term, energy security is also linked to environmental developments. Rapidly rising energy use and emissions of greenhouse gases will have severe impacts on the natural environment and the global climate. Rising sea levels, changing rainfall patterns, and increasing incidence of droughts, floods and heat waves will affect ecosystems, food production, water resources, and of course, energy production itself. Fossil reserves are not unlimited, and the costs of producing the marginal barrel, cubic metre or tonne will rise over time. Countries will need more resilience factors (such as expensive emergency stocks) to ensure their energy security. Exceptional natural disasters could delay the exploration of offshore oil and natural gas fields, and more hurricanes could force the shut-down of oil production in the affected regions. Furthermore, an increasing share of oil and gas production will come from unconventional sources and production methods with higher production costs and greater environmental footprints.

The question then is: How to achieve a transition to greater deployment of clean technologies and energy efficiency?

Improving energy efficiency is not always easy – good governance capacities (including legislative frameworks, funding mechanisms, institutional arrangements and coordination mechanisms) are needed to support implementation of energy efficiency strategies, policies and programmes. Enabling frameworks confer authority, build consensus, attract attention to, and provide resources for energy efficiency policy implementation. Important enabling frameworks include laws and decrees, strategies and action plans and funding mechanisms.

Institutional arrangements, such as implementing agencies, resourcing requirements, energy providers, public-private cooperation, stakeholder engagement, and international development assistance, reflect the broad range of actors that play leading roles in energy efficiency policy implementation. Lastly, coordination mechanisms, such as targets and evaluation, influence the quality and effectiveness of energy efficiency policy outcomes. The IEA has developed 25 energy efficiency policy recommendations which are regularly updated in order to help countries achieve energy efficiency savings in the transport, buildings, industry and power sector, at little or no cost.

But, the other key driver in the transition to a low-carbon economy will be technology and innovation. Technological change and development will significantly enhance the portfolio of options available, and over time will bring down the cost of achieving global climate change goals. Governments have an important role in this context. They can help by creating an attractive environment for research, development and demonstration (RD&D), and by safeguarding the drivers of innovation. Well-designed and targeted technology policies on both the supply and demand sides are a fundamental ingredient in a strategy to accelerate innovation.

The difficulty industry faces in fully appropriating the benefits of R&D represents one of the main justifications for government support of R&D. Low-carbon energy R&D typically requires long-term horizons, while most of industry’s focus is on incremental improvements, which are more certain. Innovations in clean energy technologies often have very high capital requirements, with substantial economic, technical, and regulatory risks that hamper access to finance. Plus, due to the ‘public good’ nature of reducing CO2 emissions, demand for certain low-carbon technologies is low, and companies have little incentive to invest in clean energy RD&D.

Public policy can play an important role in addressing market failures and the disconnect between supply and demand of appropriate innovations by inserting environmental sustainability into the research system. Government intervention with targeted technology policies will be key to encouraging greater private sector investment in low carbon energy technologies.

In both the cases of efficiency and technology, then, policy is a key driver. Yet, climate change is clearly one of the most difficult challenges faced by the energy sector, now, and for the decades to come. The response so far has been broadly inadequate. In 2010, the world added more CO2 to the atmosphere than ever before. Especially in difficult economic times, policy makers can lose sight of the pressing need to move forward.

What then, is the role of international climate change negotiations and meetings like COP18? The kind of local, regional and national policies which can do so much to improve energy efficiency and the role of clean energy technology are not dealt with by such negotiations. And yet, gatherings like COP can help on several fronts.

First, they set the tone for the global effort and remind everyone, both policy-makers and publics alike, of the clear and present danger of climate change. Second, they can establish basic rules for the credible reporting of countries’ actions to reduce greenhouse gases, and ensure that all are moving in the right direction. Good news stories, like the rapid expansion and development of renewable energy, must be reconciled with the fact that the additional capacity of coal-based power generation dwarves those carbon improvements. Under the UN Framework Convention on Climate Change, countries need to give a full and fair picture of what is really happening. Only then will we take the measure of efforts we need to make.

If political will can be maintained, then the right policies can be pursued in each country to improve energy efficiency and pursue low-carbon technologies in close concert with the private sector. That path will, in turn, bring us closer to a sustainable energy trajectory, and one which is, in the end, more secure for our economic future.

This article appears courtesy of Planet B Magazine