Electricity: Ready for Centre Stage (Part 2 - Energy Challenges in an Interdependent World

 

 

Here, then, are some of the energy-related challenges that form the backdrop to our world’s heightened electricity expectations…

 

The last two decades have seen some extraordinary changes in the world – changes that have only been accelerating. In the aftermath of the global financial crisis, centers of power, influence and capital are shifting faster than anyone anticipated even five years earlier.

There have been some positive developments – the pace of economic progress in Brazil and China, for instance or the rapid expansion of access to mobile phones in rural communities worldwide. But there have also been some troubling setbacks and even reversals of progress, such as growing numbers of people suffering from malnutrition, the return of tuberculosis as a major threat to humanity, and a host of major environmental concerns.

No one knows what kind of world we will face in another ten years. But the context for this evolution is clear: a highly interdependent global community, more so than at any point in history. We are interdependent not only in trade, as earlier times experienced, but also through capital markets, the Internet and media, science and technology, climate change, biodiversity, sustainability concerns related to oceans and forests, travel for business and tourism, immigration, and human security. In all these ways our choices and actions are shaping one another, and the future of our common humanity.

The next decades are likely to bring not only further astonishing forms of progress, but also momentous challenges, even under highly optimistic scenarios. Our interdependence presents us with a clear choice: with poor planning and inadequate global coordination, the stresses the planet is already facing will likely grow; conversely, imminent action and shared leadership may help us to mitigate and manage many of these challenges.

Consider the range of pressing energy-related challenges the world will face in coming decades:

·        Infrastructure replacement. Much of the planet’s existing energy infrastructure – valued in the trillions of dollars – is aging, edging towards the end of its useful life. Life extensions and upgrades will only buy so much time; the replacement challenge will require capital-intensive investments in new extraction equipment, transmission lines, power plants and indeed all aspects of the energy value chain.

·        Energy poverty. About half the planet lives without adequate access to energy, and a quarter of humanity have no access at all. The energy options that are available to the poor often leave much to be desired on many counts. In India, for instance, many women die prematurely from exposure to dirty cooking fuels. As a solar company in India sums up the problem: “Often, the only energy options available are unhealthy, unreliable, environmentally unfriendly and expensive.”^[i]

·        Population growth. The global population may grow from six billion to nine billion by 2050. Basic systems in agriculture and food production, water, waste and sanitation will feel the strain.

·        Urbanization. For the first time in history, more people live in urban than in rural settings, and the urbanization trend will continue, with more people moving into cities every year. The world’s cities already require massive quantities of raw materials and investment to support their burgeoning infrastructure and their demand for mining, energy and other resources will grow at a faster pace. In China alone, roughly 13 million people are moving from rural areas to cities each year.

·        Dramatic growth in new markets for energy demand. The International Energy Agency estimates that global energy demand will grow by 44 percent over the next two decades.  In transportation, there may be as many as two billion cars by 2030. For electricity, the challenge of meeting incremental demand for reliable lighting, heating, cooling, and appliances will be exacerbated by the need to renew and/or replace existing infrastructure. There is a further complication.  Growth in demand will mainly come from Asian emerging economies and the small number of countries today that use the majority of the world’s energy will need adapt to stronger demand. The global community will be tested by commodity shortfalls, hoarding of resources and unanticipated price escalations which could give rise to geopolitical tensions and conflicts.

·        Oil price risks. There is a threat of major shocks arising from production shortfalls in conventional oil, as well as the rising costs of extraction and refining of unconventional resources.^[ii]   Regional tensions and conflict may contribute to an unstable world.

·        Nuclear proliferation. As India has done in the past, countries may invest in the peaceful side of nuclear energy as a means of accessing the development of weapons technology and materials.

·        Resource depletion. Oceans, forests, drinking water, and biodiversity are already under some threat, and depletion of these resources can be expected to accelerate.

·        Climate change. British scientist James Lovelock argues that it is already too late to avert dangerous climate change, and that the future will be more about adaptation than mitigation. Other scientists contend we may have a few years yet to mitigate some of the effects of climate change – but we need to act quickly. Within the energy industry, there is still considerable uncertainty on the science and the claim for urgent action. But even skeptics acknowledge that carbon should be constrained as a prudent risk management strategy; that business-as-usual carbon emissions to 2050 would run counter to a broad social consensus. Under any of these assumptions, the capital investments of the next decade will tell us if we have any realistic prospect of shifting towards a low carbon electricity system by 2050. 

While a concerted global response to these issues would be improbable, to do nothing in the face of them would disappoint public opinion. Business executives, government officials, NGO leaders and others increasingly recognize the need for decisive action in the next decade, including the need for visionary global leadership to address this range of energy-related challenges. And when they are considered together, a pattern emerges: electricity is an indispensable variable and represents the locus of many potential solutions. 

In Part 3 of this post, we'll look at the transformation of the role of the electricity sector, from one of the regional supplier to global problem-solver...

 

Part three is available now, to read further please click here.

 

 

Pierre Guimond

President and CEO

Canadian Electricity Association