Sunday 1 February 2015

Currently browsing 'Energy'

Energy

 

Governments should benefit from low oil prices to end subsidies

Posted by on 02/11/14

With oil prices having declined to less than $90 per barrel, a low level not seen for more than a decade, oil/gas subsidies are becoming a costly affair to countries with high production costs like Russia, Egypt, Yemen, Venezuela, Indonesia. At the same time, due to the lower prices consumers enjoying them will hardly feel the abolition of the subsidies.

This is therefore the right moment to abolish them or at least start phasing them out. At the forthcoming Climate Conference in Lima, the IEA should therefore make a renewed plea for their abolition; and the international community should lend its full-hearted support for such action.

A decision to phase out oil/gas subsidies in Lima it would be the first time ever that a climate conference produces a tangible result by ending an unforgivable incentive to fossil energy.

Eberhard Rhein, Brussels, 20/10/2014

Gas talks stall as Russia pushes for EU guarantees on Ukrainian gas payments

Posted by on 30/10/14
Update 11.50 30/10/14:
Reuters is reporting that an EU spokesperson has said a deal is "very close" and talks will continue today, as we note below. As we also say below, a deal is still doable and likely, the question remains whether any form of EU payment guarantee will be needed and if this can get sufficient support within the broader EU member states.

***************************************************************

Despite another round of talks between Ukraine, Russia and the EU which ran late into the night yesterday the negotiations seem to have reached somewhat of a stalemate.

Earlier in the year the halting of gas supply between Russia and Ukraine (for Ukraine’s own use at least) was not seen as too big of an issue and it was hoped Ukraine would be able to leverage the combination of economic pain from sanctions and the Russian government’s reliance on commodities exports for funding to secure a relatively favourable deal. However, on the cusp of the harsh Ukrainian winter the power balance has steadily shifted and Russia has continued to hold firm and even broadened its demands.

What has been agreed so far?
Quite significant progress has actually been made compared to the starting point:
  • Ukraine has agreed to pay for previous gas supply at a price of $268.5 per thousand cubic metres. This means $1.45bn will be paid by the end of October and $1.65bn ($3.1bn total) by the end of the year. Ukraine’s Naftogaz has set aside $3.2bn in an escrow account to pay for this.
  • Going forward Ukraine will prepay on a monthly basis for its gas this winter at a price of $385 per thousand cubic metres. Russia has agreed to pay transit costs.
Russia has clearly shifted from its original price demand (at least with regards to back dated payments), but Ukraine has also compromised by agreeing to prepay and pay off existing debts.

What are the key sticking points?
There is really only one, but it’s a biggie. While Ukraine has proven that it can afford to pay off its existing debts there is much less certainty about its ability to prepay going forward.

We have noted before the significant downward spiral in the Ukrainian economy. While the fighting has calmed down to an extent, things are still far from normal, not least because the conflict has become frozen in the East with part of the country still de facto cut off.

Ukraine is now totally reliant on external funding from the EU and IMF. As we have seen in the Eurozone crisis the release of such funding is often more complicated than expected and creates a staggered cash flow linked to economic reforms. Such reforms should pick up following the election but remain tricky to implement in a country caught in the proverbial no man’s land in the sanctions war between Russia and the EU.

For these reasons Russia has continued to demand some form of explicit guarantee from the EU that Ukraine will be able to pay for the supplies over the winter – they are expected to cost around $1.6bn, though this could increase if the winter is particularly harsh.

Is a deal likely?
It’s looking difficult as this meeting was earmarked as the most likely one for a deal. Russia seems to be using this arena to flex its muscles given that it believes it has the upper hand. That said, the economic costs of sanctions and a falling oil price are creating problems for the Russian economy, though it’s not always clear whether economic logic is sufficient to alter Russian President Vladimir Putin’s position.

Getting explicit EU support for around $2bn to guarantee prepayment would be difficult. But, so far, the EU has been fairly supportive of Ukraine and may be willing to offer a more tacit agreement to provide further funding rather than outright underwriting of the payments. Furthermore, without a deal there will be a huge temptation for Ukraine to siphon off gas which it is transiting from Russia to Europe. This could cause Russia to halt all gas flow through Russia, something Europe is keen to avoid to say the least.

Talks are set to resume later today according to RIA Novosti. With all this in mind, and the fact that a deal remains in all sides' interests, we would think one could still be struck.

What are the lessons here?
Ultimately, this dispute is teasing out a key question for the EU in the wake of this crisis. It is becoming increasingly clear that Ukraine is economically devastated in the wake of the war and the sanctions. The offer of opening up markets in the EU is unlikely to be sufficient and the EU and IMF will have to face up to the fact that in the short and medium term they will probably have to offer significant amounts of cash to Ukraine to help stabilise its economy, currency and energy supply.

Putin is aware of how politically sensitive this is for the EU – it has just gone through a series of its own bailouts in the Eurozone crisis and now countries are being asked to stump up cash for a country which is not even a member (and is unlikely to be one for the foreseeable future, if ever). As with the sanctions, this narrative is likely to expose dividing lines within the EU and set the tone for the negotiations over the future of Ukraine.

¥uan and Waterloo of Petro$ (Part 1/2)

Posted by on 30/10/14

yuan logoOngoing western sanctions due Ukraine are pushing China and Russia to close cooperation – the great Eurasian axis is already in motion. Despite the headlines in mainstream western media related to civil war in Ukraine the primary war is being fought monetarily. The Russia-China Strategic Partnership (RCSP) is truly global in scope, having come to encompass the entire world to varying degrees. The Ukraine War might be the U.S. Dollar Waterloo event.

As the Americans and their allies are trying to squeeze Russia and Iran with a combination of economic sanctions and political isolation, alternative poles of power are emerging that soon may present a serious challenge to the U.S.-dominated world that emerged from the end of the Cold War.

The Russian response to ongoing western sanctions has been launching a counter-strategy that could bring the cost boomeranging right back to Washington. Namely, the formation of a potential non-dollar trading block among major players in the global energy markets including Iran and China.

 

 

The end of the Petrodollar

(In 1971 Richard Nixon was forced to close the gold window taking the U.S. off the gold standard and setting into motion a massive devaluation of the U.S. dollar.In an effort to prop up the value of the dollar Nixon negotiated a deal with Saudi Arabia that in exchange for arms and protection they would denominate all future oil sales in U.S. dollars. )

For decades, virtually all oil and natural gas around the world has been bought and sold for U.S. dollars. Since World War II, America’s geopolitical supremacy has rested not only on military might, but also on the dollar’s standing as the world’s leading transactional and reserve currency.

Last year Russia produced about 10.5 million bbls. of oil per day and exported 70% of it. That amounts to nearly 2.6 billion barrels with a value of nearly $250 billion at world market prices. It also exported the equivalent of nearly 1 million barrels per day of natural gas with a market value of upwards of US$50 billion. The truth is that Russia is the largest exporter of natural gas and the second largest exporter of oil in the world. If Russia starts asking for payment in currencies other than the U.S. dollar, that will essentially end the monopoly of the petrodollar.

China just overtook the US as the world’s largest economy. The US national debt is now past €17 trillion. China – their biggest creditor – has been cutting on US debt holdings and hoarding gold on the side to be prepared for the possible collapse of the dollar. The US federal government ran an estimated budget deficit of $486 billion, or 2.8 per cent of GDP, in fiscal year 2014. By contrast, Russia just posted a federal budget surplus of 2 per cent of GDP.

dollar collapseWhen U.S. politicians started plan economic sanctions on Russia, they probably never even imagined that there might be serious consequences for the United States. But now the Russian media is reporting that the Russian Ministry of Finance is getting ready to pull the trigger on a “de-dollarization” plan. For decades, virtually all oil and natural gas around the world has been bought and sold for U.S. dollars. As I will explain below, this has been a massive advantage for the U.S. economy. In recent years, there have been rumblings by nations such as Russia and China about the need to change to a new system, but nobody has really had a big reason to upset the status quo. However, that has now changed. The struggle over Ukraine has caused Russia to completely reevaluate the financial relationship that it has with the United States.

The largest natural gas producer on the planet, Gazprom, has signed agreements with some of their biggest customers to switch payments for natural gas from U.S. dollars to euros. If other nations start following suit – start trading a lot of oil and natural gas for currencies other than the U.S.$ – that will be a massive blow for the petrodollar, and it could end up dramatically changing the global economic landscape.

Moscow, allied with the BRICS, is actively working to bypass the US dollar. The core point is that Russia is not alone. Besides the BRICS also the G-77, the Non-Aligned Movement (NAM), the whole Global South is critical to U.S. led bullying and would like to have other alternative in international relations. This past summer, the BRICS countries created an alternative to the largely U.S.-controlled World Bank and International Monetary Fund (IMF), and the Shanghai Cooperation Organization (SCO) added 1.6 billion people to its rolls.

G-7 vs E-7

Back in 1971, it was necessary to assure that the dollar would retain its position in world trade as the world’s premiere currency, in spite of the fact that it was no longer backed by anything. The U.S. reached an agreement with Saudi Arabia that, in trade for arms and protection, the Saudis would denominate all future oil sales, worldwide, in dollars. The other OPEC countries fell into line, and the “petrodollar” was assured.

Now the Sino-Russian cooperation is challenging the Americans, and there are many countries that would be happy to join them in dethroning the US dollar as the world’s reserve currency. The historic gas deal between Russia and China is very bad news for the petrodollar – it might be start of the “de-Americanised” world.

 

Yuan replacing the Petrodollar

petrodollarOn April 24th 2014 the Russian government organized a special “de-dollarization meeting” dedicated to finding a solution for getting rid of the US dollar in Russian export operations. Top level experts from the energy sector, banks and governmental agencies were summoned and a number of measures were proposed as a response for American sanctions against Russia.

Over the last few weeks there has been a significant interest in the market from large Russian corporations to start using various products in renminbi and other Asian currencies, and to set up accounts in Asian locations,” Pavel Teplukhin, head of Deutsche Bank in Russia, told the Financial Times, The renminbi is the official currency of the People’s Republic of China. literally means “people’s currency”. The yuan is the basic unit of the renminbi, but is also used to refer to the Chinese currency generally, especially in international contexts.

Moving the yuan towards internationalisation involves three distinct phases: turning the Chinese currency into a) a trading currency, b) an investment currency, and c) a reserve currency.

Some recent developments:

  • Chinese credit rating agency Dagong has downgraded U.S. debt from A to A- and has indicated that further downgrades are possible.
  • China has just entered into a very large currency swap agreement with the eurozone that is considered a huge step toward establishing the yuan as a major world currency.
  • Back in June 2014, China signed a major currency swap agreement with the United Kingdom. This was another very important step toward internationalizing the yuan.
  • China currently owns about 1.3 trillion dollars of U.S. debt, and this enormous exposure to U.S. debt is starting to become a major political issue within China.
  • Mei Xinyu, Commerce Minister adviser to the Chinese government, warned (on Oct 2014) China may decide to completely stop buying U.S. Treasury bonds.

China is the largest producer of gold in the world, and it has also been importing an absolutely massive amount of gold from other nations and in addition China plans to buy another 5,000 tons of gold.) There are many that are convinced that China eventually plans to back the yuan with gold and try to make it the number one alternative to the U.S. dollar.

If China does decide to back the yuan with gold and no longer use the U.S. dollar in international trade, it will have devastating effects on the U.S. economy. If other nations stopped using the dollar to trade with one another, the value of the dollar would plummet dramatically. One could claim that the entire way of life in U.S. depends on the U.S.$ being the primary reserve currency of the world. (Source: The Economic Collapse )

eu-china trade map

The dollar does not just predominate in China’s trade with the United States, but with other countries as well. The first steps towards the internationalisation of the yuan emerged in 2008-2009. At that time, businesses and companies were allowed to use the yuan in trade with Hong Kong (Xianggang), Macau, and ASEAN countries. In 2012, every Chinese company with a licence for export and import transactions was able to use the yuan. An active transition to foreign trade settlements in yuan is happening alongside an increase in the use of the national currencies of China’s trading partners. This is being facilitated by the signing of bilateral currency swaps between the People’s Bank of China (PBC) and the central banks of China’s trading partners. To date, the PBC has signed more than 20 currency swap agreements. At the end of 2013-beginning of 2014, the yuan overtook the euro in terms of the amount of payments used for international trade, and took second place after the US dollar. According to the People’s Bank of China (PBC) , there was more than 1.3 trillion yuan overseas at the end of 2013, which is equivalent to approximately US $250 billion. In fact, this money is forming an offshore yuan market. At present, the yuan can be directly converted with the US dollar, the Japanese yen, the Australian dollar, the Russian rouble, the Malaysian ringgit, and the New Zealand dollar. The latest such agreement was signed between China and New Zealand in March 2014. (Source: Strategic Culture Foundation )

 

My conclusion

In my conclusion the era when the IMF, World Bank, and U.S. Treasury could essentially dictate international finances and intimidate or crush opponents with sanctions, pressure and threads are drawing to a close – the BRICS and the Shanghai Cooperation Organization are two nails in that coffin. These independent poles (BRICS, SCO, USAN) are developing fast and it remains to see what their ultimate impact on international politics will be – my scenario is that the impact will be a drastic shift from U.S. dominance to more balanced juxtaposition of U.S. and Eurasia.

the end of dollar

Technological breakthroughs against climate change brighten the horizon

Posted by on 28/10/14

Humanity will be unable to combat climate change without profound transformations in the way it generates energy.

Two such transformations have been recently announced, one in Singapore, the other in USA.

In Singapore, a team of scientists of the Nanyang Technological University have developed a new type of ultra-fast recharging batteries which are claimed to charge a car battery up to 70% of capacity within five minutes. This breakthrough will revolutionise e-mobility in terms of range and costs and make electric cars superior to the most efficient diesel vehicles.

European manufacturers should therefore urgently reassess the situation and adapt their proven, but old-fashioned engine technology at the risk of losing out to US and Chinese competitors.

The new batteries will provide us with truly clean motor vehicles and give a powerful boost to solar and wind energy, because millions of cars may form big energy storage systems helping to overcome the inherent intermittences of renewable energies.

Separately, the US defence company Lockheed has announced a breakthrough in fusion energy. Within a year it will build a test reactor to be followed five years later by a prototype of a 100 MW reactor of tiny dimensions (2×3 meter!).

Assuming the problems linked to nuclear fission, in particular safety and waste storage, to be solved this might usher in an era of non-fossil electricity generation based on wind, solar, biomass and nuclear fusion.

The demand for oil and gas will also fall dramatically as the global car, shipping and possibly even aircraft industry will phase out the internal combustion engine, say by 2050, reinforcing the decline of C02 emissions.

Add to these two technological breakthroughs the introduction of a magnetic super high-speed train by the Japanese railways until 2045.

Running at a speed of up to 500 km/h the train will largely replace domestic air transport, also a significant source of C02 emissions. The Japanese industry will no doubt export the new train to other parts of the earth, from North America, to Brazil, Argentina, Russia and Europe, with the consequence that there too it is likely to replace domestic air traffic on distances of less than 1500 km.

The news from Singapore, USA and Japan unfortunately show that Europe has lost its momentum in coming up with courageous technical and political solutions both to tackle climate change!

We are closer than ever to technical solutions allowing for a largely emission-free future. By establishing strict emission targets heads of government will help accelerate the technological breakthroughs that are arising on the horizon.

In conclusion, one year ahead of the World Climate Conference in Paris, there is reason for guarded optimism, provided policy makers will show the courage to fix ambitious long-term targets and avoid getting again lost in minutiae.

Brussels 20.10 2014 Eberhard Rhein

Klima

Posted by on 24/10/14

An einem Klimagipfel teilnehmen zu müssen erinnert an Zähneputzen: Es ist wichtig, aber lästig.Lange schritt Angela Merkel beim Klimaschutz voran. Teils so forsch, dass sie sich den Titel Klimakanzlerin einfing. Jetzt ist das Geschrei groß: Statt bis 2030 EU-weit 30 Prozent Energie zu sparen, stehen nur noch 27 Prozent auf dem Papier. Merkel verrate ihren Titel, monieren Kritiker. Und tatsächlich verlässt Deutschland seine Vorreiterrolle als oberster Klimaschützer. Dies aber ist kein Einknicken gegenüber Kritikern wie Großbritannien oder Polen, sondern Strategie: Den Weltklimagipfel 2015 in Paris im Blick, weiß Merkel, wie wichtig die Einigung auf EU-Ebene ist. Nur wenn sich die 28 Staaten trotz unterschiedlicher Ansprüche verständigen, kann dies Beispiel geben für Paris.

The Paris Climate Conference must agree on abolishing fossil energy subsidies

Posted by on 21/10/14

During the last years international organisations from IMF to IEA have called for the abolition of subsidies on oil and gas consumption. At its meeting in September 2009, the G20 has also agreed to phase them out in the medium term.

Without much avail; most governments concerned continue to ignore these calls, whatever the negative impact of their subsidies on budgets, urban traffic, trade balance, pollution, human health and, of course, the global climate.

The amount of the subsidies does not show signs of decline. It continues to range about half a trillion USD, 0.7 per cent of global GDP!

Most of the subsidies are being granted by low and medium-income countries, which can least afford to squander huge amounts of money for giving wrong incentives.

The other category of sinners are rich oil- and gas- producing countries that seem to consider their oil and gas reserves big enough to indulge in the highest C02 per capita emissions on earth, topping the USA, Canada and Australia.

Fossil-fuel subsidies counter-act the efforts undertaken to reduce greenhouse gas emissions and help humanity survive in sustainable conditions. By keeping fossil-fuel prices even below low world market levels they push up consumption.

The 2015 Paris Climate Conference must therefore call for rising fossil energy prices in all countries, something that has never been done before.

The first step must be a rapid phasing out of fossil-fuel subsidies to be followed by a progressive introduction of fossil energy taxation, whatever its form.

Subsidies and taxes are easy to check: governments simply have to lay open their budget expenditures and revenues.

The Paris Conference needs to fix a deadline, say 2025, when the phasing out of subsidies should be completed and fossil fuel taxation should start. IMF or IEA should be tasked with monitoring and reporting on progress.

In view of achieving a consensus in Paris on this approach, the French government should dispatch several high-level emissaries to the major subsidising countries with the mission to convince the governments of the advantages from abolishing fossil fuel subsidies and introducing fossil fuel energy taxation.

It will be anything like an easy mission. But after five years of inaction the international community must finally take the courage to be tough with the “sinners”.

Eberhard Rhein, Brussels, 10/10/2014

Open Letter to the European Council, by Orgalime

Posted by on 20/10/14

President, Hon. Heads of State and Members of the European Council,

Orgalime, the European engineering industries association, whose members’ annual turnover is some 1800 billion euro and which employ over 10 million staff in the EU, is writing to you to urge you to adopt of an integrated European 2030 Energy and Climate Change Framework at the occasion of the European Council meeting on 23/24 October 2014.

Such a decision is urgently needed to encourage investments into innovative areas of cutting edge technologies that will pave the way towards Europe´s future low carbon, energy efficient economy with higher levels of energy independence, greater security of supply and overall sustainability of the energy system.

We believe that a binding EU 40% lead carbon target, coupled with EU-level commitments for energy efficiency and renewable energy sources beyond 2020, will provide a new impetus for sustainable growth and jobs in Europe and will overall boost the competitiveness of EU industry.

We particularly welcome the fact that the Commission has now closed the gap in its initial 2030 Framework proposal with a 30% energy efficiency target*, which we consider as both, feasible and reasonable, provided that the right instruments for implementation are put into place.

Indeed, if Europe wishes to deliver on its carbon target, control energy prices, increase the integration of renewables into its energy system and become world leader in this area, action inevitably needs to go hand in hand with energy efficiency and the development of an integrated energy system, including interconnected infrastructures. Increasing the efficiency of equipment, which is often reaching its technical limits, will not suffice. The challenge is to better exploit the energy savings potentials at system and market level, which requires a future energy retail model that facilitates greater involvement of energy end users and distributed generation in a truly consumer-centric, competitive energy market.

This can only be achieved through instruments, such as the governance process, the Energy Efficiency and Energy Performance of Buildings Directives rather than through further product regulation under the Ecodesign Directive or its pending review, which risks breaking today´s delicate balance between cost efficiency, environmental improvement, product functionality and affordability.

To conclude, we call upon European regulators to set in place a robust 2030 Energy and Climate Change Framework in support of the EU´s Industrial Policy, and particularly the overall aim to reach a 20% share of
manufacturing output in the EU’s GDP by 2020.

Considering the international dimension of this debate, we encourage the EU to make the necessary efforts to obtain a global and legally binding climate agreement at the UN-FCCC in Paris in 2015. It is essential that other regions of the world show a comparable degree of ambition and take similar action.

Yours faithfully,

Sandro Bonomi

President, Orgalime

* Previously, Orgalime felt that a 40% energy efficiency target should be set considering the 2050 perspective. We consider the suggested
30% as a step in the right direction, which should be supported, while we ask for maintaining a forward looking, proactive attitude.

Mayors network listed – will Mayors take the lead on a climate deal?

Posted by on 19/10/14

National governments have proven that they do not have what is required to meet the global challenges of climate change and the unsustainable use of our planet’s resources. The shortcomings of the COP meeting since Copenhagen acts as testament to this. With the burden of recession and austerity, short-sighted national governments have thus far shown themselves unable to handle sustainable development issues.

Within the arena of sustainable development, the boundaries of responsibility are undergoing a monumental shift. This allows new actors to take pole position in the creation of new opportunities. Old infrastructures are being replaced by new ones that are better designed to cope with the challenges facing cities and regions.

We should stop directing our attentions and frustrations towards impotent governments. Instead we must focus on more localized models that simmer from below but come to influence and inspire national actors to greater action.

Better levels of engagement and the development of local and international networks have prompted a wider range of actors to become involved in sustainability, from both within and outside the market.

Over the past five years we have seen several strong international networks emerge from municipalities and regions. To get a wider understanding of this phenomenon I undertook some research that shows just how many locally-focussed organizations use their involvement in these networks to bring about sustainable solutions that can have a real impact.

Sweden’ s biggest Political Week event in 2015 – A Challenge for National Governments in front of UN Climate Meeting Paris

Next summer – between the 28 to the 30th of June – the Mayor of the Swedish Island Gotland will invite Mayors from all over the world to the event to debate and prepare to challenge national governments in front of the Paris UN Climate meeting in December 2015. The event is organised by Region Gotland, Stockholm Environment Institute, WWF, The Think Tank – Global Utmaning, The Nordics association, Kairos Future, Club of Rome and Respect Climate.

Send me an e-mail if you are interested to find out more –  kaj at embren.com.

Mayors 33 networks that can act are:

1. United Cities and Local Governments - http://www.cities-localgovernments.org/

2. United Cities and Local Governments of Africa (UCLGA) - http://www.afriquelocale.org/en/about-us/uclg-africa

3. Federación Latinoamericana de Ciudades, Municipios y Asociaciones (FLACMA) / Latin American Federation of Cities, Municipalities and Associations of Local Governments - http://www.portalambientallatinoamericano.com/

4. UCGL Euro-Asian Regional Section - http://www.euroasia-uclg.ru/index.php?lang=en

5. UCGL- Asia-Pacific - http://www.uclg-aspac.org/

6. Council of European Municipalities and Regions (CEMR) - http://www.ccre.org/en/

7. UCLG-Middle East and West Asia (MEWA)  - http://www.uclg-mewa.org/

8. METROPOLIS Network (World Association of Major Metropolises) - http://www.metropolis.org/

9. Union of the Baltic Cities  - http://www.ubcwheel.eu/

10. Local Governments for Sustainability – ICLEI  - http://www.iclei.org and ICLEI USA / National League of Cities / U.S. Green Building Council’s Resilient Communities for America Campaign:http://www.resilientamerica.org

11. C40 (Large Cities Climate Leadership Group) - http://live.c40cities.org/

12. Clinton Foundation’s Climate Initiative - http://www.clintonfoundation.org/main/our-work/by-initiative/clinton-climate-initiative/programs/c40-cci-cities.html

13. World Mayor Council on Climate Change - http://citiesclimateregistry.org/

14. Sustainable Cities Network  - http://www.sustainablecities.net/

15. United Nations Human Settlements Programme (UN-Habitat) - http://www.unhabitat.org/content.asp?typeid=19&catid=540&cid=5025

16. United Nations International Strategy for Disaster Reduction (UNISDR) - http://www.unisdr.org/campaign/resilientcities/

17. World Bank - http://blogs.worldbank.org/sustainablecities/about-us

18. Cities Alliance - http://www.citiesalliance.org/

19. World e-Governments Organisation of Cities and Local Governments (WeGO) - http://www.we-gov.org/history

20. Mercociudades - http://www.mercociudades.org/

21. Unión Iberoamericana de Municipalistas (Iberoamerican Union of Municipality Authorities – UIM) - http://www.uimunicipalistas.org/#/sobrelauim.txt

22. Federación de Municipios del Istmo Centroamericano (FEMICA) – Federation of Central American Municipalities - http://www.femica.org/

23. Cities Development Initiative for Asia (CDIA) - http://www.cdia.asia/

24. CAI-Asia – The Clean Air Initiative for Asian Cities  and CITYNET (The Regional Network of Local Authorities for the Management of Human Settlements) - http://www.cleanairnet.org/caiasia

25. Committee of the Regions (CoR) and Covenant of Mayors http://cor.europa.eu/en/activities/Pages/priorities.aspx

http://www.covenantofmayors.eu

http://www.eumayors.eu/index_en.html

http://ec.europa.eu/environment/europeangreencapital/index_en.htm

http://cor.europa.eu/en/

26. MEDCITIES - http://www.medcities.org/

27. Association of Cities and Regions for Recycling and Sustainable Resource management (ACR+) - http://www.acrplus.org/

28.Brazil – Frente Nacional de Prefeitos (National Front of Mayors – FNP) - http://www.fnp.org.br/home.jsf

29.India – City Managers Association of India (CMA) http://www.umcasia.org/content.php?id=67

30. China – China Association of Mayors (CAM) - http://www.citieschina.org/en/

31. South Korea – Governors Association of Korea - http://www.gaok.or.kr/eng/e01_intro/intro010.jsp

32. Canada – Federation of Canadian Municipalities - http://www.fcm.ca/

33. Sweden – Klimat Kommunerna – http://www.klimatkommunerna.se/

Ask the question – mobilise network, organisations and give your voice below or at LinkedIn  Rio+

 

 

A Power Shift in China and the EU

Posted by on 19/10/14

Just how fast can China and Europe change? And just how fast can the relationship between them change? The answer, at least sometimes, is very fast.

A recent report from the International Energy Agency (IEA) predicting that solar PV could, in one scenario at least, become the largest single source of electricity generation by 2050 made something of stir recently in the media. The report forecast that at solar PV could possibly account for as much as 16% of global electricity generation by 2050. These forecasts will almost certainly be revised as much can happen in the technology and economics of electricity generation in the next 40 years, but they are an indicator of the possibility for change.

Apart from the possibility that solar power will become a major source of energy, something else in the in the forecast is striking. As the following chart from the report shows, by far the largest growth in solar PV power will come from China. According to the report, at its peak China will contribute about 40% of electricity generation from solar PV in the world in 2030.

Chart 1: Forecast regional production of solar PV electricity Source: IEA

This suggests that in the future China will help change the world. However, that future is already arriving. In 2013 China was already the largest single market for solar PV installations in the world, accounting for 30% of net installations (new installations less facilities retired from service).

Chart 2: Share of net solar PV installations in 2013 Source: Earth Policy Institute

This fact reminds us how fast China, and the world is changing. Only a few years ago China accounted for a negligible share of installations. In 2009 China’s share of new solar PV installations was only 2%. The key cause of this change is that since 2011 the Chinese government has vastly increased support to the solar PV generation sector.

Chart 3: Share of net solar PV installations 2003-2012 Source: Earth Policy Institute

In the EU, the opposite has happened. As recently as 2010 the EU was estimated to account for about 80% of global installations, but it has now become a minor market. In 2013 the three leading markets were China, the US and Japan, which together accounted for 61% of installations. In 2009 Germany by itself installed over 50% of the solar PV added in the world, but in 2013 it accounted for only 9%. One of the main reasons for this has been a sharp reduction in support for the sector across Europe, especially in the eurozone, following the onset of the crisis in the EU.

Whatever these figures may say about the future of solar PV electricity generation, If nothing else, they are a reminder that nothing in China is constant, nor even in Europe. And the relationship between them, and their position in the world, can change rapidly.

Germany turning into an Electricity Importer

Posted by on 19/10/14

Germany is in the beginning of its nuclear phase-out to be completed by 2022.

To that end, it has to replace nuclear power accounting for 18% of its electricity supply, compared to more than half from coal, by higher energy efficiency and renewable energy.

It will also have to close some 30 conventional coal- and gas-fired power plants with a total capacity of 7 GW, which can no longer compete against wind and solar electricity.

To cope with these closures north-south grids  will be necessary to transport large volumes of wind power, but their construction suffers delays because of technical hiccups and public opposition. German utilities have therefore begun buying electricity from Austrian, Italian and French sources for the winters 2014-2016.

This is to be applauded. European power producers have an intrinsic interest to trade electricity according to daily and seasonal availabilities and costs.

The wider the geographic scope for trading wind and solar electricity the easier will it be to do without “stand-by” power plants: somewhere in Europe hydro, biomass, sunshine or wind should normally  be available. Gas-fired stand-by capacities should be an exception, as they are expensive to operate because of low capacity utilisation.

In order to obtain energy security and sustainable supply Europe will need pan European grids and optimal energy efficiency. That will take time and huge investments. The EU has laid out a strategy until 2050 to that end. It should start implementation 2014-20 with support financing from EU structural funds.

Eberhard Rhein, Brussels, 10/10/2014

Uncertain times

Posted by on 16/10/14

Oil prices surprise us again as Brent falls to below USD 90 on Thursday (9/10). What is going to happen next? Will the downward trend continue? Or should we rather expect the prices to hit USD 100 and above again? The answer depends on the time frame of expectations. In the short-term perspective, three sources of uncertainty may be distinguished. First, there are the geopolitical factors which have caused oil production in six North African and Middle Eastern countries to decline by a total of 3.5 million barrels a day, resulting in an escalation of tensions on the global oil market, which has been historically dependent on Saudi Arabia’s sizeable crude reserves – a bulwark against sudden price upswings. There are many indications that the production slump has reached its lowest point. The possibility of these missing barrels of oil returning to the market produces a price decline risk. The word ‘risk’ is used, because whether production in the region will continue to rise or not remains a major source of uncertainty. When I discussed oil prices a month ago, there were few reasons to believe that Libya’s crude production would go up. As it did, rising to some 900,000 barrels a day at present, the unexpected upsurge in oil supply of more than 500,000 barrels a day reversed the upward price pressure triggered by the Islamic State’s offensive in northern Iraq. However, considering the precarious political situation in Libya, the country’s oil production can fluctuate widely and is unlikely to increase any further.

Interestingly, IHS reports that the Central Bank of Libya currently has all of oil production and oil terminal staff on its payroll and is financing militia forces to protect vulnerable locations. With the central bank’s involvement, crude oil production and supply can be expected to continue uninterrupted over the short term. Although the turmoil and rioting in Libya persists, the unrest has been moved away from oil and gas infrastructure and city areas, which has further reduced the risk of production stoppages in the near future. In the long-term perspective however, the situation remains uncertain as the forces which will eventually gain control of the country may also attempt to take over its oil revenues. While the House of the Representatives, Libya’s democratically-elected and internationally-recognised government, has power in the east of the country, the west is governed by the General National Congress, which also controls Tripoli, where the central bank resides. For now, the central bank is willing to pay salaries to maintain oil supplies, but retains most of the revenue from selling the commodity in an attempt to forestall the conflict between the two rival governments. Currently, neither side is trying to take over all oil revenues, but the situation is bound to change some time. When one of the factions lays claim to the money, the country’s oil production may shrink significantly.

Libya is not the only country whose oil production has the potential to rise above expectations. Iran is still blocked by sanctions, which prevent some 1 million barrels of oil from reaching the market every day. As negotiations with the P5+1 (United States, Russia, China, Great Britain, France + Germany) continue, addressing the sanctions as one of many issues, the oil market is struggling with more uncertainty. This also applies to countries whose oil production has so far not suffered any long-lasting slumps on a scale which could materially affect the global oil market, such as Nigeria, Venezuela, Russia, and Iraq, the last country’s situation being the most worrying in the short-term perspective.

As for the sanctions imposed on Russia, they will likely have their toll on the global oil market in one or two years as the effects of stymied investment in oil production become apparent.

The second source of uncertainty has to do with how fast oil production is going to increase in the United States. The country’s rising oil production, along with the increasing supply from Saudi Arabia, Kuwait and the United Arab Emirates, more than offset the slump seen in North Africa and the Middle East, which has been instrumental in bringing relative stabilisation to the oil market. According to IHS, the potential increase in US oil production depends on whether the ban on American oil exports is lifted or not. The effects of the ban could be seen in the fourth quarter of last year, when the country’s market saw a steep decline in oil prices relative to Brent crude on the back of a seasonal decline in demand associated with repairs in American refineries. While unconventional oil extraction methods make drilling more and more wells necessary, low oil prices discourage any such investments. Lifting the ban on US oil exports could change the situation, as I argued in one of the previous posts.

Oil demand, which outside of the US has been growing at a slower rate than expected, will be the third factor of uncertainty in the coming years. What is uncertain in this case is economic growth in the Eurozone, which is facing the risk of deflation, and the condition of Asian economies, particularly China, which are grappling with an economic slowdown. The oil market is rapidly affected by stymied growth in the region due to still narrow refining margins. Russia and Brazil also contribute to the decline in crude oil demand.

However, there exist some concrete factors which will prevent crude oil prices from declining over the long term. Of these, production costs are the most important – if prices decline to a point where they are lower than production costs, oil production will be reduced, which will in turn cause the prices to go up again. A scenario where oil production declines due to low prices is particularly relevant in Saudi Arabia, where unconventional deposits account for a vast majority of the country’s reserves, and the United States, whose reserve potential is also unconventional in nature. While in Saudi Arabia the decision how much oil to produce is made arbitrarily (depending on economic factors), in the United States the same is based on individual decisions made by numerous independent entities, which are currently most affected by the oil export ban. This makes the US oil export policy, and any potential amendments to it, a crucial factor in shaping the situation on the American and global oil markets in the coming years.

 

ABC of the power segment – part 1

Posted by on 03/10/14

After discussing the crude oil and fuel market mechanisms in our ‘ABC of the crude oil and fuel prices’ series, it is now time to have a closer look at another key business segment. I have chosen to focus on the power segment, which lies at the very centre of the energy sector both in Poland and around the world. Not only does the power sector account for the largest share of the energy balance, but it also draws upon the widest range of competing technologies using all primary energy sources, including fossil fuels, nuclear energy and renewables. This is where we have seen a constant battle between technologies at different stages of maturity and energy efficiency. The idea is to generate energy safely and cost-effectively, both now and in the distant future. Security and continuity of energy supply is monitored and controlled by competent regulatory authorities, which are also responsible for setting the rules of the game in the power market, where the business community seeks to strike a balance between energy prices and new technology development. As a result, the power sector is the lifeblood rather than an ordinary sector of the economy. In the present series of posts, I will put a spotlight on selected technological aspects, the regulatory framework, and the rules of the market game, all which ultimately shape the prices of electricity and heat paid by households.

Since prices are typically associated with specific products, and pricing mechanisms with specific markets, we will start by defining the product and explaining how the power market is organised. We will also explain the meaning of certain terms denoting power and heat generation equipment.

What is the product on the power market?

Energy is traded on the power market and can take several basic forms, all of which constitute energy products:

Fuel is a form of chemical energy contained in a given substance. Fuels are broken down into three groups: solid fuels (such as coal, wood, peat, biomass, etc.), liquid fuels (fuel oils, etc.) and gaseous fuels (including natural gas, industrial and waste gases, biogas, etc.). This category of energy products also include nuclear fuels, such as uranium, where fuel energy is measured in a different manner than in conventional fuels.

In the latter case, the chemical energy content in fuel is measured in GJ (gigajoules). This is often referred to as calorific value of fuel, as calorie was historically used as the measure of fuel quality – one calorie equals approx. 4.2 J. Depending on the physical state of the fuel, its energy content is converted into fuel units. In the case of solid and liquid fuels, the standard unit is GJ/kg, and in the case of gaseous fuels – GJ/Nm3 (normal cubic meter); however, for comparison purposes, the uniform energy unit GJ/kg is used for all physical states of fuel.

When determining the amount of energy released by a unit of fuel, we often use terms such as calorific value or heat of combustion. Both these terms refer to the amount of heat released by fuel at complete combustion, which is expressed in J/kg. In the case of calorific value of fuel, the heat balance does not include heat remaining in steam contained in flue gases. However, it can make a difference for different physical states of fuel.

Heat as an energy product is the form of energy carried mainly by steam and water. Water, both as a liquid and in its gaseous phase, facilitates the conversion and transport of the necessary energy. Following the conversion (usually combustion) of fuel, its chemical energy is transferred to water or steam (depending on the pressure and temperature parameters), and may be transported by pipelines to another location and used for various purposes (for heating, as steam power to drive machinery, and in other applications).

Heat is measured and traded in GJ. Please note that water, as an energy carrier, also carries a certain amount of thermal energy. In heat generating systems, this energy is often referred to as condensate or return heat.

In the case of water and steam, the term ‘enthalpy’ is often used; it defines the potential of a given amount of energy carrier to perform work. For instance, 1 tonne of steam at the temperature of 250°C and the pressure of 0.75 MPa has much lower enthalpy then 1 tonne of steam at 550°C and 13 MPa, and, as such, offers lower potential for the performance of work. Therefore, feeding 1 tonne of steam with different enthalpy values into a turbine will generate different MW (megawatt) outputs. This means that the price of 1 tonne of high-enthalpy steam should be higher than the price of 1 tonne of lower-enthalpy steam. Although commercial settlements are GJ-based, the energy carrier must retain the pressure and temperature parameters (which are subsequently used to calculate the enthalpy value).

Electricity is generated from fuels as a product of the fuel’s chemical energy conversion processes. The conversion is associated with the notion of generation efficiency, whereby the amount of chemical energy purchased in fuel is compared with the amount of electricity sold to a power grid. In the power market, electricity is measured and traded in MW. As fuel energy and heat are measured and traded in GJ, to simplify the calculation of power generation efficiency we may assume that 1 MW=3.6 GJ

How is the power market organised?

The power market is divided into individual interconnected segments combined into one value chain:

  • Production (upstream) – The upstream segment supplies fuels containing the required chemical energy to the hydrocarbons-based power sector.
  • Generation – In the generation segment, various forms of energy (such as kinetic energy in the case of wind power or chemical energy in the case of combustion-based power plants) are converted into electricity.
  • Transmission – This is where electricity is transported over long distances from fuel generation sources to distribution systems (and, rarely, directly to end users).
  • Distribution – Just as in the transmission segment describe above, in the distribution segment electricity is also transported but over shorter distances, via lower-voltage lines, and primarily to end users.
  • Wholesale (Trade) – In this segment, market players purchase electricity (or related products such as certificates of origin or CO2 emission allowances) in wholesale quantities for subsequent resale to other market participants. These transactions include both physical delivery and virtual transactions (for speculative or hedging purposes).
  • Retail – Electricity is supplied by power companies to end users.

What kind of equipment is used to generate electricity?

Power generating turbine

Turbines are flow-through units in which an energy carrier flows through turbine stages and transfers energy to turbine blades, thereby driving the shaft. A turbine is referred to as a steam turbine if steam is the energy carrier, and a gas turbine if the source of energy are hot flue gases. Wind turbines are also used in wind power plants, in which case the rotor blades are driven by the force of wind. Turbines are the key power-generating units in the commercial power sector. Also in nuclear power plants, turbines are driven by steam generated in the process of cooling the reactor.

Steam generator (boiler)

Steam generators are used to combust fuel which releases heat to water and/or steam, thereby converting chemical energy of the fuel into thermal energy of steam or hot water. Steam generators may be fuelled with any type of combustible solid fuel (such as coal or biomass), liquid fuel (fuel oils) or gaseous fuel. Combined systems are also used, such as gas-and-oil generators.

Power generator

A unit which converts other types of energy, mainly mechanical energy, into electricity in power plants. Generators are driven by turbines or other power-generating drives, and use electromagnetic induction to generate electricity.

Turbine generator set

A turbine generator set is a drive unit which combines a turbine and a power generator. The two parts need to be installed at a close distance since they are connected with an energy transmission shaft; therefore, they share certain systems (such as oil and measurement systems, a common foundation, etc.). Both parts of a turbine generator set operate simultaneously and usually undergo planned repairs at the same time.

Steam condenser and steam turbine cooling system

A steam condenser is installed at the exit of a steam turbine, where used steam condenses and releases condensation heat to cooling water. A condenser usually consists of thousands of tubes through which cooling water flows, washed over on the outside with condensing steam. Condensate is collected in a condensate tank and pumped back into the steam generator.

Power plants fitted with a condenser unit are referred to as condensing power plants. Sometimes it is possible to use all steam exiting the turbine as process steam or as heat used for heating purposes. However, in that case a certain amount of steam enthalpy will be lost and will never be converted into electricity.

The cooling system may be open (water from rivers, lakes or seas is pumped through the condenser and heats up in the process) or closed (cooling water circulates between the condenser and e.g. a cooling tower).

Where availability of water is limited, air-cooled condenser or semi-dry systems may be used.

Steam-and-water unit

In a condensing power plant, a steam-and-water unit is a closed-loop system in which the energy carrier (water) circulates between the upper (steam generator) and lower (condenser) heat source, changing into water vapour inside the boiler and condensing again in the condenser. As a result, energy is transported and converted from fuel into mechanical energy which drives the turbine.

Step-up transformer

A step-up transformer is used to transform generator-level voltage (low voltage at approx. 20 kV) to transmission-level voltage (high voltage at 220 or 400 kV). The transformation process depends on the voltage in the network to which the power unit is connected.

 

Heating Buildings only to 16 Centigrade?

Posted by on 29/09/14

Vitali Klitschko, the mayor of Kiev, has recently warned his citizens that they might have to do with home temperatures of no more than 16° during the next winter in order to cope with gas and coal shortages, due to the tense economic and financial situation of the country.

For the average European, let alone American citizen this is unimaginable, except for Europeans who have experienced the years from 1945 to 1948.

But will this be unthinkable forever?

Who guarantees that we shall not be hit again by reduced gas supplies from Russia and difficulties to rapidly replace them by alternative alternative sources?

And more dangerous, though less immediate, are we sure that we must not one day radically reduce our coal, oil and gas consumption in order to put a brake on climate change?

This should normally happen by switching to renewable sources and higher energy efficiency, including through perfectly insulated buildings. But that may not be enough to allow us the luxury of heating our housing and offices at 22-24°! We better remember venerable traditions of wearing sweaters and warm shoes at home to feel well at only 18°. It would save a lot of energy and money.

Our grandchildren will be grateful.

Eberhard Rhein, Brussels, 25/9/2014

Humanity must stop building new and phase out existing coal power plants

Posted by on 28/09/14

The UN Climate Summit on September 24, 2014 has once again underlined the threat of global warming and climate change for future generations but stopped short of responses to what constitutes the overriding challenge for Humanity.

A mobilisation event is not enough, even if the thousands of people that flocked the streets in USA and Europe have been impressive.

Action is required; and it must come urgently and be effective. Bottom-up approaches by cities, regions or corporations are welcome but too tiny to have a global impact.

To keep the planet temperature from rising beyond the critical two centigrade humanity must reduce C02 emissions between 40 and 70% until the middle of the century, which only the EU has pledged to do so far, with its 80-95 reduction target.

In order to be successful the international community must focus on the major countries and sources accounting for the high and rising level of C02 emissions:

  • China, USA, EU, India, Japan, Russia, Brazil, Indonesia, Korea, Canada and Australia are jointly responsible for more than three quarters of total emissions. Without them joining the efforts there will be no effective action and no way to prevent havoc: USA, EU, Japan, Russia, Korea, Canada and Australia will, of course, have to deliver much more than emerging countries.
  • Fossil energies are the main sources driving climate change accounting for roughly 80% of the global C02 output.

Humanity has become fossil-addicted; very few people can imagine 9-11 billion human beings doing without fossil energies by 2050-2100.

Coal being by far the worst polluter the international community should in a first step agree on a halt of new coal-fired power plants and a phasing out existing ones by 2050.

To that end, the December 2015 Paris climate conference should agree to:

  • prohibit the construction of coal-fired power plants that are not equipped with CCS as of 2020;
  • withdraw annually at least 5% of non -CCS coal-fired power plant capacity;.

The USA has started the process of replacing coal by shale gas which emits only half as much C02 as coal-fired power plants. Between 2012-16 it plans to retire 60 GW of the total capacity of 310 GW.

The EU is sending mixed signals.

On the one hand, major coal countries like Poland and Germany continue expanding lignite/coal fired power.

On the other ,UK is preparing to build a 450 MW demonstration plant that will capture 90% of its C02 emissions and store them in deep North Sea waters. UK aims to phase out its coal-fired power and become one of the world leaders in carbon capture and storage technology, a strategy for which it deserves praise.

Politically, it will be anything but easy to conclude an international agreement to stop commissioning new and phase out existing coal-fired power plants.

Carbon capture and storage (CCS) should be the way to overcome the understandable resistance, in particular from emerging countries like India that have hardly contributed to global climate change so far.

It is therefore urgent to build demonstrations plants like the UK is doing.

In parallel, utilities should invest in power plants operating on shale gas, LNG, wind/solar and biogas as alternatives to lignite/coal.

The first step is for the EU to take: it must urgently freeze and start phasing out its lignite/coal-fired power capacity.

This would constitute a strong gesture to the international community.

Eberhard Rhein, Brussels, 20/9/2014

Better security through knowledge

Posted by on 25/09/14

Security was the leading theme of a closed expert debate organised by the Polish Institute of International Affairs and its Turkish counterpart – the Centre for Strategic Research of the Ministry of Foreign Affairs of the Republic of Turkey (SAM – http://sam.gov.tr/about-sam/). Inspired by the discussion, and the more unofficial opinions voiced behind the curtain, I have decided to re-visit the issue of energy security, this time from a slightly different perspective.

Not long ago, while discussing the draft of the Polish Energy Policy until 2050, I underlined those aspects of energy security which go beyond physical security and access to energy resources. Energy security is a system centred around policies pursued by individual countries and international institutions. At the same time, it requires policies and a business climate that promote investment, progress and innovation to ensure that adequate supplies and infrastructure will be available in a timely way in the future. Since these two aspects, politics and investment, are interwoven, it is difficult to improve energy security without international cooperation (coordination). However, cooperation alone is not enough, because the problem of energy security resembles a prisoner’s dilemma where mutual trust is necessary to improve the situation for all parties. And trust is based on credibility. The case at hand is about the credibility of one’s economic policy, of which energy policy is an important component.

Can a policy’s credibility be evaluated? Yes, it can, as financial markets demonstrate on a daily basis. How can we do that? Let’s consider a relatively simple example – monetary policy. Using their knowledge of and information on the economy, experienced participants of the market (let’s call them analysts) create models which simulate how the economy is going to develop in the near future. Central banks do the same. In a given state of knowledge and with universal access to information, both analysts and central banks obtain largely similar projections of economic growth, job markets and inflation. Knowledge of economics also indicates how central banks should react to future changes in the inflation rate. The credibility of central banks follows from the fact that they base their decisions on solid factual information which the markets can read. If central banks make surprising decisions which they are not able to justify, risk increases and investors sell off risky assets or demand greater returns.

Despite being much more complex, energy policy may also be evaluated. Suffice to say that any policy is comprised of regulations which the government uses to achieve such results as higher capital expenditures or lower energy consumption per production unit. At the heart of each such regulation lies a cause-and-effect relationship linking the instrument (regulation) to the outcome (desired result). Even if this relationship is highly complex, it should lend itself to a factual evaluation, as the regulator must have connected the effect and cause somehow. Seeing that such a mechanism exists, we may ‘replicate’ it using our economic and social knowledge to verify whether it can deliver the expected results.

This is facilitated by appropriate tools (models), which must be prepared in advance, however – a task which requires systematic and interdisciplinary research. Research into the effects of regulations has an additional benefit in that it allows us to identify areas where our knowledge is imperfect. Discussing the risk emerging when a policy takes a leap into the unknown, Noble Prize winner Edmund Phelps says: “At the simplest level, economics can better show us the consequences of our actions. Less simple are cases in which we don’t have the knowledge to predict the full consequences. Global warming and climate change is an example. Actions that we believe will remedy a perceived problem may in fact lead to an unintended consequence… Generally speaking, global energy systems are so complex that interfering with them will almost certainly lead to unintended consequences” (First Things, Economic Justice and the Spirit of Innovation, October 2009).

Knowing the limits of our knowledge is necessary to evaluate whether policymakers venturing into the unknown are fully aware of the risk or whether they do so because they lack knowledge which is objectively available.

In the first case, where such actions are born of necessity, we must consider a comprehensive spectrum of possible scenarios and then evaluate their outcomes, which will help us identify what risks can materialise when the policy is implemented. This is the approach we chose three years ago when contemplating shale gas projects in Poland. We identified three possible directions in which the sector might develop depending on how current conditions encourage investment, progress and innovation, and then investigated their outcomes.

The second situation should never come to be, and to prevent it from happening in Poland we need strategic, systematic and interdisciplinary research into the energy sector, which should look into strategic aspects of energy and climate policies and into the actions taken by the government/state and companies. Security is one of such strategic matters requiring a systematic approach. Energy security is a public good and as such lies within the remit of the state, which decides how to ensure energy security today and in the distant future. However, the actual ‘delivery’ of energy security is accomplished by companies which, acting within a framework imposed by applicable regulations, ensure uninterrupted energy supplies at an acceptable price. And it is those companies that are first to evaluate the practical cost of the regulations – the cost of security. We should therefore take their opinion into account when researching the energy sector, which should allow us to reduce our ignorance in areas where its cost is the highest.

Improving energy security requires a well-designed and durable strategy, which can only be achieved with appropriate knowledge and interdisciplinary research. It is high time we began working on it.

 

Advertisement