The World Energy Trilemma 2016: ‘Defining measures to accelerate the energy transition’ published by the World Energy Council, in partnership with global consultancy Oliver Wyman, a subsidiary of Marsh & McLennan Companies, has identified five focus areas to drive progress on the Energy Trilemma of sustainability, security and energy access, and meet the goals of 2020 and beyond.
This report will provide the foundations for many discussions at the 2016 World Energy Congress in Istanbul in October.
The energy sector is at a transition point and faces a number of growing challenges. Innovative policies and technologies are the key to addressing these challenges according to a new report by the World Energy Council. The report was presented to ministers and government representatives as they met at the seventh Clean Energy Ministerial (CEM7), San Francisco, USA on 1 June.
World Energy Trilemma Report 2016
The World Energy Council’s definition of energy sustainability is based on three core dimensions (1) energy security, (2) energy equity and (3) environmental sustainability. Balancing these three goals constitutes a ‘trilemma’ and is the basis of prosperity and the competitiveness of individual countries.
The 2016 Trilemma report defines measures to progress on the three goals of energy security, energy equity and environmental sustainability with the aim to accelerate the energy transition and lead countries to prosperity and increased competitiveness of their individual economies. It provides guidance in the complex task of translating the trilemma goals of security, equity and sustainability into tangible actions.
The analysis is based on interviews with policymakers and private sector energy leaders, wide assessments of energy strategies as well as the research and findings of the Council’s Trilemma work programme over the past five years (2011 -2015). The report also draws on Trilemma Index rankings from 2011 to 2015.
The report highlights five key findings emerging from innovative policies, interviews with policymakers and private sector energy leaders and also based on five years of assessing countries’ sustainability performance with the Energy Trilemma Index:
- Transforming energy supply: Policymakers and decision makers must set clear energy targets and provide clarity to the market. Italy has made advances in diversification in gas supplies and gas storage capacity. Renewable energy reached 39% of total electricity consumption. Early engagement of affected communities is critical in preventing project delays.
- Advancing energy access: Countries are reforming regulatory frameworks to decrease the cost of doing business and increase private investments in modern infrastructure expansion. Namibia has made advanced in energy access through innovative mechanisms including energy shops. Energy shops offer information and sell energy equipment and serve as a payment collection point for credit financing for renewable energy technologies and products. Energy access in remote areas can be advanced by bringing together policy makers, technology providers and local entrepreneurs.
- Addressing affordability: While subsidies can be vital for low-income consumers in the short-term, long term subsidies can erode the profitability of utilities. Argentina’s government froze electricity prices in response to the 2001 economic crisis. As a result there has been insufficient investment into energy in the country. Argentina became a net energy importer in 2011 for the first time since 1984. The case study illustrates that long-term subsidies and prize freezes can erode the profitability of utilities, stall improvements in energy infrastructure and stimulate inefficient energy use.
- Energy efficiency: Cost savings alone are insufficient to stimulate the adoption of energy efficiencies standards. Performance ratings, incentives and labelling programmes also encourage consumer energy efficiencies. India has addressed energy efficiency through the Perform, Achieve, Trade policy. Consumers receive specified energy consumption targets. Consumers that perform better can trade their energy savings certificates. However, few of the efficiency projects involved major technology or process changes. Private sector commitment and alternative financing solutions are crucial for the success for such schemes.
- Decarbonisation: Dynamic and flexible renewable energy investment policies are the key to responding to evolving market dynamics and technological developments. Turkey has introduced the Law on Utilisation of Renewable Energy Resources (2005) to increase the share of renewables and work towards decarbonising the energy sector. Feed-in tariffs (FITs) are the main renewable energy support mechanism. Turkey has doubled its installed renewable energy capacity between 2005 and 2010. However, greenhouse gas emissions have increased as coal prices have been lower than the FIT rates. Higher FIT rates and longer guarantee periods could improve the success of the programme
- Policy matters: Policy choices and a regime to support a robust energy sector are critical to lasting energy trilemma performance regardless of a country’s resources or geographic location.
- Time matters: Policies and investments intended to change energy supply and demand at a national level will take time and will likely be disruptive. Countries must therefore act now to progress on the trilemma with secure, equitable and environmentally sustainable energy to support a thriving energy sector, a competitive economy and a healthy society.
Joan McNaughton, Chair of the World Energy Trilemma study group – The Paris Agreement has raised the bar on what countries must do to have a sustainable energy policy – one which delivers not just on energy security, access and affordability; but is also capable of delivering the Paris commitments. Having a high GDP or great natural resources can help, but good policy with a clear sense of strategic direction, implemented well, is what really drives good Trilemma performance. More substantive dialogue with business leaders and the investment community will help policymakers to produce policies which are robust in a world of fast changing dynamics of energy supply and demand and an accelerating pace of technological and business change. The sooner countries start on the transition, the cheaper it will be.”