Executive chairperson of the Global Electricity Initiative (GEI) Philippe Joubert says energy utilities globally, together with the business community more generally, have come to terms with the science of climate change, particularly as extreme weather events begin impacting their profitability.
However, business is now looking for a clear signal from governments regarding carbon dioxide (CO2) pricing, without which there would be no commercial imperative to redirect future energy investments towards lower-carbon solutions.
The GEI is a joint initiative of the World Energy Council, the World Business Council for Sustainable Development and the Global Sustainable Electricity Partnership. It recently surveyed utility leaders from around the world covering countries that together account for 80% of global installed generation capacity, with all respondents agreeing that climate change was indeed a reality.
However, all respondents also emphasised that adaptation to changes in the climate was as important as measures to mitigate the threat of a 2 °C change in temperatures from preindustrial levels – a view informed largely by the fact that few were optimistic of meeting the emissions reduction targets outlined for the electricity sector.
In fact, the survey found that fossil fuels, such as coal and natural gas, would continue to dominate the fuel mix of GEI utilities between 2015 and 2035. Some 97% of respondents also warned that consumers were unwilling to pay higher prices for non-carbon electricity, while 94% stressed that security of supply was their priority implementation focus area.
A total of 44% of utilities were evaluating the feasibility of carbon capture and storage (CCS), but few saw it as a commercial proposition in the absence of a “meaningful carbon price”.
Speaking exclusively to Engineering News Online during a visit to Johannesburg, Joubert, who previously headed Alstom Power, argued that, while CO2 was regarded as “free” there was no incentive for utilities to invest in solutions that curtailed its production, while possible technology solutions, such as CCS, would remain undeveloped.
“As a utility CEO said to me: ‘I don’t know one CEO yet who has been fired because he has been emitting too much CO2. But I know a few who have been fired for not supplying electricity and for having blackouts in metropolitan areas’.”
Business was more afraid, Joubert argued, of uncertainty than of rules and regulations, with a number of firms currently dealing with the uncertainty by factoring in “shadow” carbon pricing of between $50/t and $100/t to model the potential impact.
There was a growing expectation that carbon pricing would be a major theme of the upcoming United Nations Climate Change Conference, also known as COP21, to be held in Paris, France, in late November and early December, although observers remain divided as to whether it was possible to negotiate an international price at the conference.
“I don’t believe a global market price for CO2 will emerge in Paris, it’s too soon,” Joubert said, adding that the carbon pricing was likely to begin regionally, with asymmetry built in for less developed regions.
“By more and more people are clear that we need to put a price to this externality immediately. If we don’t, nature will give us that price, which is already happening,” he added, stressing, too, the need for a "credible" carbon price.
The GEI was currently canvassing governments and business on the need to both tackle climate change and level the playing field so that those making emissions cuts were rewarded and laggards penalised.
It was also hoping to raise the level of the debate, by showing that all solutions have their limitations and warning against technological dogmatism. For instance, the GEI survey found that utility leaders were increasingly concerned about access to land, owing to the fact that many of the renewable-energy technologies required far more land than was the case for coal, nuclear, or gas plants. In addition, relocating generation facilities to where the renewable resources were located would require additional land for transmission infrastructure.
There were similar concerns in the area of water, with global primary energy demand projected to increase by 50% between now and 2030 and fresh water withdrawals expected to increase by 50% by 2025 in developing countries, and 18% in developed countries. The International Energy Agency had also noted that the energy sector already accounted for about 15% of water use globally.
“The business model that we have been using – whereby nature is free, available and unlimited – is dead,” Joubert said, describing as “crazy” those who believed humanity was in a position to continue using natural resources as if they were free and unlimited.