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Exploring the Nature of a New Energy Architecture

We are on the threshold of great change: the needs of emerging markets, rising populations and environmental pressures, make the transition to a new low-carbon and leaner energy infrastructure a must. A world of seven billion people – in which 1.3 billion do not have access to electricity – cannot continue to generate, consume and waste energy as we have done in the developed world. In less than 40 years the population will rise to nine billion, and the future will need to be one where we can balance universal secure access to energy with environmentally sustainable economic growth.1

The triangle of imperatives illustrated in Figure 1 represents the raison d’être of energy. By energy architecture, we mean the integrated system of energy generation, transmission and markets, shaped by government, business and civil society. In other words, the energy architecture concept represents a holistic energy system approach.

This architecture of energy is indeed in flux, at the global, national and local level.2

Figure 1: The Energy Triangle. Source: World Economic Forum’s Industry Agenda Report: New Energy Architecture – Enabling an Effective Transition, World Economic Forum in collaboration with Accenture, April 2012.

Illustrations of the significant transformation under way include the growth of renewable energies, the boom in unconventional gas and LNG, the volatile oil markets and the shift of demand growth from OECD to emerging economies. These are just a few developments with knock-on effects throughout the energy architecture. In response, countries and stakeholders are rethinking energy strategies and investments to succeed.

The Council recognizes that evolving the energy architecture to meet tomorrow’s needs is a daunting challenge requiring transformation at all levels: design, delivery and thinking. All stakeholders – government, industry and civil society – must move towards participation, collaboration and innovation on a global scale.

Any future energy infrastructure must include more renewable energy and increased electrification. Rapidly advancing technologies and breakthroughs in grid management, storage, carbon capture and sequestration of fossil fuels will also need to feature in the new landscape; giving us the ability to address energy challenges in the next few decades, in ways that we cannot foresee today.

The Global Council on a New Energy Architecture was created in 2011, as a successor to the Global Council on Sustainable Energy. It was established after the World Economic Forum launched its Energy Industry project addressing the transition to a New Energy Architecture.3 This report outlines what the Council has done during its first term and what it proposes to do in the coming year. Particular attention has been paid to the innovation and policy challenges and opportunities of moving towards a new, lower-carbon energy mix. Thinking about ways to encourage citizens to participate in collaborative problem-solving, and make informed choices about their future energy use, has also been key to the Council’s first year.

 Challenge and Opportunities

While fundamental innovations in the technologies and business models employed in the energy sector are needed to reduce both carbon, and energy intensity, the enormous capital stock invested in the generation, transmission and distribution makes it unrealistic to think that radical change will happen quickly. The International Energy Agency’s (IEA) most ambitious scenario for carbon abatement shows a reduction in hydrocarbon usage from 81% in 2009, to 62% in 2035.4

Despite greater use of gas, and growth in renewables, according to the IEA, coal will still play a role on the supply side, making effective carbon capture and sequestration imperative. Wind energy output is forecast to grow from 273 TWh in 2009 to 2703 TWh in 2035, while the output from concentrated solar power and solar photovoltaics could reach 1048 TWh.

Nevertheless, the Council would like to emphasize that the needed global investment in energy supply infrastructure, estimated at US$ 38 trillion annually by the IEA5

to meet the demand for additional energy, offers significant opportunities not only for job creation but also for experimentation and innovation. Closer partnerships between incumbents and new entrants – with leading energy companies and utilities facilitating investment in new, promising, but risky, technologies and new entrants benefiting from the expertise and experience of incumbents – would help to overcome the financing constraints that currently impede the scaling of new technologies.

The bulk of the energy demand increase in coming decades will come from emerging economies such as China and India as their economies develop. The conundrum the world faces is that an increase in living standards is tightly coupled with growth in energy consumption. But as population, economy and living standards grow in emerging economies; the world must find a way to decouple economic growth from a corresponding rise in energy consumption, putting energy efficiency at the core of future energy architecture. This will require a combination of influences to create a step-change in sustainable consumption and building efficiency into the design of energy systems.

Emerging economies are indeed increasingly focusing on reducing the energy intensity of their growth. The Chinese Government’s 12th Five-Year Plan aims to reduce energy intensity by 16% by 2015. Cost pressures will drive future reductions. As energy prices rise, especially if environmental costs are priced in, efficiency improvements will become more cost-effective in all sectors, driving continuous innovation.

Unlocking Barriers

The Council underlines that the path forward must be shaped by effective policy frameworks and incentives to promote investment in new technologies and appropriate infrastructures, market systems that encourage producers to meet the needs of consumers cost-effectively and spur innovation, and better information allowing consumers to make informed decisions.

Harnessing Political Will and Creating Enabling Policy Frameworks

It is vital to consider the politics of energy: a new architecture cannot emerge without the political will of governments and policy-makers.

The Council developed a policy paper6 that was discussed at the session on New Energy Architecture at the World Economic Forum Annual Meeting 2012 and later reflected in the World Economic Forum’s Industry Agenda report on New Energy Architecture.7 The Council and individual members have also made significant contributions to the above-mentioned industry agenda report, to its related country deep-dive studies on Japan and India and to New Energy Architecture debates instigated by the World Economic Forum.

Given the strategic significance of the energy industry, it is expected that national interests will continue to dominate energy policies, and national situations require tailored solutions. However, at present there is a patchwork of policies in most nations and internationally. Leaders from across the energy spectrum: Government, business and civil society should join forces to develop coherent policy frameworks for the future.

The frameworks should be based on core principles that address energy security and access for all, economic growth and sustainability.

Policies that are supporting the transition to a lower carbon future should be supported, but there must be realism about the role that the fossil fuel industry will continue to play for the foreseeable future to help achieve energy security and economic growth

At the root of all policies is the fundamental belief that open borders enhance diversity and security of energy supplies. The global energy system has shown its resilience in the face of crisis and disruptions and any attempts to create barriers should be discouraged.

The healthy proliferation of clean energy depends on international trade policies that facilitate the development and diffusion of sustainable energy, goods and services (SEGS). The Council acknowledges that significant barriers in many key markets are not only costly but also frustrate the market in clean energy and generate inefficiencies in global supply chains

One of the positive steps taken is SETI, a dedicated Sustainable Energy Trade initiative formed in the wake of the World Trade Organization’s difficult negotiations at Doha. SETI, proposed by a predecessor Global Agenda Council and supported by the New Energy Architecture Council, is now being developed by the Global Green Growth Institute, the Peterson Institute for International Economics, and the International Centre for Trade and Sustainable Development. The Danish Government has also lent its full support to SETI and has made it a priority of its EU Presidency in 2012.

Addressing the Demand Side: Involving Consumers and Citizens

The present relationship between rising living standards and higher energy usage cannot be sustained as millions more citizens in emerging market countries urbanize and advance economically. New patterns of energy usage that modulate and reduce individual and aggregate demand are necessary, but demand management has not attracted the attention it needs from policy-makers or the media.

The Council has explored ways to encourage consumers to be smarter in their energy choices. This will require both hard and soft tools, as we try to address the aspirations and values of people in different societies.

As a start during its first year the Council has supported organizations, such as JUCCCE in China (http://juccce.org), which are engaging the public in transition thinking. JUCCCE is a non-profit organization that is encouraging the “Greening” of China in wake of the country’s huge urbanization, population growth and consumer boom.

JUCCCE’s “China Dream” is a sustainable consumption project that aims to dilute the country’s growing consumerist ethos. China Dream has convened a group of cross-sector influencers to use policy measures, market mechanisms and the influence of online media and social activists. Influencers work across multiple platforms – including the media – to link sustainable consumption to values such as health and respect which are deeply rooted in China’s culture. The China Dream initiative is facilitating debate on sustainability and prosperity: catalysing an aspiration for lifestyles that define prosperity as “doing more, rather than having more”. This may be a means of reconciling China’s high economic growth targets to 2030 and beyond, with the need for reductions in individual energy usage. The model can be applied to other emerging countries if adapted to the local culture.

Considering the Power of Crowds

Projects such as China Dream work on building consumer awareness through the targeted use of media and high-level advocates. For the move to a new energy infrastructure to work, it needs to become an issue that people care about and to which they can contribute. The Global Agenda Council has considered the possibility of mobilizing public opinion on the New Energy Architecture via the power of crowd-sourcing.

The proposal was for the Council to help develop a crowd-sourcing tool initiated by JUCCCE that focused on democratizing innovation by allowing people to contribute to solutions, regardless of their experience or location. By providing access to stakeholders across sectors and borders, the site could become the nexus of many communities interested in transition. It was proposed that projects with the greatest potential impact could emerge through multistakeholder collaboration to create a living framework for solutions to society’s great challenges.

Council members reviewed the concept and were supportive in principle, but noted that many other organizations were active in this area and that it was difficult to conclude that it should be a priority for the Global Agenda Council as a group.

A summary of the work so far

In its first year, the Council has:

  • Delivered its first Policy Paper to the Energy Governors Annual Meeting at the World Economic Forum’s Annual Meeting 20128 and engaged 60 Energy Ministers, CEOs of energy companies, and energy specialists, in a New Energy Architecture session at the World Economic Forum’s Annual Meeting 2012
  • Council Members also contributed to a Forum video on New Energy Architecture. The video, an excerpt of the policy paper and op-eds by Council members, were included in the media launch of the World Economic Forum report mentioned above and can be viewed at: http://www.weforum.org/news/report-finds-124-countries-need-new-energy-architecture
  • Provided input and guidance to the World Economic Forum’s New Energy Architecture project and engaged in country studies and events on Japan and India.
  • Discussions with the Global Agenda Council on Sustainable Consumption about ideas for Rio+20 and other multilateral processes; and led the Council to draft a second policy paper on demand management and consumer involvement.
  • Provided input and guidance to the action-oriented China Dream initiative, as well the Sustainable Energy Trade initiative (SETI)

Future Orientation

The Council has started creating a visionary document on New Models for Energy 2050, integrating insights from other relevant councils.

Another way of thinking about a New Architecture for Energy is to avoid basing it on extrapolation from the present and to focus instead on how people will live in the future and how energy will play its part and then working backwards to derive our energy needs and a path to meet them.

This is quite possibly the more sensible approach: at significant historical inflection points, aspects of the future have proven to be quite unlike the past. The protracted industrial revolution of the 19th and 20th centuries transformed agrarian economies in ways that could not have been foreseen in the mid-18th century, as steam, railroads, the internal combustion engine and then widespread electrification changed the scale, quality and geographic reach of habitation, manufacturing, travel and transportation, paving the way for the globalized world of integrated supply chains and finance, underpinned by information and communications technology, that we take for granted today.

We are on the threshold of new breakthroughs (with uncertain effects), at the interface of rapidly advancing information technologies, biotechnologies and nanotechnologies, with trends such as urbanization happening on an unprecedented scale. These potentially give us the ability to address energy challenges in the next few decades, in ways that we cannot foresee today.

If we focus on the future, however, rather than simply projecting our experience forwards in a linear fashion, the questions that we must ask and address, change radically. For example, how should nine billion people share the planet in 2050? What are the implications for the earth’s planetary boundaries on energy?  How can we live safely and sustainably within these boundaries, while closing economic and social divides, and enabling access to sufficient energy for all?

What are the implications for integrated spatial governance within and across national boundaries, for urban planning (and the transformation of older cities), for residential, commercial and retail architecture, for mobility (both within cities and across boundaries, on land, sea and in the air), and for consumption, packaging and waste management?

Only by answering these questions can we determine what new energy infrastructures, and systems of generation, transmission and distribution, will be needed. If architecture involves the design and planning of desired and needed structures, and of the systems to enable their utility, then those addressing the New Energy Architecture must reflect both on the aspirations and financial capacity of the client – the whole of humanity – and the characteristics of the site – the Earth – in developing their designs.

This is what the Global Agenda Council on the New Energy Architecture will address in its second year.

Disclaimer

The opinions expressed here are those of the individual members of the Council and not of the World Economic Forum or any institutions to which they are affiliated.