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EEGlobal: International leaders see value in new tech, industrial investment

Capital cost crunch
Dr. Richard Bradley, head of the energy efficiency and environment division at the International Energy Agency moderated the session.
    
“It’s important to discuss energy efficiency policy because we know from studies that energy efficiency has great potential, and can lead to 20-30 per cent reductions in emissions and demand at zero or negative cost,” he said. “Climate change only makes it more urgent.”
   
The challenge Bradley and others see is capital costs. “If capital only lasted five years, we wouldn’t be having this discussion,” he noted. “But the reality is 80 per cent of power plants built in the U.S. since 1890 are still operating. Of course, they’re not the same power plants – they’ve changed, and may have even changed fuels, but it shows how difficult it is to make the old capital go away.”
   
Bradley noted that it will take effective government policy to manage the infrastructure challenges we’ll face in the coming years. He suggested that if we can slow down the rate at which we build power plants now (through energy efficiency), new power plants will be able to take advantage of emerging technologies more effectively at a lower cost.

New tech, better plant processes
While Bradley looked to the future, European representatives Gönner and Ek spoke from the perspective of those who have seen restraints close at hand very recently. As Gönner noted, the European Union now imports 60 per cent of its natural gas supplies. This will rise to 80 per cent in 2020. Germany already imports 85 per cent of its natural gas and 97 per cent of its oil. Baden-Württemberg itself has no natural energy sources of its own.
   
While this situation is a concern, energy efficiency measures could help the situation substantially. A new McKinsey study, prepared on behalf of German industry, notes that Germany could reduce its greenhouse gas emissions by 31% at acceptable costs by 2020. Gönner believes even more is possible.
   
The greatest benefit, perhaps, will come from new development.
   
“Overall, new technologies offer great potential for economic growth and employment,” says Gönner. “The renewable energy sector in Germany has already created over 200,000 jobs. The environmental sector can become a leading sector in Germany by 2020.”
   
To improve energy efficiency, the government of Baden-Württemberg launched its own financial support program called Climate Protection Plus in 2002, primarily to support the use of building and technical measures to reduce carbon dioxide emissions in small and medium-sized businesses (SMBs), as well as community and church facilities. The support was not based on any particular technology but is based on reductions of CO₂ emissions. Thus, it encompassed building retrofits, the use of renewable energy for heating, and the use of district heating power stations.
   
“Around 40 million Euros has been provided as subsidies for the investment of approximately 265 million Euros,” Gönner says. “But there is still considerable potential for further efficiency improvements in plant processes. We are therefore extending the climate program (in 2007) to efficiency improvements in electrical drive systems, compressed air systems, pump systems and other production technologies in SMBs.”
   
The state is also enacting a new renewable heat act, which will require all new residential building to derive 20 per cent of energy for room heating and hot water from renewable energy sources. A corresponding value for existing buildings is set at 10 per cent.

Speed in industry change
Lena Ek perceives the current environment in Europe an ideal window of opportunity to create a new energy policy and a new energy production sector. She cites a number of events as catalysts for this – the day two years ago that Russia cut its gas distribution to the Ukraine, the total blackout in Italy, other blackouts in parts of Germany and Northern France, as well as serious floods and fires in Europe and around the world.
   
“Two years ago, I was in Strasbourg discussing with the commission what goals to set (for emission reductions),” recalls Ek. “We were wondering how many countries could really vote for a really tough policy of emission reductions. We realized it would be a close call, but that was before the Ukraine incident.”

The effect of this one event was to create the will to establish an integrated energy and climate package that set a target of 20 per cent reduction in CO₂ emissions below 1990 levels by 2020, and set a goal to increase the use of biomass by 20 per cent in the same time frame.
   
“These are tough targets, but I think they are possible,” says Ek. She noted that none of the goals set would be possible without energy efficiency as a key component. “Energy efficiency is the quick, greenest, most cost-effective way to reduce greenhouse gas emissions.”

A year ago, an energy efficiency action plan was launched in Europe, according to which each member state was the present a national action plan for energy efficiency. This will run for six years and includes several minimum standards for electrical equipment, buildings, renovations and energy services.

Ek points to three sectors that make up one third each of CO₂ emissions – housing, industry and transport. She believes there are huge opportunities for efficiency gains in industry. “There is an average potential of 40 per cent possible savings, and that’s low hanging fruit,” she suggests. “Emissions trading will also expand to new sectors in coming years.”

Ek also noted that the European parliament is in discussions with industry to help them understand and appreciate the speed with which policy is changing. She sees this as an opportunity to work with industry to make change happen.

“Very seldom in politics do you find the opportunity for change that we find here,” she says.

The renewables challenge
California has been and continues to be an innovator in energy policy in the U.S. With the state’s Global Warming Solutions Act, signed into law in 2006, it continues that trend. Like action being taken in Europe, California sees energy efficiency as a cornerstone for change. But there are a number of constraints the state is dealing with, as Jackalyne Pfannenstiel, Chair of the California Energy Commission, says.
   
“We need to continue to protect the California environment and protect the reliability of the system,” she notes. “And California continues to grow. There are going to be three primary sources for meeting that growth – more power plants (almost exclusively gas-fired), renewable resources and energy efficiency.”

Renewables is where the state wants to see substantial growth. It had a goal of requiring 20 per cent of all generation be from renewable sources by 2017, but they are going to try to hit that target by 2010.

“There’s a policy but not yet a law that we think we should be at 33 per cent generation through renewables by 2020,” Pfannenstiel states. “We are looking at having 3,000 MW from photovoltaics by 2017.”

Other challenges remain, however – for instance, having sufficient transmission capacity to go from where the renewables are to where the load demand is. Also, placing so much of the load on renewables could put pressure on the distribution system and its reliability.

“We also have land questions,” Pfannenstiel continues. “Large solar projects consume a great deal of land.”

Inevitably, energy efficiency becomes a critical piece to the puzzle. California has been so effective in this sector, the state has managed to keep per capita electricity use flat since the mid-70s.

But that’s not enough anymore. The Energy Commission is just completing a study of all aspects of energy policy in California, and Pfannenstiel believes this will include a 10 year goal of capturing all energy efficiency possibilities in California.

“Generally, the program managers think that there’s a certain amount of energy efficiency that’s cost effective, but there’s a lesser amount that’s really achievable, that’s really marketable. We’ve looked at that and thought that our goal for 10 years should be to capture all of it, everything that’s cost effective. We’ll do so through a series of increasingly stringent mandates or standards, as well as utility programs.”

What is clear from each of the panelists is that dynamic governments around the world are introducing innovative changes to energy policy, and are encouraging industry to do the same. Making significant changes will require innovative thinking, and effective relationships between government and industry leaders.