“Gradual change will not save us,” Says IEA Chief Economist Fatih Birol

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Originally published on Energy Post.
By Karel Beckman 

Photo: Friends of Europe

The latest major report from the International Energy Agency (IEA), the Energy Technology Perspectives 2014, states that “radical action is needed to actively transform energy supply and end use”. In an interview with Energy Post, the IEA’s renowned Chief Economist Fatih Birol notes that governments in particular have to take action. “You cannot change trends by giving some lectures or speeches. Policymakers should put in place real economic incentives.” Birol is “not without hope” that next year’s Climate Summit in Paris will produce a credible international agreement.

My interview with Fatih Birol takes place at a highly symbolic time and place. We are in Rotterdam, Europe’s biggest oil port, at the Eco-Marathon event, a worldwide competition to build ultra-efficient cars, organised by Shell, Europe’s largest oil and gas company. That same morning, from Turkey the news is confirmed that over 300 coal miners have died in the worst coal-mining accident in that country’s history. In Rotterdam, at the Powering Progress conference accompanying the Eco-Marathon, Turkish-born Birol offers his condolences to the families of the miners.

After the conference, I speak with Birol about the Energy Technology Perspectives (ETP), a 382-page report just published by the IEA – a “comprehensive analysis of the technologies that are essential to achieving an affordable, secure and low-carbon energy system”. The report offers a sombre message. “The overall picture of progress remains bleak”, says the accompanying press release. “Indeed, the level of progress described in the 2014 report is arguably less than what was documented in the IEA’s previous tracking report.”

In particular what makes the picture bleak is the fact that, as IEA Executive Director Maria van der Hoeven comments in the press release: “Growing use of coal globally is overshadowing progress in renewable energy deployment.”

In that moment, then, everything seems to come together: the clash between the old and the new, the unsustainable and sustainable, the fossil fuels represented by Shell and the Turkish coal mines and the new technologies promoted at Shell’s Eco-Marathon and in the IEA Energy Technology Perspectives report.

The report enables us to discuss the energy “challenges” of the world in rational, technical language, without emotions. Yet there seems an added urgency to Birol’s message today. “Current energy trends are not sustainable”, he insists, in a soft voice. “There is a need to change course in a dramatic way”. He adds that “gradual change will not be enough to change the track we are following”.

Birol does not offer this message for the first time, yet it’s beginning to sound increasingly desperate as the global greenhouse gas concentration inexorably rises and the world is continuing to search for ever more oil and build ever more coal-fired power plants. Indeed, speaking about Turkey, that country (as one of our readers recently pointed out to me) has plans to build some 75 (!) new coal-fired power stations in the coming years. Even though not all these projects will come to fruition, the trend is unmistakable, in Turkey as well as in many other countries. And there is nothing the IEA can do about it except offer “policy advice”.

The new Energy Technology Perspectives report again hammers home Birol’s and the IEA’s call for “radical change”. It does offer hope in the form of tangible projects that the world could pursue to change its course. For example, there is a chapter on “Electrifying Transport: How can e-mobility replace oil?” And one on solar power: “Possibly the Dominant Source by 2050”. The IEA has even decided to turn the Energy Technology Perspectives, which up to now was published every two years, into an annual publication.

But is anybody listening? I ask Fatih Birol. He tries to put a brave face on it.

What do you hope to achieve with the Energy Technology Perspectives report?

“Looking at the challenges ahead, especially in climate change, it is clear that without putting new advanced technologies in place, we have no chance whatsoever to limit greenhouse gas concentrations to 450 ppm, as is needed to keep temperature rise within a 2-degree Celsius limit. Gradual change will not be enough to change the track we are following today. We need to implement new technologies. Now there are technologies available, but if they are not competitive, they will not penetrate markets. So what we do with Energy Technology Perspectives is to provide policy advice, to make it clear what the potential is of various technologies and what conditions should be created to ensure that they can see the light of day. It goes from carbon capture and storage (CCS) to advanced car technologies and advanced renewables. They are all part of the solution.”

Energy Technology Perspectives says radical change is necessary. What does ths imply?

“I am not a big fan of arguing that things will change if only the mindset of people will change. You cannot change trends by giving some lectures or speeches on television or power point presentations. There should be real economic incentives for people to invest in cleaner energy options. This can only happen if governments set the framework. If they take the right regulatory measures or make sure carbon prices are higher. This in turn depends on an international framework. To be frank, I don’t see individual countries by themselves making significant progress unless there is an international agreement.”

Do you believe that an international climate agreement will be possible at the UN Climate Conference in 2015 in Paris?

“I am not without hope. For three reasons. First, US emission levels are now at the lowest level since 1990, so the US will come to the table with much better data than in the past. The US Administration has also said it wants to leave a legacy in this area. Second, Chinese emission growth is slowing significantly, mainly because they want to find a solution to local air pollution. China also seems to want to assume leadership in some global issues. Climate change could be one of them. Third, Europe is insisting on a 40% emission reduction target. With these three things put together – and the skills of French diplomats – hopefully we will see some good news from Paris next year.”

The oil and gas industry advocates natural gas as one of the solutions for a low-carbon future. But in the Energy Technology Perspectives report you stress that natural gas is a transitional fuel, not a low-carbon solution, unless it is coupled with CCS. What contribution does gas have to make in your view?

“Gas can make a positive contribution. If we had a shale revolution in China today as we had in the US, it would solve a big part of the climate problem, because coal in China is the biggest problem we are facing today. But gas is only good if it replaces coal. So it depends very much on the country or region we are talking about. In any case gas is not enough. We still need renewable energy, energy efficiency and in my view also nuclear energy.”

Are you positive about the growth prospects of renewable energy? Energy Technology Perspectives notes that in particular China and the emerging economies are doing more than expected, but progress in the industrialised world was disappointing.

“I am impressed by what China is doing in renewables. I can tell you that the capacity growth in renewable energy in China in the next twenty years is greater than in Europe, the US and Japan put together. It’s not only wind and solar, by the way, but also hydropower.”

What do you think of the role electricity storage can play in the energy transition? Your report notes  there is a trend towards electrification and that the integration of variable renewable energy can be managed. Yet you also downplay the contribution electricity storage is likely to make.

“Storage is important and it could be a very important solution, no doubt about that. But it’s something for the longer term. We cannot use it to a significant extent today nor tomorrow. But maybe the day after tomorrow.”

Saving money by displacing fossil fuels with reneables

The major conclusion of the IEA’s new Energy Technology Perspectives report is that electricity will “increasingly power the world’s economies in the 21st Century, rivalling oil as the dominant energy carrier.” It adds that “the transition to electrification is not neutral: in fact, decarbonisation requires a massive reversal of recent trends that have shown continued reliance on unabated fossil fuels for generations.”

Here are some other important findings of what the energy future could look like if adequate measures are taken to limit climate change:

  • Impressive deployment of renewable technologies is beginning to shape a substantially different future in supply. This is true even though fossil energy carriers still accounted, in 2011, for two-thirds of primary fuel in the global electricity mix and covered most of recent demand growth. Double-digit growth rates for wind and solar PV electricity generation over the last several years helped push the global share of renewables to 20% in 2011; renewables could reach 65% by 2050.
  • Over the medium term, the report sees strong interplay between variable renewables and the flexibility of natural gas to supply both base-load and balancing generation. Gas-fired generation supports two elements of a cleaner energy system: increasing integration of renewables and displacing coal-fired generation. Its evolving role in a given system will depend on the regional resource endowment and electricity generation mix.
  • Natural gas should be seen only as a bridge to cleaner energy technologies unless CCS is deployed. After 2025, emissions from gas-fired plants are higher than the average carbon intensity of the global electricity mix; natural gas loses its status as a low-carbon fuel.
  • Increased electrification of buildings through the deployment of heat pumps as part of a comprehensive approach to improving buildings energy efficiency can significantly displace natural gas demand. Heat pumps for heating/cooling of space and water allow electricity to displace use of natural gas.
  • Electrification of transport, together with improved fuel economy, fuel switching and new vehicle technologies, substantially reduces transport sector oil use without considerably increasing overall electricity demand.
  • A framework of “systems thinking” can enable optimised cross-sector integration. The choice of technologies and their placement along the steps of generation, transmission and distribution (T&D) and consumption of electricity will play a critical role in the cost-effective development of integrated electricity systems.
  • “Systems thinking” is particularly important during the transition to optimise electricity system investments and ensure efficient management of future systems in which electricity from wind and solar dominate generation. This approach is also needed to prompt all stakeholders to optimise use of existing infrastructure and to direct research, development, demonstration and deployment towards integration.
  • Electricity storage can play multiple roles in integrated low-carbon electricity systems, [but] storage, in itself, is unlikely to be a transformative force. The role of electricity storage in a given power system will depend on system-wide development. Pumped hydro storage (PHS) currently represents 99% of all deployed electricity storage, and remains well-suited for many storage applications. Although none have yet been deployed at a capacity scale comparable to PHS, a broad range of other technologies are emerging. The value of the flexibility that electricity storage technologies can provide will appreciate as the share of variable renewables in electricity systems increases. For these services, however, storage technologies will compete with other resources such as stronger internal grids, interconnection, demand-side integration and flexible generation.
  • Smart coupling of the convergence of electricity generation from PV with rising demand from e-mobility would facilitate higher penetrations of both technologies; combining PV with electricity storage opens new possibilities.
  • Policy, finance and markets must be adapted to support active transformation of the global energy system. The report presents evidence that the USD 44 trillion 1 additional investment needed to decarbonise the energy system by 2050 is more than offset by over USD 115 trillion in fuel savings – resulting in net savings of USD 71 trillion. Even with a 10% discount rate, the net savings are more than USD 5 trillion.

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